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Citation: 2003TCC52
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Date: 20030220
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Docket: 2001-4042(IT)I
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BETWEEN:
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RONALD CRAIGMYLE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] In the 1998 and 1999 taxation
years the Appellant acted as a Parole Officer for the
following:
- Federal and
Provincial Government including the Royal Canadian Mounted
Police; and
- Quesnel Community
Corrections Office.
[2] In determining his income for the
1998 and 1999 taxation years the Appellant deducted the following
expenses:
(a) Subcontract expenses of
$4,200.00 and $5,200.00 for the 1998 and 1999 taxation years
respectively re services provided by his children;
(b) Amounts paid to his wife of
$10,000.00 and $12,000.00 in the 1998 and 1999 taxation years
respectively; (Note: The Appellant was allowed to deduct these
amounts in determining his income and the amounts were included
in Mrs. Craigmyle's income.)
(c) Miscellaneous expenses such as
meals, postage, supplies, etc. claimed by the Appellant in the
1998 and 1999 taxation years.
[3] By Notices of Reassessment dated
the 12th day of March 2001 the Minister of National Revenue (the
"Minister") reassessed the Appellant's 1998 and
1999 taxation years. The said Reassessments disallowed the
following:
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1998
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1999
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Expenses Disallowed
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$4,999.72
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$6,092.01
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B. ISSUE
[4] Is the Appellant entitled to
deduct expenses of $4,999.72 and $6,092.01 in determining his
income for the 1998 and 1999 taxation years?
C. ANALYSIS
[5] The following expenses have been
claimed and denied:
(a)
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1998
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1999
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Meals Disallowed
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$191.46
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$227.07
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The Minister denied the cost of meals where the Appellant paid
for only one meal. Most of the expenses in question were incurred
at "Fast Food" restaurants. The Appellant testified
that all of the expenses that have been disallowed in this
category were business related, i.e. the expenses were incurred
by him while he was working either as a parole officer or as a
probation officer.
Counsel for
the Respondent maintained that the Appellant has been allowed
most of the meal expenses that he claimed. However, the official
of Canada Customs and Revenue Agency ("CCRA")
disallowed those expenses where it was apparent that the
Appellant only paid for his own meal.
From the
evidence before me I have concluded that the Appellant should be
allowed to deduct 50% of the meal expenses that have been denied
by the Minister in the 1998 and 1999 taxation years.
(b)
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1998
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1999
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Telephone Line Rental
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$244.56
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$238.84
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The Appellant
testified that the telephone in his home was frequently used by
him for business purposes.
The CCRA has
allowed the Appellant to claim 30% of the cost of the telephone
in the Appellant's home. I have concluded that the Appellant
should be allowed to claim 50% of the amount that has been
disallowed as a business expense.
(c) Advertising
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1998
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1999
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Purchase of Liquor
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$300.68
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$398.10
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The Appellant
stated that in his opinion it was necessary for him to make gifts
of liquor to various clients and potential clients as Christmas
gifts in order to maintain and expand his business
activities.
The CCRA has
denied all of the expenses in this category.
I accept the
Appellant's testimony and allow 100% of the cost of liquor
supplied by the Appellant at Christmas time to clients or
potential clients.
(d) Costco Membership
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1998
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1999
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Costco Membership
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$24.50
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$28.00
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The Appellant
maintains that his Costco membership was primarily used for
business purposes. The Appellant admitted that some personal
items were purchased at Costco.
I accept the
Appellant's testimony. The amounts of $24.50 and $28.00
should be allowed as business expenses.
(e) Supplies
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1998
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Overnight Travel Bag
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$38.52
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The Appellant testified that the travel bag was used by him in
connection with his business.
As I indicated during the hearing, this amount should be
allowed as a business expense.
(f) Subcontract Expense
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1998
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1999
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Wages paid to Children
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$4,200.00
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$5,200.00
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The Appellant
maintains that his children helped him to carry on his business.
