Gajos v. The Queen, docket 2000-3979(IT)I (Informal Procedure)

Date: 20021126

Docket: 2000-3979-IT-I

BETWEEN:

ANDRZEJ GAJOS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Little, J.

A.             FACTS

[1]            The Appellant was employed by Future Shop Ltd. as a Sales Associate. Future Shop Ltd. ("FSL") is a retailer of electronic products, appliances, computers and audio/video products throughout Canada. The Appellant was employed by FSL in Winnipeg, Manitoba from 1992 until March 1995. The Appellant was transferred by FSL to Edmonton, Alberta in March 1995. In May 1996 the Appellant was transferred by FSL to the FSL owned store in Langley, British Columbia.

[2]            From June 1, 1996 to December 31, 1996 the Appellant was employed by FSL as a Sales Associate and Manager in Training in the FSL store in Langley, British Columbia.

[3]            Senior personnel of FSL signed forms entitled "Declaration of Conditions of Employment" covering periods of employment for various years. The forms prepared for the Appellant contained different statements or comments. The Declaration forms all state that the Appellant was required to pay for other expenses for which the Appellant did not receive any allowance or repayment from FSL. The Declaration forms also refer to the type of expense for which repayment was not made by FSL and the following items were specified:

                - Office Expenses, Auto Expenses;

                - Moving Expenses;

                - Automobile and Trade Magazines and supplies.

[4]            In computing income for the 1995 and 1996 taxation years the Appellant claimed the following expenses ("Employment Expenses"):

                1995                         -             $6,783.77

                1996                         -             $8,972.45

[5]            By Notices of Reassessment dated the 18th day of January 1999 the Minister of National Revenue (the "Minister") reassessed the Appellant's 1995 and 1996 taxation years. In the said Reassessments the Minister allowed Employment Expenses as follows:

                1995                         -             $733.68

                1996                         -             $459.34

B.             ISSUE

[6]            The issue is whether the Appellant is allowed to deduct Employment Expenses of $6,783.77 and $8,972.45 in determining his income for the 1995 and 1996 taxation years.

C.             ANALYSIS

[7]            In the Reply to the Notice of Appeal the Respondent agrees to a number of items including the following:

(a)            as a Sales Associate of FSL the Appellant was employed in connection with the selling of property or negotiation of contracts at stores operated by FSL in Winnipeg, Edmonton and Langley;

(b)            the Appellant was required to work away from the ordinary place of business of FSL to carry out competition shopping, attend training sessions and other meetings and provide service calls to customers as required;

(c)            the Appellant was remunerated by FSL in whole or in part by commissions;

(d)            under his contract of employment with FSL the Appellant was required to pay for his own automobile expenses plus "supplies" and "other expenses".

[8]            During the hearing of the appeals counsel for the Respondent filed a document prepared by FSL. The document was referred to as "Revenue Canada - Questionnaire, Required Employment Expenses" (Exhibit R-2) (the document is hereinafter referred to as the "Questionnaire").

[9]            The Questionnaire states that Sales Associates were required to pay for their own vehicle operating expenses plus "supplies" and "other expenses". The Questionnaire defines "supplies" and "other expenses" as follows:

                "Supplies" may include but are not limited to:

·          Business cards

·          Day timers/organizers

"Other Expenses" may include but are not limited to

·          "Specific trade publications" (we have required employees to maintain a knowledge of their field of discipline and employees have therefore have taken it upon themselves to purchase trade publications to keep current).

(Note: The phrase "vehicle operating expense" is not defined in the Questionnaire.)

[10]          From the references quoted above it is noted that the Appellant was required to pay certain Employment Expenses for which he was not reimbursed by FSL.

[11]          I will now review the Employment Expenses claimed by the Appellant in determining his income for the 1995 and 1996 taxation years and I will indicate those expenses which are to be allowed and those expenses which are to be disallowed.

A.             Vehicle Operating Expenses

[12]          The Appellant claimed vehicle operating expenses in the amount of $2,868.54 and $4,846.97 in the 1995 and 1996 taxation years respectively.

[13]          The Minister allowed the Appellant to deduct vehicle operating expenses of $634.27 and $367.97 in the 1995 and 1996 taxation years respectively.

