Citation: 2008 TCC 587
Date: 20081030
Dockets: 2007-2276(GST)I,
2007‑4154(IT)I, 2007‑4157(IT)I,
2007‑4158(IT)I, 2007‑4159(IT)I,
BETWEEN:
J. RAYMOND COUVREUR INC.,
MATHIEU JOUBERT,
JOSEPH RAYMOND,
SÉBASTIEN RAYMOND,
STEVE RAYMOND,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1]
All of the appeals were
heard on common evidence. The three Appellants Mathieu Joubert,
Sébastien Raymond and Steve Raymond are appealing from the
assessments made by the Minister of National Revenue (the Minister), in which
benefits related to the use of an automobile provided by the corporation J.
Raymond Couvreur Inc. (the Corporation) for employment purposes were included
in their income for the 2003 and 2004 taxation years pursuant to paragraphs
6(1)(e) and 6(1)(k) and subsection 248(1) of the Income Tax
Act (ITA). The amounts included in the income of these three Appellants
are as follows:
|
|
2003
|
2004
|
|
Mathieu Joubert
|
$1,258
|
$1,801
|
|
Sébastien Raymond
|
$1,242
|
$1,242
|
|
Steve Raymond
|
$1,653
|
$1,653
|
[2]
In the case of
Appellant Joseph Raymond, the Minister made assessments for taxation years
2002, 2003 and 2004, in which the amounts of $5,581, $1,858 and $1,765 in
benefits related to the use of an automobile made available to him by the
Corporation were added to his income as a shareholder of the corporation pursuant
to subsections 15(1), 15(5) and 248(1) of the ITA. Additional amounts were
added to his income for the automobile made available to his former spouse by
the Corporation during the same taxation years. These additional amounts were
$11,480 in 2002, $16,086 in 2003 and $19,439 in 2004 and were included in
Appellant Joseph Raymond’s income pursuant to subsections 15(1) and 56(2) of
the ITA. Moreover, the Minister disallowed the deduction claimed in respect of
these amounts as support payments on the basis that they did not qualify as an
allowance on a periodic basis, pursuant to subsection 56.1(4) and paragraph 60(b)
of the ITA.
[3]
For its part, Appellant
J. Raymond Couvreur Inc. is appealing from assessments made by the Minister
pursuant to section 173 of the Excise Tax Act (ETA), in which goods and
services tax (GST) was calculated in the amount of $2,461.02 with respect to
the benefits conferred on the four other appellants for the use of the
automobile made available to them, and that are the subject of these appeals,
for the years at issue. The Minister disallowed input tax credits (ITCs)
related to these amounts that were considered to be personal expenses
($3,279.75 in ITCs disallowed), and imposed the corresponding interest and
penalties.
[4]
The relevant statutory
provisions read as follows:
Income Tax Act
Inclusions
SECTION 6:
Amounts to be included as income from office or employment
(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
► 6(1)(e) ◄
(e) Standby
charge for automobile—where the taxpayer’s employer or a
person related to the employer made an automobile available to the taxpayer, or
to a person related to the taxpayer, in the year, the amount, if any, by which
(i)
an amount that is a reasonable standby charge for the automobile for the total
number of days in the year during which it was made so available
exceeds
(ii)
the total of all amounts, each of which is an amount (other than an expense
related to the operation of the automobile) paid in the year to the employer or
the person related to the employer by the taxpayer or the person related to the
taxpayer for the use of the automobile;
► 6(1)(k) ◄
(k) Automobile
operating expense benefit − where
(i)
an amount is determined under subparagraph 6(1)(e)(i)
in respect of an automobile in computing the taxpayer’s income for the year,
(ii)
amounts related to the operation (otherwise than in connection with or in the
course of the taxpayer’s office or employment) of the automobile for the period
or periods in the year during which the automobile was made available to the
taxpayer or a person related to the taxpayer are paid or payable by the taxpayer’s
employer or a person related to the taxpayer’s employer (each of whom is in
this paragraph referred to as the “payor”), and
(iii)
the total of the amounts so paid or payable is not paid in the year or within
45 days after the end of the year to the payor by the taxpayer or by the person
related to the taxpayer,
the
amount in respect of the operation of the automobile determined by the formula
A - B
where
A is
(iv)
where the automobile is used primarily in the performance of the duties of the
taxpayer’s office or employment during the period or periods referred to in
subparagraph (ii) and the taxpayer notifies the employer in writing before the
end of the year of the taxpayer’s intention to have this subparagraph apply,
1/2 of the amount determined under subparagraph 6(1)(e)(i)
in respect of the automobile in computing the taxpayer’s income for the year,
and
(v)
in any other case, the amount equal to the product obtained when the amount
prescribed for the year is multiplied by the total number of kilometres that
the automobile is driven (otherwise than in connection with or in the course of
the taxpayer’s office or employment) during the period or periods referred to
in subparagraph 6(1)(k)(ii), and
B is the total
of all amounts in respect of the operation of the automobile in the year paid
in the year or within 45 days after the end of the year to the payor by the
taxpayer or by the person related to the taxpayer;
SECTION 15: Benefit conferred on shareholder
(1)
Where at any time in a taxation year a benefit is
conferred on a shareholder, or on a person in contemplation of the person
becoming a shareholder, by a corporation…the amount or value thereof shall…be
included in computing the income of the shareholder for the year.
