Citation: 2010 TCC 641
Date: 20101221
Docket: 2008-2475(IT)I
BETWEEN:
HUGUETTE GÉNIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Mrs. Génier’s
appeal under the informal procedure from the denial of her 2003 to 2005
business losses was heard in Kapuskasing, Ontario. It is not disputed that Mrs. Génier
carried on a retirement home business. The only issue to be decided is whether,
after ceasing regular operation of that business, she continued selling off the
business assets in a commercially reasonable and orderly way in the years in
question. The amount of the expenses in the years in question is not disputed.
There was never any element of personal use by Mrs. Génier of any part of the
property in question. She lived in her own nearby home throughout.
[2]
The Court heard from
two witnesses. Mrs. Génier testified on her own behalf. The Respondent
subpoenaed Ms. Edith Belair, who was at the relevant time the chairman
of the board of directors of the Cochrane Community Living Association
(“Community Living”), Community Living being one of the entities that expressed
an interest in purchasing the former retirement home premises from Mrs. Génier
after she ceased normal operations and listed the property for sale. There is
no issue of credibility whatsoever with either witness’ testimony. Both
testified in a clear, consistent and forthright manner. Mrs. Génier’s
recollection of events was very clear, complete and at her finger tips. This is
not surprising since the events in question would have caused her significant
financial setback and loss of business reputation within her community. No
doubt whatsoever was cast on her testimony during the course of a good and
strong cross‑examination by the Respondent’s counsel. Ms. Belair’s
recollection was somewhat less clear but this is hardly surprising given her
more distant and much lesser interest in the property and the events concerning
it. Further, she was the chairman of Community Living’s board but was not
involved in its day‑to‑day management or operations at the time.
Certainly, none of Ms. Belair’s testimony regarding Community Living’s
interest in the building was inconsistent with Mrs. Génier’s testimony. I
accept entirely the testimony of each without hesitation or qualification.
[3]
Mrs. Génier lives
in the town of Genier, located outside Cochrane. She has a long personal and
business history in her community. She and her husband ran a heavy equipment
company serving the forestry industry from 1975 to 1992; it was called
Alexandre Génier Ltd. In 1992, when her husband passed away, she carried
it on for a period of less than a year and then stopped its operations and
wound up its activities. She sold off its assets over a period of three years
because she was unable to find anyone to purchase the business as a going
concern. In 1993, she became as well a part‑time secretary at a Cochrane
funeral home. She later took that position on a full‑time basis. Along
with other investors, she became the owner of the funeral home in 1995 and she became
its head of operations. In 1999, the funeral home’s name was changed to Génier &
Gauthier Funeral Home. The funeral home is a traditional local funeral home
serving the needs of those wanting to preplan their funerals and people who
have lost a loved one. It also acts as agent for a memorials company.
[4]
Her funeral home
experience caused her to perceive a need in Cochrane for an independent living
building for healthy seniors. When a closed convent building went up for sale
locally, she thought it would be an opportune location in which to open such a
business. The property was listed for sale with an agent in February 2000 for
an asking price of $269,000. After looking at it several times to assess its
suitability, she purchased it in August 2000 for $189,000. She named her
retirement home Foyer Oasis du Bonheur (“Foyer Oasis”).
[5]
Before buying the property
she made inquiries in her community and had about 25 people express an
interest in living in her proposed new retirement home. She knew that almost
all of them would need to sell their own homes in a small Ontario town first,
so she expected things to start up slowly. She anticipated start‑up
losses but projected a profitable business after a modest start‑up. She
understood the property needed rezoning, knew what that would entail and
expected to be able to receive rezoning approval after her purchase. She also
knew the property would need significant renovations in order to be changed
from a convent to a retirement home and she anticipated what those would
consist of and what they would cost, and was aware of her available sources of
financing for renovations.
[6]
After closing the
purchase, she attended to the needed renovations. The convent had
14 bedrooms. These needed modifications and she had future plans to add
two more bedrooms when needed. In addition she was required to add a bathroom
for handicapped persons. Substantial rewiring was required, including getting
both telephone lines and cable television into each of the bedrooms. Substantial
improvements to the electrical system were required in order to bring it up to
code standards. The kitchen needed to be substantially renovated to make it
into a commercial kitchen and it needed such things as a commercial dishwasher
and fridges. A suitable laundry room had to be set up with commercial washers
and dryers. She was required to convert all of the interior doors to fire
doors. She acquired office equipment and furnishings. The gas lines had to be
dug up from the street because of a defective source pipe. She also had to carry
out significant grading and landscaping upgrades of the surrounding lawns, and
she added a large petanque lawn and a large outdoor sign identifying Foyer
Oasis. The sidewalks at the entrance had to be dug up and freshly laid to have
level entranceways. Tenant storage rooms had to be constructed in some of the
convent’s former communal storage areas.