[14]          In the 1995 taxation year the Appellant claimed that he had used his automobile for business purposes and for personal purposes. He maintained that of the total vehicle operating expenses of $7,884.50 paid in the year he should be allowed to deduct $2,868.54 as business expenses and he recognized that $5,015.96 was personal.

[15]          In the 1996 taxation year the Appellant claimed that he had used his automobile for business purposes and for personal purposes. He maintained that of the total vehicle operating expenses of $9,124.43 paid in the year he should be allowed to deduct $4,846.97 as business expenses and he recognized that $4,524.46 was personal.

[16]          In disallowing most of the vehicle operating expenses claimed by the Appellant the Minister originally proposed to recognize that the Appellant only used his automobile for business purposes approximately 1,000 kilometres per year in each of the 1995 and 1996 years. However, after discussions with the Appellant, the Minister agreed to recognize that the Appellant used his automobile for business purposes approximately 1,500 kilometres per year. The Minister's letter to the Appellant said that the reason for the increase was the recognition that the Appellant also used his automobile to attend training sessions in different locations.

[17]          During the hearing of the appeal the Appellant maintained that the Minister's determination of the automobile expenses was far too low because the Minister failed to recognize that the Appellant was required to do competition shopping almost everyday at various locations. The Appellant also said that he also used his automobile to attend numerous training sessions and that he also used his automobile to assist customers on service calls.

[18]          I accept the Appellant's evidence. In my opinion the Auditor for the Canada Customs and Revenue Agency did not recognize that the Appellant was required to use his automobile frequently in carrying out his employment duties for FSL. However, I note that the log maintained by the Appellant was inadequate because it failed to indicate the client's name or the destination and purpose of the trip.

[19]          My decision on the vehicle operating expenses claimed is as follows:

                                                                                                                1995                      1996

                Automobile Expenses Claimed                           $2,868.54                                 $4,846.97

                Automobile Expenses Allowed                          $2,368.54                                 $3,846.97

B.             Additional Expenses

[20]          My decision on the additional expenses claimed is as follows:

1995 Taxation Year

                Expense                  Claimed                  Allowed                   Disallowed

Advertising                            $ 101.65                   $ 101.65                      -

Meals                                      82.75                     82.75                        -

Supplies                  133.75                    133.75                       -

Business Parking 267.50                    100.00                    $ 167.50

Other Expenses

Long Distance       106.60                    106.60                       -

Dry Cleaning                          1,418.00                   100.00                    $1,318.00

Casual Labour       500.00                       -                                           500.00

Work Space

in Home                  1,215.00                                 500.00                  715.00

1996 Taxation Year

Expense                  Claimed                  Allowed                   Disallowed

Advertising                            $ 157.43                      -                                           $ 157.43

Meals                                      312.85                    212.85                    100.00

Supplies                  283.44                    283.44                        -

Other Expenses

Cellular Phone       233.76                    233.76                        -

Long Distance       80.00                      80.00

Dry Cleaning                          732.00                    100.00                    632.00

Casual Labour       500.00                       -                                           500.00

Work Space

in Home                  $1,738.00                                 $ 500.00                 $1,238.00

[21]          The Minister is instructed to issue Notices of Reassessment in order to permit the Appellant to deduct the amounts that I have allowed. The appeals are allowed, without costs, and the assessments are referred back to the Minister for reconsideration and reassessment on the basis of the above Reasons for Judgment.

Signed at Vancouver, British Columbia, this 26th day of November 2002.

"L.M. Little"

J.T.C.C.

COURT FILE NO.:                                                 2000-3979(IT)I

STYLE OF CAUSE:                                               Andrzej Gajos and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Vancouver, British Columbia

DATE OF HEARING:                                           October 28, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge L.M. Little

DATE OF JUDGMENT:                                       November 26, 2002

APPEARANCES:

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Raj Grewal

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2000-3979(IT)I

BETWEEN:

ANDRZEJ GAJOS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on October 28, 2002 at Vancouver, British Columbia, by

the Honourable Judge L.M. Little

Appearances

For the Appellant:                                                                 The Appellant himself

Counsel for the Respondent:                              Raj Grewal

JUDGMENT

                The appeals from the assessments made under the Income Tax Act for the 1995 and 1996 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

Signed at Vancouver, British Columbia, this 26th day of November 2002.

"L.M. Little"

J.T.C.C.