Tremblay v. The Queen

Tremblay v. The Queen Court (s) Database Tax Court of Canada Judgments Date 2005-01-11 Neutral citation 2005 TCC 16 File numbers 2004-2694(IT)I Judges and Taxing Officers Paul Bédard Subjects Income Tax Act Decision Content Docket: 2004-2694(IT)I BETWEEN: GAÉTAN TREMBLAY, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeals heard on November 23, 2004, at Chicoutimi, Quebec. Before: The Honourable Justice Paul Bédard Appearances: For the Appellant: The Appellant himself Counsel for the Respondent: Annick Provencher ____________________________________________________________________ JUDGMENT The appeals from the assessments established under the Income Tax Act for the taxation years 2000 and 2001 are dismissed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 11th day of January 2005. "Paul Bédard" Bédard J. Translation certified true on this 12th day of April 2005 Elizabeth Tan, Translator Citation: 2005TCC16 Date: 20050111 Docket: 2004-2694(IT)I BETWEEN: GAÉTAN TREMBLAY, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Bédard J. [1] These appeals, filed under the informal procedure, concern expenses in the amounts of $6,116 and $16,314 claimed by the Appellant for the taxation years 2000 and 2001 respectively, which were refused by the Minister of National Revenue (the "Minister"), as stated in detail in Appendix II, attached to the Reply to the Notice of Appeal. [2] In establishing new assessments, dated August 5, 2004, for the taxation years 2000 and 2001, the Minister relied on the following assumptions of fact: [translation] (a) In his income tax returns for the taxation years 2000 and 2001, the Appellant claimed the following gross and net incomes from commission: (admitted) Description 2000 2001 Gross income from commission $39,796 $48,999 Net income from commission $20,683 $15,864 (b) The statement of professional activities attached to the income tax report for the taxation years 2000 and 2001 indicated "financial advisor" as the profession; (admitted) (c) During the taxation years in question, the Appellant was the only shareholder of the company 9046-6871 Québec Inc., which is mentioned in paragraph 1 of the Notice of Appeal (hereinafter called the "Company"); (denied as written) (d) During the taxation years in question, the Appellant was also the sole administrator of the Company; (denied as written) (e) The Company's fiscal year ended December 31 of each year; (admitted) (f) The Company did not produce income tax reports for the taxation years 2000 and 2001; (denied as written) (g) The Minister's auditor performed an audit of the expenses regarding the income from commission claimed by the Appellant; (admitted) (h) Following his audit, the auditor refused some of the Appellant's expenses from commissions for the taxation years 2000 and 2001; (no knowledge) (i) Moreover, based on the information provided, the Minister's auditor estimated that the "business" use of his vehicle was 62% for the taxation years 2000 and 2001; (no knowledge) (j) The Appellant did not show that the respective amounts of $6,116 and $16,314, which he claimed as commission expenses for the taxation years 2000 and 2001, and which the Minister refused, were incurred to generate business income or income from property (see detail in Appendix II [of the Reply to the Notice of Appeal]. (no knowledge) [3] Although he denied the Minister's presumptions as written in subparagraphs (c), (d) and (f), the Appellant admitted that he was the sole administrator and shareholder of 9046-6871 Québec Inc. (Québec Inc.) for the period May 1, 2001, to December 31, 2001. As for subparagraph (f), the Appellant testified that Québec Inc. produced its income tax reports on the date of the hearing, for the taxation years 2000 and 2001, and that assessments had been issued regarding these years. [4] It must be noted that the only points the Appellant contested were regarding the following expenses[1] claimed by the Appellant in the calculation of income for the taxation year 2001: (i) secretary's fees: $7,937; (ii) rent: $3,069; (iii) telephone and public services: $1,864. $3,069 expense for rent [5] The evidence showed the following: (i) starting May 1, 2001, the Appellant began renting half of the main floor of a commercial building in Chicoutimi. This building belonged to Immeuble Berlap Enr. ("Berlap"). The Appellant rented this space to carry out his duties as financial advisor. The parties signed the lease in April 2001; (ii) under the terms of the lease (Exhibit A-1), the Appellant agreed to pay rent in the amount of $3,069 for the period beginning May 1, 2001, and ending December 31, 2001; (iii) this expense for rent ($3,069) was paid by Québec inc., not the Appellant; (iv) during this period, the Appellant was the sole shareholder and administrator of Québec inc.; (v) Québec Inc. had deducted this $3,069 expense in the statement of activities (Exhibit A-3) for its fiscal year ending December 31, 2001. This expense appears under "cost of goods sold;"[2] (vi) this $3,069 was included in the Appellant's income from commission of $29,605.87 from Québec Inc. for the taxation year 2001; (vii) the Appellant had claimed the $3,069 deduction of this expense from his $29,605.87 income from commission for his taxation year 2001, although he did not pay Berlap the rent himself in 2001. [6] The Minister denied this expense for the simple reason that he did not incur or pay this expense. [7] Essentially, the Appellant claimed that the end result of these operations should be the same as if Québec Inc. had paid him $3,069 as commission and then he personally paid Berlap the $3,069 in rent. [8] In my opinion, the Appellant's theory would mean he paid an expense, whereas in this case, the Appellant simply did not pay the expense in question. I therefore find that the Appellant could not deduct this expense in the calculation of his income from commission for the taxation year 2001. Expenses for secretary's fees ($7,937) and telephone and public services ($1,864) [9] Since the evidence showed that these expenses were handled in the same way as the expenses for rent, for the income calculation of both Québec Inc. and the Appellant, I find that the Appellant could not deduct such expenses in the calculation of his income from commission for the taxation year 2001 because he simply did not pay them. [13] The appeals are therefore denied. Signed at Ottawa, Canada, this 11th day of January 2005. "Paul Bédard" Bédard J. Translation certified true on this 12th day of April 2005. Elizabeth Tan, Translator REFERENCE: 2005TCC16 COURT FILE NUMBER: 2004-2694(IT)I STYLE OF CAUSE: Gaétan Tremblay and H.M.Q. PLACE OF HEARING: Chicoutimi, Quebec DATE OF HEARING: November 23, 2004 REASONS FOR JUDGMENT BY: The Honourable Justice Paul Bédard DATE OF JUDGMENT: January 11, 2005 APPEARANCES: For the Appellant: The Appellant himself Counsel for the Respondent: Annick Provencher COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: John H. Sims Deputy Attorney General of Canada Ottawa, Canada [1] See Appendix II attached to the Reply to the Notice of Appeal. [2] This $3,069 expense was included in the $29,605.87 (Gaétan Tremblay Comm.) that appeared under "Cost of goods sold."