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Citation: 2004TCC101
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Date: 20040129
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Docket: 2003-1266(IT)I
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BETWEEN:
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ANN GUILMETTE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
[OFFICIAL ENGLISH TRANSLATION]
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REASONS FOR JUDGMENT
Lamarre Proulx J.
[1] This is an appeal under the
informal procedure concerning the taxation years 1998 and
1999.
[2] The issues are whether the
Appellant and her husband, Daniel Cozak, were living in
a marital relationship during the years in question and whether a
vehicle belonging to the Appellant was used for business
purposes.
[3] The Minister of National Revenue
(the "Minister") relied on the following facts when establishing
the reassessments, as described in paragraph 12 of the Reply
to the Notice of Appeal (the "Reply"):
[TRANSLATION]
EMPLOYMENT EXPENSES
(a) during the
taxation years in question, the Appellant was employed by the
company Traitement de recyclage Industriel Inc. (hereinafter, the
"company");
(b) Daniel Cozak is
the majority stockholder of the company;
(c) Daniel Cozak is
the Appellant's spouse;
(d) for the taxation
years 1998 and 1999, the Appellant claimed $3,621 and $6,893,
respectively, as other employment expenses;
(e) the amounts
stated in the preceding paragraph are only the expenses for the
depreciation of a vehicle;
(f) for each
of the taxation years in question, the Appellant produced a T777
form-Statement of Employment Expenses;
(g) for the taxation
year 1998, the Appellant claimed to have driven her personal
vehicle 25,000 km for business purposes out of a total of
28,000 km, for the period from August 28, 1998, to
December 31, 1998;
(h) for the taxation
year 1999, the Appellant claimed she drove 10,000 km for
business purposes and 10,000 km total;
(i) in
response to the request of the Minister's auditor, the Appellant
produced a log in which she had detailed the 29,594 km she
had driven for business travel out of a total of 35,405 km
over the taxation year 1998;
(j) the
vehicle she allegedly used was acquired in November 1998;
(k) the Appellant
indicated that she leased the vehicle from
August 28, 1998, until it was purchased in
November 1998;
(l) for the
taxation year 1999, the travel indicated in the log was
10,162 km for business purposes and 10,162 km
total;
(m) during a telephone
conversation with the Minister's auditor, the Appellant said that
she left the residence directly to go meet her clients;
(n) later, during
another telephone conversation with the Minister's auditor, the
Appellant said that she travelled with a friend to get to the
office and then she left the office with the vehicle to go see
the clients;
(o) the Appellant
refused to identify the "friend" with whom she travelled;
(p) based on the
above, the Minister's auditor considered that the log produced by
the Appellant was not valid, and as a result, refused her the
amounts of $3,621 and $6,893 for the taxation years 1998 and
1999, claimed as other employment expenses;
(q) at the objection
stage, the Appellant's agent informed the Minister's agent that
all gas and vehicle maintenance fees were paid by the Appellant
who was then reimbursed by the company;
(r) the Minister's
agent asked the Appellant's agent to provide evidence of the
travel and of the reimbursements by the company, in support of
the trips;
(s) further to this
analysis, the Minister's agent came to the same conclusions as
the auditor, that is that the evidence provided did not support
the travel indicated in the log submitted, and moreover, the
amounts indicated were sometimes unreasonable.
EQUIVALENT-TO-SPOUSE CREDIT
(t) the
Appellant claimed amounts of $5,918 and $6,290 as amounts for a
married person to be used for the calculation of non-refundable
tax credits for the taxation years 1998 and 1999;
(u) by way of a
notice of assessment for the taxation year 1999, sent to the
Appellant on May 8, 2000, the Minister reduced the
amount claimed by the Appellant as amount for a married person to
be used for the calculation of non-refundable tax credits to
"NIL";
(v) by way of a
notice of reassessment for the taxation year 1998, sent to the
Appellant on March 21, 2002, the Minister reduced the
amount claimed by the Appellant as amount for a married person to
be used for the calculation of non-refundable tax credits to
"NIL";
(w) on or around May 17,
2002, the Appellant notified the Minister of her opposition to
the reassessments of March 21, 2002, for the taxation
years 1998 and 1999;
(x) further to a
telephone request by the Appellant, during which the Appellant
claimed $5,380 as an equivalent-to-spouse amount to be used for
the calculation of non-refundable tax credits for the taxation
year 1998, the Minister issued a notice of reassessment on
May 21, 2002, in accordance with subsection 152(4)
of the Act;
(y) on or around
September 5, 2002, the Appellant notified the Minister of her
opposition to the reassessment of May 21, 2002, for the
taxation year 1998;
(z) by way of a
notice of reassessment for the taxation year 1998, sent to the
