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Citation: 2005TCC356
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Date: 20050519
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Docket: 2004-4036(IT)I
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2004-4037(IT)I
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BETWEEN:
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MICHAEL KASABOSKI and MARIA KASABOSKI,
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Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bowie J.
[1] These two Appellants are husband and wife.
They work as a team driving a long distance highway transport truck for TransX
Ltd. They each appeal their assessment for income tax for the 2002 taxation
year. Their dissatisfaction with the assessments is specifically as to the
amount that the Minister of National Revenue has permitted them to deduct for
meals that they were required to purchase, without any reimbursement from their
employer, while travelling in the course of their work. The appeals were
brought under the Court’s informal procedure. I heard the evidence of the two
Appellants separately, one after the other, followed by argument applicable to
both cases.
[2] The Appellants live in Bancroft Ontario. They drive a truck owned by their employer to
whatever destination is assigned to them. Generally they are away from home, on
the road, for about two weeks at a time. Each such trip is followed by about
two days off. These trips take them to all parts of North America. When they
are on the road they are generally under severe time constraints in that they
have a schedule that they must meet. Each of them is permitted by the relevant
regulations to drive a maximum of 13 hours in a 24-hour period, so they drive
shifts of about five hours. The tractor has a bunk in it, and when one is
driving the other is able to sleep in the bunk. Their meal times are, of
necessity, not entirely regular, but they try to eat their meals at the time
when they change drivers at the end of a five-hour shift. This must vary, of
course, depending on where they are, and on the facilities available. The
tractor is also equipped with a small refrigerator, but they both explained
that it is very difficult to carry any significant amount of food with them due
to their frequent border crossings between Canada
and the United States, and due to spoilage. For the most part,
therefore, they take their meals in restaurants, usually truck stops, as that
is where there are facilities to park a long distance rig.
[3] Although they are away from home for two
weeks at a time, they seldom stay in motels or hotels. They sleep in the bunk
as I have described; only if the truck is being repaired and they have to
remain overnight at a location to wait for repairs to be completed do they take
a motel room, and then TransX reimburses them for it. Otherwise, if they choose
to stay in a motel then they have to bear the expense themselves. They take
showers at truck stops, and try to do so once a day where possible. They also
gave evidence that while they are away from home they must arrange for their
driveway to be cleared of snow in the winter, and for their grass to be cut in
the other months, and they must pay someone to check on their house from time
to time.
[4] Paragraph 8(1)(g) of the Income
Tax Act (the Act) makes provision for employees of transport
companies to deduct the cost of meals and lodging when computing their income
for the year, to the extent that they have not been reimbursed. The amount that
may be deducted is limited, however, by the specific provisions of subsection
67.1(1). Those read as follows:
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) …
(g) where the
taxpayer was an employee of a person whose principal business was passenger,
goods, or passenger and goods transport and the duties of the employment
required the taxpayer, regularly,
(i) to travel, away
from the municipality where the employer's establishment to which the taxpayer
reported for work was located and away from the metropolitan area, if there is
one, where it was located, on vehicles used by the employer to transport the
goods or passengers, and
(ii) while so away
from that municipality and metropolitan area, to make disbursements for meals
and lodging,
amounts so disbursed by the taxpayer in the
year to the extent that the taxpayer has not been reimbursed and is not
entitled to be reimbursed in respect thereof;
67.1(1) For the purposes
of this Act, other than sections 62, 63 and 118.2, an amount paid or
payable in respect of the human consumption of food or beverages or the
enjoyment of entertainment shall be deemed to be 50% of the lesser of
(a) the amount
actually paid or payable in respect thereof, and
(b) an amount
in respect thereof that would be reasonable in the circumstances.
[5] In an Information Circular the Minister
states for the benefit of those claiming meal allowances that they may use
either the detailed method or the simplified method to make their claim. The
detailed method requires that the taxpayer maintain a record of each meal taken
and each payment for lodging, together with vouchers to prove the expenditure.