► 15(5) ◄
(5) Automobile benefit. For the
purposes of subsection 15(1), the value of the benefit to be included in
computing a shareholder’s income for a taxation year with respect to an
automobile made available to the shareholder, or a person related to the
shareholder, by a corporation shall (except where an amount is determined under
subparagraph 6(1)(e)(i) in respect of the automobile
in computing the shareholder’s income for the year) be computed on the
assumption that subsections 6(1), 6(1.1), 6(2) and 6(7) apply, with such
modifications as the circumstances require, and as though the references
therein to “the employer of the taxpayer”, “the taxpayer’s employer” and “the
employer” were read as “the corporation”.
► 56(2) ◄
(2) Indirect payments. A payment or transfer of
property made pursuant to the direction of, or with the concurrence of, a
taxpayer to some other person for the benefit of the taxpayer or as a benefit
that the taxpayer desired to have conferred on the other person (other than by
an assignment of any portion of a retirement pension pursuant to section 65.1
of the Canada Pension Plan or a comparable provision of a provincial
pension plan as defined in section 3 of that Act or of a prescribed provincial
pension plan) shall be included in computing the taxpayer’s income to the
extent that it would be if the payment or transfer had been made to the
taxpayer.
SECTION 56.1: Support
(1) For the purposes of paragraph 56(1)(b)
and subsection 118(5), where an order or agreement, or any variation thereof,
provides for the payment of an amount to a taxpayer or for the benefit of the
taxpayer, children in the taxpayer’s custody or both the taxpayer and those
children, the amount or any part thereof
(a) when payable, is deemed to be payable to and receivable
by the taxpayer; and
(b) when paid, is deemed to have been paid to and received
by the taxpayer.
► 56.1(2) ◄
(2) Agreement. For the purposes of section
56, this section and subsection 118(5), the amount determined by the formula
A - B
where
A is
the total of all amounts each of which is an amount (other than an amount that
is otherwise a support amount) that became payable by a person in a taxation
year, under an order of a competent tribunal or under a written agreement, in
respect of an expense (other than an expenditure in respect of a self-contained
domestic establishment in which the person resides or an expenditure for the
acquisition of tangible property that is not an expenditure on account of a
medical or education expense or in respect of the acquisition, improvement or
maintenance of a self-contained domestic establishment in which the taxpayer
described in paragraph (a) or (b)
resides) incurred in the year or the preceding taxation year for the
maintenance of a taxpayer, children in the taxpayer’s custody or both the
taxpayer and those children, where the taxpayer is
(a) the person’s spouse or common-law partner or former
spouse or common-law partner, or
(b) where the amount became payable under an order made by
a competent tribunal in accordance with the laws of a province, an individual
who is the parent of a child of whom the person is a legal parent,
and
B is the amount,
if any, by which
(a) the total of all amounts each of which is an amount
included in the total determined for A in respect of the acquisition or
improvement of a self-contained domestic establishment in which the taxpayer
resides, including any payment of principal or interest in respect of a loan
made or indebtedness incurred to finance, in any manner whatever, such
acquisition or improvement
exceeds
(b) the total of all amounts each of which is an amount
equal to 1/5 of the original principal amount of a loan or indebtedness
described in paragraph (a),
is, where the order or written
agreement, as the case may be, provides that this subsection and subsection
60.1(2) shall apply to any amount paid or payable thereunder, deemed to be an
amount payable to and receivable by the taxpayer as an allowance on a periodic
basis, and the taxpayer is deemed to have discretion as to the use of that
amount.