Appellant on January 7, 2003, the Minister reduced the
amount claimed by the Appellant as an equivalent-to-spouse amount
used in the calculation for non-refundable tax credits to
"NIL";
(aa) during the years in
question, the Appellant resided at 54 Louis-Jolliet,
Ste-Catherine-de-la-Jacques-Cartier (hereinafter the
"residence");
(bb) many personal expenses that
were included as expenses for Daniel Cozak's company were
for the residence;
(cc) among these expenses were
groceries, recreation activities, clothing and dry cleaning for
women's clothing and other expenses for the Appellant and the
children;
(dd) moreover, the company paid
for many of the maintenance and renovation expenses for the house
that was the Appellant's residence;
(ee) according to the T-4 forms
issued by the company for the Appellant, she received $28,000 and
$21,250 in wages for the taxation years 1998 and 1999,
respectively;
(ff)
Daniel Cozak had revenues of $50,367 and $41,511 for the
taxation years 1998 and 1999, respectively;
(gg) the Appellant was not
receiving any support payments and says she reinvested almost all
her salary into the company;
(hh) during the period under
investigation, the Appellant contributed $12,496 to a "Registered
Retirement Savings Plan";
(ii) the Appellant
never justified these contributions;
(jj) Daniel Cozak
provided the Minister with a lease as his proof of residence;
(kk) this lease is for the
premises he uses as a business office in
Trois-Rivières;
(ll) moreover, the
entire space is claimed as the company's business expenses;
(mm) in light of the preceding, the Minister
concluded that Daniel Cozak and the Appellant did not live
apart during the taxation years in question;
(nn) the Minister therefore
refused the equivalent-to-spouse amount claimed by the Appellant
to be used for calculating the non-refundable tax credits
for the taxation years 1998 and 1999;
CREDIT/ADDITIONAL AMOUNT FOR EACH
INDIVIDUAL
(oo) the Appellant claimed $925
and $1000 as additional personal amounts to be used for
calculating non-refundable tax credits for the taxation years
1998 and 1999, respectively;
(pp) according to the T-4's
issued by the company for the Appellant, she received $28,000 and
$21,250 in wages for the taxation years 1998 and 1999,
respectively;
(qq) Daniel Cozak had total
revenues of $50, 367 and $41,511 for the taxation years 1998 and
1999, respectively;
(rr) given the above, the
Minister determined that the Appellant was not entitled to any
amount for the taxation year 1998 and was only entitled to $117
for the taxation year 1999 as additional amounts to be used for
calculating non-refundable tax credits.
[4] The Appellant's testimony was
long. She has university training in anthropology. During the
years in question, she worked at Traitement Recyclage Industriel
Inc., or TRI, a company belonging to Daniel Cozak, who,
according to the Appellant, is her former spouse. Mr. Cozak
has a PhD in chemistry and his company works in the environmental
field.
[5] They starting living together in
1989 and were married in 1991. They had two children, born
in 1989 and 1991. The family home at 54 Louis-Jolliet,
in Ste-Catherine-de-la-Jacques-Cartier, was purchased in
1992 and belongs to the Appellant. Mr. Cozak paid for it
after the sale of a first business.
[6] The Appellant stated that in 1995,
there was a spousal abuse incident between her and her husband.
The police arrested her husband and put him in prison for a
weekend. She produced Exhibit A-1, an agreement by
Mr. Cozak to keep the peace and be of good behaviour, with
an order restricting him from communicating directly or
indirectly with Ann Guilmette and from being at
54 Louis-Jolliet, Ste-Catherine-de-la-Jacques-Cartier,
except for work purposes in the basement. This agreement is dated
February 27, 1995.
[7] On July 11, 1995, a probation
order was served. Mr. Cozak's address is shown as
54 Louis-Jolliet. The only conditions are to refrain
from abusing or interfering with Ann Guilmette and to
continue following the treatment he had started. The words
[translation] "do not communicate or attempt to communicate
directly or indirectly with Ms. Anne Guilmette" were struck
out.
[8] The Appellant stated that after
this violent event, she and Mr. Cozak did not live together
as a couple. However, there were never any legal separation
proceedings. For a year and a half, he allegedly lived in the
basement so he could see his children. She explained that even
when Mr. Cozak found another place to live, he would come to
see the children at the house because she preferred for the
children to not go to his place.
[9] Mr. Cozak allegedly left for good
at the end of 1996, early 1997. He rented a place on rue
St-Stanislas. During 1998 and 1999, he still had his own
apartment, although it was not the same one. The Appellant was
not sure of the addresses of Mr. Cozak's apartments. She
did, however, confirm that during 1998 and 1999, they always
lived apart. Their relationship was a working relationship.
[10] The company's office was first located
on the airport road in Ste-Foy, 25 kilometres from the
home. The office moved around four years ago to rue Newton
in Québec. The distance from the Appellant's home was then
around 40 kilometres. The distance for the children in 1998
and 1999 was essentially the same.
