Citation: 2009TCC612
Date: 20091207
Docket: 2009-1271(IT)I
BETWEEN:
MILES D. McKAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1] There are two
issues in these appeals:
1. what amount, if any, is the
Appellant entitled to deduct for meal expenses in determining his income from
employment for 2004 and 2005; and
2. is the Appellant entitled to
include an amount for GST and provincial sales tax as part of the capital cost
of the truck that was purchased in 2005 in determining the undepreciated
capital cost to the Appellant of the class 10.1 that was created in relation to
the acquisition of this truck (in addition to the $30,000 that was added to
this class 10.1 in relation to the purchase of this truck)?
[2] In the first
page of the Appellant’s Notice of Appeal he stated that the years under appeal
were 2004, 2005 and 2006 but in the statement of relevant facts and reasons he
only addressed matters related to 2004 and 2005. The Respondent had brought a
motion to quash the appeal related to 2006 on the basis that the Appellant had
not filed a Notice of Objection in relation to the reassessment of his 2006
taxation year. At the commencement of the hearing, the Appellant confirmed that
he was only appealing the reassessment of his 2004 and 2005 taxation years and
therefore the hearing proceeded on the basis that only the reassessments
related to 2004 and 2005 were under appeal and that the only issues related to
these reassessments that were under appeal were the two issues referred to
above.
[3] The Appellant
was employed as a surveyor by Maple Leaf Construction Ltd., a company based in Winnipeg. The
company had a division that concentrated on projects in the City of Winnipeg
and a rural division that dealt with projects throughout Manitoba,
Saskatchewan and northwestern Ontario.
[4] The Appellant
was employed in the rural division of Maple Leaf Construction Ltd. and worked
at project sites throughout Manitoba and northwestern Ontario in 2004 and 2005. The Appellant indicated that the
closest site at which he worked during these two years would be approximately a
1.5 hour drive from his home and from the office of the company in Winnipeg. The
Appellant worked at various sites during the construction season which would be
from the middle of May to sometime in November. He would work long hours during
the construction season. The Appellant claimed a deduction in determining his
income from employment for 2004 and 2005 for an amount for meal expenses for
the days when he was working at the various sites.
[5] The position of
the Respondent is that the claim for meal expenses should be denied on two grounds:
1. The Appellant was not required
by his duties to be away for a period of not less than 12 hours from Winnipeg; and
2. The Appellant has not
established that he expended the amount that he had claimed for meals.
[6] Paragraph 8(1)(h)
and subsection 8(4) of the Income Tax Act (the “Act”) provide as
follows:
8(1) In
computing a taxpayer's income for a taxation year from an office or employment,
there may be deducted such of the following amounts as are wholly applicable to
that source or such part of the following amounts as may reasonably be regarded
as applicable thereto:
…
(h) where the
taxpayer, in the year,
(i) was
ordinarily required to carry on the duties of the office or employment away
from the employer's place of business or in different places, and
(ii) was
required under the contract of employment to pay the travel expenses incurred
by the taxpayer in the performance of the duties of the office or employment,
amounts
expended by the taxpayer in the year (other than motor vehicle expenses) for
travelling in the course of the office or employment, except where the taxpayer
(iii)
received an allowance for travel expenses that was, because of subparagraph
6(1)(b)(v), (vi) or (vii), not included in computing the taxpayer's income for
the year, or
(iv) claims a
deduction for the year under paragraph (e), (f) or (g);
…
8(4) An amount
expended in respect of a meal consumed by a taxpayer who is an officer or
employee shall not be included in computing the amount of a deduction under
paragraph (1)(f) or (h) unless the meal was consumed during a period while the
taxpayer was required by the taxpayer's duties to be away, for a period of not
less than twelve hours, from the municipality where the employer's
establishment to which the taxpayer ordinarily reported for work was located
and away from the metropolitan area, if there is one, where it was located.
