Date: 20000228
Docket: 98-651-IT-I
BETWEEN:
JEFF CRAWFORD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Lamarre, J.T.C.C.
[1] These are appeals, filed under the informal procedure, from assessments made by the Minister of National Revenue ("Minister") under the Income Tax Act ("Act") in respect of the appellant's 1994, 1995 and 1996 taxation years.
[2] In computing his income for those years, the appellant claimed employment expenses as follows:
1994, 1995, 1996 Employment Expenses Claimed
Description 1994 1995 1996
Accounting & Legal $ 75.00 $ 250.00 $ 214.00
Long distance telephone 567.98
Food, beverages 341.86 206.95
Clothing 249.40
Supplies 154.34
Work space in the home 7,757.29 951.99 899.57
Automobile expenses 3,379.88 3,164.52 2,716.53
Totals $11,780.15 $4,957.77 $4,191.39
[3] The Minister disallowed all the expenses claimed by relying on the facts set forth in paragraphs 7, 8, 9 and 10 of the Reply to the Notice of Appeal. These paragraphs read:
7. In so reassessing the Appellant, the Minister made the following assumptions of fact:
. . .
(b) the Appellant works full-time for the City of Ottawa;
(c) during the 1994, 1995 and 1996 taxation years, the Appellant was a volunteer fireman with the Kemptville Fire Department;
(d) at no time relevant to this appeal was the Appellant an employee of the Kemptville Fire Department;
(e) during the 1994, 1995 and 1996 taxation years, a fixed allowance, determined by the number of fires and training sessions/courses which he attended, was paid to the Appellant by the Kemptville Fire Department for expenses incurred by him in the discharge of his duties as a volunteer fireman;
(f) the Kemptville Fire Department did not withhold source deductions from the fixed expense allowances paid to the Appellant;
(g) the Appellant received from the Kemptville Fire Department the gross amounts of $2,118.48 in 1994, $1,865.13 in 1995 and $2,570.52 in 1996, as expense allowances for expenses incurred by him in the discharge of his duties as a volunteer fireman;
(h) the Kemptville Fire Department exempted from the Appellant's income the expense allowance paid to him up to the maximum of $500.00 per year pursuant to subparagraph 6(1)(b)(iii) (sic) of the Income Tax Act (the "Act");
(i) the Appellant included in the computation of his income for tax purposes the net amounts of $1,618.48 in 1994, $1,365.13 in 1995 and $2,070.52 in 1996;
(j) with the exception of the expense allowances referred to in subparagraph 7(c) (sic) above, the Appellant was not in receipt of any salary, wages or other remuneration from the Kemptville Fire Department in respect of the discharge of his duties as a volunteer fireman;
(k) the Appellant claimed the amounts of $11,780.15 in 1994, $4,957.77 in 1995 and $4,191.39 in 1996, as employment expenses incurred by him in respect of the discharge of his duties as a volunteer fireman;
(l) the said employment expenses referred to in subparagraph 7(k) above were disallowed as they were not made or incurred by the Appellant for the purpose of gaining or producing income in respect of the discharge of his duties as a volunteer fireman;
(m) the Appellant is not entitled to deduct the said employment expenses in the said amounts as referred to in subparagraph 7(k) above.
8. The Minister submits that accounting, legal, long distance calls, clothing, food and beverages are not deductible pursuant to subsection 8(2) of the Act.
9. The Minister submits that the Appellant does not require a work space at home and the expenses claimed are not reasonable.
10. The Minister submits that the automobile business portion rates of 68%, 58% and 56% in 1994, 1995 and 1996, respectively, are unjustified and unreasonable.
[4] At the hearing, counsel for the respondent advised the Court that she accepted the fact that during the years at issue the appellant was in receipt of income from an office or employment pursuant to subsection 5(1) of the Act, which income was paid by the Kemptville Fire Department with respect to the discharge of his duties as a volunteer fireman.
[5] The respondent submits however that the appellant is not entitled to deduct the expenses claimed on the basis that those expenses were not made or incurred by the appellant for the purpose of gaining or producing income in respect of the discharge of his duties as a volunteer fireman and therefore are not allowable expenses pursuant to subsection 8(1) of the Act. More particularly, the respondent submits that (1) the accounting, legal, long distance telephone call, clothing, and food and beverage expenses claimed are not deductible pursuant to subsection 8(2) of the Act, (2) the appellant was not required to supply a work space at home, and (3) the automobile business portion amounts allocated for each year were excessive.
[6] The appellant admits that he is not entitled to deduct any accounting and legal expenses. He submits, however, that he can claim all the other expenses.