► 56.1(4) ◄
“support
amount” − means an amount
payable or receivable as an allowance on a periodic basis for the maintenance
of the recipient, children of the recipient or both the recipient and children
of the recipient, if the recipient has discretion as to the use of the amount,
and
(a) the recipient is the spouse or common-law partner or former spouse
or common-law partner of the payer, the recipient and payer are living separate
and apart because of the breakdown of their marriage or common-law partnership
and the amount is receivable under an order of a competent tribunal or under a
written agreement; or
(b) the payer is a legal parent of a child of the recipient and the
amount is receivable under an order made by a competent tribunal in accordance
with the laws of a province.
► 60(b) ◄
(b) Support − the total of all amounts each of which is an amount determined by
the formula
A - (B + C)
where
A is the total of all amounts each of which is a support amount
received after 1996 and before the end of the year by the taxpayer from a
particular person where the taxpayer and the particular person were living
separate and apart at the time the amount was paid,
B is the total of all amounts each of which is a child support amount
that became receivable by the taxpayer from the particular person under an
agreement or order on or after its commencement day and before the end of the
year in respect of a period that began on or after its commencement day, and
C is the total of all amounts each of which is a support amount
received after 1996 by the taxpayer from the particular person and included in
the taxpayer’s income for a preceding taxation year;
SECTION 60.1: Support
(1) For the
purposes of paragraph 60(b) and subsection
118(5), where an order or agreement, or any variation thereof, provides for the
payment of an amount by a taxpayer to a person or for the benefit of the
person, children in the person’s custody or both the person and those children,
the amount or any part thereof
(a) when payable, is deemed to be payable to and receivable by that
person; and
(b) when paid, is deemed to have been paid to and received by that
person.
► 60.1(2) ◄
(2) Agreement. For the purposes
of section 60, this section and subsection 118(5), the amount determined by the
formula
A - B
where
A is the total
of all amounts each of which is an amount (other than an amount that is
otherwise a support amount) that became payable by a taxpayer in a taxation
year, under an order of a competent tribunal or under a written agreement, in
respect of an expense (other than an expenditure in respect of a self-contained
domestic establishment in which the taxpayer resides or an expenditure for the
acquisition of tangible property that is not an expenditure on account of a
medical or education expense or in respect of the acquisition, improvement or
maintenance of a self-contained domestic establishment in which the person
described in paragraph (a) or (b)
resides) incurred in the year or the preceding taxation year for the maintenance
of a person, children in the person’s custody or both the person and those
children, where the person is
(a) the taxpayer’s spouse or common-law partner or former
spouse or common-law partner, or
(b) where the amount became payable under an order made by
a competent tribunal in accordance with the laws of a province, an individual
who is a parent of a child of whom the taxpayer is a legal parent,
and
B is the amount,
if any, by which
(a) the total of all amounts each of which is an amount
included in the total determined for A in respect of the acquisition or
improvement of a self-contained domestic establishment in which that person
resides, including any payment of principal or interest in respect of a loan
made or indebtedness incurred to finance, in any manner whatever, such
acquisition or improvement
exceeds
(b) the total of all amounts each of which is an amount
equal to 1/5 of the original principal amount of a loan or indebtedness
described in paragraph (a),
is, where the order or written
agreement, as the case may be, provides that this subsection and subsection
56.1(2) shall apply to any amount paid or payable thereunder, deemed to be an
amount payable by the taxpayer to that person and receivable by that person as
an allowance on a periodic basis, and that person is deemed to have discretion
as to the use of that amount.
► 60.1(4) ◄
(4) Definitions. The definitions in subsection 56.1(4) apply in this section and
section 60.