[7] In this case,
the Appellant was ordinarily required to carry out his duties as a surveyor
away from his employer's place of business and in different places and he was
also required under his contract of employment to pay the travel expense
incurred by him in the performance of his duties. The Appellant stated that he
received an allowance of $15 per day for meals for those days when he was
required to work at a location that was away from the office. However the total
amount paid to the Appellant as a meal allowance for 2004 was $2,754 and for
2005 was $3,094. Neither of these amounts produces an even number when divided
by $15. In filing his tax return for 2004 the Appellant claimed a deduction for
meals purchased on 153 days and for 2005 a deduction for meals purchased on 171
days. It seems logical that these must have been the total number of days that
the Appellant worked outside the office and for which he received the meal
allowance. Dividing $2,754 by 153 days and $3,094 by 171 days produces a result
of exactly $18 per day for 2004 and $18.09 per day for 2005. I am assuming that
the Appellant simply made a mistake when he stated that the meal allowance was
$15 per day and that the actual amount paid was $18 per day.
[8] It does not seem
to me that a meal allowance of $18 per day is a reasonable amount for meals
(which would only be $6 per meal based on 3 meals per day) for the days for
which the Appellant recorded 12 hours or more at a work site or was otherwise
required to be away from Winnipeg for 12 hours or more because of his
employment duties. Therefore the allowance paid for these days would not be an
allowance for travel expenses that was, because of subparagraph 6(1)(b)(v),
(vi) or (vii), not included in computing the Appellant's income for the year.
[9] The issue in
this case related to the requirements of subsection 8(4) of the Act and
in particular whether the Appellant was required by his duties to be away from Winnipeg, for
at least 12 hours. The Appellant introduced copies of his time sheets for 2004
and 2005. There are several days on the time sheets during which the Appellant
worked for 12 hours or more at a site away from Winnipeg. The Appellant worked
at various places including Thompson, Flin Flon, Brandon, Swan Lake, and Dauphin. Counsel for the Respondent acknowledged
that she did not have an argument in relation to the requirements of subsection
8(4) of the Act with respect to the days during which the Appellant
recorded 12 hours or more at a site outside Winnipeg.
[10] In 2004 the
number of days that the Appellant recorded 12 hours or more of work at a
location outside Winnipeg was 111 days. Following a review of the time sheets
for 2004, the parties requested a break to review the time sheets for 2005.
Following the break, the parties provided the number of days for each month for
which the Appellant recorded 12 hours or more at a work site outside Winnipeg and the
total number of these days for 2005. However, the total number of these days
for 2005 as indicated by the parties does not match the number of these days
determined by adding the number of such days for each month. As a result I
reviewed the time sheets for 2005. The total number of such days that I
determined for 2005 was 81 days. The total number of such days as stated by the
parties was 79 days but the cumulative sum of the days for each month as stated
by the parties was 83 days. One of the days that I had included as a day for
which the Appellant recorded 12 hours or more at a work site outside Winnipeg was
included by the parties in the “disputed days” category. I find that the number
of days for 2005 for which the Appellant recorded 12 hours or more at a work
site was 81 days.
[11] There are also
additional days in 2004 and 2005 for which the Appellant recorded less than 12
hours of work at a site, but which were days when the Appellant was working at
a site away from Winnipeg and would not return home after work. He would stay
overnight at a hotel. The closest of these sites was in Brandon,
Manitoba. The Appellant indicated that Brandon, Manitoba was a two and a half hour drive away from Winnipeg. He
would stay overnight in Brandon as he would have to be at the project site early in
the morning (at sunrise). It seems to me that it would be reasonable to stay in
Brandon (or locations that were further away) rather than drive for two and
half hours (or more) in the evening after a long day of work to only have to
drive for two and half hours (or more) to return the next morning by sunrise.
It seems to me that on those days where he would stay over at the work
location, because it was too far to drive back to Winnipeg, were still days
where he was required by his duties (which had to be performed at those
locations) to be away from Winnipeg for 12 hours or more, and therefore these
additional days (which were referred to above as the “disputed days”) should be
included as days for 2004 and 2005 when the Appellant was required by his
duties to be away from Winnipeg for 12 hours or more.
[12] The number of
these additional days for 2004 was 13 days and for 2005 was 46 days (taking
into account the one “disputed day” that I had included in determining that there
were 81 days in 2005 for which the Appellant recorded 12 hours or more at a job
site). Therefore, the total number of days that the Appellant was required by
his duties to be away from Winnipeg for 12 hours or more in 2004 was 124 days and for
2005 was 127 days.
