Citation: 2007TCC644
Date: 20071108
Docket: 2007-2072(IT)I
BETWEEN:
ARMEL LAROCHELLE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
for the 2003 and 2004 taxation years.
[2] The issues in
question are:
(a) Did the Minister of
National Revenue (the "Minister") correctly determine the net income
regarding the Appellant's building, as follows?
DESCRIPTION 2003 2004
Net rental income $4,884 $5,365
(b) Did the Minister
correctly determine the net losses of the Appellant's company, as follows?
DESCRIPTION 2003 2004
Net business losses ($4,480) ($660)
(c) Was the Minister
justified in disallowing the Appellant's claims for amounts as expenses related
to using part of his personal residence for business purposes, for
$1,456 and $1,608 respectively?
(d) Was the Minister
justified in refusing the Appellant's claims for property tax amounts of $612
and $684, respectively, for the Appellant's woodlot for the 2003 and 2004
taxation years, and adding these amounts to the adjusted cost base of the lot?
(e) The sections on which
the Minister relied and the other related provisions are valid legislative
instruments, compatible with the Canadian Charter of Rights and Freedoms.
[3] Given the content
of the Notice of Appeal, I explained to the Appellant at length that he had the
burden of proof. I specifically pointed out that he had to present evidence
directly related to the basis of the assessment under appeal.
[4] I also indicated to
the Appellant that the only jurisdiction the court has is to consider the
evidence submitted in order to verify and analyze whether the assessments were
established in accordance with the provisions of the Act.
[5] Observations and instructions were required
regarding the content of the Notice of Appeal, from which I am reproducing some
excerpts:
[translation]
I challenge the
following:
COMPANY:
I am NOT a COMPANY. I
gathered everything that is:
not rental income,
not interest income,
not dividend income,
not capital gain income,
not retirement income,
and called it GESTION ARMEL LAROCHELLE.
All that is tax-related is included, for example books I wrote and my Internet
site that deals with the same subjects as my books (particularly cosmology). I
spent more than eight years just on my Internet site. I am quite sure that the
auditor did not even look at this work when he thought I used only 10% of my
computer to create this site. I worked every morning, every afternoon and every
evening. GESTION ARMEL also includes a woodlot in Château-Richer. If I put all
this under company, it is because there was no other appropriate place on the
tax return.
I invite you to consult
the site: http://science-univers.qc.ca
…
Charters of rights:
Respect and human dignity
The Department of Revenue, to make more
money, chops us up into pieces, a violation of humanity that goes against our charters
of rights. I am a whole BEING and it is an inconceivable lack of respect to not
take my entire being into consideration. I constitute a whole and no one should
take each part of me and judge it without my whole being able to intervene and
compensate as necessary. This is called DIVIDING to better COLLECT.
When the auditor says I did not have
enough income to allow such expenses, he is wrong because I already have more
than $60,000.00 in income. I have enough income to allow all the expenses I
presented. I therefore ask for this adjustment.
…
Admissible expenses:
These two statements are
both equally valid:
1-
"Your expenses
are too high for the income you have. Therefore, you do not have the right to
consider them as expenses"
2-
"Your income is
too high for the expenses you have, so your income should not be taxable"
The two statements also make no sense.
What would you do if one day I sold the
6,000 books that I have stored?
We are partners. Taxes must take risks as
I do. If taxes do not participate in the expenses, why should it be able to
benefit from the income?
JUSTICE requires taxpayers to be on an
equal basis as Revenue Canada.
If you disallow my expenses, will you
sign a waiver regarding the 6,000 books that are still not sold?
…
Examinations of details in the 2004
assessment notice
Maintenance and repairs: (1)
I included two electric bills in this
column by mistake. The auditor refused them.
Secretarial: (2)
Of 3,022, the auditor disallowed $2,908
of expenses. He only allowed $114, the annual cost of my host.
He even claims that "It was personal
and LIVING expenses…
I never purchased food for myself. I
never even counted as expenses the food I purchased to feed those who came to
meet with me to discuss my theories. Moreover, I never included any expense for
my vehicle; I did, however, use if many times for the purposes of my
activities.
Property tax: (3)
The last auditor disallowed the expense
of taxes regarding my woodlot in Château-Richer ($684).
He said "that my lot was not
exploited commercially." One year I sold $1,155 of wood, for which I paid
taxes. Taxes are a recurring expense that is not of a "capital" type.
If I cut wood every other year, are the taxes one year considered an expense
and the other year they are considered "capital"?
Rent: (3)
This is a subject of disagreement. I have
a 3-storey building on Saint-Joseph Street in Québec. I rent the ground floor
to a jewellery store. I also rented the 2 apartments on the 2nd floor.
After a few years, I decided to install
all I needed to write and publish my books there, and to create a 50Mb Internet
site: bookcase, computer, phone, conference room, projection equipment, chairs,
furniture, cupboards, Internet subscription, host subscription, quantizer,
cards, posters, charts, etc.
Each of the two apartments has its own
electricity meter for lighting and heating.
As for the 3rd floor, it is my personal
residence. I have been living there since 1986.
The auditor disallowed these rental
expenses. If I did my accounting this way it was to better establish the true
costs of my activities. At any rate, it does not change the final amount of
taxes in the end. The taxes I do not pay under Gestion Armel Larochelle, I pay
entirely in my rental income.
Electricity: (1)
The auditor disallowed
electricity-heating. Why? I do not know. I have enough income to meet these
expenses. Unless I am again being cut into pieces to better milk the payer.
Divide in order to better collect.
Other expenses: (4)
It is mainly about the item SMALL
INVOICES.
Of $551 in small invoices, he only
allowed $56. He even refused invoices for postage for books that were sold.
Depreciation: (6)
I do not have a computer in my residence.
