Freire v. The Queen, 2005 TCC 25 (Informal Procedure)

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Agent for the Appellant: John A. Milewski

Counsel for the Respondent: A'Amer Ather

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REASONS FOR JUDGMENT

(Delivered orally from the Bench at

Toronto, Ontario, on November 2, 2004)

McArthur J.

[1]      These are appeals by the Appellant for the 1999 and 2000 taxation years. In reassessing the Appellant for 1999, the Minister of National Revenue added the amount of $18,318 to business income and disallowed a deduction of business expenses in the amount of $4,787. In the taxation year 2000, the Minister disallowed a deduction of business expenses in the amount of about $11,087. During the 1999 taxation year and until three months after June 30, 2000, the Appellant operated a carpentry and framing business. In 1999, he reported income from the business of $140,857.01 and to that amount, the Minister added the amount of $18,318. There is no dispute to this added amount and the Appellant consents to it. Although it does not have any affect on this decision, I accept the Appellant's position that this amount was inadvertently omitted by the Appellant's former accountant.

[2]      There was a misunderstanding between the Minister's auditor and the Appellant as to which of his two vehicles was used primarily or totally for business and which was used as a secondary family vehicle. I accept the evidence of the Appellant and his spouse, Eva Maria Santos Freire, that in fact it was the van and not the Toyota truck that was used exclusively for business purposes. I can understand the confusion because one would normally think that the family vehicle would be the van and the business vehicle the truck. However, the Appellant used the van for business purposes and a Toyota truck for personal purposes for himself and his wife. Also, I accept the evidence of Mrs. Freire to the effect that she did numerous courier duties for her husband's business to include purchasing needed supplies, delivering them when necessary, and bringing books and records to the bookkeeper.

[3]      The Appellant claimed motor vehicle expenses of $5,474.56 in 1999 and $8,119.44 in 2000 and the Minister allowed $3,686.39 and $2,272, respectively. The second issue deals with home office expenses and the issue is whether the Appellant used 33% or 20% of his 1,860 square foot home for business purposes during the relevant years.

[4]      The Appellant and his spouse testified at the hearing, as well as the Minister's auditor, Elzbieta Sudol. With respect to the Appellant, I do not question his honesty but I keep in mind that he tailored his responses to meet the present-day circumstances, which is not uncommon under these circumstances.

[5]      With respect to the home office expenses, first the Appellant acknowledges that he used 200 square feet of the home and that is not disputed. He also claims to have used 80% of his garage for storage and other business purposes, and I accept that evidence. That would work out to about 200 square feet in the garage. The Minister has not discounted any of the garage use as being of a lesser value than the home itself for the purposes of the assessment. I accept that 400 square feet of the home was used for business purposes, and the Minister's conclusion that the business use of the home and garage was not greater than 20% is reasonable and is accepted.

[6]      For the taxation year 2000, I agree with the Minister that the Appellant incurred expenses for an office in the home of 20% of his claimed expenses but for a period of nine months rather than six months because although the business closed down on June 30, 2000, I accept the evidence of the Appellant that he had considerable close-up work for the next three months. So the Appellant is entitled to 20% of his home expenses for the whole of the year 1999 and for nine months in the year 2000.

[5]      With regard to the car use, the Appellant and his spouse testified that 100% of the van was business use for both years and part of the Toyota truck was used for personal purposes. The evidence of the Minister's auditor was impressive but I cannot ignore the following facts: first, that the van was used as opposed to the Toyota; and, secondly, that the second vehicle, the Toyota truck, was used, and I find as a fact, 25% of the time for nine months in the year 2000.

[6]      To conclude, the appeal is allowed to permit the Appellant's claim of 20% of the home expenses in both years and to claim 100% of the expenses for the Van and 25% of the expenses for the Toyota for twelve months in 1999 and nine months in 2000.

Signed at Ottawa, Canada, this 7th day of January, 2005.

McArthur J.