[13] The second issue
raised by the Respondent was that the Appellant did not have any receipts for
the meals that he purchased while he was away. The provision that permits a
deduction for travel expenses incurred by an employee is paragraph 8(1)(h)
of the Act. This paragraph provides that the amount that may be claimed
is the amount expended by the taxpayer in the year. Without receipts, the issue
is what amount, if any, can the Appellant establish that he expended for meals
in 2004 and 2005?
[14] In Lesnick v.
The Queen, 2008TCC522, I reviewed the decisions of the Supreme Court of
Canada in The Continental Insurance Company v. Dalton Cartage Company
Limited, [1982] 1 S.C.R. 164, and Hickman Motors Limited v. The
Queen, [1997] 2 S.C.R. 336, and of the House of Lords in the cases of In
re Doherty, [2008] UKHL 33, and In re B (Children),
[2008] UKHL 35. As I stated in Lesnick, the conclusion that I
reached based on these decisions was that:
16. It
seems to me that these cases are consistent and the issue in a civil case
(which will include the current appeal) will be whether the evidence as
presented is sufficient to satisfy the trier of fact, on a balance of
probabilities, that the person who has the burden of proof has established what
is required of him or her. In analyzing the proof or evidence that has been
presented, the probability or improbability of the event that is in issue is a
factor that can be taken into account in this analysis. The more improbable the
event the stronger the evidence that would be required. Conversely it would
also seem to me that a person may be able to establish, on a balance of
probabilities, that a highly probable event occurred based on weaker evidence
than would be required to establish that an improbable event had occurred.
[15] It seems to me
that, for those days during which the Appellant was away from Winnipeg for 12
hours or more, it was a highly probable event that he would be eating meals
during those days and that those meals would be purchased at restaurants.
Therefore, it seems to me that it was a highly probable event that he expended
amounts on meals at restaurants. The amount that the Appellant is claiming is
$15 per meal for three meals per day. The Appellant submitted a number of
different menus from restaurants from various locations and it seems to me that
$15 per meal is reasonable and therefore I find that the Appellant spent $15
per meal per day for three meals for each of the above dates.
[16] The Appellant
calculated his claim for a deduction as follows (using 153 days for 2004 and
171 days for 2005):
2004
|
$15
/ meal x 3 meals / day x 153 days:
|
$6,885
|
|
Minus:
Allowance paid by employer:
|
($2,754)
|
|
Net
Amount:
|
$4,131
|
|
Amount
claimed (50% of the Net Amount):
|
$2,065
|
2005
|
$15
/ meal x 3 meals / day x 171 days:
|
$7,695
|
|
Minus:
Allowance paid by employer:
|
($3,094)
|
|
Net
Amount:
|
$4,601
|
|
Amount
claimed (50% of the Net Amount):
|
$2,300
|
[17] The Appellant had
indirectly included the meal allowance amount in his income by reducing the
meal expense amount claimed. However it does not seem to me that this is the
correct method of determining the amount that is deductible or the net affect
on his income from employment. Reducing the difference between the meal cost
and the allowance paid by 50% suggests that the provisions of section 67.1
of the Act apply to this amount. However it seems clear to me that the
provisions of section 67.1 of the Act only apply to the amounts paid
not to the allowance received.
[18] Subsection 67.1(1)
of the Act provides that:
67.1 (1)
Subject to subsection (1.1), for the purposes of this Act, other than sections
62, 63, 118.01 and 118.2, an amount paid or payable in respect of the human
consumption of food or beverages or the enjoyment of entertainment is deemed to
be 50 per cent of the lesser of
(a) the amount
actually paid or payable in respect thereof, and
(b) an amount
in respect thereof that would be reasonable in the circumstances.
[19] This subsection
deems the amount paid for meals to be 50% of the amount actually paid (assuming
that the amount paid is reasonable). It does not limit the amount included as a
meal allowance to 50% of the amount received. There are exceptions to the
limitations imposed by subsection 67.1(1) of the Act. However none of
these exceptions would apply in this case. While the exception contained in
paragraph 67.1(2)(d) refers to an amount paid by a person that is
included in any taxpayer’s income because of the application of section 6, this
paragraph does not apply because subsection 67.1(1) of the Act only
applies to amounts paid and the amounts paid by the Appellant to restaurants
would not be included in the income of the restaurants because of section 6
(but would be included in the business income of the restaurants). This
exception presumably applies to an employer who pays a meal allowance that is
included in an employee’s income.
