Date: 20020730
Docket: 2002-148-IT-I
BETWEEN:
GARY C. STEELE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
O'Connor, J.T.C.C.
[1] These appeals relate to the 1996, 1997 and 1998 taxation years and the issues are what expenses are to be allowed to the Appellant in the calculation of rental losses in those years. At the hearing the Appellant and his wife and the auditor for Canada Customs and Revenue Agency ("CCRA") reviewed Exhibits A, B and C to the Reply to the Notice of Appeal, which Exhibits are attached to and form part of these Reasons.
[2] At the hearing certain items were conceded by the Appellant and it was agreed that, where a particular expense is to be allowed, it will only be the percentage thereof shown in the last column of the said Exhibits.
[3] The following sets forth the items conceded or agreed to and my judgment on the remaining items.
Exhibit A
With respect to maintenance and repairs it was conceded by the Appellant that the siding and soffit expense in the amount of $3,832.85 is indeed a capital amount and is not to be allowed as an expense. Consequently the figure to be allowed as a deductible expense is 53% of $155.25 or $82.28.
With respect to the microwave island, $69.97, the mattress, posture bed, $159.00 and the VCR $346.14, I allow 100% of the mattress, posture bed and 53% of the other two items for a total of $379.53 instead of the figure $575.11.
The result is that the total of the allowable maintenance and repairs expenses is $82.28 + $ 379.53 or $461.81.
With respect to the personal items, namely lawn spinner and pool, $144.82, water pump for pool, $83.93, and telephone and batteries, $59.63, I allow the percentages indicated and therefore a total deductible expense of $180.86.
With respect to other items - wrong year, the amount $4.82 is to be allowed for the 1997 year and is therefore removed from the 1996 year as a deductible expense. Also the figure $20.97 was an expense in the 1995 year and is therefore also to be removed as a deductible expense in 1996.
The total food expenses in each year will be dealt with separately at the end of the analysis of Exhibits A, B and C.
Exhibit B
With respect to maintenance and repairs I allow 53% of the total windows expense, i.e. 53% of $815.17 or $432.04. The windows were broken and, in my opinion, the entire cost of the repair and not only the cost of replacing windowpanes should be allowed as a legitimate repair expense.
The carpet, $516.70 and floor underlay $59.79, in my opinion, constitute capital items and are not to be allowed as an expense.
With respect to the dryer, $582.51, the lazy-boy, $819.25 and the sofa-recliner, $1,658.30 the Appellant concedes that these are capital items and are not to be allowed as deductible expenses.
However, I allow 53% of the lamp expense $144.88 and of the TV/VCR stand, $217.35, i.e. 53% of $362.23 or $191.98 as a deductible expense.
The bird feeder, $29.82 has either been conceded or simply is a capital item and is not to be allowed.
With respect to the personal items totalling $1,100.96, the details of which are shown on page 2 of Exhibit B, in my opinion, it is reasonable to allow all of those items at the percentages shown in the last column on page 2 of Exhibit B. Consequently the total of the items to be allowed as a deductible expense is $638.32.
Also to be allowed as deductible expenses in 1997 are the $4.82 amount mistakenly shown as a 1996 expense and the $19.87 expense mistakenly shown as a 1998 expense.
Exhibit C
I allow the mattress expenses of $672.72 and $181.44 and 53% of the vacuum cleaner, $344.97, and 53% of the air conditioner, $379.30. Thus in respect of all these items a total of $1,238.02 is to be allowed as a deductible expense.
With respect to the "personal" items, I would allow all of them at the percentages shown in the last column of Exhibit C. Consequently the total of the "personal" items to be allowed as a deductible expense is $725.44.
With respect to other items disallowed, the $19.87 has been taken back to the 1997 year and consequently is not to be allowed as an expense in 1998.
Further I am satisfied that the $28.68 figure for Giant Tiger and the $33.35 for LDS waterproof are acceptable expenses and 53% thereof is to be allowed. Thus the figure to be allowed is $32.87.
With respect to the unvouchered amount of $471.44, the Appellant has conceded that this is not an allowable expense.
Food Expenses
The Appellant's agent points to the three lease agreements filed as Exhibits A-1 which indicate that the $450.00 monthly rent includes heat, hydro, telephone, cable, groceries and sundries and argues that the amounts claimed for food expenses of $1,993, $2,117 and $3,031.60 in the 1996, 1997 and 1998 years respectively should be allowed.
By way of background the Appellant's daughter Stephanie, who was born in 1977 left the family home of her own volition and became a single mother. Thereafter she decided to move back into the family home and occupy part thereof. Her parents indicated to her that it would have to be on a fair market rental basis for the space that she would occupy. The figure of $450 was arrived at and it was not contested by the respondent. The question remains however as to whether the food expenses in each of the years is a permitted deductible expense. The Appellant's wife pointed out that in years prior to the rental to their daughter she had rented out certain rooms to students on a room and board basis and the amounts allocated as to food were never questioned by the Minister of National Revenue.
