Maysky v. Canada (Attorney General), 2003 DTC 5337, 2003 FCA 237

Date: 20030526

Docket: A-563-01

Citation: 2003 FCA 237

CORAM:        DÉCARY, J.A.

NADON, J.A.

PELLETIER, J.A.

BETWEEN:

                                                                    FRED MAYSKY

                                                                                                                                                       Applicant

                                                                              - and -

                                                ATTORNEY GENERAL OF CANADA

                                                                                                                                                   Respondent

                                    Heard at Edmonton, Alberta, on Monday, May 26, 2003.

             Judgment delivered from the Bench at Edmonton, Alberta, on Monday, May 26, 2003.

REASONS FOR JUDGMENT OF THE COURT BY:                                       PELLETIER, J.A.

CONCURRED IN BY:                                                                                           DÉCARY, J.A.

NADON, J.A.

Date: 20030526

Docket: A-563-01

Citation: 2003 FCA 237

CORAM:        DÉCARY, J.A.

NADON, J.A.

PELLETIER, J.A.

BETWEEN:

                                                                    FRED MAYSKY

                                                                                                                                                       Applicant

                                                                              - and -

                                                ATTORNEY GENERAL OF CANADA

                                                                                                                                                   Respondent

                                       REASONS FOR JUDGMENT OF THE COURT

                                       (Delivered from the Bench at Edmonton, Alberta,

                                                                    on May 26, 2003.)

PELLETIER, J.A.

[1]                 The issue in this application is whether the applicant's rental property at 12039 63^rd Street Edmonton Alberta constituted a source of income so as to allow the applicant to deduct from his income losses which were incurred in relation to that property. The learned trial judge held that the rental property did not constitute a source of income and disallowed the deductions claimed by the applicant.

[2]                 The case was decided prior to the decision of the Supreme Court of Canada in Stewart v. Canada 2002 SCJ 46, [2002] S.C.J. No. 46 which dealt with the use of the reasonable expectation of profit test, a test which the learned trial judge applied in this case.

[3]                 Stewart decided that if an activity was a commercial activity, then the reasonable expectation of profit test could not be used to second guess the taxpayer's business decisions:

[para. 53] ... Where the nature of an activity is clearly commercial, there is no need to analyze the taxpayer's business decisions. Such endeavours necessarily involve the pursuit of profit. As such, a source of income by definition exists, and there is no need to take the inquiry any further.

[4]                 However where an activity has a personal element, then a number of factors, including the reasonable expectation of profit, are to be taken into account in deciding if it is a source of income for purposes of the Income Tax Act R.S.C. 1985 c. 1 (Fifth Supp.) as amended.

[5]                 The evidence establishes that the property in question has been a rental property since the 1980's. On the face of it, this is a commercial activity. However the trial judge found a personal element in the applicant's use of the property:

The personal element stems from the property having formerly [been] the Appellant's home, from the appellant using the property as collateral for a line of credit pertaining to his realty business and from the appellant's acknowledgement of retaining pride in maintaining the home as an asset to the neighbourhood.

[6]                 We are satisfied that these elements are not sufficient to make the applicant's dealings in respect of that property something other than a commercial activity.    The applicant's motivation for maintaining the house is irrelevant to the question of commercial activity. The use of the property as collateral, whether for his real estate business or otherwise, does not make it something other than a commercial asset, though this does not mean that interest charges for money borrowed for personal expenses would be deductible.

[7]                 We would therefore remit the matter to the Tax Court judge for reconsideration on the basis that the applicant's rental of the property is a source of income for purposes of the Income Tax Act. That will leave for his consideration the issues identified in sub-paragraphs 3 and 4 of paragraph 7 of his reasons.

[8]                 The applicant is entitled to his disbursements.

[9]                 These reasons will apply as well to the application brought by Sylvia Maysky in application A-568-01.

           "Denis Pelletier"                

J.A.

                                                    FEDERAL COURT OF APPEAL

                              NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                             A-563-01

STYLE OF CAUSE:                           FRED MAYSKY v.

ATTORNEY GENERAL OF CANADA

PLACE OF HEARING:                     EDMONTON, Alberta

DATE OF HEARING:                       May 26, 2003

REASONS FOR JUDGMENT BY PELLETIER, J.A.

CONCURRED IN BY:                      DÉCARY, J.A.

NADON, J.A.

DATED:                                                May 26, 2003                 

APPEARANCES:

Fred Maysky (self-represented)                                                    FOR THE APPLICANT

Carla Lamash                                                                                  FOR THE RESPONDENT

SOLICITORS OF RECORD:

(Self-represented)                                                                           FOR THE APPLICANT

Morris Rosenberg

Deputy Attorney General of Canada

Ottawa, Ontario                                                                             FOR THE RESPONDENT