Brooks v. The Queen, 78 DTC 6505, [1978] CTC 761 (FCTD)

Grant, DJ:—The plaintiff is a solicitor and member of a firm who at all material times had their offices and business premises on Albion Road in Metropolitan. Toronto. The plaintiff moved into his home at 34 Beardmore Crescent in Willowdale some 15 miles from his firm’s office.

In each of the 1971 and 1972 taxation years he deducted the sum of $1,200 from his income claiming that amount as an expense incurred by him in gaining or producing his income within the meaning of paragraph (a) subsection (1) of section 12 of the Income Tax Act for the year 1971 and paragraph 18(1 )(a) of the Act in 1972. He claimed the right to make such deduction because in those years he had interviewed clients at his home in evenings and he claimed this was a just proportion of the taxes, mortgage payments, and telephone which he paid on the home.

He kept no record of the clients he saw at his home nor the amount of fees collected from them. All such earnings went into the firm’s account. After seeing such clients all their work would be done in the firm’s office where their papers and records would be kept. He had only a few law books in one room in which he saw such clientele. It was a ground floor room with a door leading into the rest of the house and another door leading outside. There was no typewriter or office equipment in such room and no sign on the house or in the telephone to indicate that he carried on the practice of law there. The fact- is he did not practise law thereby but only saw some clients there rather than at his office to suit his and their convenience. His home was in an area designated by bylaw as a residential area only where no business. was allowed to be carried on. He was not assessed for business tax and never claimed capital cost allowance on the room in his income tax returns. Most of his practice consisted of real estate or company law. He claimed the room was for no other purpose but it was part of the residence and immedi - ately available for household use.

The Minister disallowed such deduction in each of such years and this is an appeal by the taxpayer against the ruling of the Tax Review Board who upheld such decision.

The section of the Income Tax Act applicable to the 1971 assessment is paragraph 12(1)(a) and for 1972 paragraph 18(1)(a). Although numbered differently both sections read as follows:

In computing income, no deduction shall be made in respect of

(a) an outlay or expense except to the .extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from property or a business of the tax payer.

All the items of mortgage payments, taxes and telephone bills were nothing more than personal or living expenses. They were not increased in any way by the fact he saw clients there in the evening. He: arrived at the figure of $1,200 by dividing the total of such payments by Six.

If these sums were incurred for the purpose of producing income then they were properly payable by the firm which received all revenue from the business. No such credit was allowed by the firm to the plaintiff in the division of their income.

Paragraph 12(1 )(d) of such Act read as follows in 1971,

in computing income no deduction shall be made in respect of the annual value of property except for property leased by the tax payer for use in his business.

The appellant can not bring his case with such wording as he was the owner of the property and not the lessee.

Similar cases decided by the Tax Appeal Board are H R Locke v MNR, 38 Tax ABC 38; 65 DTC 223; A C Heakes v MNR, 32 Tax ABC 443; 63 DTC 667; H E English v MNR, 15 Tax ABC 87; 56 DTC 267.

In the Locke case it was stated:

According to the Board, a taxpayer, in claiming a deduction for the business use of a room in his home, should be prepared to show that the room was definitely separate from the living quarters of his family and that he had forgone the personal use of part of his home for the sake of his business; that an appreciable amount of business was transacted in the room and that it was not just used for personal convenience; that there was a sign on his house announcing to the general public that his business was being conducted therein; that he had a telephone for business purposes; that, if he had a regular office. his home was a second or branch office; etc.

There is a very heavy onus on a lawyer who seeks to claim a deduction over and above the expenses applicable to his regular office, in connection with the use of a room in his home as an office study.

In Newson v Robertson, [1972] 2 All ER 728, the English Court of Appeal held that the travelling expenses of a barrister were not deductible from his income tax purposes unless they were incurred wholly and exclusively for the purpose of the profession.

The appeal should be dismissed with costs payable by the appellant to the defendant.