[7]
Mrs. Génier
financed all of this with her savings, a mortgage loan on the convent and two
lines of credit, one of which was secured with her own home. All of the
proceeds of the mortgage and all of the draws on the lines of credit were used
to finance the acquisition and renovation of the Foyer Oasis business. None of
it was used for any personal purposes; Mrs. Génier had other financial
resources in place for her personal matters.
[8]
Foyer Oasis opened for
business in October 2000. More than 225 people came to its opening
ceremony. One resident moved in on the first day, another signed up on the
first day and moved in a week later, and a third would move in two weeks after
that. All three of these were from her initial list of 25 potential
occupants.
[9]
Foyer Oasis was staffed
24 hours a day, as one would expect. Mrs. Génier employed six full‑time
staff in the business: two cooks, one washer, two housekeepers and one
maintenance man/handyman.
[10]
Foyer Oasis’ tenants
paid $1,200 per month, which was within her initial projections. For this,
occupants received a private bedroom, a storage area, three meals and two
snacks a day, laundry and housekeeping services, as well as cable television and
telephone.
[11]
Unfortunately for Mrs. Génier,
Foyer Oasis’ success in attracting tenants stalled shortly thereafter. Within
the community, whispered rumours began circulating about her conflict of
interest in running both a seniors’ home and a funeral home and, perhaps
related to that, concerns were expressed about the adequacy of the meals.
[12]
In spite of this, she
continued to promote and publicize Foyer Oasis, including obtaining favourable
local newspaper coverage.
[13]
In May 2001, still
with only three tenants and not generating enough revenue to pay the winter
heating bills, she decided to close the residence’s doors and discontinue
operations. The three residents were able to be placed in other homes by
May 31, 2001. She promptly listed the property for sale for an asking
price of $450,000. By the time that listing expired in December 2001, all
of Cochrane was well aware that the property, after its extensive renovations
and brief operation, was up for sale. The property was very visible, located in
town, on a hill, beside the church, and it was advertised in the newspapers as
well as the normal real estate media. There were “For Sale” signs outside the
property as well as in a window of the property. After the listing expired she
had her own “For Sale” signs on the property. She listed the property again in
June 2002 and dropped the price to $359,000. By October 2002, she had
dropped the price to $295,000 in consultation with her real estate agent. She
was anxious to sell the property from the outset due to the financial drain on
her. That listing agreement expired in December 2002 and was not renewed.
The agent’s interest in the listing dwindled; the agent was located some
distance from Cochrane, in the broker’s New Liskeard office. The agent
recommended that Mrs. Génier consider selling privately or use a local
broker who could, among other things, be present to show the property promptly.
[14]
Mrs. Génier
immediately started offering the property for sale privately. In addition to relying
on the signage and the local knowledge that the property was for sale, she
advertised the property in newspapers outside Cochrane as far away as Timmins,
where the advertisements could be targeted economically. The property was
listed on Internet sites including eBay and Kijiji Sudbury. She also listed the
property for sale with business brokers.
[15]
During this period the
property had been shown 25 to 50 times and, although no written offers
were received, a number of oral proposals and expressions of interest from
interested persons were received. She had offers or expressions of interest at
prices up to $395,000, which fell through because of financing, zoning or other
difficulties.
[16]
While the property was being
offered for sale privately, the local Community Living organization developed a
strong interest in the property. Community Living had in mind selling its
several homes in the area and consolidating its services into the much larger
Foyer Oasis property. It is not clear when Community Living first expressed an
interest in the property and had the first of its visits to the property.
During its visits, Community Living did an extensive assessment of the adequacy
of the projects and the renovations needed for complete handicapped access. Several
officials from Community Living, including at least one director, looked at the
property.
[17]
In mid‑February 2004,
its Executive Director wrote a follow‑up letter to Mrs. Génier inquiring
about occupancy costs and formally requesting a purchase price for the
property. At the earlier showings, Mrs. Génier had only mentioned a range.