If the taxpayer maintains these records then the Minister will allow a
deduction based upon the full amount paid, provided that it is a reasonable
amount as subsection 67.1(1) requires. Those who do not wish to keep such
detailed records are advised by the circular that they may base their claim
simply upon the number of meals that they ate during the year while away from
home in the course of their employment, and the Minister will allow a deduction
based upon an assumed cost of $11.00 per meal,
up to a maximum of three meals per day. In that case the circular advises them
that they should enumerate the trips for which the meals are claimed.
[6] The Appellants in this case chose to file
their returns without any detailed enumeration of the meals for which they
claimed, or the cost of each. In fact, their claims did not include any account
of the various trips for which the meals were claimed. Michael Kasaboski simply
claimed $17,712.00 for 288 days and an unspecified number of trips, and Marie Kasaboski
claimed $11,623.50 for 189 days and an unspecified number of trips. In each
case the claim is apparently based upon an amount of $61.50 per day. The
Appellants were unable to shed much light on the manner in which their claims
had been computed as their returns were prepared by a tax preparation firm.
However, the amounts that they now claim to be entitled to deduct were computed
by their agent, Mr. Velle, as appears in their Notices of Appeal. He asserts
that the Appellants’ meal deductions should be computed using the rates
established by the Treasury Board to be paid as an allowance to employees of
the Government of Canada for meals and incidental expenses when travelling on
government business.
[7] There is no dispute about the fact that the
two Appellants work for an employer whose business is the transportation of
goods, or that they are required to be away from the municipality in which they
report for work for periods of about two weeks at a time. Nor is it disputed
that they are not reimbursed at all for meals that they eat during those trips.
Michael Kasaboski worked for TransX for the full 12 months of 2002; Marie
worked from the beginning of May until the end of the year, and that is why
their claims are not identical. The Respondent, however, does resist their
claims to the deductions on several grounds. First, it is argued that they have
no claim for lodgings, and so they cannot be entitled to a claim for meals. Second,
it is argued that they cannot be allowed deductions for meals because neither
of them has a satisfactory record of their expenditures for meals. Not only did
they not keep receipts for the meals, or written record of the amounts that
they spent, but they both testified that as they ate together they did not pay
separately; after each meal one or other of them would pay the bill, and there
was apparently no accounting and settling up afterwards, so that it is
impossible for either to say now which meals they paid for and which the other
paid for. In addition, the Respondent takes the position that there is no
provision of the Act that permits any deduction from income for the
amounts expended on snow removal, grass cutting, house watching or showers, all
of which the Appellants seek to recover as a claim for incidentals analogous to
the allowance for incidentals paid under the Travel Regulations to a public
servant on travel status. Finally, the Respondent argues that in the case of
Marie Kasaboski the amount claimed for meals is so high in relation to her
total income from her employment for the year that it cannot be said to be
reasonable, and only reasonable amounts may be deducted because of the limiting
effect of subsection 67.1(1).
[8] I shall deal with the Respondent’s
objections to the claim in order.
no claim for disbursements for lodging
[9] Mr. Penney argued that as the word “and” in
paragraph 8(1)(g) is conjunctive, there can be no claim to deduct an
amount for meals without an accompanying claim for a deduction for amounts
expended for lodging. He relies on my decision in Crawford v. the Queen. In that
case four employees of B.C. Ferries claimed to be entitled to deduct amounts
for meals that they were required to eat while working away from the
municipality where they reported to work. They worked on ferries that carried
passengers across the Strait of Georgia, or at least some part of it. None of
them were required to spend a night away from home in the course of their
employment, although some of them worked quite long days. In that context, I
concluded that they were not entitled under paragraph 8(1)(g) to a
deduction for their meals, and that decision was affirmed by the Federal Court
of Appeal, whose reasons for judgment end with the sentence
The deduction contemplated is only
available when there are disbursements for both meals and lodging.
