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Citation: 2005TCC216
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Date: 20050329
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Docket: 2004-3294(IT)I
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BETWEEN:
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GEORGE APRILE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bell, J.
[1] The
Appellant, for his 2001 taxation year, claimed a deduction from employment
expenses in the amounts of $24,000 made up of $10,000 with respect to wages
paid to his wife, and $7,000 in respect of each of his two sons. The Respondent
allowed the $10,000 paid to his wife but disallowed the remaining $14,000.
[2] He
testified that the sons were 11 and 13 years old respectively in the taxation
year in question and that they worked photocopying, stuffing and stamping
envelopes for five different mailings in that year, placing ten sheets of paper
into each envelope respecting mailing to more than 2,500 partners. This
totalled 500 hours for each son. The Appellant testified further that there
were two other meetings in the year respecting limited partnerships and that
each son worked about 50 hours for each of those two meetings. That totalled an
additional 100 hours for each child. He stated further that his sons helped
move files to storage about six hours per month and performed a number of other
services for him. He said that the time devoted to these other services was in
excess of 100 hours.
[3] He
testified that he asked his employer if he could hire someone to perform these
services and received a positive response. He stated further that he did not
give cheques to his sons but that he bought them snowmobiles, motorcycles and gasoline
for those machines and that he gave them cash, all to a value of at least $7,000.
He said that he determined the value of this compensation at the rate of $10
per hour for his sons’ work.
[4] Respondent’s
counsel produced a form issued by Canada Revenue Agency (“CRA”) bearing number
T2200(01) entitled “DECLARTION OF CONDITIONS OF EMPLOYMENT”. That contained the
Appellant’s name and social insurance number and was signed, apparently, by an
authorized person for his employer. It furnished the following information:
1. His
contract required him to pay his own expenses.
2. He was not normally required to work away from his place of
business.
3. The employment period in question was the 2001 calendar
year.
4. He did not receive an allowance.
5. He did not receive repayment of expenses.
6. The Appellant was required to pay other expenses for which
he did not receive any allowance or repayment, namely “assistant & auto
expenses”.
7. He was not paid by commissions or similar amounts according
to the volume of sales made or in contracts negotiated.
8. He was not required to be away for at least 12 hours from
the area of the employer’s business.
9. He was required to
“rent an office away
from your place of business, or use a portion of his … home”
and pay for a substitute or assistant. He
was not required to pay for supplies that he used directly in his work. He was
not repaid for the above expenses.
[5] The
Appellant submitted simply that he was authorized by this form to do exactly
what he did and that the $10,000 paid to his wife was allowed as a deduction but
that officials of CRA stated that they did not want to hear
anything from him about the nature of the compensation he paid his sons. He said
that such officials wanted to see cheques and or receipts. Respondent’s counsel
referred to Section 8(1)(i)(ii) of the Income Tax Act which reads
as follows:
(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:
…
(ii) office rent, or salary to an
assistant or substitute, the payment of which by the officer or employee was
required by the contract of employment,
Respondent’s counsel
then advanced the simple submission that the amounts paid to his sons were not
allowed as deductions because there were no “documents”. By that it appears
that she meant cheques or other proof of payment to the sons.
ANALYSIS AND
CONCLUSION
[6] Respondent’s
counsel did not agree with the proposition that someone could be paid in kind
for services resulting in the deductibility of such amounts. She submitted that
the amount had to be paid in cash or by cheque with proof of payment. She did
not cross examine the Appellant with respect to the services performed by his
sons. She did not cross examine him on his evidence that he had provided them
with the foregoing assets as consideration for the enumerated services
performed by them for him.
[7] It
is clear that an amount can be paid in kind as well as in money. I have no
doubt about the Appellant’s credibility. I accept the unchallenged
evidence given by him as above set forth and I conclude that the amount of
$7,000 claimed by him in respect of each of his sons is made up of “amounts
paid by the taxpayer in the year” 2001 as those quoted words appear in Section
8(1)(i) of the Act.
[8] Accordingly,
the appeal is allowed.
Signed at Ottawa, Canada, this 29th day of March, 2005.
Bell, J.
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