Murray v. The Queen, 2006 TCC 454 (Informal Procedure)

Citation: 2006TCC454

Date: 20060829

Docket: 2005-4251(IT)I

BETWEEN:

ELLSWORTH MURRAY,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

(Judgment delivered orally on June 6, 2006, at Ottawa, Ontario, and subsequently revised at Ottawa, Ontario, on August 29, 2006.)

Lamarre J.

[1]      By notices of reassessment dated February 25, 2005, the Minister of National Revenue ("Minister") disallowed expenses claimed by the appellant in computing his income for the 2001 and 2002 taxation years.

Business-use-of-home expenses

[2]      The appellant originally claimed an amount of $2,002.80 for 2001 and $1,953.60 for 2002 as business-use-of-home expenses on the basis that he operated his business from his home. The Minister allowed $1,001.79 for 2001 and $1,037.03 for 2002. At trial, the appellant decided to claim instead of the business-use-of-home expenses rent expenses for a two-bedroom apartment that was not his home in the years at issue. The basis of the claim was that he met clients and kept records there. He is claiming with respect to that apartment $7,263.99 for 2001 and $7,617.58 for 2002. The only evidence filed was a ledger sheet from the owner of the apartment showing the amounts paid as rent. There is, however, no proof that the appellant did in fact operate a business in that apartment. No lease, no notebook, no client list and no business cards were filed as evidence that the apartment was used for business purposes. The appellant is faced with a credibility problem. Indeed, he originally claimed business-use-of-home expenses on the basis that he operated his business from his home. That version has since changed. He now says his business was conducted from the apartment. In those circumstances, I find that the appellant's testimony alone is not sufficient to prove on a balance of probabilities that the rent expenses disclosed for the first time at trial were business expenses. The reassessments will thus remain unchanged with respect to the business-use-of-home expenses.

Travel, lodging and car rental expenses

[3]      The appellant also claimed on the day of the trial expenses in the amount of $3,656 for travel, $750 for lodging and $487.50 for car rental, all these expenses being related to a one-month trip to Rome with his girlfriend in 2001. The appellant, who is an insurance agent in the Ottawaarea, said that he went to Rome to learn the Italian language, to get information on Italian habits and to observe other sales agents in order to better serve his Italian clientele in Ottawa. The appellant's girlfriend is Italian. The expenses claimed are for both his girlfriend and him. I find that this trip is more akin to a personal leisure activity and is too remote from the appellant's business to be considered a business expense.

Group insurance premium

[4]      The appellant claimed amounts of $1,440 for 2001 and $1,680 for 2002 for group insurance premiums, which expenses were disallowed by the Minister. It would seem from the documentation filed that these premiums were for life insurance. There is no evidence that they were related to a private health services plan within the meaning of section 20.01 of the Income Tax Act (the term "private health services plan" is defined in subsection 248(1) as being a private hospital care or medical care insurance plan). The premiums paid by the appellant do not therefore qualify as deductions and the reassessments shall remain unchanged with regard to these expenses.

Motor vehicle expenses

[5]      At the outset of the hearing, counsel for the respondent conceded an additional amount of $373 for 2001 and $261 for 2002 with respect to motor vehicle expenses. The appellant is therefore allowed a total amount of $3,136.76 for 2001 and $3,002.43 for 2002 for motor vehicle expenses, and he agrees with that. The appellant will therefore be reassessed accordingly.

Signed at Ottawa, Canada, this 29th day of August 2006.

CITATION:                                        2006TCC454

COURT FILE NO.:                             2005-4251(IT)I

STYLE OF CAUSE:                           ELLSWORTH MURRAY v. HER MAJESTY THE QUEEN

PLACE OF HEARING:                      Ottawa, Ontario

DATE OF HEARING:                        June 6, 2006

REASONS FOR JUDGMENT BY:     The Honourable Justice Lucie Lamarre

DATE OF JUDGMENT:                     August 29, 2006

APPEARANCES:

COUNSEL OF RECORD:

       For the Appellant:

                   Name:                             

                   Firm:

       For the Respondent:                     John H. Sims, Q.C.

                                                          Deputy Attorney General of Canada

                                                          Ottawa, Canada