ARTICLE 248:
Definitions
(1) In this Act,
“automobile” means
(a)
a motor vehicle that is designed or adapted primarily to carry
individuals on highways and streets and that has a seating capacity for not
more than the driver and 8 passengers,
but does not include
…
(e) a motor vehicle
(i) of a type commonly called a van or pick-up
truck, or a similar vehicle, that has a seating capacity for not more than the
driver and two passengers and that, in the taxation year in which it is
acquired or leased, is used primarily for the transportation of goods or
equipment in the course of gaining or producing income,
(ii) of a type commonly called a van or pick-up truck, or a similar
vehicle, the use of which, in the taxation year in which it is acquired or
leased, is all or substantially all for the transportation of goods, equipment
or passengers in the course of gaining or producing income,
Excise Tax Act
Taxable Benefits
S. 173. Employee and shareholder benefits
(1) Employee and
shareholder benefits
Where
a registrant makes a supply (other than an exempt or zero-rated supply) of
property or a service to an individual or a person related to the individual
and
(a) an amount (in this subsection referred to as the “benefit amount”)
in respect of the supply is required under paragraph 6(1)(a), (e), (k) or (l) or subsection 15(1) of the Income Tax Act to be included in
computing the individual’s income for a taxation year of the individual, or
(b) the supply relates to the use or operation of an automobile and an
amount (in this subsection referred to as a “reimbursement”) is paid by the
individual or a person related to the individual that reduces the amount in
respect of the supply that would otherwise be required under paragraph 6(1)(e), (k) or (l) or
subsection 15(1) of that Act to be so included,
the following
rules apply:
(c) in the
case of a supply of property otherwise than by way of sale, the use made by the
registrant in so providing the property to the individual or person related to
the individual is deemed, for the purposes of this Part, to be use in
commercial activities of the registrant and, to the extent that the registrant
acquired or imported the property or brought it into a participating province
for the purpose of making that supply, the registrant is deemed, for the
purposes of this Part, to have so acquired or imported the property or brought
it into the province, as the case may be, for use in commercial activities of
the registrant, and
(d) in any case, except where
(i)
the registrant was, because of section 170, not entitled to claim an input tax
credit in respect of the last acquisition, importation or bringing into a
participating province of the property or service by the registrant,
(ii)
an election under subsection (2) by the registrant in respect of the property
is in effect at the beginning of the taxation year,
(iii) the registrant is an individual or a partnership and
the property is a passenger vehicle or aircraft of the registrant that is not
used by the registrant exclusively in commercial activities of the registrant,
or
(iv)
the registrant is not an individual, a partnership or a financial institution
and the property is a passenger vehicle or aircraft of the registrant that is
not used by the registrant primarily in commercial activities of the
registrant, for the purpose of determining the net tax of the registrant,
(v)
the total of the benefit amount and all reimbursements is deemed to be the
total consideration payable in respect of the provision during the year of the
property or service to the individual or person related to the individual,
(vi)
the tax calculated on the total consideration is deemed to be equal to
(A)
where the benefit amount is an amount that is or would, if the individual were
an employee of the registrant and no reimbursements were paid, be required
under paragraph 6(1)(k) or (l)
of the Income Tax Act to be included in computing the individual’s
income, the prescribed percentage of the total consideration, and
(B)
in any other case, the amount determined by the formula
(A/B) × C
where
A is
(I)
where
1.
the benefit amount is required to be included under paragraph 6(1)(a) or (e) of the Income Tax
Act in computing the individual’s income from an office or employment and
the last establishment of the employer at which the individual ordinarily
worked or to which the individual ordinarily reported in the year in relation
to that office or employment is located in a participating province, or
2.
the benefit amount is required under subsection 15(1) of that Act to be
included in computing the individual’s income and the individual is resident in
a participating province at the end of the year,
the total of
4% and the tax rate for the participating province, and
(II)
in any other case, 4%,
B is the total
of 100% and the percentage determined for A, and
C is the total
consideration.
(vii)
that tax is deemed to have become collectible, and to have
been collected, by the registrant
(A)
except where clause (B) applies, on the last day of February of the year
following the taxation year, and
(B) where the
benefit amount is or would, if no reimbursements were paid, be required under
subsection 15(1) of that Act to be included in computing the individual’s
income and relates to the provision of the property or service in a taxation
year of the registrant, on the last day of that taxation year.
[5]
Counsel for the
Appellants contends that during the years at issue, there were no benefits
conferred on the Appellants for the use of an automobile made available by the
Corporation. He submits that the vehicles made available to the Appellants do
not meet the definition of an automobile in subsection 248(1), and that they
were utility vehicles used almost exclusively for transporting equipment in the
course of gaining or producing income. He also submits that the vehicles were
made available to the Appellants at all times for business purposes and that it
cannot be concluded that the Appellants were using them for personal purposes.