[7] The appellant and Mr. Timothy Gordon Bond, the fire chief for the Kemptville Fire Department, testified.
[8] Mr. Bond explained the duties of Captain Crawford, the appellant. He filed in evidence a document dealing with the duties of a captain (Exhibit R-1). That document reads as follows:
CAPTAIN
GENERAL STATEMENT OF DUTIES:
Has responsible charge of an assigned fire company and does the related work as required.
DISTINGUISHING FEATURES OF THE RANK:
This is supervisory work involving responsibility for directing the activity of a fire company at an emergency scene or around the fire station. The work is done in accordance with established policies and requires the exercise of good judgment in emergency situations. The captain responds to emergency calls assigned to his/her company and assumes command until relieved by a senior officer.
EXAMPLES OF WORK:
• responds to alarms assigned to his/her company
• assigns personnel to lay out and connect hose lines and nozzles, turn water on and off, direct hose streams, raise ladders, ventilate buildings, perform salvage, perform rescue operations, stabilize hazardous materials scenes and any other life and property saving functions which the department may be involved in
• inspects the fire scene to prevent re-ignition
• supervises the cleaning, checking and replacement of tools and equipment after an emergency
• supervises the work of the fire fighters to ensure that it is done safely and in accordance with established procedures
• inspects equipment, grounds and station to insure proper order and condition
• reports deficiencies to the deputy fire chief
• maintains discipline
• trains and drills fire fighters
• maintains a record of training activities
• meets on a regular basis with the fire chief and deputy chief to discuss the overall operation of the department
• any other duties as assigned by fire chief
REQUIRED KNOWLEDGE, SKILL AND ABILITIES:
• good knowledge of modern fire fighting and fire prevention methods
• good knowledge of the municipality and surrounding areas protected by agreement
• good knowledge of the type of buildings in his/her assigned area
• good knowledge of rescue and first aid procedures
• good knowledge of safety procedures, rules and equipment
• must have the ability to supervise fire fighters, maintain discipline, have sound judgment, be resourceful and in good physical condition
EXPERIENCE AND TRAINING:
Should have at least five years satisfactory experience as a fire fighter and have received additional training at regional fire schools or educational seminars.
WORKING CONDITIONS:
The captain will be expected to respond and work in all types of weather and less than ideal conditions. He/she could have to enter hazardous atmospheres and areas and will be expected to work in a safe manner.
[9] Mr. Bond said that, in practice, firefighters are called out to fires by pagers. They have to go directly to the emergency scene or to the fire hall, whichever is closer, from wherever they are when they receive the call. If they go directly to the fire scene, they use their own means of transportation. Once there, they direct the operations in the field until the other fire fighting personnel arrives.
[10] The captain's duties also require him to train inexperienced members. The captain also does research on and carries out projects with respect to safety programs. That includes giving courses on fire prevention at the fire hall for the benefit of schools, nursing homes and hospitals.
[11] While firefighters are not required to have a cellular phone or to work at home, having a cellular phone and working at home are both useful. Indeed, a firefighter can be reached on his cellular phone if he gives his number to the fire station. It is also useful for the captain to work at home since the fire hall does not have the necessary space. In cross-examination, Mr. Bond acknowledged that there was a very large meeting room and a kitchen at the fire hall, but he said that it was more convenient for the captain to prepare his courses at home.
[12] Mr. Bond testified that firefighters would only occasionally be required to work more than 12 hours away from the municipality of Kemptville. He also said in cross-examination that total calls per year would average between 160 and 180 and that there were not more than a half dozen calls per year outside the area of the municipality of Kemptville, which covers approximately 150 square miles.
[13] Mr. Bond explained that all volunteer firefighters are paid on a "split system". For example, according to Exhibit R-2, the municipality of Kemptville allowed an honorarium amount of $40,000 for the year 1999 for all the volunteer firefighters. That amount was split among the firefighters in accordance with the total points accumulated by each of them. For one hour or less of work, the fire fighter gains one point. On top of that, officers in command, like the appellant, receive a separate cheque in the amount of $850 per year. Mr. Bond testified that the same "split system" existed during the years at issue.