The facts of that case are materially different from
the present case. The taxpayers in Crawford did not spend a night away
from home, whereas the present Appellants are away from home for weeks at a
time. That a transport driver sleeps in her vehicle rather than in paid
accommodation does not affect the fact that it is impossible for her to eat
meals at home during the trip, requiring her to incur the expense of restaurant
meals. Clearly the purpose of the conjunctive “and” is to limit the meal
deduction to persons whose work requires them to stay away from home overnight,
so that the expression “… required … to make disbursements for meals and lodging”,
interpreted according to its purpose, is satisfied where the taxpayer is
required to eat and to sleep away from home, and has to make disbursements for
either of those purposes. In any event, the taxpayers here were required to
make disbursements for lodgings. The evidence was that when their rig was being
repaired they stayed in a motel, and they were reimbursed by the employer for
doing so. Even the most literal reading of paragraph 8(1)(g) does not require
that the taxpayer bear the cost of the lodging for it to qualify as being a disbursement
for lodging that he was required to make; the concluding words limit the
deduction to that which is not reimbursed or to be reimbursed, but it is
nonetheless a disbursement that he was required to make, even if it has since
been recovered. There also was evidence that the Appellants very occasionally
paid for a motel themselves, even though they could not recover it from TransX.
The Act does not specifically require that there be a claim for a
disbursement for lodging for every day that there is a disbursement for meals
claimed. Finally, the claims in respect of the use of showers, which I shall
come to presently, is a recurring claim in respect of disbursements for
lodging: see Hiscoe v. The Queen.
the quality of
the Appellants’ evidence
[10] The Respondent submits that a claim to
deduct expenses that is not supported by either receipts for the amounts
claimed or a contemporaneous record of those amounts maintained by the taxpayer
has little prospect of success, because the oral evidence of the taxpayer,
given from memory, will not meet the requirement of “… evidence … strong enough
for the Court to be firmly convinced” as to the correctness of any estimate. I accept that as
an appropriate evidentiary standard to be applied. That does not mean, however,
that the absence of receipts or a contemporaneous log of money paid for meals
will disentitle the taxpayers to any deductions. That would be patently unjust,
as it is obvious that they must have eaten a great many meals for which the Act
provides that they are entitled to a deduction of half the cost, subject of
course to the requirement of reasonableness. The number of days that the
Appellants were on the road are precisely ascertainable from the logs that they
were required to keep for regulatory purposes. Three meals a day would be
normal, although the evidence suggests that a few meals were either missed
entirely or replaced by fruit and other food that they were able to carry with
them in the truck’s refrigerator. They both estimated the daily cost of meals
as being between $50 and $55, including tax, but not tips. They said that the
cost was roughly the same whether they were in Canada
or in the United States, but of course meals eaten in the U.S. had to be paid for in U.S.
currency. The exchange rate at the time was approximately $1.57 CAN = $1 US.
[11] While it has no legal foundation, the
Minister’s willingness to accept meal claims by transport employees on the
so-called simplified basis is a recognition of the injustice that would result
if claims were to be totally denied if the taxpayer could not produce a
corroborating log. The $33.00 per day that he allows is a recognition of what I
consider to be a truism — a taxpayer should never benefit from a failure to
keep proper records. That said, it is obvious that $33.00 per day falls very
far short of the amount that persons in the situation of these Appellants would
have to spend for meals while on the road doing their employer’s business, even
in Canada. It is generally true, however, that
taxpayers who estimate their expenditures are more likely to overestimate them
than to underestimate them.
[12] I see no merit in the suggestion that the
Appellants should be denied deductions for meals because they cannot remember
now which of them paid for each meal. Where a married couple work together as
these Appellants do throughout the year it is proper, I think, to infer that
the payments will average out without the need for a formal accounting between
them.
public servants’ travel allowances
[13] Mr. Velle offered no rationale for the
contention that truckers should be allowed deductions for meals and other
expenses at the rates established as non‑accountable allowances for
public servants travelling on business for the Government of Canada, other than
that he thought it to be fair. I have no mandate to allow deductions that are
not provided for by Parliament simply on the basis that I think them to be
fair. The Act is very specific as to the amounts that may be deducted.