With respect to the automobile provided by the Corporation to Joseph Raymond’s
former spouse, Counsel for the Appellant acknowledges that he must include the
amount calculated by the Minister as a shareholder benefit pursuant to
subsection 15(1) of the ITA, but he is claiming an equivalent deduction on the
ground that it is a support amount.
[6]
Counsel for the
Respondent are contesting the Appellants’ arguments in every respect. As for
the assessment pursuant to the ETA, it results directly from the decision that
will be rendered with respect to the existence of a taxable benefit for the use
of an automobile, which is the subject of the case at bar.
Vehicles made available to the Appellants
Facts
[7]
The Corporation runs a
business specializing in residential and commercial roofing. Joseph Raymond is
the president and majority shareholder. During the years at issue, the
Corporation had $6 million in sales. This figure is now around $10-12
million. During the years at issue, the Corporation employed between 35 and 40
employees, in positions varying between roofers, apprentice roofers,
estimators, and project managers. The Corporation provided vehicles to
estimators and project managers.
[8]
Mathieu Joubert, one of
the Appellants, was an estimator for the residential department and said he
needed a vehicle at all times. He met clients early in the morning or at the
end of the day in order to accommodate them. He always had a ladder with him
so that he could go up to the roof and he always brought his tool kit, which
contained the instruments necessary to cut roofing material so that he could
make more accurate estimates.
[9]
Joubert was also on the
call list for services the Corporation guaranteed at all times. To respond to
calls quickly, Joubert said he required a vehicle from the Corporation at all
times. This vehicle had a permanent Corporation name and logo on it. Steve,
Sébastien and Joseph Raymond were the other three who responded to service
calls. Steve and Sébastien are Joseph Raymond’s sons. His sons both had
larger utility vehicles for towing purposes.
[10]
In his testimony,
Joseph Raymond said that he used the Corporation-provided vehicle for personal
purposes two to five percent of the time. His personal time included stopping
for groceries and the times he used it to go up to his cottage. He said his
spouse at the time had a vehicle and he usually went to the cottage with her.
He had a motorcycle and bought a sports car on May 27, 2004. He used the
Corporation utility vehicle only for going to work. The vehicle is an
extended-cab pick-up truck, with rear seats that could seat at least four
people.
[11]
In the questionnaire
filled out at the request of the Canada Revenue Agency (CRA) (Exhibit I-1, tab
3), he indicated he drove 30,000 km per year with the Corporation vehicle. He
entered 4 km as the distance between his home and place of employment, and a
personal use of 4,500 km. In his testimony, he said that he also included the
distance travelled between his home and place of employment. He insisted,
however, that he did not believe this distance should be counted in personal
use as he rarely went from home to the office without first going to a work
site or stopping by a client’s, as often at the start as at the end of the day.
[12]
He said that he and
both his sons were mainly project managers. Apparently, there were between
five and nine active projects at all times. He and his two sons divided the
projects between themselves: two to three projects each and all three went to
them almost every morning of the week except when it was raining. One morning
a week, Joseph Raymond held coordination meetings at the office and everyone
came directly to work without going to a work site first.
[13]
The Corporation did
business with another corporation, ABC Cité Comm s.e.n.c. (Cité Comm), which
handled service calls. Three bills from this Corporation were submitted as
Exhibit A-2. One of them shows that there were six service calls in one month;
another indicates four calls and the third, 12 calls. When cross-examined,
Joseph Raymond said clients often called him directly during an emergency
without going through Cité Comm. In any case, he said the number of calls
varied a lot and he had to be available at all times, which is why he kept the
Corporation vehicle. He committed to being on site by a certain time, which
did not give him enough time to go by the Corporation’s garage to get a fully
equipped Corporation vehicle.
[14]
Mathieu Joubert said he
did not have a personal vehicle, but his girlfriend owns one. He owns a
motorcycle. He estimates that he makes use of the Corporation vehicle three to
five percent of the time for personal purposes to go to the grocery store or
the Société des alcools du Québec (SAQ). He estimates that he sees a client to
make an estimate before going into the office three times per week.
[15]
On the form filled out
at the request of the CRA and submitted as Exhibit I-1, tab 4, he indicated
that he travelled 20,000 km per year with the Corporation vehicle. He
indicated that the distance between his residence and place of employment was 2
kilometres and that he used the vehicle for personal purposes for a distance of
4,800 km. In Court, he indicated that his kilometrage included the distance
between his home and place of employment. He also said that he has relatives
in Sherbrooke.