[18]
Mrs. Génier
promptly responded to this letter, indicating that the asking price was
$390,000, which was a reduction from the original listing price. She also
answered their questions about utilities and occupancy costs. Community Living
orally negotiated a price of $350,000.
[19]
Thereafter, Community
Living made a funding proposal to the Ontario Ministry of Community and Social
Services for its proposed purchase of the Génier property and a relocation from
its existing properties. There is no reason to think that Community Living did
not propose a purchase at a price in the vicinity of $350,000. The Executive Director
of Community Living had a meeting with the Ministry of Community and Social
Services to discuss this. The other board member involved in this process was a
former mayor of Cochrane of good reputation and known for his integrity. For
all of these reasons, Mrs. Génier, reasonably, felt comfortable in continuing
to negotiate with Community Living in the hope that a sale would come to fruition.
The Ontario Ministry of Community and Social Services rejected the Community
Living proposal for reasons entirely unrelated to the property. The Ministry’s
letter to Ms. Belair was dated in August 2004. This letter was not
shared with Mrs. Génier until preparation for trial. In fact, Community
Living’s interest did not end at that time even though Ms. Belair might
not have recalled this or even been aware of it at the time. Community Living’s
continued interest in the property is evidenced by Mrs. Génier’s late
September 2004 letter to the Executive Director of Community Living. Her
letter says she is responding to his request to consider renting the building
to them. Her response is to quote a monthly net rent for the building and to
offer a lease to own option whereby 80% of the monthly rent would be applied
towards the purchase price. Mrs. Génier recalls Community Living’s interest
continuing well after that time and she continued to be hopeful for a long
period of time.
[20]
Ms. Belair
confirmed that everybody in the area knew the property was for sale because of
the prominently displayed “For Sale” sign on what was an institutional property
and because of its central location in the town.
[21]
It is not clear when
Community Living’s interest finally ended. However, I accept that
Mrs. Génier continued to believe that the Community Living possibility was
worth pursuing and that she did pursue it with officers from Community Living
into 2005.
[22]
In September 2005,
Mrs. Génier again listed the property for sale, through December 2006,
with the original listing broker. However this time she listed it with one of
their sales agents located in Cochrane. The asking price was $249,900. This listing
was renewed in November 2006 for another year with the same broker. While
the property was listed with this broker, Mrs. Génier continued with her
private advertisements on Internet sites, even though any private sale would be
subject to the terms of the exclusive listing agreement. Over this period she
also dropped the price to $225,000 and then to $189,000.
[23]
She later advertised it
in Toronto and Ottawa as well as on MLS.ca. She had prospects from as far away
as Toronto. Over the duration of the listing she received offers to purchase
the property in order to demolish the building and sell off the four lots on
which it was built; one such offer was from the Town of Cochrane itself.
[24]
She asked her listing
agents what she could do to make it more readily saleable and they generally
indicated that as long as she was flexible on the price there was little else
to do.
[25]
At the time of the
hearing, Mrs. Génier had entered into an agreement to sell the property
for $175,000, however closing was conditional on a necessary rezoning being
obtained.
[26]
During the period she
had the property for sale and was no longer carrying on her business activities
there, Mrs. Génier sought to minimize her carrying costs by renting out
the property. At times she was able to receive modest rent and the tenants were
also responsible for the utilities; at other times she was only able to have
the tenants pay the utilities. She also had several short‑term special
event rentals and was once able to rent out several of the small rooms for one
year to a professional practice that was in need of temporary accommodations
while its new building was being completed.
[27]
There was no evidence
that, or from which I can infer that, Mrs. Génier did not, generally speaking,
want to sell the property during this period, but was interested in holding on
to it in order to obtain greater capital appreciation at the expense of
taxpayers generally through the deduction of her losses.
[28]
Mrs. Génier
reported in respect of Foyer Oasis during the years in question net losses in
amounts between $25,000 and $30,000. These were made up primarily of interest,
property taxes and utilities.
Analysis
[29]
It is clear from the Respondent’s
assumptions, the Canada Revenue Agency (“CRA”) audit proposal letter and the notice
of confirmation following Mrs. Génier’s objections that CRA officials reassessed
2003 through 2005 with little or no further thought once they found out that the
business’s regular operations of running a retirement home had ended in mid‑2001.
