Docket: 2003-3982(CPP)
BETWEEN:
REID SCHMIDT,
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
SEAL IT PRODUCTS INTERNATIONAL INC.,
Intervenor.
____________________________________________________________________
Appeal
heard together on common evidence with the appeal of Seal It Products
International Inc. (2003-3980(CPP)) on November 2, 2005,
at Saskatoon, Saskatchewan
Before: The Honourable Justice D.W.
Beaubier
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Brooke Sittler
|
|
Agent for the
Intervenor:
|
Reid D. Schmidt
|
____________________________________________________________________
JUDGMENT
The appeal is dismissed and the decision of the
Minister is confirmed in
accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day
of November 2005.
"D.W. Beaubier"
Docket: 2003-3980(CPP)
BETWEEN:
SEAL IT PRODUCTS INTERNATIONAL INC.
Appellant,
and
THE MINISTER OF NATIONAL REVENUE,
Respondent,
and
REID SCHMIDT,
Intervenor,
and
DOUGLAS L. SCHOCK,
Intervenor.
____________________________________________________________________
Appeal heard together on common evidence
with the appeal of Reid Schmidt (2003-3982(CPP) on November 2, 2005,
at Saskatoon, Saskatchewan
Before: The Honourable Justice D.W. Beaubier
Appearances:
|
Agent for the
Appellant:
|
Reid Schmidt
|
|
Counsel for the
Respondent:
|
Brooke Sittler
|
|
Counsel for the
Intervenor:
|
Reid Schmidt
|
____________________________________________________________________
JUDGMENT
The appeal is dismissed and the decision of the
Minister is confirmed in
accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of November 2005.
Beaubier,
J.
Citation: 2005TCC737
Date: 20051109
Docket: 2003-3982(CPP)
BETWEEN:
REID SCHMIDT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
SEAL IT PRODUCTS INTERNATIONAL INC.,
Intervenor.
Docket: 2003-3980(CPP)
AND BETWEEN:
SEAL IT PRODUCTS INTERNATIONAL INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
REID SCHMIDT,
Intervenor,
and
DOUGLAS L. SCHOCK
Intervenor.
REASONS FOR JUDGMENT
Beaubier, J.
[1] These appeals were
heard together on common evidence at Saskatoon, Saskatchewan on November 2, 2005. Reid Schmidt was the
only witness.
[2] The particulars in
dispute are set out fully in the Reply to the Notice of Appeal
(2003-3980(CPP)). Paragraphs 3 to 7 inclusive of that Reply read:
3. By Notice of
Assessment dated December 3, 2002 the Appellant was assessed for, among other
things, Canada Pension Plan contributions in the amount of $2,187.22 for the
201 year, in respect of Schock and Reid Schmidt (hereinafter “Schmidt”). This
amount was reduced by a credit carry forward of $500.82.
4. By letter dated
February 6, 2003 the Appellant appealed to the Minister
for a reconsideration of the 2000 and 2001 year assessments.
5. In response to the Appellant’s appeal, the
Minister confirmed the assessments for the 2000 and 2001 years as the amounts
paid by the Appellant to Schock and Schmidt (collectively hereinafter “the
Workers”) were director’s fees.
6. In so deciding as the Minister did with
respect to the Workers, the Minister relied on the following assumptions of
fact:
(a) the Appellant’s business involved the
manufacturing and marketing of building material preservatives.
(b) the share structure of the Appellant was
as follows:
Schock 50%
Schmidt 50%
(c) the Workers were the corporate directors
of the Appellant;
(d) the Appellant paid director’s fees to the
Workers;
(e) director’s fees paid by the Appellant to
the Workers for the 2000 and 2001 years were as follows:
|
|
2000
|
2001
|
|
Schock
|
$10,550.08
|
$16,216.40
|
|
Schmidt
|
|
$16,216.39
|
(f) Schock received royalty payments from the
Appellants;
(g) the Appellant filed federal corporate
income tax returns (“T2s”) as follows:
|
Year-end
|
T2 Filed
|
T2 Assessed
|
|
31/12/2000
|
11/6/2001
|
10/10/2001
|
|
31/12/2001
|
4/7/2002
|
7/8/2002
|
(h) the Appellant had not filed amended T2s as
of the date of the Minister’s decision;
(i) on the T2s, the Appellant claimed
director’s fees paid to the Workers;
(j) the Appellant’s shareholder loan amounts
were as follows:
|
31/12/1999
|
|
|
Loan from Schock
|
$13,335
|
|
Loan from Schmidt
|
$16,041
|
|
Total Shareholder loan
|
$29,376
|
|
|
|
|
31/12/2000
|
|
|
Loan from Schock
|
$23,329
|
|
Loan from Schmidt
|
$17,382
|
|
Total Shareholder loan
|
$40,711
|
|
|
|
|
31/12/2001
|
|
|
Loan from Schock
|
$39,512
|
|
Loan from Schmidt
|
$34,519
|
|
Total Shareholder loan
|
$74,031
|
B. ISSUES TO BE DECIDED
7. The issue to be decided is whether the
amounts paid by the Appellant to the Workers for the 2000 and 2001 years was
director’s fees.
[3] None of the
assumptions were refuted by the evidence.
[4] Mr. Schmidt kept
the books of the corporation for the years in question on a computer program.
He testified at great length. It is clear that he does not understand the
program, accounting or corporate concepts. The changes described in assumption
6(j) were done by Mr. Schmidt as an arithmetic exercise to balance each side of
the books. His testimony did not provide any substance to support the changes
from the original numbers.
[5] This case is clear
evidence that a corporation requires a qualified accountant to operate and to
file its various statements and reports in Canada’s highly regulated economy.
[6] The Appellants
failed to refute either set of assumptions and failed to provide any credible
evidence to support the appeals.
[7] The appeals are
dismissed.
Signed at Ottawa, Canada, this 9th day of November 2005.
"D.W. Beaubier"
CITATION: 2005TCC737
COURT FILE NOs.: 2003-3982(CPP) and 2003-3980(CPP)
STYLE OF CAUSE: Reid
Schmidt, et al. v. The Minister of National Revenue
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: November
2, 2005
REASONS FOR JUDGEMENT BY: The
Honourable Justice D.W. Beaubier
DATE OF JUDGMENT: November 9, 2005
APPEARANCES:
|
For the
Appellants:
|
Reid Schmidt
|
|
Counsel for the
Respondent:
|
Brooke Sittler
|
|
For the
Intervenors:
|
Reid Schmidt
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa,
Ontario
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