However the general rule is that food expenses are considered personal and are not deductible.
In the case of Valldolid v. R., 2001 DTC 696, Mogan, T.C.J. in relatively similar circumstances to those in these appeals distinguished between the rental operations and the food operation and with respect to food supplied to family members of the Appellant in that case, he concluded that the Appellant was providing subsidized meals to part of her family and in essence did not allow the deduction of the loss caused by the food expenses. I have reviewed other cases dealing with the deduction of food expenses and although there is some authority to the effect that providing room and board to strangers may justify the deduction of food expenses, I was unable to find any authority to the effect that food expenses in relation to a person's daughter can be considered as a deductible expense. Consequently the food expenses claimed in each of the three years are not deductible.
[4] In conclusion the appeals are allowed to the extent set forth above. There shall be no costs.
Signed at Ottawa, Canada, this 30h day of July, 2002.
"T. O'Connor"
J.T.C.C.
COURT FILE NO.: 2002-148(IT)I
STYLE OF CAUSE: Gary C. Steele v. Her Majesty the Queen
PLACE OF HEARING: Belleville, Ontario
DATE OF HEARING: July 3, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge T. O'Connor
DATE OF JUDGMENT: July 30, 2002
APPEARANCES:
Agent for the Appellant: Arthur Lucas
Counsel for the Respondent: Marlyse Dumel
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
Gary A. Steele
Amounts under appeal
1996
EXHIBIT A
|
|
Gross Exp |
Rental % |
|
Maintenance and Repairs |
|
|
|
|
|
|
|
Items disallowed - capital |
Class 1 |
|
|
Door awning |
$ 75.00 |
53% |
|
Material and labour re awning |
80.25 |
53% |
|
Siding and soffit |
3,832.85 |
53% |
|
|
$ 3,988.10 |
|
|
|
Class 8 |
|
|
Microwave island |
$ 69.97 |
53% |
|
Mattress, posture bed |
159.00 |
100% |
|
VCR |
346.14 |
53% |
|
|
$ 575.11 |
|
|
Total of capital items disallowed - gross amounts - classes 1 & 8 |
$ 4,563.21 |
|
|
Other items disallowed - personal |
|
|
|
Lawn spinner & pool |
$ 144.82 |
53% |
|
Water pump for pool |
83.93 |
53% |
|
Telephone and batteries |
59.63 |
100% |
|
|
$ 288.38 |
|
|
Other items disallowed - wrong year |
|
|
|
Mini blind (1997) |
$ 4.82 |
100% |
|
Scatter mats (1995) |
20.97 |
100% |
|
|
$ 25.79 |
|
|
Total of other items disallowed - gross amounts |
$ 314.17 |
|
|
Total maintenance & repairs expenses under appeal - gross amounts |
$ 4,877.38 |
Various |
|
Office expenses (food) |
|
|
|
|
|
|
|
Total food expenses under appeal |
$ 1,993.00 |
100% |
|
|
|
|
|
TOTAL UNDER APPEAL - gross amounts - 1996 |
$ 6,870.38 |
|
|
|
Gary A. Steele
Amounts under appeal
1997
EXHIBIT B
|
|
Gross Expense |
Rental % |
|
Maintenance and Repairs |
|
|
|
|
|
|
|
Items disallowed - capital |
Class 1 |
|
|
Carpet - family room |
$ 516.70 |
53% |
|
Floor underlay |
59.79 |
53% |
|
Windows |
650.00 |
53% |
|
Windows |
165.17 |
53% |
|
|
$ 1,391.66 |
|
|
|
Class 8 |
|
|
Lamp |
$ 144.88 |
53% |
|
Dryer |
582.51 |
53% |
|
TV/VCR stand |
217.35 |
53% |
|
Lazy-boy |
819.25 |
53% |
|
Sofa-recliner |
1,658.30 |
53% |
|
|
$ 3,422.29 |
|
|
Total of capital items disallowed - gross amounts - classes 1 & 8 |
$ 4,813.95 |
|
Other items
|
Other items disallowed - wrong year |
|
|
|
Bird feeder (1996) (also personal) |
$ 29.82 |
53% |
|
Total of other items disallowed - personal - see page 2 for details of items disallowed |
$ 1,100.96 |
various |
|
Total of other items disallowed - gross amounts |
$ 1,130.78 |
|
|
Total maintenance & repairs expenses under appeal - gross amounts |
$ 5,944.73 |
various |
Office expenses (food)
|
Total food expenses under appeal |
$ 2,117.00 |
100% |
|
TOTAL UNDER APPEAL - gross amounts - 1997 |
$ 8,061.73 |
|
Gary A. Steele
Amounts under appeal
1997
EXHIBIT B
|
|
Gross Expense |
