Date: 19980618
Docket: 96-3869(IT)I
BETWEEN:
GORDON A. COLLINS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Agent for the Appellant: Sharon Granove
Agent for the Respondent: Lyle Bouvier
(Student-at-law)
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Winnipeg, Manitoba on May 27, 1997)
Sarchuk, J.T.C.C.
[1] This is an appeal by Gordon
Collins (the Appellant) from an assessment of tax with respect to
his 1992 taxation year. In computing his income for that year,
the Appellant claimed $7,479.27 as a business investment loss.
That amount was subsequently revised to $8,983.06 as set out in
Schedule A to the Reply to the Notice of Appeal of the Minister
of National Revenue.
[2] There are a number of documents
before me as well as the evidence of Brenda Lynette Collins, who
was one of the individuals involved in the transaction before the
Court. The basic facts are set out in paragraphs 8(a) to 8(i) of
the Reply. Those paragraphs are not in dispute.
[3] The position of the Appellant has
been hampered somewhat by the absence of perhaps key witnesses
and documents. Nonetheless, the testimony of Ms. Collins
establishes the following. First, I am satisfied that the four
partners in this instance were equal partners. I base my
conclusion on her testimony to the effect that if the venture was
profitable it was understood that they would all be equal
partners in terms of sharing the profits.
[4] That, essentially, is the only
acceptable evidence before me on the partnership issue. The
argument that somehow this was only a matter of couples getting
together and was not a partnership just does not wash. I cannot
put it any more simply than that. That concept has no place in
law; it has no place in fiscal matters; it has no place in the
Income Tax Act.
[5] The fact that one of the partners,
or two of the partners, may have advanced funds on behalf of the
partnership creates nothing more than a debt from the partnership
to the parties advancing the monies. It does not change the
partnership structure. It cannot change the partnership
structure. And there is no evidence before me upon which I could
reach any other conclusion.
[6] Second, on the evidence before me,
again I am satisfied that the partners' business commenced on
November 4, 1991. Thus, in my view, the earliest any expenses
might be deductible would be October 28, 1991, the date upon
which Ms. Collins and Ms. Granove flew to Mexico and,
shortly thereafter, completed the transaction for the acquisition
of the property in issue. It would be extremely difficult, on the
evidence before me, to attempt to allocate the expenses as
between capital and current expenses, for the period of time
October 28 to November 4, 1991. However, because of my conclusion
with respect to the year in which the deductions are entitled to
be made, that becomes unnecessary.
[7] The third conclusion that I have
reached on the evidence before me, particularly the documentary
evidence, is that it is clear that most of the items in issue,
most of the amounts in issue, were expenditures made in taxation
year 1991. I have considered the submissions made and the
evidence and I cannot find any valid legal reason to conclude
that these expenses are somehow deductible in 1992. They may be
deductible in 1991, certainly the expenses from November 4, 1991
and onward would be deductible in 1991. But that taxation year is
not before me and I do not have to, nor can I make a
determination in that regard.
[8] I have already indicated that in
my view the partnership was an equal partnership with each
partner having 25%. Accordingly, and particularly in light of
counsel's comments with respect to the amounts expended in 1992,
I find that any amounts in respect of which it can be established
that they were actually expended are deductible expenses to the
partnership in that year. There was no income in that year. The
Appellant would be entitled to claim as his share of the loss in
that year, in the proportion of 25% only.
[9] I have not looked at all of the
documents. I do know from Ms. Collins' testimony that some of the
receipts that were produced, I believe, in the group of Exhibits
A-14 to A-16 or A-17, there are items which were clearly expended
in 1992. Actually, they are Exhibit A-19, which covers the period
October 31, 1991 to January 2, 1992 and Exhibit A-20 for the
period October to February 12. Exhibit A-22 deals strictly with
January 1992. I do not know what that represents. There may be
others, but I do not propose to go through each document to
indicate the items that relate to 1992.
[10] I will ask that the parties give me a
figure, or in the alternative, my order will be that the appeal
will be allowed to that limited extent for 1992 and you can try
to sort it out later on. It would be preferable, however, if the
amount to be allowed is agreed upon. Let me know by the end of
the week. I am here until Friday. That is all 1992 expenses are
to be tallied and 25% of them will be deductible. That will
include the airfare and other costs which were incurred by Ms.
Collins travelling to Mexico to put an end to the affair.
Signed at Ottawa, Canada, this 18th day of June, 1998.
J.T.C.C.
COURT FILE
NO.:
96-3869(IT)I
STYLE OF
CAUSE:
Gordon A. Collins and
Her Majesty the Queen
PLACE OF
HEARING:
Winnipeg, Manitoba
DATE OF
HEARING:
May 27, 1997
REASONS FOR JUDGMENT BY: The Honourable
Judge A.A. Sarchuk
DATE OF
JUDGMENT:
June 18, 1998
APPEARANCES:
Agent for the
Appellant:
Sharon Granove
Agent for the
Respondent: Lyle
Bouvier (Student-at-law)
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent:
George Thomson
Deputy Attorney General of Canada
Ottawa, Canada
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