Date: 20010119
Docket: 2000-2106-IT-I
BETWEEN:
DEAN SPEARING,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hershfield, J.
Facts
[1]
The Appellant sells Amway products and has done so since
1991.
[2]
The Minister of National Revenue ("Minister")
reassessed the Appellant for his 1996 and 1997 taxation years
disallowing the losses, which the Appellant had claimed as
business losses arising from his sales activity. The Appellant
has appealed these reassessments.
[3]
In making the reassessment the Respondent asserts that the losses
in the 1996 and 1997 taxation years were not start-up losses,
that the Appellant had not taken any significant action to turn
the sales activity around and make it profitable, that the
Appellant did not have a reasonable expectation of profit during
the subject years and that the sales activity did not constitute
a source of income for the Appellant in the subject years
pursuant to sections 3 and 4 of the Income Tax Act
("the Act"). The Respondent also asserts that
the expenses claimed in relation to the sales activity were
personal or living expenses of the Appellant and, as an
alternative position, if it is found that the Appellant did have
a reasonable expectation of profit and source of income, that the
Appellant was properly reassessed in accordance with paragraphs
18(1)(a) and 18(1)(h) of the Act on the
basis that all of the losses in the subject years were personal
or living expenses of the Appellant.
[4]
From 1991 to 1997 the Appellant reported the following income
(losses) from the sale of Amway products:
Taxation
Gross
Net
Year
Income
Expenses
Income (Loss)
1991
$ 25,240 $
28,237
($ 2,997)
1992
185,040
191,433
( 6,393)
1993
160,540
167,124
( 6,584)
1994
147,250
173,975
( 26,725)
1995
74,878
101,293
( 26,415)
1996
72,976
98,044
( 25,068)
1997
54,407
71,339
( 16,932)
Total
$720,331
$831,445
($111,114)
[5]
The following loss was reported in 1998 (exhibit A-3):
Gross Income: $45,608.00;
Total expenses $63,095.00;
Loss: $17,487.00.
[6]
The Appellant testified that in 1999 gross revenues were
$27,700.00, but that the business (transferred to a partnership
in that year) showed a profit of $100.00. While the
Appellant's complete 1998 income tax return was put in as an
exhibit, the 1999 return that the Appellant had available was
missing the Business Income Statement and was not submitted as an
exhibit. However, that the front page of the 1999 return showed a
business net profit of $100.00 was acknowledged by counsel for
the Respondent and accepted by him as part of the Appellant's
uncontradicted evidence. On the other hand, the absence of a
statement of income and expense for the business in 1999 limits
the usefulness of considering the net profit in that year in the
analysis of the potential of the business in terms of it having a
reasonable expectation of profit or of being a source of income.
One acknowledged factor in the reporting of a profit was that the
Appellant did not give his spouse a salary in that year; rather,
she joined the business as a partner. The Appellant admits that
he was aware of the assessments to deny losses when the 1999
return was prepared. In the circumstances, self discipline in the
claiming of expenses may have contributed to the small profit or
perhaps the Appellant sold off his closing inventory. This is
mere speculation. I have no basis to find that the activity here
became commercially profitable in 1999.
[7]
The sale of Amway products is done by way of a down line
marketing system in which products are purchased by a distributor
from Amway. The distributor might use a portion of the products
for personal consumption but the objective would be for the
distributor to sell the products at a retail level to a consumer
or to resell the products to another distributor down the line.
Sales down the line to persons who are themselves distributors
are sales done at cost. Only sales for personal consumption to a
person who is not a distributor are retail sales that allow the
seller a margin of profit. Income from down the line sales to
down the line distributors is derived from a complicated formula
for bonuses paid by Amway to distributor groups.
[8]
The Appellant commenced his Amway distributorship in the 1991
taxation year. The Appellant testified that the Amway business
plan has essentially not changed since that time except that
recent changes have simplified accounting and administration.
Down the line sales can now be credited to the upstream
distributors without a series a purchase sales and deliveries
actually having to be done at each distribution level.
[9]
As can be seen from gross sales, the Appellant's income
peaked in 1993.
[10] The
Appellant testified that he had a business plan which was to have
six distributors under him, which was all he felt he needed to
sustain a profitable "Point Value" in the Amway
commission hierarchy. Point Values are a percentage of the
"Business Value" of products purchased from Amway by
the Appellant and his distributor group. The Appellant appeared
to have a good understanding of the complicated bonus system.
