Docket: 2011-2800(IT)I
BETWEEN:
GORDON McINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on common
evidence with the appeal of
Susan McIntosh (2011-2801(IT)I)
on December 14, 2011 at Edmonton, Alberta
Before: The Honourable
Justice J.M. Woods
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Paige Atkinson
|
____________________________________________________________________
JUDGMENT
The
appeal with respect to assessments made under the Income Tax Act for the
2007 and 2008 taxation years is allowed, and the assessments are referred back
to the Minister of National Revenue for reconsideration and reassessment on the
basis that the following items should be excluded from the appellant’s income:
(a) meals in the amounts of $1,209 and
$813, plus GST, for the 2007 and 2008 taxation years, respectively,
(b) an inter-company advance in the
amount of $14,000 for the 2008 taxation year, and
(c) an amount of $618 on account of
motor vehicle expenses for the 2008 taxation year.
The
appellant is entitled to his costs, if any.
Signed at Toronto,
Ontario this 29th day of December 2011.
“J. M. Woods”
Docket: 2011-2801(IT)I
BETWEEN:
SUSAN McINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on common
evidence with the appeal of
Gordon McIntosh (2011-2800(IT)I) on December
14, 2011 at Edmonton, Alberta
Before: The Honourable Justice J.M. Woods
Appearances:
|
Agent for the
Appellant:
|
Gordon McIntosh
|
|
Counsel for the
Respondent:
|
Paige Atkinson
|
____________________________________________________________________
JUDGMENT
The
appeal with respect to assessments made under the Income Tax Act for the
2007 and 2008 taxation years is allowed, and the assessments are referred back
to the Minister of National Revenue for reconsideration and reassessment on the
basis that the following items should be excluded from the appellant’s income:
(a) meals in the amounts of $1,209 and
$813, plus GST, for the 2007 and 2008 taxation years, respectively,
(b) an inter-company advance in the
amount of $14,000 for the 2008 taxation year, and
(c) an amount of $618 on account of
motor vehicle expenses for the 2008 taxation year.
The
appellant is entitled to her costs, if any.
Signed at Toronto, Ontario this 29th day of December 2011.
“J. M. Woods”
Citation: 2011 TCC 579
Date: 20111229
Docket: 2011-2800(IT)I
BETWEEN:
GORDON McINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Docket: 2011-2801(IT)I
AND BETWEEN:
SUSAN McINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1]
The question to be decided in
these appeals is whether Gordon and Susan McIntosh received a shareholder
benefit in respect of meals consumed by them and paid by their wholly-owned
corporation. For the 2007 and 2008 taxation years, meals in the amounts of $1,209
and $813, plus GST, were included in the income of each of the appellants under
section 15(1) of the Income Tax Act.
[2]
Two other issues were raised in
the notices of appeal which were resolved in the appellants’ favour prior to
the hearing.
[3]
In the relevant taxation years,
the appellants operated an auto detailing business through their wholly-owned
corporation, Quick-Clean Incorporated. The appellants were the only persons
working in the business in these years.
[4]
Quick-Clean’s customers were
almost exclusively automobile dealers and wholesalers. Approximately 500
automobiles were serviced during the two years at issue. The nature of the
business required the appellants to work at irregular hours, including nights
and weekends.
[5]
Most of the expenditures at issue
involve restaurant meals consumed outside the normal hours of work, and involve
circumstances where the appellants had to return to work after the meal.
[6]
The Minister of National Revenue assumed
that this expenditure was made to benefit the appellants in their capacity as
shareholders and that it was not incurred for the purpose of earning income
from the business.
[7]
I am satisfied from the evidence
that the Minister’s assumption was incorrect. The expenditures were incurred in
order to benefit Quick-Clean’s business in the same manner that any corporation
agrees to reimburse arm’s length employees for meals consumed while working
overtime. The meals were provided to the appellants in their capacity as either
employees or independent contractors. The expenditure was not paid in their
capacity as shareholders.
[8]
Counsel for the respondent
referred me to a decision of Campbell J. in which she decided that meals
provided to a shareholder were a shareholder benefit: Kowalchuk v The Queen,
2005 TCC 757, 2005 DTC 1754. This decision was based on a lack of reliable
evidence from the taxpayer to rebut the assumptions of the Minister. The
circumstances in these appeals are quite different.
[9]
I have concluded that the cost of
the meals was incorrectly included in the income of the appellants as a
shareholder benefit.
[10]
I was also referred to an obiter
comment in Kowalchuk to the effect that benefits in respect of meals are
taxable even if they are paid in the capacity of an employee. It is not necessary
that I consider this comment because the respondent did not put employee
benefits at issue in the pleadings.
[11]
The appeals will be allowed on the
basis that the following items should be excluded from the appellants’ income:
(a) meals in the amounts of $1,209 and $813, plus
GST, for the each of the appellants for the 2007 and 2008 taxation years,
respectively,
(b) an inter-company advance in the amount of
$14,000 for the 2008 taxation year, and
(c) an amount of $618 for each appellant on
account of motor vehicle expenses for the 2008 taxation year.
[12]
The appellants are entitled to
their costs, if any.
Signed at Toronto,
Ontario this 29th day of December 2011.
“J. M. Woods”
CITATION: 2011 TCC 579
COURT FILE NOS.: 2011-2800(IT)I and
2011-2801(IT)I
STYLE OF CAUSE: GORDON McINTOSH v.
HER
MAJESTY THE QUEEN and
SUSAN
MCINTOSH v.
HER
MAJESTY THE QUEEN
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: December 14, 2011
REASONS FOR JUDGMENT BY: The
Honourable Justice J.M. Woods
DATE OF JUDGMENTS: December 29, 2011
APPEARANCES:
|
Agent for the
Appellants:
|
Gordon McIntosh
|
|
Counsel for the
Respondent:
|
Paige Atkinson
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa, Canada
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