Anderson – Tax Court of Canada finds that the principle of deference, in reviewing s. 67 expense deductibility, to presumed taxpayer business acumen does not extend to bone-headed decisions

After stating that “the presumed existence of business acumen should not be treated as absolute, irrefutable or sacrosanct” in the s. 67 context, Smith J allowed many of the $64,000 of expenses incurred in a year by an individual, with a salary of $117,000, in trying to convince successful sales people to sell coffee as his sub-agents in a business venture he was starting up on the side – but Smith J couldn’t countenance the deduction of U.S.$15,000 paid to a prospective salesman, supposedly with a phenomenal sales record, mostly as an enticement to become the taxpayer’s sub-agent and as an advance on his future commissions, stating:

I find that “no reasonable business man would have contracted to pay that amount” (Gabco...), certainly not without a more detailed business agreement.

Neal Armstrong. Summary of Anderson v. The Queen, 2016 TCC 106 under s. 67.