Bonuses depended on the so-called "Business Value" of
products purchased from Amway. Business Value is a variable
percentage of the retail price of the products. The relevant
percentage varies from product to product and from time to time.
The Appellant gave credible evidence that he watched on a regular
basis the Business Value of various products relative to their
retail price and was thereby always current as to the actual
commissions associated with the sale of different products.
[11] In 1993,
the Appellant had a group of six distributors which sustained for
some six months a Point Value sufficient to give the Appellant
the benchmark status of being a "platinum" distributor.
While 1993 gross revenues were significant, a loss was still
incurred. The loss was not such in the early years of the
endeavour to justify a conclusion that it would never become a
source of income. Indeed, the Appellant's business plan was
not far off the mark at that point. Any growth in the group of
six distributors could well have afforded the Appellant a
positive source of net income.
[12] Another
aspect of the Appellant's business plan relates to the
assignable nature of Amway bonuses. The Amway marketing system
permits bonuses for so long as anyone in the distribution line is
active. The Appellant believed that he could establish
distribution groups over a period of time that would permit
commissions without personal retail sales. Such commissions or
residuals would be essentially expense free and are assignable to
his family on his death. That is in theory, at least, the
Appellant felt that his efforts were creating a source of income
for his family in the future that was not dependent on his
personal labour. His motive for incurring expenses and suffering
losses was to build residual values. He testified emphatically
that his efforts as an Amway distributor were an investment to
generate a stream of income for his family that might be
comparable to a retirement plan. However, the Appellant testified
that residuals were only 4% of Point Values (a percentage of
Business Values, which is a percentage of gross sales) and that
if the 1997 sales were all calculated as residuals, the
Appellant's income would be less than $2,000.00 per year.
Even this modest residual might be difficult to sustain in a
retirement or bequest situation. The investment (losses) over the
seven preceding years to earn this example residual was over
$100,000.00.
[13] The
Appellant acknowledged that he lost his "platinum"
level distinction in 1994 and that by 1995 his group of six had
shrunk and become less active. He testified that in 1995 a large
part of his or the group's business was lost due to the
closing of a main industry in Melford, Saskatchewan. This
resulted in one or more of his group having to give up the Amway
distributorship business. Further, one of his group was audited
and resultant tax liabilities caused that group member to drop
out.
[14] The
expenses claimed in the subject years are as follows:
1996
1997
Gross profit (sales less cost of goods
and inventory
adjustments)
$3,989.00
$7,799.00
Expenses
Advertising
932.00 360.00
Delivery 1,594.00 1,170.00
Insurance
84.00 165.00
Interest 2,622.00 1,719.00
Meals & entertainment
1,084.00 1,067.00
Motor Vehicle
81.00 85.00
Offices expenses 1,004.00 966.00
Legal &
accounting
250.00 250.00
Rent 25.00
Wages 7,601.00 7,601.00
Supplies 2,858.00 1,470.00
Travel 4,319.00 2,375.00
Telephone
2,671.00 2,519.00
$25,125.00
$19,747.00
Capital cost
allowance
378.00 276.00
$25,503.00
$20,023.00
Motor vehicle expenses
3,554.00 4,708.00
Total Business Expenses
$29,057.00
$24,731.00
Net
Loss
($25,068.00)
($16,932.00)
Business use of home expense:
Property taxes
$1,718.00
$1,848.72
Utilities 1,470.85 1,584.84
Water heater
rental
65.40 64.20
Insurance
513.00 516.00
Mortgage
interest
3,827.29 3,734.99
Repairs & maintenance
58.63 91.68
$7,653.42
$7,840.43
Business use
20.4%
$1,561.30
$1,599.45
[15] The
Appellant advised that he took out an inventory loan in 1993 in
the approximate amount of $13,500.00 and that the loan had been
reduced somewhat by the end of 1997. Interest expenses in 1996 of
$2,622.00 and $1,719.00 in 1997 were for inventory loans.
[16] The wage
expenses deducted by the Appellant included a $600.00 per month
salary to his spouse in each of 1996 and 1997. Travel expenses of
$4,319.00 in 1996 and $2,375.00 in 1997 included flights for him
and his wife to Colorado and a resort in Minnesota to attend
Amway conventions or seminars. Office expenses, supplies and
motor vehicle expenses were not well explained by the Appellant
in his testimony. No capital cost allowance was claimed on a
vehicle. The Appellant testified his vehicles were old models and
that capital cost allowance would not have been material from the
outset of the business. Home office expenses were claimed at
20.4% of the Appellant's annual home expenses (based on
office and storage space used in respect of the Amway business
relative to the total size of his home).