[11] The Appellant explained that the
company developed projects for agricultural use of sludge from
paper mills or grass cuttings. He did not have a laboratory.
Mr. Cozak no longer performed experiments; he was only a
consultant. If there were analyses to be done for his reports, he
had them done by laboratories. As for her, she worked on the
communications aspect.
[12] She worked three or four
days a week. The Appellant said that the salary she claimed was
reinvested in the company. The company's debts to her are almost
all erased, because the company repaid her in some way.
[13] The Appellant's income declarations for
1998 and 1999 were submitted as Exhibits I-1 and
I-2. These declarations were prepared by Mr. Cozak.
The Appellant claimed a salary income of $28,000. She claimed
$3,621 as other employment expenses related to depreciation of
the car.
[14] As for Exhibit I-3, a supposed detailed
log of the Appellant's travels for 1998 and 2000, she is not the
one who filled it in. This exhibit states that the "Villager"
vehicle was leased from August 28 to November 1998. The
Appellant, however, stated that this vehicle was never
leased.
[15] Exhibit A-2 consists of
invoices for the 1998 Villager. The first invoice is dated
August 24, 1999. It states that 46,967 had been driven.
The second invoice, dated October 28, 1999, shows
55,901 kilometres. A third invoice, dated
November 30, 1999, shows 59,895 kilometres. The
last invoice is dated March 21, 2000, and shows
69,424.
[16] Mario Gaudet, the caretaker, produced
Exhibit A-3, a lease involving Daniel Cozak. This
lease is for 6 rue St-Stanislas, Apt. 28,
and was for December 1, 1996, to
June 30, 1997. A letter dated July 7, 1997,
indicated that the lease he had signed expired on
June 30, 1997, and that the owner was ready to renew
the lease for a 12-month period from
July 1, 1997, to June 30, 1998, for $310
per month. No document was produced indicating that the
lease was renewed.
[17] Rachel Pelletier, appeals officer
at the Canada Customs and Revenue Agency ("CCRA") testified. The
Appellant asked for depreciation of the car, and was refused at
the audit. Ms. Pelletier contacted the Appellant regarding
the travel log. The Appellant asked her to contact
Mr. Cozak. The company reimbursed the gas and maintenance
fees. Ms. Pelletier asked to see the invoices to confirm the
trips. She added up the invoices for 1998 for a total of $784.
Using a calculation of one dollar per ten kilometres, the
total driven was 16,840. The Appellant claimed to have driven
35,400 kilometres for business in 1998. This is out of
proportion. The gas expenses do not at all correspond to the
travel log.
[18] Marie-Julie Durand, a police
officer with the City of Montréal since 1997, testified
for the Appellant. She is a trained engineer. Before 1997, she
worked for the company TRI for around two years, from 1995
to 1997. She was a consultant. She and Mr. Cozak went to
meet with companies to seek out new consulting contracts in waste
reclamation. She went alone or with him. They made many contracts
for sludge from paper mills. They wrote reports regarding
environmental issues. Most of her work took place at the office
but she often went to meet potential clients wherever they were,
such as Trois-Rivières and other places in Quebec.
They went to see companies that produced sludge in order to
reclaim it. She also met with some farmers to perform
experiments. For example, a piece of farmland would be separated
into plots, with one as the control plot and the other receiving
sludge from the paper mills.
[19] She used Mr. Cozak's car, a Tempo, to
get around.
[20] She knew Ann Guilmette because she
was the wife of Mr. Cozak, her boss. The witness stated that
Ms. Guillemette [sic] worked with them a few times.
They occasionally travelled together to meet government
representatives or paper mill employees.
[21] Ms. Durand stated that she and her boss
were together eight hours a day. She added that
Mr. Cozak was not someone who spoke a lot about his personal
business. However, one morning when he did not look well, he
explained that it was not going well with him and his wife and
that he had rented a place in Old Québec. This was
probably in the fall of 1996. She was not really in contact with
him after she left.
[22] Mr. Cozak stated that in 1995 and 1996,
he was having marital problems with the Appellant. At the time,
he was arrested for spousal abuse. He was told not to communicate
with Ms. Guilmette, but he still had to go to the house for
work, since his office was there at that time.
[23] He found an apartment in Québec,
on rue St-Stanislas, where he lived for around a year, and
allegedly renewed the lease but had to break the lease during the
second period because he moved to
Trois-Rivières.
[24] In Trois-Rivières, he
rented a place at 442 Laviolette. He produced the lease as
Exhibit A-4. The signature was dated
July 1, 1998 for the lease ending
June 30, 1999. It is interesting to note that on the
lease, Mr. Cozak's address was
54 Louis Jolliet.
[25] He said that the Appellant took care of
communications in environmental projects. She also took care of
business development by visiting clients and finding new
contracts.