[16]
Steve Raymond has a
spouse and had two children during the period at issue. He said he used his
spouse’s vehicle for personal purposes.
[17]
The vehicle made
available to him by the Corporation had an extended cab and could seat five
people. He said he used this vehicle for personal purposes approximately five
percent of the time.
[18]
On the form completed
at the request of the CRA (Exhibit I-1, tab 1), he said that he travelled
between 25,000 and 30,000 km per year with this vehicle. He said he lives 10
km from his place of employment and indicated 4,000 km as the distance
travelled for personal purposes. In Court, he said that the Corporation’s
bookkeeper had completed the form and that the 4,000 km included the distance
between his residence and place of employment.
[19]
Finally, Sébastien
Raymond said he went straight to work sites almost every morning and once or
twice a week during evenings. He calculated having travelled 20,000 km with
the Corporation-provided vehicle. He said in Court that his personal use of
the vehicle amounted to a maximum of 2,000 to 2,500 km for the purpose of
stopping for groceries or going to hockey games. On the form completed at the
request of the CRA (Exhibit I-1, tab 2), he indicated that he lived 5 km from
his place of employment and used his vehicle for personal purposes over a
distance of 3,500 km. He said he did not have a personal vehicle but he owns a
motorcycle, which he used during his vacations.
[20]
He explained that he
needed the Corporation vehicle at all times because he was on the call list
that clients had access to and frequently visited work sites during the week.
[21]
Ronald Audy, Revenu
Québec auditor, was working on a draft tax audit of the Corporation for the
years preceding the case at bar. He was on the business premises in 2002 in
order to conduct his audit. Even though his audit was not primarily based on
the same issue and he had very little information, he decided not to include a
taxable benefit for the use of the vehicles; although the distance travelled
between home and work is considered personal use, it was very negligible in his
opinion, given the total kilometrage travelled for work. Neither Sébastien
Raymond nor Mathieu Joubert worked for the Corporation in 2002. He saw the
vehicles and confirmed that they all held at least three passengers. He
considered, without further verification, that the vehicles were used for
commercial purposes over 90% of the time in the years preceding 2002.
[22]
Sonia Dionne, who
carried out the audit and made the assessments being appealed, did not see the
vehicles. She calculated the taxable benefit based on the information on the
forms filled out by the Appellants, submitted as Exhibit I-1. Moreover, none
of the Appellants had a personal vehicle except Joseph Raymond, who bought
himself a sports car in May 2004. Moreover, in November 2005, Joseph Raymond
confirmed the information provided in the forms on travel applied for all the
preceding years (Exhibit I-2).
[23]
During the audit, the
Appellants never indicated that they misunderstood the question being asked on
the form with respect to personal use or that what they wrote was erroneous.
Vehicle
provided to Joseph Raymond’s former spouse
[24]
Joseph Raymond’s former
spouse worked for the Corporation until January 7, 2002. The Corporation made
a vehicle available to her beginning in 1997 for which she received a T4 slip
indicating a taxable benefit (Exhibit A-5).
[25]
On June 7, 2002, a
provisional judgment from the Superior Court of Quebec (Exhibit A-4) ordered
Joseph Raymond to pay his former spouse $2,000 gross in spousal support per
month. The judgment also indicated the former spouse was to keep the use of
the vehicle [TRANSLATION] “Trail Blazer currently in her possession”. Joseph
Raymond said the vehicle belonged to the Corporation and that he had during the
provisional hearing asked that his former spouse get another personal vehicle,
which was clearly not accepted in the judgment.
[26]
Following this
judgment, the Corporation issued T4 slips to the former spouse so that she
could include taxable benefits related to the use of a Corporation vehicle in
her income (Exhibits A-6 and A-7). She refused to do so. The Minister
included this benefit in Joseph Raymond’s income instead, as the former spouse
was no longer an employee of the Corporation and it was Mr. Raymond’s personal
obligation to provide a car for his former spouse under the provisional
judgment. Joseph Raymond does not contest the inclusion of this taxable
benefit in his income but is claiming a deduction for support payments with
respect to this vehicle. On September 30, 2004, the final divorce judgment was
rendered by the Superior Court of Quebec (Exhibit A-8).