[17] The
Appellant testified that he worked at the business 15 to 20 hours
per week.
[18] The
Appellant testified that, in the subject years, between 10 and
12 percent of the products acquired from Amway were used
personally by him and his family in their home. More
particularly, the Appellant estimated that his family's
personal consumption of Amway products totalled some $6,800.00
per year in each of 1996 and 1997. That is, his family's
personal consumption of Amway products in those years was
approximately 9.5% of gross sales in 1996 and approximately 12.5%
of gross sales in 1997. The Appellant attributes a good part of
his family's consumption of Amway products to his business
having left-over inventory. Amway would sell a distributor an
ordered product in a box of 12 regardless that the
distributor's customer may have only placed an order with the
distributor for one such product. In this example the distributor
would have a left-over inventory of 11 items. The Appellant
testified that personal consumption was the result of having such
excess inventories. The balance of closing inventories for years
ending 1996, 1997 and 1998 were $26,460.00, $23,973.00 and
$21,257.00 respectively. These closing inventories might suggest
that Amway products lend themselves to normal inventory practices
without personal consumption requirements. Since there are no
benefits or imputed income, the only implication or inference to
be drawn from such personal consumption is whether or not it
contributes to the question of there being a personal element in
the conduct of the Amway business by the Appellant. It also
appears that the cost of goods sold includes inventory used for
personal consumption. This clearly would be a non-deductible
personal expense in my view regardless of the "left-over
inventory" explanation given by the Appellant, which
explanation I find does not detract from the expense being,
inherently, a living expense.
[19] In
respect of any plan to turn the business into a profitable one,
the Appellant testified that he has made every effort to reduce
expenses and rebuild his distribution group. He points to
difficult and unusual circumstances in the last few years that
have resulted in the shrinkage of group sales relative to the
good start that he had in 1993 and 1994. In this regard, I find
the testimony of the Appellant unconvincing. From 1992 to 1999
gross sales declined steadily from $185,040.00 to $27,700.00.
From 1995 to 1997 the decline was from $74,878.00 to $54,407.00
and in 1998 gross sales were $45,608.00. There is no evidence to
support the contention of the Appellant that in the subject years
he ambitiously invoked any plan to enhance sales or
profitability. The slide in revenues in 1994 and 1995 were
somewhat due to circumstances according to the Appellant's
testimony but the absence of further explanation for further
dramatic revenue reductions suggest to me that the
Appellant's efforts in regard to the business were winding
down. I am not prepared to find however that in the subject years
there was no business at all. His sales activity still
constituted a genuine commercial enterprise in those years.
Analysis
[20] The basis
for the reassessments under appeal is set out in paragraph 3
above. In particular, the Respondent relies on the assertions
that the Appellant did not have a reasonable expectation of
profit during the subject years from his sales activities and
that such sales activities did not constitute a source of income
for the Appellant in the subject years. In the alternative the
Respondent asserts that the losses were personal or living
expenses of the Appellant and that the Appellant was properly
reassessed in accordance with paragraphs 18(1)(a) and
18(1)(h) of the Act.[1]
[21] While
many cases have articulated a source of income requirement to
claiming losses, such requirement often seems to be only an
alternate expression of the reasonable expectation of profit test
laid down by the Supreme Court of Canada in Moldowan v. The
Queen.[2] Cases
that have treated the source of income test as an alternative
expression of the reasonable expectation of profit test suggest
that a business cannot exist without a reasonable expectation of
profit. It is then axiomatic that if there is no reasonable
expectation of profit, there is no business and if there is no
business, there is no source of income. Such applications of the
reasonable expectation of profit test are not well founded in my
view.[3]
[22] It is
helpful to consider the source of income test distinct from the
reasonable expectation of profit test. It is well accepted that
only certain sources of income and loss are the subject matter of
the Act. They are the four sources itemized in section 3.