The objections were promptly followed by a confirmation on that same basis
notwithstanding that the submissions to the CRA audit and appeals units detailed
the continued efforts to sell the asset after normal operations had ended. The CRA
was clearly wrong. It is simply not in accordance with the Income Tax Act
(the “Act”), with the interpretation of that Act by the courts,
and with the realities of Canadian businesses, large and small, that once
normal operations cease all of a business’s assets become non‑business or
personal assets. It is simply incontrovertible that the general rule is that
business closing costs are deductible business expenses. It would be nonsensical
if it were otherwise. It is simply unacceptable that individual Canadian
business people are summarily told otherwise by CRA audit and appeals officials.
[30]
That CRA business
auditors could be wrong on such a basic tax premise is surprising. That CRA
appeals officers could dismiss an objection on this point is simply
inexcusable. Canadian businesses expect and deserve better. Canadians are
entitled to, and pay for, a professional and trained public service.
[31]
The Respondent at trial
sensibly abandoned the positions of the CRA audit and appeals officials and of the
CRA agent who drafted the reply. The Respondent’s counsel instead focussed on
whether Mrs. Génier was reasonable in her approach to selling the property
and minimizing her continuing losses after regular operations had ceased.
However, in this case there is no suggestion of either personal use or some other
obvious reason to continue to hold the property, nor is there any evidence from
which to infer that Mrs. Génier was holding it for the purpose of continued
capital appreciation. In such a case, the CRA has little business questioning
the commercial business and investment decisions of Canadians. As I wrote in Central
Springs Limited v. The Queen, 2010 TCC 543:
34 The courts have, on a number of occasions, reminded the
CRA that it does not have the authority to second‑guess business decisions
legally implemented. See, for example, Gabco Ltd. v. M.N.R., 68 DTC 5210
(Ex. Ct.), and Jolly Farmer Products Inc. v. The Queen,
2008 TCC 409, 2008 DTC 4396 (TCC).
[32]
Mrs. Génier may
have made some business mistakes but those were her mistakes to make. Many
Canadian businesses have exercised what Monday morning and armchair
quarterbacks say was poor business judgment and lost large amounts of money,
including banks and other financial institutions, natural resource companies
and real estate development companies. Some, with names like Eaton, Campeau and
Massey lost their businesses as a result. Their tax losses were not denied as a
result of arguably poor business decisions. It can be no different for the
Géniers of Canada. It is not open to CRA officials after the fact to substitute
their sense of what constitute reasonable and sound commercial, business or
economic investment decisions for the judgment of those who incur the losses. Canadian
businessmen and women, of whatever type they may be, are entitled to make their
own considered judgments and decisions. Some may be averse to risk and
conservative; others may be more aggressive and open to risk. Once it is
established that their business or investment activity is a source of income
from a business or property, their risk/reward analysis, risk tolerance,
judgment and decisions are not generally open to be challenged by the CRA, nor should
these be reviewed by judges. That is not the role of the CRA or the Court where
everything is clearly happening within the context of a business and where no
concerns of personal use or benefit arise. This is all the more true where the Respondent
leads no evidence to support its view that a genuine reasonable, sensible
business person would not act in such a way.
[33]
In Brian J. Stewart
v. The Queen, 2002 SCC 46, 2002 DTC 6969, the Supreme
Court of Canada wrote:
50 It is clear that in order to apply s. 9, the taxpayer
must first determine whether he or she has a source of either business or
property income. As has been pointed out, a commercial activity which falls
short of being a business, may nevertheless be a source of property income. As
well, it is clear that some taxpayer endeavours are neither businesses, nor
sources of property income, but are mere personal activities. As such, the
following two-stage approach with respect to the source question can be
employed:
(i)
Is the activity of the taxpayer undertaken in
pursuit of profit, or is it a personal endeavour?
(ii)
If it is not a personal endeavour, is the source
of the income a business or property?
The first stage of the test assesses the general question of whether
or not a source of income exists; the second stage categorizes the source as
either business or property.
[34]
The first step in the Stewart
analysis is to distinguish between commercial and personal activities but,
according to the Supreme Court of Canada, this analysis is only required where
there is some personal or hobby element to the activity in question. See
paragraphs 52 and 53 of the Court’s reasons.