[26] He claimed that his apartment in
Trois-Rivières is his permanent residence. To the
question: "How can he live in Trois-Rivières and at
the same time be at his office on rue Newton in Québec?"
he replied that when he set up an office in
Trois-Rivières, 90% of his sales was with Kruger
Paper. Currently, the Trois-Rivières office is a
shell, because the client doesn't give him much work.
[27] Alain Tremblay is a CCRA auditor.
He started auditing the company TRI and then the couple's files.
The Appellant indicated her marital status from 1990 to 1996 as
married, in 1996 as separated, in 1997, married, and from 1998 to
today, separated. Mr. Cozak declared that he was a
common-law spouse until 1995 inclusively. He claimed he was
separated from 1996 on.
[28] In his income declarations, Mr. Cozak
declared that, until 1996 inclusively, his address was
54 Louis-Jolliet in Sainte-Catherine. As of
March 10, 1997, he declared 6 rue St-Stanislas
until December 29, 1998. From December 29, the address
given is 442 Laviolette in Trois-Rivières. On
September 14, 2000, the address is changed to
54 Louis-Jolliet until July 23, 2001, and then it
is back to the Trois-Rivières address. For the
Appellant, it is 54 rue Louis-Jolliet.
[29] In November 2001, Mr. Tremblay went to
442 Laviolette a number of times and knocked on the door, but
there was never any answer. He returned in December 2001 and
saw Mr. Cozak. He inspected the apartment where the
Trois-Rivières office was. There was almost no
furniture in the rooms; there was no refrigerator or stove. There
was a table and shelves in one room. There was no mattress or
bed. He asked to see the bathroom, where there was a sink and a
toilet. Outside, was written TRI. It was more an office than an
independent domestic housing unit.
[30] Mr. Tremblay stated that the Appellant
did not cash in her wages and the wages were systematically
reinvested in the company. Many of the company's expenses were
spent on the Appellant's personal expenses, such as groceries,
taxes, videos and movies. There were also invoices related to
renovations on the home, such as exterior finishing and the pool
deck.
[31] Mr. Tremblay got differing
versions, depending on whether he spoke with Ms. Guilmette
or Mr. Cozak. As for the mileage, there were
two different versions. In the beginning, Ms. Guilmette
left from home and went to work, then went to see the clients.
Later, she said, [translation] "No, I leave from my house, I go
see clients and then I go to work." When he asked her who the
clients were, she replied that he should speak to Mr. Cozak.
When he asked Mr. Cozak for the logbook, he said he would
get it. He asked to see it immediately because that would allow
him to believe that version of the facts, but it took seven days
to get it.
[32] In cross-examination, he admitted that
he didn't go to the apartment in Trois-Rivières in
1998 or 1999. The auditor's report was submitted as
Exhibit I-6. The T2020 report was submitted as
Exhibit I-7.
[33] In response, the Appellant explained
that the personal housing expenses paid by the company were
reimbursements for the wages and investments she made in the
company.
Conclusion
[34] The years in question are 1998 and
1999. At this time, according to the Appellant and
Mr. Cozak's version of the facts, they lived apart. During
her testimony, the Appellant did not mention that Mr. Cozak
lived in Trois-Rivières. Explanations should
have been provided to account for Mr. Cozak's being at the
Québec office at the same time, or who was managing the
Québec office, or where Mr. Cozak lived while he
managed the Québec office. No part of this issue was even
touched upon during the Appellant's testimony. What came out
during her testimony was hesitation surrounding the location of
Mr. Cozak's residence. Moreover, Exhibit A-4, the
lease for the premises in Trois-Rivières, has
54 Louis-Jolliet as Mr. Cozak's address.
[35] It is also important to consider that
Mr. Cozak paid the family expenses and the housing expenses
at 54 Louis-Jolliet.
[36] All these facts do not lead to the
conclusion that the Appellant and her husband Mr. Cozak were
separated.
[37] As for using the car for business
purposes, again, the evidence is unsatisfactory. Mr. Cozak
filled in the travel log well after the events. The Appellant
asked the auditors to ask Mr. Cozak for explanations
regarding the travel. There is a statement that indicates that
the car was leased starting in August, then bought in November.
According to the Appellant, the car was not leased. She bought it
in November. The appeals officer tried to confirm the statements
regarding the trips with the gas expenses that were paid by the
company. There was no relationship between these expenses and the
number of kilometres supposedly driven.
[38] The testimony of a young employee, with
the company in 1995 and 1996, does not support the fact that the
Appellant was very present at the office. It does, however, fully
substantiate the work done by the company.
[39] Accordingly, based on the evidence
presented at the hearing, the appeal must be dismissed.
Signed at Ottawa, Canada, this 29th day of January 2004.
Lamarre Proulx J.
Translation certified true
on this 15th day of December 2004.
Elizabeth Tan, Translator
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