Docket: 2009-315(IT)I
BETWEEN:
LISA METZA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals
heard on June 28, 2011, at Cranbrook, British Columbia
Before: The Honourable
Justice G. A. Sheridan
Appearances:
|
For the Appellant:
|
The
Appellant herself
|
|
Counsel for the Respondent:
|
Rob Whittaker
|
____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for Judgment,
the appeals from the reassessments by the Minister of National Revenue under
the Income Tax Act of the Appellant’s 2004 and 2005 taxation years are
allowed and the matter is referred back to the Minister for reconsideration and
reassessment on the basis that the Appellant is entitled to business expense
deductions for each of the taxation years as set out below:
For
2004:
1.
Travel: 70% of the $7,194.85
claimed by the Appellant in her 2004 income tax return;
2.
Legal Expenses: $ 7,000, the full
amount claimed by the Appellant in her 2004 income tax return; and
3.
Business Use of Home: 60% of the
$7,475.93 claimed by the Appellant in her 2004 income tax return.
For
2005:
1.
Travel: 70% of the $6,790.92
claimed by the Appellant in her 2005 income tax return;
2.
Business Use of Home: 60% of the
$4,943 claimed by the Appellant in her 2005 income tax return.
Signed at Ottawa, Canada,
this 5th day of July 2011.
“G. A. Sheridan”
Citation: 2011TCC331
Date: 20110705
Docket: 2009-315(IT)I
BETWEEN:
LISA METZA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
The Appellant, Lisa
Metza, is appealing reassessments by the Minister of National Revenue which disallowed certain business expense deductions
claimed in 2004 and 2005.
[2]
The Appellant
represented herself and testified at the hearing. Called for the Respondent was
Clive Wheatley, the Appeals Officer who
reviewed her Notice of Objection.
[3]
As is often the case in
Informal Procedure appeals involving business expenses, the Appellant had not previously disclosed to the
Respondent some of the documentation she intended to rely on at the hearing.
After reviewing the documentation with his client and having heard the
Appellant’s evidence in respect thereof, counsel for the Respondent conceded
that the Appellant was entitled to deduct the following amounts in 2004 and
2005:
For 2004:
1.
Travel: 70% of $7,194.85, the
amount claimed by the Appellant in her 2004 income tax return; and
2.
Legal Expenses: $ 7,000, the full
amount claimed by the Appellant in her 2004 income tax return.
For
2005:
1.
Travel: 70% of $6,790.92, the
amount claimed by the Appellant in her 2005 income tax return;
[4]
The only issues then remaining for the Court’s consideration were the
Appellant’s entitlement to the amounts claimed in her 2004 and 2005 income tax
returns in respect of Office Expenses and Business Use of Home.
[5]
By way of background, the
Appellant is in the business of designing and sewing traditional Bavarian
costumes. She works out of her home and markets her merchandise primarily at
German folk festivals across Canada and the United
States. She uses fabric, thread and
other items typically associated with sewing in her business. Her home is
equipped with cutting tables, merchandise racks, an iron and ironing board,
heavy duty shelving for the fabric and accessories used to make the clothing, storage
containers, display tables and other marketing paraphernalia used at the
festivals. The Appellant is passionate about sewing and takes great pride in
her work as a seamstress.
Office
Expenses – 2004
[6]
The Appellant claimed $5,848.72 as
Office Expenses in 2004. At the audit stage, the auditor disallowed the entire
amount because the Appellant had not provided documents in support of her
claim. However, when reviewing her file at the objection stage, Mr. Wheatley
took the view that as the Appellant was carrying on a business in 2004, it
followed that she would have had some expenses. In the absence of
supporting documentation, he felt a better approach would be to allow $3,000,
approximately the same amount claimed by the Appellant and accepted by the
Minister in 2005. This strikes me as entirely reasonable and since the
Appellant produced no receipts at the hearing, I can see no justification for
interfering with the $3,000 amount already allowed by Mr. Wheatley.
Business
Use of Home – 2004 and 2005
[7]
In each of the taxation years, the
Appellant claimed $7,475.93 and $4,943.21, respectively, for the business use
of her home, both of which amounts were disallowed in full. At the objection
stage, after discussing the matter with the Appellant and her tax preparer at
H&R Block, Mr. Wheatley allowed 50% of the amounts claimed. At the hearing,
the Appellant argued that because her business had effectively taken over her
home, she ought to be able to claim 90% of her residence costs.
[8]
While she provided no floor plan
or photos of her home, the Appellant was credible in her description of it and
its use in her business. It is a small two‑bedroom house which, in 2004
and 2005, she shared with her son. While she would have preferred to have a
separate studio in which to carry out her craft, she has not yet managed to
achieve this dream. As a result, much of her home was taken over by her sewing
business. The living room was where she did the cutting, sewing, ironing and
other tasks associated with making the costumes. Her bedroom was dedicated to
storing the merchandise and some of the sewing supplies. The second bedroom,
her son’s, housed the computer used for correspondence that had to be written
in English. (The Appellant’ s first language is German and she said she had to
rely on her son to look after this for her because she was not as fluent in
written English as she would have liked to be. Although a translator was provided
for her at the hearing, the Appellant impressed me with her fluency in
English.) The basement was used to some extent for storing fabrics but this
ultimately proved unsatisfactory because of its dampness. The kitchen, bathroom,
a corner of the living room housing the television and a small sleeping area were
for personal use.
[9]
While I accept Mr. Wheatley’s
evidence that the 50% that he allowed on objection is higher than is typically
allowed for a business use of home deduction, each case must be decided on its
particular facts. Based on the additional information provided by the Appellant
at the hearing, I am satisfied that the appropriate percentage of business use
of her home was 60% of the amounts originally claimed.
[10]
The appeals of the 2004 and 2005
taxation years are allowed in accordance with the reasons set out above.
Signed at Ottawa, Canada, this 5th day of July 2011.
“G. A. Sheridan”
CITATION: 2011TCC331
COURT FILE NO.: 2009-315(IT)I
STYLE OF CAUSE: LISA METZA AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Cranbrook, British Columbia
DATE OF HEARING: June 28, 2011
REASONS FOR JUDGMENT BY: The
Honourable Justice G. A. Sheridan
DATE OF JUDGMENT: July 5, 2011
APPEARANCES:
|
For the Appellant:
|
The Appellant herself
|
|
Counsel for the
Respondent:
|
Rob Whittaker
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa,
Canada
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