[35]
In Langille v. The
Queen, 2009 TCC 398, 2009 DTC 1262, I wrote the
following on the subject of the continued deductibility of expenses related to
a business once its ordinary operations had ceased and it was in a winding‑up
period and pursuing the winding‑up in a commercially reasonable, sensible
and orderly manner:
9 I am satisfied that the net business losses claimed by
Mr. Langille in 1999 to 2001 were properly deductible. The evidence is that a
sensible, commercially reasonable and entirely business-like approach was
followed in liquidating the dairy farm assets following the suspension of its
business operations. It is not unreasonable to think that the disposal of
approximately 3,000 acres of farmland in the Annapolis Valley, after deciding there was no future viability of carrying on
commercial farming operations on it, would not be a quick process. The taxpayer
made business decisions on how to liquidate and maximize his proceeds thereby
minimizing his shutdown expenses consistent with the advice he received,
continuously tried to market and sell the remaining property, and did not use
the property for any personal purposes. In the circumstances of this case, the
period 1988 or 1989 through 2001 continues to be a reasonable period in which
to continue to successfully conduct the liquidation in commercial fashion.
10 This approach to expenses incurred during a winding up
period for a discontinued business was adopted by C. Miller J. in Heard v.
Canada, [2001] 4 C.T.C. 2426 (see especially paragraph 15). The
reasons of C. Miller J. in Heard were quoted approvingly by Hershfield
J. in Mikhail v. Canada, [2002] 2 C.T.C. 2612 (at paragraph 34). The
reasons of C. Miller J. and Hershfield J. are not diminished by the fact they
were written in a pre-Stewart REOP world (Brian J. Stewart v. The Queen,
2002 SCC 46, 2002 DTC 6969).
11 As I wrote in Caballero v. The Queen,
2009 TCC 390, at paragraph 6:
It is possible to commence to carry on a business for purposes of
the Income Tax Act (the “Act”) before the business is
operational. A business can be expected to have different types and different
levels of activities throughout its course. What it does during its start-up or
winding down phases can be expected to differ significantly from what it does
during its operational phase. It may even have periods of relative dormancy
when its normal operations are interrupted.
In this case, I find we have a business that is continuing to be
carried on in the year in question in the course of completing the winding down
of the farming activities it had ceased to operate.
12 As stated by the House of Lords in South Behar Railway
Company Limited v. I.R.C., [1925] A.C. 476 at 488: “Business is not
confined to being busy; in many businesses long intervals of inactivity occur.”
In that case the decision was: “The concern is still a going concern though a
very quiet one.”
13 It was the respondent’s position that in the years 1999 to
2001 the taxpayer simply was not in a farming business. His activity in those
years did not establish he was genuinely farming. The respondent did not
consider the historical substantial commercial farm operations relevant. The
CRA was either looking only at what was happening in the years 1999 to 2001, or
treated those years’ activities as reflective of the past farming history of
Mr. Langille. In the words of the CRA witness, that farm history was so far
removed she just did not factor it in. Further, she was not aware there had
been regularly recurring land sales since 1988. This means that the respondent
was not looking at those losses as resulting from business shutdown expenses.
14 As a general rule, there is no reason that business
shutdown or termination expenses incurred post-closure of operations cease to
be deductible business expenses in ordinary commercial and business-like
circumstances. If it were otherwise, Canadian businesses, whether
manufacturers, mills, mines or otherwise, would be denied recognition of a
potentially significant portion of the expenses associated with their taxable
revenues. That would not be right and there are no express provisions of the Income
Tax Act which would require it as a general principle. While no evidence
was received on this point, I doubt very much that it would be in accordance
with ordinary commercial principles or with Canadian generally accepted
accounting principles.
15 The Crown argued that, after the dairy operations ended or
at least for the years in question, the land was held for personal enjoyment or
for investment purposes. There was no evidence to support the remaining listed
lands being personal use property or being used for personal enjoyment. In
order for me to conclude the lands ceased to be related to the shutdown [of
the] dairy business and its use changed to being held as a capital investment
asset, I would have to at least be persuaded that the taxpayer was not carrying
on throughout a reasonable disposition of the farming assets. The evidence
presented does not support such a conclusion and, where there is no personal or
hobby aspect to a venture, it is not for the CRA to second-guess or overlook
business decisions made by business owners relating to their businesses if the
decision is not unreasonable.
16 On the Crown’s theory, section 45 would have applied at
some point upon a change from an income-producing use to a non-income-producing
use or from a business income-producing use to a property income-producing use
by Mr. Langille. There is no evidence to support the position that the
property ever ceased to be held or used for the purpose of gaining or producing
business income. Section 45 was not pleaded by the Crown.