[14] Mr. Bond acknowledged having signed the Form T2200 that the appellant filed with his tax returns (Exhibit R-3). On that form, Mr. Bond indicated that the Kemptville Volunteer Fire Department ("employer") (1) normally required the appellant to work away from its place of business, (2) required the appellant to pay his own expenses, (3) required the appellant to be away for at least 12 hours from the area of the municipality of Kemptville, and (4) paid the appellant by commissions according to the volume of contracts negotiated. Mr. Bond also stated in that declaration that the appellant was required to pay for vehicle expenses, meals and an office at home and that the employee did not receive an allowance or a repayment for those expenses paid to earn employment income. It is also indicated in the declaration that the appellant was required under a contract of employment to use a portion of his home as an office and to pay for supplies that he used directly in his work.
[15] Mr. Bond said that he did not himself fill in that declaration for each year at issue but that he had read it carefully the first time he signed it. He said that he did not have a good knowledge of the provisions of the Act but he thought that he had answered the questions legitimately.
[16] In cross-examination, however, Mr. Bond clearly stated that it was not mandatory to have a cellular phone. He also said that he could not dictate that an officer or a captain use space at home as an office, although that was certainly more convenient, because they would have asked to be reimbursed and the municipality did not have the budget for that. As for supplies, Mr. Bond said that, other than personal clothing they may have to wear when they go directly to the scene of a fire, firefighters are not required to furnish any supplies for work.
[17] With respect to the use of vehicles, Mr. Bond testified that there was no requirement for firefighters to use their own car but they were expected to go to the scene of the fire or to the fire hall, whichever was closer, by their own means of transportation. If firefighters use their own car and file a sheet for kilometers driven in the course of their work, the Kemptville Fire Department will reimburse them.
[18] The appellant testified that he finished the basement in his house, making an office where he keeps a computer and some files. He also said that he built a garage to park his truck and his car.
[19] In 1994, he claimed home expenses in a proportion of 49% with respect to work. That proportion was reduced to 17% in 1995 and raised to 24% in 1996.
[20] During the years at issue, the appellant worked for the City of Ottawa and as a volunteer firefighter for the municipality of Kemptville. He said he has worked 500 to 600 hours per year in his house for the municipality of Kemptville without being paid. Very rarely, he would meet people at his home for work purposes. In Form T2200, he declared that he drove 33,152 kilometres in 1994, 29,602 kilometres in 1995 and 28,512 kilometres in 1996 for the municipality of Kemptville. He also said that he lives six miles from the Kemptville Fire Hall. In cross-examination, he was not able to explain all the kilometers claimed on the form. He could not explain either why he claimed $154 for supplies in 1996 and nothing in the previous years. He could not explain why he claimed $567.98 for long distance telephone calls in 1994 and nothing for 1995 and 1996. Contrary to what Mr. Bond stated, the appellant said that he had had to work for more than 12 hours on several occasions.
Analysis
[21] The relevant sections of the Act are the following:
Inclusions
SECTION 6: Amounts to be included as income from office or employment.
(1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:
86(1)(b)w
(b) Personal or living expenses – all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except
. . .
(vii) reasonable allowances for travel expenses (other than allowances for the use of a motor vehicle) received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling away from
(A) the municipality where the employer's establishment at which the employee ordinarily worked or to which the employee ordinarily reported was located, and
(B) the metropolitan area, if there is one, where that establishment was located,
in the performance of the duties of the employee's office or employment,
(vii.1) reasonable allowances for the use of a motor vehicle received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling in the performance of the duties of the office or employment,
(viii) such part of the total of allowances received by a person who is a volunteer fireman from a government, municipality or other public authority for expenses incurred by the person in respect of, in the course of, or by virtue of the discharge of the person's duties as a volunteer fireman, as does not exceed $500,
. . .
and, for the purposes of subparagraphs (v), (vi) and (vii.1), an allowance received in a taxation year by a taxpayer for the use of a motor vehicle in connection with or in the course of the taxpayer's office or employment shall be deemed not to be a reasonable allowance
(x) where the measurement of the use of the vehicle for the purpose of the allowance is not based solely on the number of kilometres for which the vehicle is used in connection with or in the course of the office or employment, or
(xi) where the taxpayer both receives an allowance in respect of that use and is reimbursed in whole or in part for expenses in respect of that use (except where the reimbursement is in respect of supplementary business insurance or toll or ferry charges and the amount of the allowance was determined without reference to those reimbursed expenses);
Deductions
SECTION 8: Deductions allowed.
(1) In computing a taxpayer's income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:
88(1)(h)w
(h) Travel expenses – where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and
(ii) was required under the contract of employment to pay the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the office or employment, except where the taxpayer
(iii) received an allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing the taxpayer's income for the year, or
(iv) claims a deduction for the year under paragraph (e), (f) or (g);
88(1)(h.1)w
(h.1) Motor vehicle travel expenses – where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and
(ii) was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer's income for the year, or
(iv) claims a deduction for the year under paragraph (f);
88(1)(i)w
(i) Dues and other expenses of performing duties – amounts paid by the taxpayer in the year as
. . .