[20] The meal
allowance would be included in the Appellant’s income pursuant to
paragraph 6(1)(b) of the Act. This paragraph provides in
part as follows:
6. (1) There
shall be included in computing the income of a taxpayer for a taxation year as
income from an office or employment such of the following amounts as are
applicable:
…
(b) all
amounts received by the taxpayer in the year as an allowance for personal or
living expenses or as an allowance for any other purpose, except
…
(vii)
reasonable allowances for travel expenses (other than allowances for the use of
a motor vehicle) received by an employee (other than an employee employed in
connection with the selling of property or the negotiating of contracts for the
employer) from the employer for travelling away from
(A) the
municipality where the employer's establishment at which the employee
ordinarily worked or to which the employee ordinarily reported was located, and
(B) the
metropolitan area, if there is one, where that establishment was located,
in the
performance of the duties of the employee's office or employment,
[21] It seems clear
that since the meal allowance of $18 per day paid by the Appellant’s employer
was not a reasonable allowance for the days during which the Appellant was
required by his duties to be away from Winnipeg for 12 hours or more, the total amount of this
allowance would be included in the income of the Appellant. If the allowance
would have been a reasonable amount, since it covered the same meals for which
he was claiming a deduction, the amount would not be included in the
Appellant’s income and the Appellant would not be entitled to claim a deduction
for meal expenses.
[22] However the meal allowance
was paid both for days during which the Appellant was required by his duties to
be away from Winnipeg for 12 hours or more and for the days that the
Appellant was working outside the office for less than 12 hours. He was paid
the allowance for more than 124 days in 2004 and for more than 127 days in
2005. The Appellant based his meal claim for 2004 on 153 days and for 2005 on
171 days and, as noted above, presumably he was paid the meal allowance for 153
days in 2004 and for 171 days in 2005.
[23] The meal
allowance amount of $18 per day may well have been reasonable for the days when
he was not required by his duties to be away from Winnipeg for 12
hours or more. The provisions of subparagraph 6(1)(b)(vii) of the Act
related to the exclusion of allowances from income do not parallel the
conditions imposed by subsection 8(4) of the Act. There is no
requirement in subparagraph 6(1)(b)(vii) of the Act that the
employee be required by his duties to be away for 12 hours or more in order for
the allowance to not be included in income.
[24] There is no
reference in the Reply to any argument that the amount paid for the days when
he was not required by his duties to be away from Winnipeg for 12
hours or more was not a reasonable amount. It seems to me that the allowance
paid for these days can be separated from the allowance paid for the other
days. The $18 / day allowance paid for the days during which the
Appellant was not required by his employment duties to be away from Winnipeg for 12
hours or more will not be included in income by virtue of paragraph 6(1)(b)(vii)
of the Act. The $18 / day allowance paid for the days during which the
Appellant was required by his duties to be away from Winnipeg for 12 hours or
more will be included in his income and the Appellant will be entitled, subject
to the provisions of subsection 67.1(1) of the Act, to a deduction
for the meal costs incurred during those days.
[25] As a result, the
Appellant’s income from employment for 2004 and 2005 will be reduced by the
following amounts:
2004
|
Meal
Allowance amount paid for 124 days ($18 x 124):
|
$2,232
|
|
Amount
expended by the Appellant for meals for 124 days: 124 days x 3 meals / day x
$15 / meal = $5,580
|
|
|
Amount
deemed to be paid for meals: (50% of amount paid - subs. 67.1(1)):
|
($2,790)
|
|
Net
reduction in income from employment:
|
($558)
|
2005
|
Meal
Allowance amount paid for 127 days ($18 x 127):
|
$2,286
|
|
Amount
expended by the Appellant for meals for 127 days: 127 days x 3 meals / day x
$15 / meal = $5,715
|
|
|
Amount
deemed to be paid for meals: (50% of amount paid - subs. 67.1(1)):
|
($2,858)
|
|
Net
reduction in income from employment:
|
($572)
|
[26] The full amount
of the allowance received is included in income (paragraph 6(1)(b)
of the Act) but the amount paid by the Appellant for meals is, pursuant
to subsection 67.1(1) of the Act, deemed to be 50% of the amount
actually paid (since this amount is a reasonable amount).