What paragraph 8(1)(g) and subsection 67.1(1) permit when they are read
together is simply this — one-half of the amount actually spent for meals and
lodging, provided always that it is a reasonable amount that was spent. There
is no provision made for snow removal, grass cutting, or any other personal
expense, even though it may be incurred as the necessary result of carrying out
the duties of the employment away from home for an extended period: see Symes
v. Canada;
Hogg v. Canada.
Allowances paid to public servants are established as a term of their
employment. They are not at all relevant to the matter before me, unless as a
possible test of reasonableness for the purposes of section 67.1, and they
certainly cannot establish an entitlement to a deduction from income not found
in the Act.
reasonableness
[14] I do not accept the proposition that
Marie Kasaboski’s claim for meal deductions should be measured against her
income for the year and found on that basis to be unreasonable. She started to
work with her husband in May 2002. She was a trainee at that time, and so she
earned less than he did. This, however, did not affect her nutritional
requirements. In Gabco Ltd. v M.N.R.,
Cattanach J. set out the test of reasonableness of expenses that has been
generally accepted ever since. As that test applies here, the question becomes
not what in the Minister’s judgment or mine would be a reasonable amount for a
trucker to pay for meals each day, but rather whether any reasonable trucker
would have paid that amount. Applying that test, there is no basis on which I
could find the amounts claimed by Marie to have been unreasonable, if only she
could have established that she had in fact paid them.
showers
[15] The remaining issue is a claim for the cost
of the use of showers at truck stops. The evidence establishes that the
Appellants slept almost exclusively in the bunk that was part of the truck that
they drove. It, of course, has no bathing facilities. Showers for the use of
truckers are widely available at truck stops throughout North America, and the
Appellants used them almost every day. Unlike meals, the price of these
facilities is not highly variable. Marie said they cost between $5 and $7. In Hiscoe
v. The Queen,
I suggested that the cost of showers at truck stops would have been deductible
if the Appellant had been able to prove the expenditures. Bathing facilities
are a necessary part of lodging, and a teleological approach to the meaning of
paragraph 8(1)(g) could hardly ignore that reality. It would do violence
to the intent of the statute to deny a deduction of $5.00 for a shower to a
trucker who sleeps in the relative discomfort of a bunk in the tractor for
purely economic reasons, while permitting a deduction of $50.00 or $100.00 if
she chose to stop at a motel for the night. The cost of the showers is
deductible as a component of lodging.
conclusion
[16] Considering all these factors, I consider
that the correct basis upon which to allow the deductions under paragraph 8(1)(g)
in this case is the following.
Michael Kasaboski
meals
163 days in Canada: 163 x
$40 x 50% = $3,260.00
99 days in United States: 99
x $40 x 1.57 x 50% = $3,108.60
$6,368.60
To this I would add for the use of showers 1,200.00 Total $7,568.60
Marie Kasaboski
96 days in Canada: 96 x
$40 x 50% = $1,920.00
76 days in United States 76 x $40 x 1.57 x 50% = $2,386.40
$4,306.40
To this I would
add for the use of showers 800.00
Total $5,106.40
[17] These amounts are substantially less than
the Appellants claimed, both in the income tax returns that they filed and in
their Notices of Appeal in this Court. They are almost twice as much as the
amounts that the Minister allowed in assessing them under his simplified
method. I am sure that they are substantially less than the amounts that they
would have been entitled to deduct if only they had gone to the trouble of
keeping receipts and a log of their expenditures. I appreciate that it may be
tiresome to do so, but the benefit of ensuring that they can establish the
deductions to which they are entitled may be worth the trouble. Those who
choose to ignore the need to keep proper records to support their claims can
expect that the Minister will continue to assess them on the basis of a rate
per meal that he establishes unilaterally from time to time. They can appeal
his assessments to this Court, of course, but without proper records they
cannot expect any more than the modest success that Mr. and Mrs. Kasaboski have
achieved in this case.
[18] The appeals are allowed. The assessments
are referred back to the Minister for reconsideration and reassessment on the
basis that the Appellants are entitled to the deductions under paragraph 8(1)(g)
that are set out above in paragraph 16.
Signed at Toronto, Ontario, this 19th
day of May, 2005.
Bowie J.
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