[27]
In this judgment, Mr.
Raymond’s former spouse was awarded a lump sum of $65,000 so, among other
things, she could get a car in her own name (paragraph 92 of the judgment,
Exhibit A-8).
[28]
Moreover, Mr. Raymond
is also responsible for increasing support payments to his former spouse to
$2,750 per month, since the Court took into consideration, among other things,
the cost of transportation (paragraphs 115 and 116, Exhibit A-8).
[29]
The Corporation vehicle
was returned to the Corporation in October 2004 and was immediately returned to
the dealer.
Analysis
Vehicles provided to the Appellants for
work
[30]
Counsel for the
Appellants is arguing, first of all, that the vehicles were not “automobiles”
within the meaning of subsection 248(1) of ITA. According to him, the vehicles
in question are excluded from the definition of the word “automobile” by
paragraph (e), as these vehicles are minivans or trucks, or similar
vehicles, the use of which, in the taxation year in which they were acquired or
leased, was all or substantially all for the transportation of equipment in the
course of gaining or producing income. Counsel for the Appellants explained
that the vehicles in question are pick-ups with permanent racks built in to
transport a ladder in order to climb up to roofs, and in which the Appellants
leave the basic tools they need for emergency repairs. According to him, these
vehicles did not have the potential for personal use, which was also Mr. Audy’s
conclusion during a previous audit in which he found that these were utility
vehicles that were used more than 90% of the time for commercial purposes.
According to counsel, the fact that the Appellants had to have their vehicles
at all times for work-related reasons removes all personal aspects as, even if,
in fact, there may be some minor personal use. Moreover, it is not the number
of service calls received in a month that counts. What is important is that the
Appellants are always reachable for emergencies or service calls.
[31]
Moreover, the fact that
the Appellants wrote their personal kilometrage on the forms submitted as
Exhibit I-1 does not have to change the actual facts. The Appellants included
the distance travelled between their homes and place of employment in this
kilometrage. However, according to him, the evidence shows that the Appellants
went to work sites more often before going into the office, and thus the
kilometres travelled are not personal but work-related. He reiterates that the
mere fact of having to keep the work vehicle at all times at the Corporation’s
request removes any personal element with respect to the use of the vehicle.
The Appellants therefore did not have to log the use of their vehicles.
[32]
For her part, the
Respondent is arguing that the vehicles in question are automobiles within the
meaning of the ITA. They are vehicles designed to carry individuals and that
can seat more than three passengers, and therefore it cannot be said that all
or substantially all of the use during the taxation year in which the vehicles
were acquired or leased was to transport equipment in the course of gaining or
producing income.
[33]
Moreover, for the
purposes of paragraphs 6(1)(e) and 6(1)(k), she says that once an
automobile is made available to a taxpayer, there is a taxable benefit. This
benefit will be reduced depending on the actual number of kilometres travelled
by the automobile for work, which reduction was granted by the Minister to the
Appellants, based on the information provided by them in the forms submitted as
Exhibit I-1. She says the Appellants never contested the information submitted
in these forms throughout the audit.
[34]
In my opinion, the
Appellants did not successfully prove that the information they themselves
submitted to the CRA (Exhibit I-1), and which the Minister used to calculate
the taxable benefit, was incorrect. While it is easy to recognize that the
vehicles in question were mostly used for work purposes, the Appellants all
acknowledged on the forms that they used these vehicles for personal purposes
more than 10% of the time.
[35]
Counsel for the
Appellants maintains that from the moment when a taxpayer is obliged to have
access to a company-provided vehicle at all times, personal use is no longer
part of the equation. This argument does not correspond with the evidence
before me. According to the documentary evidence, they did not receive that
many service calls. Even if the Appellants said in their evidence that the
clients could call them directly without going through Cité Comm, the evidence
is insufficient in my opinion to argue that three employees and the president
had to have a vehicle at all times to respond to these calls. Moreover,
according to the evidence, no one worked seven days per week at all times (see
Exhibit I-1). Everyone benefited from a vehicle in their spare time and they
all acknowledged a certain amount of personal use (to go to the cottage, hockey
games, for groceries, the SAQ, etc.). None of them kept an exact log of the
kilometres travelled for personal or work purposes. The Minister accepted the
kilometrage indicated in the forms filled out in this regard. From the moment
when the Appellants recanted and contested the personal kilometrage they
themselves provided, it is up to them to prove the exact kilometrage actually
travelled for personal and work purposes (see Adams v. Canada, [1998]
F.C.J. No. 477 (QL)). It is not sufficient to say in Court that they often
went to work sites before going into work.