(iii) the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for,
. . .
to the extent that the taxpayer has not been reimbursed, and is not entitled to be reimbursed in respect thereof;
88(2)w
(2) General limitation. Except as permitted by this section, no deductions shall be made in computing a taxpayer's income for a taxation year from an office or employment.
88(4)w
(4) Meals. An amount expended in respect of a meal consumed by a taxpayer who is an officer or employee shall not be included in computing the amount of a deduction under paragraph 1(f) or (h) unless the meal was consumed during a period while the taxpayer was required by the taxpayer's duties to be away, for a period of not less than twelve hours, from the municipality where the employer's establishment to which the taxpayer ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.
88(10)w
(10) Certificate of employer. An amount otherwise deductible for a taxation year under paragraph (1)(f), (h) or (h.1) or subparagraph (1)(i)(ii) or (iii) by a taxpayer shall not be deducted unless a prescribed form signed by the taxpayer's employer certifying that the conditions set out in that provision were met in the year in respect of the taxpayer is filed with the taxpayer's return of income for the year under this Part.
88(13)w
(13) Work space in home. Notwithstanding paragraphs (1)(f) and (i),
(a) no amount is deductible in computing an individual's income for a taxation year from an office or employment in respect of any part (in this subsection referred to as the "work space") of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either
(i) the place where the individual principally performs the duties of the office or employment, or
(ii) used exclusively during the period in respect of which the amount relates for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of the office or employment.
[22] Before analyzing in detail the expenses claimed by the appellant, I will make some comments on the information found in the declarations (Form T2200) signed by Mr. Bond, as required by paragraph 8(10) of the Act, for each year at issue. It strikes me that most of the information contained in those declarations contradicts the testimony of Mr. Bond. For example, it is stated in the declarations that the appellant was normally required to work away from the employer's place of business or in different places. However, Mr. Bond testified that there might be six calls out of total calls averaging 160 to 180 per year that would be outside the municipality of Kemptville, which covers a relatively small area.
[23] Mr. Bond also indicated in those declarations that the appellant was required to pay his own expenses and that he was paid by commission. However, Mr. Bond's evidence did not rebut the allegation in the Reply to the Notice of Appeal that the firefighters received an allowance that should normally cover the expenses they personally incurred in the discharge of their duties as volunteer firemen. Mr. Bond also said that a firefighter could receive additional reimbursement from the municipality of Kemptville for travelling expenses if they presented a sheet for the kilometers driven in the course of their work.
[24] It is also mentioned in the declarations that the appellant was required to be away for at least 12 hours from the area of the municipality of Kemptville for his work. Mr. Bond, in his testimony, said that such a situation would happen only occasionally.
[25] With respect to supplies and an office at home, Mr. Bond testified that he could not force employees to provide those as they would have asked for reimbursement. In the declarations, Mr. Bond stated that the appellant was required to pay the expenses with respect thereto and was required to use a portion of his home under his contract of employment.
[26] In view of all those contradictions, I do not think that the declarations filed with the appellant's tax returns are reliable. In the circumstances, I do not intend to give any weight to those declarations. Having made these comments, I will now analyze each of the expenses claimed and determine whether the appellant is allowed to deduct them from his employment income.
Long Distance Telephone Calls, Clothing and Supplies
[27] The appellant claimed $567.98 for long distance telephone calls in 1994 and nothing for 1995 and 1996. The appellant explained that he made long distance telephone calls to Kemptville from Ottawa while he was working in Ottawa. The appellant also claimed $249.40 for clothing in 1995 and nothing for 1994 and 1996. He claimed $154.34 for supplies in 1996 and nothing for 1994 and 1995.
[28] Under subparagraph 8(1)(i)(iii) of the Act, the appellant may claim amounts paid in the year as the cost of supplies that were consumed directly in the performance of his duties if he is required by the contract of employment to supply and pay for them, to the extent that he has not been reimbursed and is not entitled to be reimbursed in respect thereof. The appellant did not explain what supplies were claimed in 1996. Mr. Bond testified that the appellant was not required to supply anything except his clothing. He clearly stated that the use of a cellular phone was not a requirement. The long distance telephone calls from Ottawa, where the appellant was working for another employer, namely the City of Ottawa, were not required by the municipality of Kemptville. With respect to clothing, it has been held that the cost of clothing customarily worn or required to be worn by employees is not in the nature of "supplies consumed directly" in the performance of those employees' duties (see Goodman v. M.N.R., 53 DTC 225 (I.T.A.B.); Martyn v. M.N.R., 64 DTC 461 (T.A.B.) and Interpretation Bulletin IT-352R2 paragraph 9). Furthermore as I said previously, I cannot rely on the declarations (Form T2200) filed with the appellant's tax returns. I am therefore of the view that the appellant has not established on a balance of probabilities that those expenses were deductible expenses pursuant to subparagraph 8(1)(i)(iii) and subsection 8(2) of the Act.