[27] The other issue
raised in these appeals relates to the amount that should be added as the
capital cost of the truck acquired in 2005 in determining the undepreciated
capital cost to the Appellant of the class 10.1 that was set up for the truck.
Subsection 1101(1af) of the Income Tax Regulations provides that a
separate class is prescribed for each property included in Class 10.1 in
Schedule II to these Regulations. Paragraph 13(7)(g) of the Act
provides that:
13(7) Subject
to subsection 70(13), for the purposes of paragraphs 8(1)(j) and (p), this
section, section 20 and any regulations made for the purpose of paragraph
20(1)(a),
…
(g) where the
cost to a taxpayer of a passenger vehicle exceeds $20,000 or such other amount
as may be prescribed, the capital cost to the taxpayer of the vehicle shall be
deemed to be $20,000 or that other prescribed amount, as the case may be; …
[28] The Appellant
accepted that this limitation applied to the amount that could be included as
the cost of the truck. The issue in this case is related to the interpretation
of subsection 7307(1) of the Income Tax Regulations. This subsection of
the Income Tax Regulations provides, in part, that:
7307. (1) For
the purposes of subsection 13(2), paragraph 13(7)(g), subparagraph
13(7)(h)(iii),…, the amount prescribed is
…
(b) with
respect to an automobile acquired, or leased under a lease entered into, after
1990, the amount determined by the formula
A + B
where
A is, with respect to an automobile acquired, or leased under
a lease entered into,
…
(v) after
2000, $30,000, and
B is the sum that would have been payable in respect of
federal and provincial sales taxes on the acquisition of the automobile if it
had been acquired, at a cost equal to A before the application of the federal
and provincial sales taxes, if the automobile
(i) was
acquired, at the time of the acquisition, or
(ii) was
leased, at the time the lease was entered into.
[29] The issue is
whether any amount should be included for “B” in the formula described in
paragraph 7307(1)(b) above. The vehicle was purchased from Winnipeg
Dodge Chrysler Jeep (Pointe West Autopark) on June 11, 2005. The price of the
vehicle was $40,358 and a credit of $5,750 was allowed for the vehicle that was
traded-in. No GST and no provincial sales tax was paid when the vehicle was
purchased.
[30] The Appellant’s
name is typed in as the purchaser but his wife’s name was written in by hand as
a co-purchaser. The Appellant’s wife is an Indian as defined for the purposes
of the Indian Act and the Appellant is not. Notwithstanding the fact
that the Appellant is not an Indian as defined for the purposes of the Indian
Act, the entire purchase of the vehicle was apparently treated by the
dealership as qualifying for the exemption from the imposition of taxes
provided by section 87 of the Indian Act and no GST or provincial sales
taxes were collected by the dealership.
[31] Subsections 87(1)
and (2) of the Indian Act provide as follows:
87. (1) Notwithstanding any other Act of Parliament
or any Act of the legislature of a province, but subject to section 83 and
section 5 of the First Nations Fiscal and Statistical Management Act,
the following property is exempt from taxation:
(a) the interest of an Indian or a band in reserve lands
or surrendered lands; and
(b) the personal property of an Indian or a band
situated on a reserve.
(2) No Indian or band is subject to taxation in respect of the
ownership, occupation, possession or use of any property mentioned in paragraph
(1)(a) or (b) or is otherwise subject to taxation in respect of any such
property.
[32] The exemption
from taxation only applies to the personal property of an Indian as defined in
the Indian Act. The truck, if purchased by the Appellant, would not be
exempt from taxation as he is not an Indian as defined in the Indian Act.