That windfalls, lotteries, gifts, inheritances and gambling, for
example, are not sources of gains or losses for the purposes of
the Act has never been questioned. They are not one of the
four statutory sources, thus, any gross receipts are not income
and any expenses are not deductible. Net gains or profits are
irrelevant concepts if there is no source for the purposes of the
Act. Sections 9, 18 and 67 have no application if there is
no source for the purposes of the Act. To say that where
there is no source, there is no loss recognition available under
the Act is misleading if it implies that the
"possibility" of loss or profit are relevant. Unlike
the reasonable expectation of profit test, the source of income
test is not results oriented. If the proper test (in these
reasonable expectation of profit cases) is the source of income
test, it should simply look to whether there is a genuine
commercial enterprise – a business. When the taxpayer's
approach to an activity becomes sufficiently systematic,
organized and businesslike with a genuine profit motive so as to
constitute rewards (if any) as rewards for effort extended in a
commercial context for that purpose, then that activity becomes a
business and its incomes and losses are recognized as income or
loss sources for the purposes of the Act.[4] In Walls et al. v. The
Queen (under appeal to the Supreme Court of Canada)[5], the Federal Court of
Appeal found that unless there is something more to consider,
such as a personal element,[6]an ongoing commercial business is not subject to
the reasonable expectation of profit test.
[23] Where the
reasonable expectation of profit test is applied, even though an
activity has been found to be a business and thereby a source of
income, it is hard to understand how that test, as a common law
test, can apply to deny losses. A "loss" denial
rule does not deny expense deductions but rather denies that part
of allowed expenses that exceeds the income from that source.
Loss denial rules have been and should remain the domain of
Parliament, not the courts.[7] Parliament can prescribe whether a particular
loss is allowed, denied or source restricted. It can prescribe
whether a source restricted loss can be carried back or forward,
and if so, for how many years, to shelter income from the
restricted source (but not other sources). A common law loss
denial rule enjoys no such conceptual modelling opportunities.
Consider a specific legislative expense denial and carry over
provision that deals with an expense item often present in
reasonable expectation of profit cases. Subsection 18(12) denies
home office expenses to the extent they create a loss, however,
it permits a carry over of such losses. How can this provision be
applied when a loss has been denied using the reasonable
expectation of profit doctrine? If the expenses claimed by a
taxpayer filing a business loss include home office expenses, can
such expenses or some part of them be carried over as provided in
paragraph 18(12)(c) if the reasonable expectation of
profit test has denied the loss? The benefit of the carry over
seems to be lost. While the carry over would have only been
available if there is income in the following year (perhaps an
unlikely scenario in a reasonable expectation of profit case),
this illustration still serves as an example of the potential
difficulties of applying a common law doctrine within a
comprehensive legislative model. Even if it is perceived by the
courts that the model is not sufficiently comprehensive or fair
or appropriate, judicial intervention should be discouraged,
particularly in respect of a taxing statute.
[24] The
reasonable expectation of profit test has taken on a life of its
own and has gone beyond the Supreme Court of Canada
"hobby" farm endorsement of the test as set out in
Moldowan. Now, common commercial endeavours are being
attacked by questioning whether or not a taxpayer's
endeavours are commercially exploitable. The test is being
applied to tax shelters (for example, Walls) where express
anti-avoidance provisions do not apply on their own terms. That
is, it is increasingly being used as a broad common law
anti-avoidance assessing tool without a legislative basis for
doing so. Further, the application of the doctrine has changed
the focus of the analysis from considering the deductibility of
particular expenses as envisioned by the Act to
circumscribing the application of a common law “loss”
denial rule. Moving from expense denials contemplated by the
Act to loss denials, was advocated in Moldowan but
only in the context of hobbies. At page 5215, Chief Justice
Dickson noted that in respect of the reasonable expectation of
profit principle, which he accepted, "[i]f the taxpayer . .
. is merely indulging in a hobby, with no reasonable expectation
of profit, he is disentitled to any deduction at all in
respect of expenses incurred" (emphasis added). Yet, in
envisioning and describing three classes of farmers at page 5216,
Chief Justice Dickson observed that "losses" sustained
by a hobby farmer "are not deductible in any amount".
