Date: 20021002
Docket: 2002-1746-IT-I
BETWEEN:
ROBERT DEBOU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowie J.
[1] The Appellant is a lawyer who lives in Richmond, B.C., and has his office in West Vancouver. His practice is largely in the field of litigation and it takes him to courthouses and various other locations all over the lower mainland, and occasionally to the interior of B.C. He is appealing to this Court from reassessments of his income tax for the years 1998 and 1999. Initially, he disputed the disallowance of the expenses that he had claimed for advertising and promotion, meals and entertainment, motor vehicle expenses and travel. At the beginning of the hearing he abandoned his claims for advertising and promotion and for meals and entertainment.
[2] The dispute with respect to travel expense involves three trips in the year 1999. Two of these were to Osoyoos, B.C. in connection with a personal injury claim in which he initially expected to act for the plaintiff. The other was a trip to Calgary, Alberta where he consulted a computer technician in whom he had exceptional confidence in connection with a crash of his personal organizer, and the consequential potential loss of data, and also in connection with some difficulties encountered with his laptop computer.
[3] The Appellant made the first trip to Osoyoos at a time when he thought that he would be retained by a young man who had been seriously injured while in Vancouver. He did some investigation there, and hired a private investigator to do more. He did not have a signed retainer, but it would appear that he and the young man did have a solicitor-client relationship. Eventually other counsel was retained, and the Appellant did not recover his expenses from the client. The Respondent opposed the deduction of the cost of this trip on the basis that it should be regarded as a debt due from the client. I do not agree. There does not appear to have been any agreement by the client to pay these expenses and he was never billed for them. The case, had it been conducted by the Appellant, would have been on a contingent-fee basis. The trip to do some basic investigation and to seek the retainer was a legitimate expense of the Appellant's business. The Appellant made the second trip to Asoyus to attempt to get a retainer signed by this same individual. Counsel for the Respondent accepted during the hearing that this was a legitimate business expense. In my view both these trips were.
[4] The Appellant's trip to Calgary was also made for a legitimate business purpose. The fact that he took the trip, and the purpose of it, were not seriously challenged during the hearing. It might be argued that it is not reasonable to go from Vancouver to Calgary to consult a particular computer consultant about a personal organizer and a laptop computer. However, the Minister has not pleaded section 67 of the Income Tax Act. Moreover, I do not think it can be said that this expense is one that no reasonable businessperson would make.[1] It is not for either the Minister of National Revenue or the Court to tell the Appellant where to get technical service for his computer. The Appellant's travel expenses should be allowed as claimed by him.
[5] I turn now to the Appellant's claim for motor vehicle expenses. The Appellant has placed himself at a considerable disadvantage in respect of this issue by not maintaining a contemporaneous log of his vehicle use. The amounts he claimed for business use are $8,743 for 1998 and $13,499 for 1999. These amounts were based on the total use of one vehicle, as the Appellant uses one vehicle for his work, including commuting between his home and his office, and has another vehicle that is used for travel that is not related to his business. The Minister allowed 50% of the amount claimed in each year, on the basis that the use of the vehicle is divided evenly between commuting from home to the office and travel from the office, or home, to a courthouse, client's home or office, or some other work place. The Appellant testified that prior to the hearing before me he had gone through all of his client billing sheets for the years under appeal and had calculated the mileage driven by him on business, and had thereby established that the ratio of business to non-business use was 80% in each year. However this ratio is predicated on the assumption that when he went out of his way to pick up his secretary or his legal assistant on the way to the office, as he often did, then the trip was a deductible one. Excluding these trips yielded a ratio of slightly less than the 50% that the Minister allowed. The Appellant concedes that his numbers are estimates, but he maintains that they are conservative estimates. It appears to me that when the personal use for travel to the place of work and back is excluded the 50% allowed by the Minister is a reasonable estimate, and certainly more in line with reality than the 80% claimed by the Appellant.
[6] At the hearing, the Minister sought to exclude from the automobile expense total the amount of repairs made to a vehicle that the Appellant had taken in payment of an unpaid debt, on the basis that it was for repairs which were of such a substantial nature that they should be capitalized. However, this amount, as I understand it, had been allowed by the Minister in his assessment, and had not been put in issue in the appeal; in any event, I do not have sufficient evidence before me to determine that the outlay was on capital rather than current account. The Appellant has failed to discharge the onus disproving the Minister's assumption, specifically pleaded, that his motor vehicle expenses incurred to earn income did not exceed $4,371.50 in 1998 and $6,749.50 in 1999. The appeal fails on this issue.
[7] In the result, then, the appeal for 1998 is dismissed. The appeal for 1999 is allowed, and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to deduct the full amount claimed by him for travel expense. There will be no costs to either party.
Signed at Ottawa, Canada, this 2nd day of October, 2002.
|
"E.A. Bowie" |
J.T.C.C.
COURT FILE NO.: 2002-1746(IT)I
STYLE OF CAUSE: Robert Debou and
Her Majesty the Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: September 27, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge E.A. Bowie
DATE OF JUDGMENT: October 2, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Ron D.F. Wilhelm
COUNSEL OF RECORD:
For the Appellant:
Name: N/A
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-1746(IT)I
BETWEEN:
ROBERT DEBOU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on September 27, 2002, at Vancouver, British Columbia, by
the Honourable Judge E.A. Bowie
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Ron D.F. Wilhelm
JUDGMENT
The appeal from the assessment of tax made under the Income Tax Act for the 1998 taxation year is dismissed.
The appeal from the assessment of tax made under the Act for the 1999 taxation year is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to deduct the full amount claimed by him for travel expense.
There will be no costs to either party.
Signed at Ottawa, Canada, this 2nd day of October, 2002
|
"E.A. Bowie" |
J.T.C.C.