Date:
20021129
Docket:
2001-4018-IT-I
BETWEEN:
JOHN
GULAK,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
Little,
J.
A.
FACTS
[1]
The Appellant owns an 80-acre farm located in Sliding Hills,
Saskatchewan (the "Farm").
[2]
In the years under appeal (1998 and 1999) the Farm was operated
by a person described by the Appellant as a Rancher.
[3]
The Appellant said that the Rancher paid all of the operating
expenses of the Farm. If there was any profit realized from the
operation of the Farm approximately two-thirds of the profit
would be distributed to the Rancher and approximately one-third
of the profit would be distributed to the Appellant.
[4]
The Appellant also testified that he and his father had
established a gravel crushing business approximately 25 years
ago. The gravel crushing business was operated by the Appellant
and his father as a Partnership. The Appellant said that the
Partnership had purchased expensive crushing equipment and other
pieces of equipment.
[5]
The Appellant said that his father became ill in 1992-1993 and
the gravel crushing business stopped when his father became ill.
The Appellant said that his father died in July 1998.
[6]
The Appellant said that the gravel crushing business was not
operated in the 1998 and 1999 taxation years. The Appellant
testified that he attempted to maintain some of the equipment
during the years under appeal.
[7]
When the Appellant filed his personal income tax returns for the
1998 and 1999 taxation years he reported income and expenses as
follows:
1998
Taxation Year
RENTAL
INCOME
Income
$ 3,541.68
Expenses:
Maintenance
1,631.22
Motor
Vehicle
2,165.22
Office
Expenses
1,631.50
Professional
Fees
424.32
Travel
952.78
Utilities
2,405.11
Other
Expenses
460.00
$ 9,670.59
Net Income
(Loss)
($6,128.91)
1999
Taxation Year
RENTAL
INCOME
Income
$ 1,979.09
Expenses:
Maintenance &
Repairs
3,309.64
Professional
Fees
589.84
Other
Expenses
1,260.18
$ 5,159.66
Net Income
(Loss)
($3,180.57)
1999
Taxation Year
BUSINESS
INCOME
Income
$ 300.00
Expenses:
Business tax, fees,
licence
878.00
Insurance
372.00
Meals & Entertainment
Travel
Expenses
1,147.23
Rent
2,198.50
Telephone
2,957.11
Total
$7,552.84
Net Income
(Loss)
($6,128.91)
[8]
On the 29th day of April 1999 the Minister of National Revenue
(the "Minister") reassessed the Appellant's 1998
taxation year to disallow the rental expenses claimed in the
year.
[9]
On the 11th day of May 2000 the Minister reassessed the
Appellant's 1999 taxation year to disallow the rental
expenses and business losses claimed by the Appellant.
B.
ISSUE
[10] Is the
Appellant entitled to deduct the following expenses:
1998
1999
Rental
Expense
$9,670.59
$5,159.66
Business
Expense
-
$7,552.84
C.
ANALYSIS
Re: Farm - 1998
[11] No receipts
were provided by the Appellant with respect to the rental
expenses claimed for the 1998 taxation year. However the
Appellant testified that he used the industrial loader twice to
pick rocks and dig trenches on the Farm. I will allow the amount
of $500.00 as an expense in the year re the use of the industrial
loader on the Farm. Since no records were filed to substantiate
the other expenses that were claimed, the expenses claimed are
denied.
Re: Farm - 1999
[12] The
Appellant stated that the Rancher paid all of the operating
expenses of the Farm. I see no basis for allowing the maintenance
and repairs of $3,309.64. However, I will allow the Appellant to
deduct the amount of $500.00 re rock picking and trenching on the
Farm. I will also allow the sum of $589.84 claimed as
professional fees on the income tax return. All other expenses
are denied.
Re: Business - 1999
[13] As noted
above, the Appellant testified that he was not operating the
gravel crushing business in 1998 and 1999. However he claimed
business expenses of $7,552.84 in connection with the gravel
crushing business in determining his income for the 1999 taxation
year. Since the gravel crushing business was not an economic
enterprise and was not operating in 1999, all expenses claimed in
connection with the business are disallowed.
[14] The appeals
will be allowed, without costs, and the assessments are referred
back to the Minister of National Revenue for reconsideration and
reassessment to permit the Appellant to deduct the amounts
specified above. In all other respects the appeals are
dismissed.
Signed at
Vancouver, British Columbia, this 29th day of November
2002.
J.T.C.C.
COURT FILE
NO.:
2001-4018(IT)I
STYLE OF
CAUSE:
John Gulak and
Her Majesty the Queen
PLACE OF
HEARING:
Regina, Saskatchewan
DATE OF
HEARING:
November 18, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
November 29, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for
the
Respondent:
Anne Jinnouchi
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-4018(IT)I
BETWEEN:
JOHN
GULAK,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeals
heard on November 18, 2002 at Regina, Saskatchewan, by
the
Honourable Judge L.M. Little
Appearances
For the
Appellant:
The Appellant himself
Counsel for
the
Respondent:
Anne Jinnouchi
JUDGMENT
The appeals from the assessments made under the Income Tax
Act for the 1998 and 1999 taxation years are allowed, without
costs, and the assessments are referred back to the Minister of
National Revenue for reconsideration and reassessment to permit
the Appellant to deduct the
amounts specified above. In all other respects the appeals are
dismissed in accordance with the attached Reasons for
Judgment.
Signed at
Vancouver, British Columbia, this 29th day of November
2002.
J.T.C.C.
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