In respect of a "hobby", the difference between denying
expense deductions and denying losses is not worth clarifying if
the hobby is not a source of income. The underlying premise in
Moldowan in applying a loss denial rule (to Class 3
farmers) is that hobbies, pursued as non-business
activities, are not sources of income. The Class 3 farmer
sustains losses in the operation of a "non-business"
farming activity and such losses are not recognized in our tax
system. Whether any activity is a "business" – a
source of income - should be a finding of fact in each case. This
requires an examination in each case of the particular activity
and requires consideration of whether there is a genuine profit
motive and whether the commercial indicia of the activity are
sufficient to constitute it a business. In some cases, such as
the case of a Class 3 farmer, the activity will be wanting in
respect of these factors and will be found to be a hobby or
similar pastime that is not a business.
[25] One of
the prevailing assumptions in reasonable expectation of profit
cases is that but for applying that test, the only reasonably
foreseeable outcome of the activity would be an inappropriate tax
deduction of expenses that would have been incurred (for personal
reasons) even if the activity had not been undertaken. If the
activity only breaks even in other respects, such expenses
generate losses which offset other income to create a tax profit.
In my view, where the activity has been found to be a genuine
commercial enterprise (or found not to be a
"non-business" in the Moldowan sense), it should
not be necessary to look beyond the expense deduction provisions
of the Act to deal with this concern. Indeed,
section 18 alone should suffice.[8] For an expense to be deductible,
paragraph 18(1)(a) requires it to have been incurred
for the purpose of gaining or producing income. The intention of
the taxpayer that he or she "could generate a taxable income
sometime in the future" governs the application of this test
(Mattabi Mines v. Ontario[9]). This construction of paragraph 18(1)(a)
of the Act is cited with approval by the Supreme Court of
Canada in 1994 in Symes v. The Queen[10] at page 6013. The purpose
test was applied on a subjective basis in Mattabi Mines to
reject the notion that there had to be a casual connection
between the expenditure and the income. Still, support can be
found in Symes for reading objective standards into
subjective tests such as the purpose test in
paragraph 18(1)(a):
As in other areas of the law where purpose or intention behind
actions is to be ascertained, it must not be supposed that in
responding to this question, courts will be guided only by a
taxpayer's statements, ex post facto or otherwise, as
to the subjective purpose of a particular expenditure. Courts
will, instead, look for objective manifestations of purpose, and
purpose is ultimately a question of fact to be decided with due
regard to all of the circumstances. [11]
That is, in cases where "reality" does not conform
to stated purposes, expenses can still be denied under paragraph
18(1)(a). That is, applying the Act on its terms,
can permit not only scrutiny of the genuineness and credibility
of a taxpayer's intentions to carry on a commercial
enterprise permitting a finding as to whether or not there is a
source of income, but it can permit scrutiny of the genuineness
and credibility of a taxpayer's purpose in incurring a
particular expenditure. This is particularly true in cases where
there are personal elements associated with the activity or the
particular expenditure. When personal elements are considered in
the search for objective manifestations of the purpose for
incurring particular expenses, there should be little need to
invoke a reasonable expectation of profit test as a means of
introducing objective testing of a taxpayer's purpose in
carrying out an activity or incurring an expenditure in pursuit
of it.[12]
[26] In
addition to the possibility of applying paragraph 18(1)(a)
to more closely scrutinize a taxpayer's purpose, more resort
in these types of cases might also be had to
paragraph 18(1)(h) of the Act which denies the
deduction of personal living expenses. There is clearly room in
the application of this expense denial provision for findings in
reasonable expectation of profit cases that particular expenses
incurred are simply personal expenses. Again, applying the
Act on its terms, permits scrutiny as to the true nature
of an expense.
[27] Based on
the foregoing, the common law test of reasonable expectation of
profit should, in my view, have limited application to cases
where there is no business - no genuine commercial enterprise.
Still, there is a body of common law that does apply it, even
where an activity is found to be a genuine commercial enterprise.
Such cases should, in my view, be limited to circumstances
described in Walls. Alternatively, another approach that
applies a reasonable expectation of profit test (even where a
genuine commercial activity exists) on a very limited basis, is
described in Kuhlmann et al. v. The Queen.[13] In that case, the
reasonable expectation of profit test would not be applied unless
the expectation of profit (i.e. the subjective intention to earn
income) was, objectively, "irrational, absurd and
ridiculous".
Conclusion
[28] The
Appellant's sales activity in the case at bar is clearly a
business. It is not a hobby or "non-business" in the
Moldowan sense. The worst that can be said is that the
business in the subject years evidences a dramatic slow-down in
sales and that the trend in recent years evidences that the
Appellant might be winding down his business and spending less
time at it. However it was still, in the subject years, a genuine
commercial enterprise. While his drive for profit may have
diminished in the subject years, I accept his testimony that the
undertaking was still being pursued with a genuine intention to
profit. I also find that there is no material personal element in
this case that would dissuade me from applying Walls.