For many years, I worked an average of 10 hours a day. Now I am older and I
work less, much less. I still reply to e‑mails (at least 2000 e-mails). I
am no longer able to work as intensely. I lack concentration. When you go visit
my site you will see that I did a tremendous amount of work on it that lasted
for many years. This work had even begun when I was in Africa, over 35 years
ago. Reducing my depreciation from $474 to $47 is simply an insult to my
immense work. As a result, I ask for the amount I had calculated according to
the previous auditor's method to be reinstated.
I did not find "attached for
consultation a detailed table of the calculations of deductions for
depreciation."
Results:
The reduction of expenses for 2004 was
such that my expenses went from $11,886 to $262. A disallowment that equals $11,624,
a 97.8% disallowment.
[6] To make the
Appellant's work easier, the Respondent suggested he present his evidence
first. It was an excellent suggestion and the Court agreed with this procedure.
So Martin Bouchard and
Guylaine Fraser explained the work they carried out for these assessments.
[7] Mr. Bouchard indicated that he separated
the Appellant's various activities. He then assessed the issue of income from
rentals of the building the Appellant owned.
[8] He explained that
he disallowed the rental amounts the Appellant paid to himself from the rental
income. The inherent expenses were also disallowed in the analysis, which is
perfectly legitimate.
[9] Second, Mr. Bouchard took into consideration that
the Appellant could not show that the expenses claimed were directly related to
one or more activities that would eventually lead to income, income from a
possible business being completely marginal, even symbolic, for 2003 and 2004.
The same approach was used for the woodlot in Château‑Richer that produced
$1,155 in income just one year earlier.
[10] At the objection
stage, Ms. Fraser
explained that the Appellant did not submit new documents or facts, leading her
to carry out the revision with only the documents that were already on file.
[11] She did, however,
make a slight change by substituting 90% for 10% for use of the computer; the
auditor had only granted 10%, with the change based on the ground that it was a
piece of equipment the Appellant used only very little. That is more or less
what was taken into consideration when establishing the assessments the
Appellant is challenging in his appeal.
[12] Although the
Respondent's evidence was essentially made up of explanations for the various
grounds or reasons, the disallowments of one or more general bases—namely the
disallowment of rental income from his personal use—led to the expenses related
to the personal portion also being disallowed.
[13] Moreover, the
auditors also dismissed the facts presumed by the Appellant, namely that he
operated a company. Additionally, he himself admitted that he was not a company
in his notice of appeal.
[14] Based on such an
approach, all the components regarding expenses were dismissed, and not
disallowed individually as irrelevant. In other words, the Respondent did not
disallow the expenses individually, but rather at the level of their
allowability, based on the principle that an expense not carried out for the
purposes of earning income is not deductible.
[15] When asked to submit
his evidence, the Appellant focussed on his individual expenses, clearly not
understanding why and how the assessments had been established.
[16] He wanted to
challenge the individuality of the expenses instead of showing that he truly
did operate a company; therefore, he tried to show the relevance of certain
expenses instead of submitting elements showing he operated a business of some
sort.
[17] On this subject he
basically confirmed he had already been questioned where the decision was that
the expenses claimed were carried out for the purposes of earning or generating
income.
[18] Presuming his status
as a business operator was permanent or still valid, he concealed relevant or
even essential elements of his evidence that would have shown the true
existence of a real company that would have given rise to an analysis of
expenses as an individual.
[19] He essentially
restated what he said in his Notice of Appeal. He stated he forgot many
documents and would have liked a few days or more to review each of the
invoices and exhibits he had submitted at the audit.
[20] Clearly, the
Appellant has a very personal view of his fiscal obligations. From this vision
that is his alone, he comes to
conclusions that are completely unfounded. I believe the Appellant would
benefit from consulting a qualified person so that certain provisions of the
Act regarding the right to deduct expenses could be explained.
[21] The Appellant's
approach, from which certain excerpts were produced, shows the extent of his
misunderstanding of the basis of the assessments being appealed.
[22] Despite the
observations and precisions stated at the beginning of the hearing, the
Appellant did not submit any evidence or element of evidence that would
discredit the quality of the exercise that led to the new assessments.
[23] He expressed
criticism, stated his disagreement, and complained that he did not have the
possibility to talk face to face with the auditor, whom he said did not go
on-site to make certain observations with his own eyes.
[24] Because of the
nature of the case, it is perfectly normal and reasonable to proceed as the
auditor did. Moreover, his understanding, analysis and finding were completely
reasonable and justified.
[25] I cannot really make
any analysis because the evidence is completely deficient; therefore, I must
conclude that the reasoning, development, interpretation and findings are
coherent and valid in terms of the fundamental elements available, namely
regarding the lack of business income for the woodlot, and no commercial activity
regarding the Appellant's apparent main occupation, that of writer.
[26] On this aspect of
his case, the Appellant states he sold a few units of his books, which for the
most part are stored at his home. He stated he thought, hoped and even dreamed
that one day he would become a well-read and well‑known author, but he
did not explain how he expected to achieve this. He did repeatedly refer to his
Website, which he created and which took a tremendous amount of work.
[27] Given the lack of
evidence by the Appellant, it is completely inappropriate to try and analyze
the expenses because the assessment did not include an analysis of such
expenses. In fact, the assessments were essentially established on the ground
of inadmissibility resulting from the lack of a business of any sort being
operated.
[28] As a result, the
evidence submitted does not meet the minimum requirement to be evaluated on
merit; the Appellant simply did not meet his minimal obligation to submit
relevant evidence.
[29] For these reasons,
the appeal is dismissed.
Signed at Ottawa, Canada, this 8th day of November
2007.
"Alain Tardif"
Translation certified true
on this 23rd day of November 2007.
Elizabeth Tan, Translator
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