If the Appellant did not purchase the truck, on what basis could he add $30,000
to the undepreciated capital cost of class 10.1 in relation to the purchase of
the truck? The definition of “undepreciated capital cost” in subsection 13(21)
provides in part that:
“undepreciated
capital cost” to a taxpayer of depreciable property of a prescribed class as of
any time means the amount determined by the formula
(A + B + C + D
+ D.1) –
(E + E.1 + F + G + H + I + J + K)
where
A is
the total of all amounts each of which is the capital cost to the taxpayer of a
depreciable property of the class acquired before that time,
[33] The amount that
would be included for “A” in the above formula is the capital cost to the
Appellant of the truck. If the Appellant did not acquire any interest in the
truck (and presumably his wife acquired the truck) then a separate class 10.1
of the Appellant would not be created in relation to the acquisition of the
truck and no amount would be added to the undepreciated capital cost of the
depreciable property of such class of the Appellant but the purchase of the
truck would at least satisfy the condition of section 87 of the Indian Act
that the truck be personal property of an Indian as defined in the Indian
Act.
[34] However, this is
not supported by the facts in this case nor by the position taken by the Canada
Revenue Agency. In the Reply, it is stated that the Appellant and his spouse
acquired the truck. It is also stated, as an assumption, that:
(t) No
amount was payable for GST or PST to purchase the 2005 truck;
[35] Whether GST or
PST was payable would be a question of law or a question of mixed fact and law.
Whether GST or PST would be payable could only be determined by examining the
requirements of the Indian Act, the applicable decisions of the various
courts, and the facts related to the purchase. It does not seem to me that
whether GST or PST was payable is a proper assumption. There also does not
appear to be any basis upon which a finding could be made that any acquisition
of an interest in the truck by the Appellant would qualify for the exemption
from tax contained in the Indian Act.
[36] It appears from
Schedule D attached to the Reply that the Appellant did not include the cost of
the new truck as an addition in 2005 to Class 10.1 (however the Appellant
appears to have an opening balance as of January 1, 2005 for the undepreciated
capital cost that exceeds the closing balance for December 31, 2004,
notwithstanding that a separate class is prescribed for each vehicle that is
included in class 10.1). Schedule D also shows the amounts allowed by the auditor
for the Canada Revenue Agency and by the appeals officer for the Canada Revenue
Agency and shows that $30,000 was added as the cost of additions for 2005 to
class 10.1. In paragraph 20 of the Reply, the Respondent also states that:
20…the amount
for the calculation of the cost of the Truck pursuant to subsection 7307(1) of
the Income Tax Regulations (the “Regulations”) is limited to
$30,000.
[37] Therefore it
seems to me that the Appellant was reassessed on the basis that the Appellant
(and not his wife) had acquired the truck. If the Appellant acquired the truck,
there would be no basis for a claim that the purchase was exempt from GST and
provincial sales tax as a result of the Indian Act or on any other basis
identified by either the Appellant or the Respondent.
[38] It also seems
clear to me that this truck was the Appellant’s truck. The Appellant traveled
extensively as part of his work and worked on construction sites where
presumably a truck was the vehicle of choice. The truck was acquired on June
11, 2005. According to the time sheets for the Appellant, he worked for 5 hours
on the Sunset Mall project in Brandon on June 11. He either acquired the truck before
proceeding to Brandon or acquired it after returning from Brandon, in
which case the next time entry is for June 13 for 13 hours at the same job.
Therefore it seems to me that the truck was used shortly after it was purchased
to transport the Appellant to the work site in Brandon.
[39] It seems to me
that the Appellant acquired the truck and that this is consistent with the
basis on which he was reassessed. The position of counsel for the Respondent
was unclear in relation to whether the Appellant had acquired the truck. It
appears that she was arguing that since no GST or provincial sales tax was paid
when the truck was acquired, that no GST or provincial sales tax would be
payable if the truck would have been acquired for $30,000 without focusing on
whether the Appellant had acquired the truck and, if so, whether GST and
provincial sales tax would then be payable. However, as noted above, either the
auditor or the appeals officer for the Canada Revenue Agency had assumed that
the Appellant (and not his spouse) had acquired the truck (or at least such an
interest in the truck that would justify a cost of $30,000 being added to a
class 10.1 of the Appellant). As noted above, if the Appellant acquired the
truck, GST and provincial sales tax would have been payable by him on the
acquisition of the truck.
[40] It is possible
that the truck was acquired by the Appellant’s spouse and then she later
transferred her interest in the truck to the Appellant. (There was no evidence
to suggest that this had occurred, this is simply a logical conclusion to attempt
to reconcile the position that no sales taxes were paid when the vehicle was
acquired yet the Appellant is the person who is entitled to claim capital cost
allowance on the truck.) However, since:
(a)
there was only a short period of
time from the time that the truck was purchased until it was used by the
Appellant to drive to his work site (and continuously used by the Appellant to
drive to various work sites thereafter);
(b)
the Appellant’s wife’s name was
added as a co-purchaser by writing her name in the agreement by hand; and
(c)
the Appellant in his Notice of
Appeal described the issue related to the truck as follows:
Disputed
amount allowed for my vehicle’s CCA for 2005 year (emphasis
added)
it
seems to me that it was more likely than not that the Appellant acquired the
truck from Winnipeg Dodge Chrysler Jeep on June 11, 2005 and that any interest
acquired by his wife by adding her name to the agreement as a co-purchaser was
only a nominal interest.
[41] As a result there
does not appear to be any basis to find that no sales taxes were payable by the
Appellant when the vehicle was acquired from the dealership. Therefore in
determining the undepreciated capital cost to the Appellant of the class 10.1
set up in relation to the truck, an amount should have been added for the GST
and provincial sales tax that would have been payable by the Appellant if he
would have acquired the vehicle at a cost of $30,000 from the dealership.
Neither the Appellant nor the Respondent made any submissions with respect to
the appropriate amount that should be added for GST and provincial sales taxes.
In the Appellant’s Notice of Appeal he states that the amount should be $4,560
but he was unable to explain how this amount was determined. The Appellant had
stated that the GST rate at the time of purchase was 6%, but the rate was not
reduced from 7% to 6% until July 1, 2006. Neither party was able to definitely
state the provincial sales tax rate in Manitoba in 2005. No submissions were made with respect to the
issue of whether the trade-in should affect the amount of GST and provincial
sales tax that would be included for “B” in the formula in paragraph 7307(1)(b)
of the Income Tax Regulations and if so, how it would affect the
determination of this amount. The parties requested that I only deal with the
issue of whether an amount should be included for “B” in the formula in
paragraph 7307(1)(b) of the Income Tax Regulations and if it was
determined that an amount should be included, that they would determine the
appropriate amount.
[42] I find that an
amount should have been included for “B” in the formula in paragraph 7307(1)(b)
of the Income Tax Regulations as an amount would have been payable for
GST and provincial sales tax if the Appellant would have acquired the vehicle
at a cost of $30,000. If the parties are unable to agree upon the appropriate
amount that should be added for these sales taxes within 90 days from the date
of this decision, then either party shall have the right bring a Motion to have
any issue related to the calculation of the amount of these sales taxes resolved
by this Court. If the parties are unable to agree upon the amount of these sales
taxes and neither party brings a motion to resolve any issue related to the
calculation of this amount within 90 days from the date of this decision, then
the amount of these sales taxes will be $4,560.
[43] As a result, these
appeals are allowed, without costs, and the matter is referred back to the
Minister of National Revenue for reconsideration and reassessment on the basis
that:
(a) the Appellant’s income from
employment for 2004, is reduced by the amount of $558;
(b)
the Appellant’s income from
employment for 2005, is reduced by the amount of $572;
(c)
an amount, to be determined as
provided in paragraph (d), be added to the undepreciated capital cost of the
class 10.1 of the Appellant created for the truck for GST and provincial sales
tax (the “sales tax amount”) in relation to the acquisition by the Appellant of
the truck in 2005 based on a cost of $30,000 before the application of such
sales taxes (which is the amount identified as “B” in the formula set out in
paragraph 7307(1)(b) of the Income Tax Regulations); and
(d)
the Appellant and the Respondent
shall determine the sales tax amount. If the parties are unable to agree upon
the calculation of the sales tax amount within 90 days from the date of this
decision, then either party shall have the right to bring a Motion to have any
issue related to the calculation of the sales tax amount resolved by this
Court. If the parties are unable to agree upon the calculation of the sales tax
amount and neither party brings a motion to resolve any issue related to the
calculation of this amount within 90 days from the date of this decision, then
the sales tax amount will be $4,560.
Signed at Ottawa, Ontario, this 7th day of December,
2009.
“Wyman W. Webb”
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