[36]
This is entirely
consistent with earlier decisions of this Court in Mikhail v. The Queen,
[2002] 2 C.T.C. 2612, Raegele v. The Queen, [2002] 2
C.T.C. 2955, Baird v. The Queen, 2010 TCC 316, MacIntyre
v. The Queen, 2010 TCC 277, Heard v. The Queen,
[2001] 4 C.T.C. 2426, and Nadoryk v. The Queen, 2002 DTC 2044.
[37]
The Crown’s principal
submission was that Mrs. Génier’s exorbitant $450,000 asking price at the
outset and the absence of a listing agreement with a commercial real estate
brokerage for most of the period in question demonstrated that she was not
pursuing the sale of Foyer Oasis in a reasonable manner, hence her continued
ownership and efforts to sell were no longer connected with the Foyer Oasis
retirement home business. It was argued that she was looking instead for the future
accrual of a capital gain. I am unable to reach the same conclusion. In
hindsight, Mrs. Génier may have been as unwise in setting her initial
asking price as she may have been in even opening the business, but she readily
dropped the price every six months or so, and by early October 2002 it was
listed at $295,000.
[38]
Her asking price was
simply that — an asking price; it was clear that it was
always negotiable. Indeed, she quickly began dropping the price on the
recommendation of her agents, and by the end of 2002 her asking price compared
favourably with the asking price for the old convent, which had been $269,000
before Mrs. Génier’s extensive renovations and improvements. Further, by
the end of 2005, she had reduced her price to under $250,000.
[39]
During the periods that
she did not have the property listed with an agent, it continued to be
advertised extensively for sale and continued to be known throughout the
Cochrane area as still being for sale. It was during that period that Community
Living pursued its interest in the property. The fact that, when Community
Living was unable to buy the property and was interested in renting it, Mrs. Génier
offered them a lease‑to‑purchase agreement confirms that she
continued to be interested in selling the property in its entirety as quickly
as reasonably possible.
[40]
This was a special‑use
institutional residential complex in a Northern Ontario town. It could not be
expected to sell very quickly. It was in need of a special purchaser like
Community Living or someone interested in running a guest house, a bed and
breakfast, a rooming house, a special needs home or a group home, or some organization
interested in communal housing. The property could be converted into
professional offices or a residential treatment centre or it could be converted
back to church use given its chapel and its small rooms suitable for offices
and classrooms.
[41]
This is not a case of a
taxpayer holding on to an asset which has declined in value, hoping for a
future capital gain to recover her investment.
[42]
There is no concept of
reasonableness which would suggest that in these circumstances a real estate
agent was required. It seems illogical that there should be any such
presumption or general principle that would require the incurring of additional
fees by taxpayers. The reasonableness of winding‑up efforts will need to
be decided on the basis of particular facts and circumstances. In this case,
I am satisfied that throughout 2003 to 2005 Mrs. Génier continued to
pursue the sale of the property in an orderly, sensible, commercially
reasonable and businesslike manner.
[43]
I find that Mrs. Génier’s
continued carrying costs for the property in the period 2003 through 2005
continued to be deductible as an expense associated with her Foyer Oasis
business.
[44]
The Respondent, in the
course of her cross‑examination and argument, questioned whether Mrs. Génier’s
lines of credit associated with Foyer Oasis had only been used for the purposes
of that business. The Respondent questioned the amount of interest claimed in
respect of those lines of credit.
[45]
After hearing the
evidence, in particular Mrs. Génier’s responses in cross‑examination
in which she was able to account from memory for about 90% of the amount in
question by referring to specific renovations and their approximate cost, I am
satisfied that the amounts drawn on the lines of credit were, as Mrs. Génier
testified in examination‑in‑chief, used entirely for the Foyer
Oasis business renovations and the carrying costs and were never used for
personal purposes. The only evidence of any crossover of her business and
personal financing is the fact that she mortgaged her home to secure the Foyer
Oasis business lines of credit.
[46]
The taxpayer’s accountants
did contribute to the Respondent’s concern by showing the interest not as a
business expense in her initial return but as interest paid on money borrowed
for investments. The evidence satisfied me that that was an incorrect
classification at the outset.
[47]
For these reasons, the
appeal is allowed with costs.
Signed at Ottawa, Canada, this 21st day of December 2010.
"Patrick Boyle"
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