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Docket: 2001-4042(IT)I |
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BETWEEN: |
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RONALD CRAIGMYLE, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
_______________________________________________________________
Appeals heard on October 2 and 3, 2002 at Prince George, British Columbia
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Before: The Honourable Judge L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Amy Francis |
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JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1998 and 1999 taxation years are allowed, without costs, 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 Vancouver, British Columbia, this 20th day of February 2003.
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"L.M. Little" |
J.T.C.C.
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Citation: 2003TCC52 |
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Date: 20030220 |
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Docket: 2001-4042(IT)I |
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BETWEEN: |
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RONALD CRAIGMYLE, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] In the 1998 and 1999 taxation years the Appellant acted as a Parole Officer for the following:
- Federal and Provincial Government including the Royal Canadian Mounted Police; and
- Quesnel Community Corrections Office.
[2] In determining his income for the 1998 and 1999 taxation years the Appellant deducted the following expenses:
(a) Subcontract expenses of $4,200.00 and $5,200.00 for the 1998 and 1999 taxation years respectively re services provided by his children;
(b) Amounts paid to his wife of $10,000.00 and $12,000.00 in the 1998 and 1999 taxation years respectively; (Note: The Appellant was allowed to deduct these amounts in determining his income and the amounts were included in Mrs. Craigmyle's income.)
(c) Miscellaneous expenses such as meals, postage, supplies, etc. claimed by the Appellant in the 1998 and 1999 taxation years.
[3] By Notices of Reassessment dated the 12th day of March 2001 the Minister of National Revenue (the "Minister") reassessed the Appellant's 1998 and 1999 taxation years. The said Reassessments disallowed the following:
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1998 |
1999 |
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Expenses Disallowed |
$4,999.72 |
$6,092.01 |
B. ISSUE
[4] Is the Appellant entitled to deduct expenses of $4,999.72 and $6,092.01 in determining his income for the 1998 and 1999 taxation years?
C. ANALYSIS
[5] The following expenses have been claimed and denied:
(a)
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1998 |
1999
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Meals Disallowed |
$191.46 |
$227.07 |
The Minister denied the cost of meals where the Appellant paid for only one meal. Most of the expenses in question were incurred at "Fast Food" restaurants. The Appellant testified that all of the expenses that have been disallowed in this category were business related, i.e. the expenses were incurred by him while he was working either as a parole officer or as a probation officer.
Counsel for the Respondent maintained that the Appellant has been allowed most of the meal expenses that he claimed. However, the official of Canada Customs and Revenue Agency ("CCRA") disallowed those expenses where it was apparent that the Appellant only paid for his own meal.
From the evidence before me I have concluded that the Appellant should be allowed to deduct 50% of the meal expenses that have been denied by the Minister in the 1998 and 1999 taxation years.
(b)
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1998 |
1999
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Telephone Line Rental |
$244.56 |
$238.84 |
The Appellant testified that the telephone in his home was frequently used by him for business purposes.
The CCRA has allowed the Appellant to claim 30% of the cost of the telephone in the Appellant's home. I have concluded that the Appellant should be allowed to claim 50% of the amount that has been disallowed as a business expense.
(c) Advertising
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1998 |
1999
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Purchase of Liquor |
$300.68 |
$398.10 |
The Appellant stated that in his opinion it was necessary for him to make gifts of liquor to various clients and potential clients as Christmas gifts in order to maintain and expand his business activities.
The CCRA has denied all of the expenses in this category.
I accept the Appellant's testimony and allow 100% of the cost of liquor supplied by the Appellant at Christmas time to clients or potential clients.
(d) Costco Membership
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1998 |
1999
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Costco Membership |
$24.50 |
$28.00 |
The Appellant maintains that his Costco membership was primarily used for business purposes. The Appellant admitted that some personal items were purchased at Costco.
I accept the Appellant's testimony. The amounts of $24.50 and $28.00 should be allowed as business expenses.
(e) Supplies
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1998
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Overnight Travel Bag |
$38.52 |
The Appellant testified that the travel bag was used by him in connection with his business.
As I indicated during the hearing, this amount should be allowed as a business expense.
