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Citation: 2003TCC807
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Date: 20031124
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Docket: 2002-604(IT)I
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BETWEEN:
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JOHN T. GLEN,
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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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____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: A'Amer Ather
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Toronto, Ontario on January 31, 2003)
McArthur J.
[1] The issue in these appeals is
whether the Appellant is entitled to deduct additional business
or employment expenses of $34,560 and $10,730 in the 1998 and
1999 taxation years, respectively, details of which expenses are
set out in Schedules "A" and "B" of the Reply
to the Notice of Appeal. Prior to the trial, the Appellant
requested an adjournment to permit settlement efforts. These
talks commenced two days before the hearing and were at best in
the preliminary stage. Upon my request, the parties appeared on
the day and time set for the hearing of the appeals, which date
had been set some months ago. They were prepared and the hearing
proceeded. For reasons given by Judge Bowie in Solomons v. The
Queen, 2003 DTC 505, I was not prepared to allow an
adjournment unless a settlement was near and it was not.
[2] The Appellant is a highly
knowledgeable real estate appraiser and part-time
university professor. He has a B.A. and an M.A. from the
University of Western Ontario, and belongs to several appraisal
institutes. His curriculum vitae is impressive.
[3] In 1998 and 1999, he received
T-4 slips from Jones Lang Wootton Canada in the amounts of
$109,999.92 and $82,499.94 and from York University of $11,525.81
and $12,822.62. He in fact earned $140,000 from Jones Lang in
1998, but supported a corporate initiative by surrendering
$30,000. I mention this fact for the purpose of taking it into
consideration when comparing income proportionately to expenses.
In 1998, the Appellant deducted $62,609.33 in expenses from an
approximate income of $150,000. In the spring of 1999, he left
Jones Lang and worked on his own account for the remainder of the
year.
[4] The question is whether the
Appellant can deduct the expenses claimed set out in Schedules
"A" and "B" of the Reply. The auditor for
Canada Customs and Revenue Agency did not give evidence, but his
position is set out in the letter dated March 12, 2001 and filed
in evidence as Exhibit A-2. The Minister of National
Revenue relies primarily on section 8 of the Income Tax
Act.
[5] The Appellant was the only
witness. His evidence was comprehensive, but lacking in detail
for amounts expended. Summarizing it briefly, he stated why he
was required to travel extensively; why he required
state-of-the-art computer equipment together
with costly software and photographic equipment; why he incurred
substantial printing costs preparing lectures and handouts for
his University of York lectures; and why he used his home
extensively to prepare his classes and meet students and work on
his appraisals.
[6] The Respondent's position is
that to claim employment expense, the Appellant must come within
the statutory provisions of subparagraphs 8(1)(i)(i), (ii)
and (iii), and subsections 8(2) and 8(13), the relevant portions
of which read:
8(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:
(a)
...
(i)
amounts paid by the taxpayer in the year as
(i) annual
professional membership dues the payment of which was necessary
to maintain a professional status recognized by statute,
(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,
(iii) the cost of supplies
that were consumed directly in the performance of the duties of
the office or employment and that the officer or employee was
required by the contract of employment to supply and pay for,
...
8(2) Except as permitted by this
section, no deductions shall be made in computing a
taxpayer's income for a taxation year from an office or
employment.
8(13) Notwithstanding paragraphs
(1)(f) and (i),
(a) no amount
is deductible in computing an individual's income for a
taxation year from an office or employment in respect of 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 place
where the individual principally performs the duties of the
office or employment, or
(ii) used
exclusively during the period in respect of which the amount
relates for the purpose of earning income from the office or
employment and used on a regular and continuous basis for meeting
customers or other persons in the ordinary course of performing
the duties of the office or employment; ...
[7] Through his accountant, the
Appellant filed his 1998 and 1999 income tax returns and claimed
employment expenses. The Appellant did not present that he was an
independent contractor, although it would appear that he was for
seven or eight months in 1999 with respect to his appraisal
business. No breakdown of income was given in 1999 other than
paragraph 8(a) of the Reply indicating that he received a
T-4 from Jones Lang of $82,499.94 in 1999. No independent
business income was noted. I proceed on the basis that all
expenses were employment expenses and restricted by section 8
which applies.
[8] I will examine the
Respondent's argument. After being inspired by the comment of
Judge Bowman in McCann v. The Queen, [2002] 3 C.T.C. 2422
at paragraph 15 where referring to the Respondent's
submissions, he stated:
This is indeed a formidable array of arguments. The easy
solution would be to accept some or all of them and dismiss the
appeals. Nonetheless the claim is a most deserving one and I
think this court has an obligation to the Appellant to examine
with some care the Crown's arguments. Unrepresented
Appellants make up a large and important part of the work of this
court, particularly in the informal procedure. The course of
least resistance is to dismiss the appeal because usually the
Crown's arguments have some semblance of plausibility and if
the trial judge accepts them and dismisses the appeal he or she
can take comfort from the fact that the unrepresented litigant is
unlikely to appeal to the Federal Court of Appeal. Our
obligations as a court of first instance with exclusive
jurisdiction to hear appeals under the Income Tax Act and
other federal statutes go far beyond adopting superficially
plausible arguments.
[9] I found the Appellant to be an
impressive witness. He obviously is immersed in the academic
profession, albeit as a part-time professor. He is a highly
skilled appraiser who has been retained by the giants of the
industry such as Cadillac Fairview, Cambridge, Olympia & York
and several banks. He lectures to approximately 80 students
during the evenings twice weekly, sharing his appraisal
expertise. His remuneration is modest from the University,
approximately $12,000 annually. He has considerable computer
expertise and can provide his students with the most
up-to-date techniques. He uses or purchases the
latest computer hardware and software. Students frequently
telephone him after work hours, and by "after work
hours", I am referring to the work with his full-time
job with Jones Lang. He saw 30 or 40 students in his home
condominium office over a four-month period. The University
made no office space available to him.
[10] He attended international conferences
or seminars at his own expense to keep up with the times and to
retain his accreditation. One of these conferences during the
relevant period was in Kuala Lumpur. He is obviously very
thorough and precise in preparing his appraisals. He retains
title searchers from time to time. In his teaching profession, he
retains the assistance of an exam marker.
[11] Dealing with specific items claimed by
the Appellant, it is unfortunate that for the most part, no
amounts were given. The parties could not put a number to some of
these items included in the expenditures and I have attempted to
deal with them in the same manner as they were presented.
(i) I agree with
Respondent's counsel that payments made by the Appellant to
his accountant in 1998 and 1999 are not deductible. There is no
provision in section 8 in that regard, and I refer to the case
Blair-Lawton v. The Queen, [2001] T.C.J. No. 335,
where Judge Sarchuk of this Court dealt with a similar
situation.
(ii) Payments to the marker at
the University of York are not deductible under subparagraphs
8(1)(i)(i) and (ii). There was no evidence that a marker
was required in the contract of employment.
(iii) I find the cost of the computer
software claimed by the Appellant is included under cost of
supplies set out in subparagraph 8(1)(i)(iii). The
software was consumed directly in the performance of the
Appellant's teaching duties and his contract surely implies
that to perform his duties, he needed updated software.
(iv) Now dealing with his home
expenses. The Respondent submits that there are the two
components because of Mr. Glen's two sources of income.
I find the Appellant used his condominium office as his principal
location for the university employment. While he lectured at the
university, I have no difficulty in finding that over 50% of his
duties were performed in his home office preparing his lectures
and speaking to his students, either in person or by telephone. I
find as a fact that his office space was exclusively for use of
discharging his teaching employment obligations and I accept that
he used 20% of his condominium for that purpose and the expenses
are deductible in 1998 and 1999.
[12] As the Respondent acknowledges,
appraisal dues are deductible. In addition, I am prepared to
allow the travel expense of $9,936.08 claimed in 1998. I find
that the Appellant had to travel extensively in Canada and
internationally at his own expense to complete appraisals,
usually for large corporate property owners. I fully accept the
Appellant's evidence in this regard. I accept the
Respondent's position with regard to all other expenses,
including food, beverages, supplies, accommodation, travel, car,
taxis, train expenses, vehicle rental, and meeting expenses,
other than those amounts and items specifically allowed
previously in this judgment.
[13] I have tried to follow the
Respondent's counsel's submissions in the order
presented. Should any matters require clarification, I invite the
parties to arrange a telephone conference, although I am
confident that they can follow the direction contained herein.
The appeals are allowed and referred back to the Minister of
National Revenue for reconsideration and reassessment to allow
deductions under subsection 8(1) of the Act in the
computation of the Appellant's income for 1998 and 1999 from
his office or employment as specifically provided in this
judgment. No costs are awarded.
Signed at Ottawa, Canada, this 24th day of November, 2003.
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