Rental % |
|
Maintenance and Repairs (cont'd) |
|
|
|
|
|
|
|
Other items disallowed - personal - see page 1 |
|
|
|
Fan |
$ 20.69 |
100% |
|
Pans, face cloth, aluminum foil |
69.26 |
53% |
|
Gate |
49.99 |
100% |
|
Dishcloths |
3.44 |
53% |
|
Pillow |
45.94 |
100% |
|
Pliers |
35.47 |
53% |
|
Dishwasher drying solution, sink mat |
17.84 |
53% |
|
Cookware set |
91.97 |
53% |
|
Kitchen utensils - 'pampered chef' |
51.75 |
53% |
|
Candle, ibuprofen (OTC medication) |
12.20 |
53% |
|
Paper towels, hand mixer, sink caddy |
72.40 |
53% |
|
BBQ brush, paper towels |
11.85 |
53% |
|
Pans, ladle, paper towels |
29.57 |
53% |
|
Cookie pan, paper towels |
15.39 |
53% |
|
Roaster |
2.29 |
53% |
|
Pans, wastebasket |
33.30 |
53% |
|
Analgesic (OTC medication), pans |
41.46 |
53% |
|
Kitchen Tools |
13.77 |
53% |
|
Bathroom tissue, pan, blankets |
42.76 |
53% |
|
Analgesic (OTC medication), pans |
11.86 |
53% |
|
Roaster |
22.99 |
53% |
|
Utensil rack, pans |
10.33 |
53% |
|
Bathroom tissue |
9.36 |
53% |
|
Tablecloth, pool light |
10.15 |
53% |
|
Cookware, set |
11.47 |
53% |
|
2 x 20 piece flatware, 1 scumbuster |
114.67 |
53% |
|
Kitchen utensils, CO2 detector, Bounty |
67.86 |
53% |
|
Outdoor light set, soap, flowers |
55.10 |
53% |
|
Face cloths, bathroom tissue |
15.46 |
53% |
|
Foam plates, tablecover |
10.72 |
53% |
|
Electrical tape, cords |
6.87 |
53% |
|
Furnishings, |
92.78 |
53% |
|
|
|
|
|
Total other items disallowed - personal - see page 1 |
$ 1,100.96 |
|
Page 2
Gary A. Steele
Amounts under appeal
1998
EXHIBIT C
|
|
Gross Exp |
Rental % |
|
Maintenance and Repairs |
|
|
|
|
|
|
|
Items disallowed - capital |
Class 8 |
|
|
Mattress |
$ 672.72 |
100% |
|
Mattress |
181.44 |
100% |
|
Vacuum cleaner |
344.97 |
53% |
|
Air conditioner |
379.30 |
53% |
|
Total of capital items disallowed - gross amounts - class 8 |
$ 1,578.43 |
|
|
Other items disallowed - personal |
|
|
|
Tablecloth, flowers, beachtowel, etc |
$ 73.49 |
53% |
|
Plates |
34.29 |
53% |
|
Hamper |
27.58 |
53% |
|
Cake pans |
33.33 |
53% |
|
Cake pan |
9.19 |
100% |
|
2 photo frames |
14.33 |
100% |
|
Mattress pad |
100.53 |
100% |
|
Roasting pan |
34.47 |
53% |
|
Dinnerware |
51.72 |
53% |
|
Cookware, spoons, ladle |
135.71 |
53% |
|
Fan, kitchen organisers |
96.52 |
53% |
|
pillows |
22.99 |
100% |
|
Frosty mug, broom |
10.27 |
53% |
|
Silverware |
31.01 |
53% |
|
Disney clock |
119.06 |
53% |
|
Bedding |
111.44 |
100% |
|
Pillow |
45.98 |
100% |
|
Comforter bottom |
45.91 |
100% |
|
Pillows |
22.99 |
100% |
|
Cups |
8.94 |
100% |
|
|
$ 1,029.75 |
|
|
Other items disallowed - wrong year, missing date/detail |
|
|
|
1997 - LDS Waterproof |
$ 33.35 |
53% |
|
No date |
19.87 |
100% |
|
Giant Tiger - no detail |
28.68 |
53% |
|
|
$ 81.90 |
|
|
Other items - unvouchered amounts |
$ 471.44 |
53% |
|
Total of other items disallowed - gross amounts |
$ 1,583.09 |
|
|
Total maintenance & repairs expenses under appeal - gross amounts (carried forward to page 2) |
$ 3,161.52
|
Various |
Gary A. Steele
1998
EXHIBIT C
|
Total maintenance & repairs expenses under appeal - gross amounts (from page 1) |
$ 3,161.52 |
various |
Office expenses (food)
|
Total food expenses under appeal |
$ 3,031.60 |
100% |
|
TOTAL UNDER APPEAL - gross amounts - 1998 |
$ 6,193.12 |
|
Page 2
2002-148(IT)I
BETWEEN:
GARY C. STEELE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on July 3, 2002 at Belleville, Ontario, by
the Honourable Judge Terrence O'Connor
Appearances
Agent for the Appellant: Arthur Lucas
Counsel for the Respondent: Marlyse Dumel
____________________________________________________________________
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1996, 1997 and 1998 taxation years are allowed, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment to the extent of and in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 30th day of July, 2002.
|
"T. O'Connor" |
J.T.C.C.