Citation: 2003TCC328
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Date: 20030513
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Docket: 2002-4835(IT)I
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BETWEEN:
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LEONARD BACH,
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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
Beaubier, J.T.C.C.
[1] This appeal pursuant to the
Informal Procedure was heard at Kamloops, British Columbia, on
May 2, 2003. The Appellant testified and called
Margaret Galon, a part-time Gaming Supervisor at the Lake
City Casino ("Casino") in Kamloops and Sherry Molansky,
a Dealing Supervisor at the same Casino. The Respondent called
the auditor on the file, Diana King, C.G.A.
[2] Paragraphs 7 to 14 inclusive of
the Reply to the Notice of Appeal outline the matters at issue.
They read:
7. In
computing income for the 1999 taxation year the Appellant
included $727.00 on account of tips that he received from his
employment as a dealer for Lake City Casinos.
8. The
Minister conducted an audit of the tips paid to the dealers of
Lake City Casinos and determined that the Appellant received
additional tips totalling $5,941.00. The Appellant did not
include the additional $5,941.00 of tips in calculating his
income for the 1999 taxation year.
9. The
Minister reassessed the Appellant for the 1999 taxation year to
include the unreported tips of $5,941.00 (the "Unreported
Amount") and issued a reassessment notice dated September 4,
2001.
10. The Appellant filed a
Notice of Objection on October 29, 2001 and disputed
the inclusion of the Unreported Amount in calculating his income
for the 1999 taxation year.
11. The Minister confirmed
the 1999 taxation year reassessment by Notice dated September 16,
2002.
12. In so reassessing and
confirming, the Minister relied on the following assumptions of
fact:
a) the
Appellant was employed as a dealer at Lake City Casino (the
"Casino") in 1999;
b) the
Appellant, in addition to his employment income from the Casino,
received amounts on account of tips;
c) the tips
paid by the Casino patrons to the dealers were paid in the forms
of cash, chips or winnings from bets referred to as "dealer
bets" (collectively, the "Tips");
d) a dealer
bet involved a Casino patron placing a bet and turning the
winnings, if any, over to the dealers as a tip;
e) the
Appellant placed the Tips given to him in a tip box during each
of his shifts;
f) the
Appellant's Tips were pooled with the Tips of the other
dealers;
g) a committee
comprised of Casino employees performed the record keeping
respecting the Tips and distributed the Tips on a biweekly basis
to the Appellant and to the other dealers;
h) a tip share
allocation based on a formula of time worked and seniority was
used to calculate the amount to be paid out to the Appellant and
to the other dealers;
i) the
Appellant's entitlement to his share of the pooled Tips was
as a result of his employment duties as a dealer, and were paid
to him regardless of the amount he contributed to the Tips
pool;
j) the
Appellant did not purchase the right to the chance to win with
respect to the dealer bets placed by the Casino patron on his
behalf;
k) the
Appellant did not place any dealer bets himself;
l) the
Appellant had no control over the placement of any dealer
bets;
m) the Appellant did
not receive the Unreported Amount on account of a prize in
connection with a lottery scheme; and
n) the
Appellant received the Unreported Amount due to his
employment.
B. ISSUES
TO BE DECIDED
13. The issue is whether
the Unreported Amount was correctly included in calculating the
Appellant's income for the 1999 taxation year.
C.
STATUTORY PROVISIONS RELIED ON
14. He relies on paragraph
6(1)(a) and on subsections 5(1) and 52(4) of the Income Tax
Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the
"Act").
[3] None of the assumptions were
refuted. However some deserve a further explanation. By reference
to the subparagraphs to paragraph 12, the explanations are:
g) the committee was elected
by the employees.
h) probationary employees
got a smaller fixed share then non-probationary employees. All
non-probationary employees who worked a 4½ hour full day
got 6 shares for that full day. (Probationary employees got 3
shares for a full day). Forty-two employees shared in the pool
consisting of the dealers and the pit supervisors on all shifts.
The committee allotting the money was elected by the people who
shared in the pool from among themselves.
j) the
Appellant's major argument was that his dealer bets were the
proceeds of gambling. Thus they are not taxable. However the
Court was given a demonstration of the dealer bet process in two
simulated casino Black Jack games. The casino patron places his
own bet chip and a second chip beside his placed chip as a bet
for the dealer. If the bet is lost, all the chips go to the
casino. If the bet is won, the dealer gets his chip plus a
matching chip paid off. If the patron's cards tie the
dealer's, there is no win and no loss; the result is a tie or
a "push" and the patron keeps all his chips, including
the bet for the dealer. The result of this demonstration
established that the bet for the dealer is not the dealer's,
rather the tip bet is the patron's. Only if the gamble of the
dealer bet by the patron is a win does the dealer ever receive
anything - after the patron's game is concluded. Therefore,
there is no gamble by the dealer. He or she never does own or
possess the dealer bet chip until the patron wins the game.
[4] The amount of $727 that the
Appellant reported was merely his estimate as he stated. The
assessment of the "Unreported Amount" was derived from
the committee records of payment of tips to the Appellant and an
amount averaged by the auditor for two weeks for which records
were missing. The auditor's calculations were not refuted in
evidence and they are accepted as correct. The actual
"tips" in question are described correctly in
assumption 7 c). There are two categories of these; (1) straight
payments of cash or chips by a patron to a dealer, and (2) the
so-called "dealer bets" which the Appellant claims are
subject to chance and therefore are gambling winnings. No records
or evidence exists which describe the amount of each
category.
[5] The final question is whether the
Appellant received his share of the pool as a result of his
employment with the Casino. In considering this, it should be
noted that:
1. The dealer bets were
only paid to dealers who were employees of the Casino.
2. The dealers and the pit
supervisors, a total of 42 people on two shifts of Casino
employees, shared then in a pool of employees. That is to say
that the person who received the dealer bet was not the only
recipient of it; other employees received part of it too, in
respect of their employment by the Casino. Just as the Appellant
received part of the dealer bets paid to other dealers on his or
the second shift of each day.
3. The patron paid the
dealer bet as a form of tip, that is, in recognition of the
dealer dealing the patron a winning hand. That payment had no
element of chance in it, since the payment itself only occurred
after a win. Only then did the dealer actually receive it.
4. Similarly, the amount
that a qualified Casino employee might receive from the pool was
only known upon the employee being paid by the committee of
Casino employees.
[6] The appeal is dismissed. The
Unreported Amount is income to the Appellant from an office or
employment within the meaning of both subsection 5(1) and of
paragraph 6(1)(a) of the Income Tax Act.
Signed at Saskatoon, Saskatchewan, this 13th day of May,
2003.
J.T.C.C.