Accordingly, I find that the reasonable expectation of profit
test does not apply here. Since Walls is under appeal, I
will go further. Based on the evidence before me I am satisfied
that the facts here do not support a finding that the
Appellant's intended purpose and expectation to profit from
the business in the subject years was irrational, absurd or
ridiculous. As such, I am satisfied that the reasonable
expectation of profit test, to the extent it applies here at all,
has been satisfied. That does not mean to say that the
Appellant's credibility in respect of his stated purpose for
incurring a number of expenses is not suspect. Indeed, the more
sales decline and the more the activity in the pursuit of sales
decline, the more suspect I am of the Appellant's reasons for
incurring a number of expenses. Further, while I have found that
there was no material personal element sufficient to alter my
view that the sales activity in the subject years was a genuine
commercial enterprise, I am not thereby, precluded from finding
certain expenses to be personal expenses.
[29] In
examining particular expenses, it would have been helpful if the
Respondent had conducted a detailed audit of this business for
the years in question. That was not done. This reflects a
regrettable tendency of the Minister to essentially accept, in
these cases, expenses and losses as filed and to rely on
the reasonable expectation of profit test to rectify any
inappropriate claims. Accepting expense claims and shifting the
focus of examination to whether an activity is commercially
exploitable is a lazy and unacceptable practice. The first task
in the reassessment process is surely to determine whether the
taxpayer has calculated his income or loss correctly in
accordance with the terms of the Act. Indeed, to seek to
apply a reasonable expectation of profit test without first
determining what the true income or loss of the activity is,
makes little sense. But for the Respondent's alternative
position set out in its Reply to the Notice of Appeal that the
losses reflect expenses that are personal and living expenses of
the Appellant, I would be tempted to allow the appeal in full on
the premise that if expenses have not been challenged, they must
be permitted. Further, my having to review the deductibility of
particular expenses in order to uphold all or part of the subject
assessments is to search for facts supporting a new assessing
position. If that is the exercise, then the onus is on the
Minister to establish that the Appellant's expense claims
should be denied. In any event and regardless of these concerns,
I am satisfied that a number of expenses here are personal
expenses or expenses incurred without the genuine purpose of
earning income. I also question the reasonableness of some of the
expenses given that in the subject years the business here seems
to be in at least the initial stages of winding down.
[30] Based on
the evidence produced at the trial, revenues and expenses can be
adjusted on the following basis. In both years, cost of sales
were overstated to the extent they included inventories for
personal use. It is my understanding from evidence at the trial
that no such adjustment was made and that profits were thereby
understated by $6,553.00 in 1996 and $5,826.00 in 1997.[14] Based on the absence
of evidence to the contrary and my doubts as to the genuine
purpose of the expenditures, I find that meals and entertainment
expenses in this case were personal. I find wages to the
Appellant's spouse as being unreasonably high based on the
substantial reduction in sales activity in the subject years
versus earlier years (when the payments commenced) and on the
lack of evidence that her wages were reasonable. I would deny 50%
or $3,600.00 in each of 1996 and 1997 in respect such wages.[15] The Appellant
could not provide any explanation for the expenditures in respect
of supplies and could not differentiate between what might have
been included in office expenses from what he might have included
in supplies. On this basis I would deny expenses claimed in
respect of supplies ($2,858.00 in 1996 and $1,470.00 in 1997). I
would deny travel expenses on the basis that, in my view, they
were holiday oriented trips taken with his spouse. It is simply
not credible to me as business is winding down that it was an
income earning purpose that drove the Appellant to take these
trips. Accordingly, I would deny the entire travel expense in
both years. Further, if after these adjustments, there is still a
loss that would be increased by having home office expenses
($1,561.00 in 1996 and $1,599.00 in 1997), same would be denied
under subsection 18(2).
[31]
Accordingly, the appeals are allowed without costs and referred
back to the Minister for reassessment on the basis of the
adjustments described in paragraph 30 above which I have
calculated will permit losses in 1996 of $5,093.00 and losses in
1997 of $995.00.
Signed at Ottawa, Canada, this 19th day of January 2001.
"J.E. Hershfield"
J.T.C.C.
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