(f) Subcontract Expense
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1998 |
1999
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Wages paid to Children |
$4,200.00 |
$5,200.00 |
The Appellant maintains that his children helped him to carry on his business. The Appellant said that his children helped him in various ways. The Appellant said that his children answered the telephone and took messages. The Appellant said that his children also provided janitorial services, carried out shredding of files and assisted him in preparing reports.
In my opinion the main point to consider in determining whether expenses of this nature should be allowed is whether the amounts paid to the children are reasonable in the circumstances.
I am not convinced that it is reasonable to claim that a daughter, age 14 and a son age 11, provided services to the Appellant that would justify salaries of $4,200.00 and $5,200.00 in the 1998 and 1999 taxation years respectively. In reaching this conclusion, I have also recognized that the Appellant paid his wife a fee of $10,000.00 and $12,000.00 during the same period.
I have concluded that the Appellant should be allowed to deduct the following amounts as wages to his children:
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1998 |
1999
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Wages to Children |
$1,800.00 |
$2,000.00 |
[6] The Appellant maintained that because of the conduct of the official of the CCRA during the audit his rights under the Canadian Charter of Rights and Freedoms (the "Charter") have been denied, deprived or infringed.
[7] The Appellant referred to the fact that the official of the CCRA who carried out the audit should have discussed his tax position solely with him and not with his wife. However the Appellant's wife personally responded to a request for information that was made to the Appellant by the official of the CCRA. Furthermore, as noted above, the Appellant employed his wife in his business and paid her a salary of $10,000.00 in 1998 and $12,000.00 in 1999. Mr. Peter Martin, a senior official of the CCRA, was called as a witness by counsel for the Respondent. Counsel for the Respondent asked Mr. Martin whether he thought that the official of the CCRA had breached the provisions of the Income Tax Act when the official dealt with the Appellant's wife.
[8] Counsel for the Respondent asked Mr. Martin the following question:
Q. ... what was the outcome of any investigation into that potential confidentiality breach?
A. The outcome was that we were obtaining information from someone who had an official capacity in the business and, therefore, under section 231 we had a right to obtain information from that person. And so we concluded that there was no breach of section 241.
(Transcript, page 19, l. 16-23)
[9] Under these circumstances I do not believe that the official of the CCRA was incorrect in dealing with the Appellant's wife during the audit.
[10] The Appellant referred to the following mistakes or inaccuracies that were made by the auditor during the audit:
(a) The auditor did not report the date or the time of the telephone calls to the Appellant in the T-2020 Auditor's Report;
(b) Mr. Martin's notes of a telephone call that he made to a Mr. Brulé may have contained an incorrect date;
(c) A suggestion by the Appellant (although not established) that officials of the CCRA may have amended their notes; and
(d) The Appellant also questioned some of the investigations carried out by the officials of the CCRA.
[11] In order to determine whether the Appellant's rights under the Charter have been denied or deprived I have carefully considered the evidence that was presented to me. In this connection I quote a question that the Appellant asked Peter Martin:
Q. Today would you like to justify or give a comment today based on what the status is with some of these errors or mistakes? Would you like to say and clarify on a scale of one to ten, ten being good and one being poor?
A. No, I won't give you a one to ten, but I will give you that I feel that the errors you've pointed out are relatively minor errors and don't - don't go to the heart of the reassessments . . .
(Transcript, page 91, l. 7-14 .)
[12] Mr. Martin is an experienced senior official of the CCRA. I accept his testimony with respect to the several points raised by the Appellant.
[13] I have concluded that officials of the CCRA did not breach any of the Appellant's rights under the Charter when they carried out the audit on the Appellant.
[14] The appeals are allowed, without costs, and the Minister is instructed to reassess the Appellant's 1998 and 1999 taxation years to allow the Appellant to deduct the amounts referred to herein.
Signed at Vancouver, British Columbia, this 20th day of February 2003.
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"L.M. Little" |
J.T.C.C.
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CITATION: |
2003TCC52 |
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COURT FILE NO.: |
2001-4042(IT)I |
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STYLE OF CAUSE: |
Ronald Craigmyle and Her Majesty the Queen |
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PLACE OF HEARING |
Prince George, British Columbia |
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DATE OF HEARING |
October 2 and 3, 2002 |
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REASONS FOR JUDGMENT BY: |
The Honourable Judge L.M. Little |
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DATE OF JUDGMENT |
February 20, 2003 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Amy Francis |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |