Jurcevic v. The Queen, docket 2001-456-IT-I (Informal Procedure)

Date: 20011129

Docket: 2001-456-IT-I

BETWEEN:

IVAN JURCEVIC,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

McArthur J.

[1]            The Appellant appeals his 1992, 1993, 1994, 1995, 1996 and 1997 taxation years. The issue is whether he is entitled to deduct business losses from the operation of an automotive garage for 1994, 1995, 1996 and 1997 and carry back losses for 1992 and 1993.

[2]            The Respondent states that the garage business was owned by 603291 Ontario Inc. (603) and it incurred the losses, not the Appellant personally.

Facts

[3]            The Appellant is an auto mechanic and commenced an auto repair business in Hamilton, Ontario in 1975. The business has always been called Ivan's Garage (the Garage). His business prospered and he incorporated 603 in 1985 and rolled over vehicles and inventory of the Garage to 603 under section 85 of the Income Tax Act. Before 1991, he had two employees because he needed assistance after an accident in the mid-1980's where he lost the full use of an arm. In 1990, his employees left and working alone, his business deteriorated and began losing money. His accountant advised him to cease operating under 603 in order to claim the losses personally.

[4]            In 1985, when 603 took control, the business name did not change nor did it change when the Appellant attempted to revert back to his personal name in 1991. 603 filed T2 income tax returns for 1985 to 1990 reflecting the income and expenses of the garage. Apparently, no returns for 603 were filed in 1991, 1992, 1993 or 1994. Returns were filed for 1995, 1996 and 1997 to keep 603 alive only and did not reflect the garage operations. About 1998, the Appellant's son joined the business and it is now profitable. The question is, whose business was it in 1994, 1995 and 1996.

Facts that favour the Appellant's position

[5]            The Appellant represented to his suppliers, customers and the world that it was his business. The garage was always called "Ivan's Garage", and that did not change. There was never any visible indication to those doing business with the Appellant that they were dealing with 603. Returns filed by 603 during the relevant years did not reflect the business. The business income and expense statements in the relevant years indicated that the Appellant personally carried on the business. The lease for the garage premises was in the Appellant's name alone. Photocopies of cancelled cheques from 1991 to 1997 indicate the account in the name of Ivan's Garage. Suppliers billed the Garage and the insurance policies were also in its name. There was no evidence that the assets of the Garage were ever conveyed to 603. The Appellant alone was liable for the monthly rent, he personally was liable to the garage suppliers and customers.

Facts that favour the Respondent's position

[6]            On April 18, 1986, 603 filed the required T2057 form with Canada Customs and Revenue Agency. The goods and services tax and retail sales tax accounts were registered under 603 and indicate Ivan's Garage as a trade name.

[7]            On balance, I find that the Garage's operations were that of the Appellant during the relevant years. His transfer from 603 to himself in 1991 was casual, but the Appellant is a mechanic and was struggling to make a living in the first half of the 1990s during difficult times. Presently, his son has joined his operation and the business is profitable.

[8]            The appeals are allowed with costs, if any.

Signed at Ottawa, Canada, this 29th day of November, 2001

"C.H. McArthur"

J.T.C.C.

COURT FILE NO.:                                                 2001-456(IT)I

STYLE OF CAUSE:                                               Ivan Jurcevic and

Her Majesty the Queen

PLACE OF HEARING:                                         Hamilton, Ontario

DATE OF HEARING:                                           November 20, 2001

REASONS FOR JUDGMENT BY:                      The Honourable Judge C.H. McArthur

DATE OF JUDGMENT:                                       November 29, 2001

APPEARANCES:

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Lesley King

COUNSEL OF RECORD:

For the Appellant:                

Name:                                --

Firm:                  --

For the Respondent:                             Morris Rosenberg

                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

2001-456(IT)I

BETWEEN:

IVAN JURCEVIC,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on November 20, 2001, at Hamilton, Ontario, by

the Honourable Judge C.H. McArthur

Appearances

For the Appellant:                      The Appellant himself

Counsel for the Respondent:      Lesley King

JUDGMENT

          The appeals from assessments of tax made under the Income Tax Act for the 1992, 1993, 1994, 1995, 1996 and 1997 taxation years are allowed, with costs, if any, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to claim the business losses incurred by 603291 Ontario Inc.

Signed at Ottawa, Ontario, this 29th day of November, 2001.

"C.H. McArthur"

J.T.C.C.