[36]
As the Federal Court of
Appeal said in Adams, there is a taxable benefit as soon as a vehicle is
made available to an employee or shareholder. This benefit is reduced
depending on the kilometrage actually travelled for work. The Appellants are
responsible for demonstrating this; in this case, a logbook would have been
important. As they were not capable of proving with supporting documentation
that the information submitted to the CRA, which indicates more than 10% for
personal use (Exhibit I-1), was not adequate, I conclude that not all or
substantially all of these use of these vehicles was to transport equipment in
the course of gaining or producing income. Also, there is no proof that these
vehicles were not designed to carry three passengers or less. The Appellants
did not demonstrate that these vehicles were not automobiles within the meaning
of the ITA. I conclude that the Minister was correct to calculate a taxable
benefit for each of the Appellants for the vehicles provided to them by their
Corporation during the years at issue. The assessments are therefore
well-founded on this point.
Vehicle provided by the Corporation to
Appellant Joseph-Raymond’s former spouse: can he claim a support payment
deduction?
[37]
As previously mentioned,
Joseph Raymond recognizes he is responsible pursuant to subsection 15(1) of the
ITA for a taxable benefit on a vehicle provided by the Corporation to his
former spouse for the years at issue. However, counsel for Joseph Raymond
argues that he is entitled to support payment deductions because the
provisional judgment made the Corporation responsible for leaving the vehicle
in his former spouse’s possession. He maintains that this judgment seems to
indicate that this constitutes a support payment taxable for the former spouse
and deductible for the Appellant.
[38]
The Respondent
maintains the Appellant did not pay his former spouse directly for the use of
the vehicle and there is nothing in the provisional judgment that says that the
former spouse agrees to be taxed under subsection 56.1(2) of the ITA, which
would give a deduction to the Appellant under subsection 60.1(2) of the ITA.
[39]
I agree with the
Respondent that the provisional judgment does not specifically state that
subsections 56.1(2) and 60.1(2) of the ITA must be applied. The judgment also
does not contain any provisions stipulating that the benefit thus conferred on
the Appellant by the Corporation by the provision of a vehicle to his former
spouse to meet his support obligation towards her is taxable for her and
deductible for him (see Stohl v. Canada, [2004] T.C.J. No. 595 (QL),
confirmed by [2006] F.C.J. No. 705 (QL)).
[40]
Moreover, the Appellant
maintains that the provision of the vehicle to his former spouse is part of the
support payable by him. To support this argument, he submits that this is
confirmed by the final divorce judgment rendered in September 2004, in which
the support payments were increased from $2,000 to $2,750 specifically so that
she could get herself a vehicle in her own name. This reasoning does not
conform to the actual terms of the divorce judgment. The final judgment
establishes a lump sum ($65,000) for, among other things, the purchase of a car
by her, which is not expressly part of the new amount of support payments
established at $2,750 per month. Even if this amount has to cover
transportation expenses, it does not cover the capital investment to acquire a
vehicle. Joseph Raymond cannot claim that the provision of a vehicle to his
former spouse was part of his support payment. Accordingly, he did not prove
that he was entitled to a support payment deduction to reduce the taxable
benefit on which he must pay tax for the personal use of the vehicle provided
by the Corporation to his former spouse during the years at issue.
Conclusion
[41]
The Appellants did not
successfully demonstrate, on a balance of probabilities, that the taxable
benefits added to the Appellants’ income for the personal use of the vehicle
made available to them by the Corporation during the years at issue were
erroneous. Joseph Raymond also failed to demonstrate that he was entitled to a
support payment deduction to reduce the taxable benefit amount on which he was
assessed for his former spouse’s personal use of a vehicle made available to her
by the Corporation. As a result, all the assessments made pursuant to the ITA
under appeal are confirmed. The assessment made in respect of the Corporation
pursuant to subsection 173(1) of the ETA directly results from the other
assessments. It is also confirmed.
[42]
The appeals are
dismissed.
Signed at Montréal, Quebec, this 30th day of October
2008.
“Lucie Lamarre”
Translation
certified true
on this
6th day of February 2009.
Bella Lewkowicz, Translator
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