Date: 20010927
Docket: 2000-4176-IT-I
BETWEEN:
THOMAS VANKA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Reasons for Judgment
Lamarre Proulx, J.T.C.C.
[1] This is an appeal by way of the informal procedure concerning the 1994 and 1995 taxation years.
[2] The question at issue is whether a workspace in the Appellant's residence is used exclusively for the purpose of earning income from the Appellant's medical practice and used on a regular and continuous basis for seeing patients in respect of that practice.
[3] The Appellant testified. He stated that he was a physician; that he has been practicing in family medicine for the last 25 years; that his patients are primarily elderly people and psychologically unstable people; and that these patients require their physician's availability on almost a continuous basis.
[4] The Appellant referred the Court to the Code de Déontologie des Médecins du Québec and to a report of a task force set up by the Collège des médecins du Québec. In the report entitled "New Professional Challenges for Physicians in the 21st Century" the Appellant cited excerpts at pages 26 and 33 :
As for family physicians, they must increase the time they spend with families, the elderly, and chronically ill patients; they must devote the necessary time to coordinating their work with that of the nurse and specialist colleagues. Their work with respect to medical record- keeping, medical-administrative tasks and teaching, if applicable, will become ever more demanding. Family practitioners will often act as ombudsmen for their patients vis-à-vis certain agencies and health professionals, so that their patients have ready access to the care their condition requires.
...
Family physicians are called upon to play a particular role in first-line care. Indeed, they are responsible for the primary care of their patients. ...The first-line care they provide corresponds to primary medical care as defined by WHO. It includes preventive, curative, rehabilitative and palliative care. It is characterized by its accessibility 24 hours a day, seven days a week. Thus, it is comprehensive and continuous and includes long-term management of the person (Conseil médical du Québec, 1995). ...
[5] The Appellant explained that his downtown office is situated on Drummond Street in Montreal where he sees patients Monday to Friday, from 8:00 a.m. to 7:00 p.m. The Appellant described his home office as a self-contained unit measuring nine feet by nine feet in a two-bedroom cottage situated in the Town of Mount-Royal.
[6] The Appellant stated that unlike a walk-in clinic where administrative and medical responsibilities end with the shift and where the patients are shared with other doctors, his practice requires him to remain available all times from 7:00 p.m. to 8:00 a.m. He stated that he receives an average of seven calls in the evening and will see one patient per week.
[7] He explained that he considers his home office to be an extension of his downtown office. It is directly connected to the downtown office by telephone and to the computer. The patients' files are on a computer system. When a patient phones, the Appellant has access to the patient's file. The same applies when he sees a patient. That office will be used to check the medication effectiveness, calling in new prescriptions, monitoring the progress of the patient's condition, reporting on the laboratory results, discussing their case with families, listening to their problems and advising the patients. The correspondence with other specialists pertaining to problem cases is done from the home office.
[8] The home office is also used for administration purpose, as the Appellant does not have time for that part of his work while he is at the downtown office. The Appellant also stated consultations by phone are medical acts and are paid by the health care system.
Conclusion
[9] Subsection 18(12) of the Income Tax Act (the "Act")was added by 1988, c. 55, subsection 10(16), and is applicable to fiscal periods commencing after 1987. It read as follows, for the year 1994:
18(12) Work space in home — Notwithstanding any other provision of this Act, in computing an individual's income from a business for a taxation year,
(a) no amount shall be deducted in respect of an otherwise deductible amount for 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 individual's principal place of business, or
(ii) used exclusively for the purpose of earning income from business and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business;
(b) where the conditions set out in subparagraph (a)(i) or (ii) are met, the amount for the work space that is deductible in computing the individual's income from the business for the year shall not exceed the individual's income from the business for the year, computed without reference to the amount; and
(c) any amount not deductible by reason only of paragraph (b) in computing the individual's income from the business for the immediately preceding taxation year shall be deemed to be an amount otherwise deductible that, subject to paragraphs (a) and (b), may be deducted for the year for the work space in respect of the business.