The Appellant said that his children helped him in various ways.
The Appellant said that his children answered the telephone and
took messages. The Appellant said that his children also provided
janitorial services, carried out shredding of files and assisted
him in preparing reports.
In my opinion
the main point to consider in determining whether expenses of
this nature should be allowed is whether the amounts paid to the
children are reasonable in the circumstances.
I am not
convinced that it is reasonable to claim that a daughter,
age 14 and a son age 11, provided services to the Appellant
that would justify salaries of $4,200.00 and $5,200.00 in the
1998 and 1999 taxation years respectively. In reaching this
conclusion, I have also recognized that the Appellant paid his
wife a fee of $10,000.00 and $12,000.00 during the same
period.
I have
concluded that the Appellant should be allowed to deduct the
following amounts as wages to his children:
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1998
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1999
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Wages to Children
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$1,800.00
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$2,000.00
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[6] The Appellant maintained that
because of the conduct of the official of the CCRA during the
audit his rights under the Canadian Charter of Rights and
Freedoms (the "Charter") have been denied,
deprived or infringed.
[7] The Appellant referred to the fact
that the official of the CCRA who carried out the audit should
have discussed his tax position solely with him and not with his
wife. However the Appellant's wife personally responded to a
request for information that was made to the Appellant by the
official of the CCRA. Furthermore, as noted above, the Appellant
employed his wife in his business and paid her a salary of
$10,000.00 in 1998 and $12,000.00 in 1999. Mr. Peter Martin, a
senior official of the CCRA, was called as a witness by counsel
for the Respondent. Counsel for the Respondent asked Mr. Martin
whether he thought that the official of the CCRA had breached the
provisions of the Income Tax Act when the official
dealt with the Appellant's wife.
[8] Counsel for the Respondent asked
Mr. Martin the following question:
Q. ... what was the
outcome of any investigation into that potential confidentiality
breach?
A. The outcome was
that we were obtaining information from someone who had an
official capacity in the business and, therefore, under section
231 we had a right to obtain information from that person. And so
we concluded that there was no breach of section 241.
(Transcript, page 19, l. 16-23)
[9] Under these circumstances I do not
believe that the official of the CCRA was incorrect in dealing
with the Appellant's wife during the audit.
[10] The Appellant referred to the following
mistakes or inaccuracies that were made by the auditor during the
audit:
(a) The auditor did not report
the date or the time of the telephone calls to the Appellant in
the T-2020 Auditor's Report;
(b) Mr. Martin's notes of a
telephone call that he made to a Mr. Brulé may have
contained an incorrect date;
(c) A suggestion by the Appellant
(although not established) that officials of the CCRA may have
amended their notes; and
(d) The Appellant also questioned some
of the investigations carried out by the officials of the
CCRA.
[11] In order to determine whether the
Appellant's rights under the Charter have been denied
or deprived I have carefully considered the evidence that was
presented to me. In this connection I quote a question that the
Appellant asked Peter Martin:
Q. Today would you
like to justify or give a comment today based on what the status
is with some of these errors or mistakes? Would you like to say
and clarify on a scale of one to ten, ten being good and one
being poor?
A. No, I won't
give you a one to ten, but I will give you that I feel that the
errors you've pointed out are relatively minor errors and
don't - don't go to the heart of the reassessments . .
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(Transcript, page 91, l. 7-14 .)
[12] Mr. Martin is an experienced senior
official of the CCRA. I accept his testimony with respect to the
several points raised by the Appellant.
[13] I have concluded that officials of the
CCRA did not breach any of the Appellant's rights under the
Charter when they carried out the audit on the
Appellant.
[14] The appeals are allowed, without costs,
and the Minister is instructed to reassess the Appellant's
1998 and 1999 taxation years to allow the Appellant to deduct the
amounts referred to herein.
Signed at Vancouver, British Columbia, this 20th day of
February 2003.
J.T.C.C.
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