Mr. Don Godfather filed a personal tax return on April 30, 2016 declaring income of $2,500 for the year ended December 31, 2015. As a result of an investigation, the CRA determined that, at December 31, 2014, Mr. Godfather had total assets estimated at $125,000 and total liabilities estimated at $90,000. At December 31, 2015, the taxpayer had total assets estimated at $140,000 and total liabilities estimated at $102,500. It was also determined by the CRA that a sum of $15,500 represented personal or living expenses of the taxpayer and it was further established that the taxpayer won $1,000 from playing poker with friends during the course of the year.

REQUIRED

(1) What legal right given by the Act does the CRA have to dispute Mr. Godfather’s signed declaration of income?

(2) What will the CRA argue is the income of Mr. Godfather for 2015?

(3) What are the possible arguments available to him to substantiate a lower income figure?