Subparagraph 18(12)(b) was amended applicable to the year 1995 and subsequent years :
(b) where the conditions set out in subparagraph (a)(i) or (ii) are met, the amount for the work space that is deductible in computing the individual's income for the year from the business shall not exceed the individual's income for the year from the business, computed without reference to the amount and sections 34.1 and 34.2; and
[10] Since there is no dispute that the Appellant's workspace at home is not his principal place of business, the pertinent part of the above provision in the present matter is subparagraph 18(12)(a)(ii). This subparagraph allows for a deduction of an amount in respect of a workspace in home, insofar as it is used exclusively for the purpose of earning income from business and is used on a regular and continuous basis for seeing patients in respect of the business.
[11] I accept the Appellant's testimony that the home office is well equipped to carry out the Appellant's professional services and that it is used exclusively for this purpose.There was no evidence to the contrary and the evidence given by the Appellant is plausible and thus credible.
[12] It remains to be determined whether the home office was used on a regular and continuous basis in respect of the business. It is of interest to read the Interpretation Bulletin IT-514 entitled: "Work space in home expenses" at paragraph 3, entitled "Regular and Continuous Basis" that states:
3. The first requirement of 1(b) above is that the work space must be used exclusively to earn business income. This requirement is met if a segregated area, such as a room or rooms, is used in a business and for no other purpose. The second requirement is that the work space must be used for meeting clients, customers or patients on a regular and continuous basis. The regularity and frequency of meetings in a work space to meet the requirement of being on a regular and continuous basis will depend on the nature of the business activity and is determined on the facts of each situation. However, a work space in respect of a business which normally requires infrequent meetings or frequent meetings at irregular intervals would not meet the requirement. A home office used by a doctor to meet one or two patients a week is an example of a work space which would not be considered used on a regular and continuous basis for meeting patients. On the other hand, a work space used to meet an average of 5 patients a day for 5 days each week would clearly be used for that purpose on a regular and continuous basis. Unless 1(a) above applies, both requirements in 1(b) above must be met in order to deduct expenses relating to a work space.
[13] It is my view that if the seeing of a patient on an average of once a week at the home office could not suffice to make it a regular and continuous use of the home workspace, the receiving of an average of seven phone calls an evening by patients may be considered such a regular and continuous use of a home workspace. The phone calls could not be taken without the use of the home workspace since the patients' files have to be reviewed and completed. These files are in the computer system. Moreover, according to the Appellant, the consultations made by phone are medical acts and billable. The administrative work that follows the calls is also made in the workspace. Although the words used in the provision are "meeting patients", I am not convinced that these words require the physical presence of the patients in the home workspace. It is my view that the physician met his patients by making himself available to answer his patients' queries by phone and doing all that is described at paragraph 7 of these Reasons.
[14] The appeals are allowed.
Signed at Ottawa, Canada, this 27th day of september, 2001.
"Louise Lamarre Proulx"
J.T.C.C.
COURT FILE NO.: 2000-4176(IT)I
STYLE OF CAUSE: Thomas Vanka and The Queen
PLACE OF HEARING: Montreal, Québec
DATE OF HEARING: August 21, 2001
REASONS FOR JUDGMENT BY: the Honourable Judge Louise Lamarre Proulx
DATE OF JUDGMENT: September 27, 2001
APPEARANCES:
For the Appellant: The Appellant himself
Agent for the Respondent: Philippe Dupuis (Student-at-Law)
COUNSEL OF RECORD:
Counsel for the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-4176(IT)I
BETWEEN:
THOMAS VANKA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 21, 2001 at Montreal, Québec, by
the Honourable Judge Louise Lamarre Proulx
Appearances :
For the Appellant: The Appellant himself
Agent for the Respondent: Philippe Dupuis (Student-at-Law)
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1994 and 1995 taxation years are allowed, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 27th day of september, 2000.
|
"Louise Lamarre Proulx" |
J.T.C.C.