Food and Beverages
[29] The appellant claimed $341.86 in 1995, $206.95 in 1996 and nothing in 1994 for food and beverages. Under paragraph 8(1)(h), travel expenses will be deductible if the appellant was ordinarily required to carry on his duties away from the employer's place of business and was required to pay the travel expenses incurred in the performance of his duties.
[30] With respect to food and beverages, the appellant had to show, under subsection 8(4), that they were consumed during a period while he was required to be away for his duties, for a period not less than 12 hours, from the municipality of Kemptville.
[31] Mr. Bond testified that this happened only occasionally. The appellant said that it happened several times. The amounts claimed by the appellant were not explained. According to Mr. Bond, the municipality of Kemptville responds to calls outside the municipality only six times in a year out of 160 to 180 total calls. This would mean that three per cent of the total calls were outside the municipality. I find that this is a very low percentage and I am not satisfied that those food and beverage expenses incurred by the appellant were over and above the annual $500 exempt allowance received by him from the municipality of Kemptville. I therefore conclude that the appellant was not justified in claiming those expenses.
Work Space In Home
[32] The appellant claimed $7,757.29 in 1994, $951.99 in 1995 and $899.57 in 1996 for work space in the home. Under subsection 8(13), an amount will be deductible for work space in the home if the appellant can demonstrate that (1) this work space was the place where he principally performed his duties or that (2) he used this work space exclusively for the purpose of earning income from the Kemptville Fire Department and used it on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing his duties. This is clearly not the case. The evidence disclosed that it was more convenient for the appellant to prepare his courses at home, but he was not required to do so by the employer. Furthermore, the place where the appellant principally performed his duties was clearly not at home but on the scene of fires (as may be inferred from Exhibit R-2). The appellant also did not demonstrate that he used his work space in his home exclusively for the purpose of earning income from the municipality of Kemptville. The appellant said that he only occasionally met people at his home for the purposes of his work. The appellant also said that he was not paid for the work done at home. I therefore conclude that those expenses are not deductible.
Automobile Expenses
[33] The appellant claimed $3,379.88 in 1994, $3,164.52 in 1995 and $2,716.53 in 1996 for automobile expenses. These expenses mainly represent fuel costs, maintenance, and license and registration costs. Under paragraph 8(1)(h.1), the appellant has to demonstrate that he was ordinarily required to carry on his duties away from the employer's place of business or in different places and was required under his contract of employment to pay motor vehicle expenses incurred in the performance of his duties.
[34] Mr. Bond said that there was no written contract of employment and that if firefighters had to travel away from the municipality of Kemptville with their own cars, they would be reimbursed by the employer, provided they submitted a claim form. Mr. Bond also said that the firefighters were not required to have a car but that they had to go by their own means either to the fire hall or to the scene of the fire, whichever was closer.
[35] The appellant said that he lives six miles (10 km) from the fire hall. Mr. Bond testified that the area of the municipality of Kemptville covers approximately 150 square miles (240 km2). The appellant claims that he drove 33,152 km in 1994, 29,602 km in 1995 and 28,512 km in 1996 in the course of his duties. In cross-examination, the appellant could not explain how he could justify such high mileage for such a small area. Indeed, it is difficult to imagine that the appellant used his car an average of 30,000 km per year in the performance of his duties for a municipality which covers an area of 24 km by 10 km. This is completely unreasonable and unjustified. It is more conceivable that these kilometers were done travelling on a daily basis from the municipality of Kemptville to Ottawa for his other job. The cost of travelling between two or more concurrent employments is not deductible (see Larocque v. M.N.R. (1966), 42 Tax A.B.C. 23).
[36] I therefore conclude that the appellant has not shown on a balance of probabilities that the motor vehicle expenses were deductible during the years in issue.
[37] The appeals are dismissed.
Signed at Ottawa, Canada, this 28th day of February 2000.
"Lucie Lamarre"
J.T.C.C.