Date: 19990217
Docket: 97-3328-IT-I
BETWEEN:
ANDRÉ GÉLINAS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Tardif, J.T.C.C.
[1] This is an appeal for the 1990, 1991 and 1992 taxation
years. The issue is whether a $25,000 repayment and $1,636 in
professional fees—for a total of $26,636—must be
considered in calculating the undepreciated capital cost of the
property in question or whether they are instead personal or
living expenses.
[2] The respondent assumed the following facts as
justification for the reassessments disallowing the carryback of
a non-capital loss for the 1990, 1991 and 1992 taxation
years:
[TRANSLATION]
(a) in filing his tax return for the 1993 taxation year, the
appellant:
(i) claimed a net rental loss on the property of $58,365.25,
including a terminal loss of $58,254.25 [sic], the latter
being calculated as follows:
Undepreciated capital cost $130,254.25
Minus: Proceeds of disposition considered
at 100% rental use $74,000.00
Terminal loss on the property $56,254.25
(ii) and requested a carryback of the non-capital loss
of $27,395.22 as follows: $8,697.61 for each of the 1990 and 1991
taxation years and $10,000 for the 1992 taxation year;
(b) in response to information obtained from the objections
division of the Quebec Department of Revenue, the Minister
revised the terminal loss down to $28,511 based on the following
calculation:
Undepreciated capital cost $130,254.25
Minus: Disallowed expenses
- Insurance repayment $25,000
- Professional fees $1,636 $26,636.00
Revised undepreciated capital cost $103,618.25
Business portion: 60% of this amount $62,171.00
Plus: Change in use in 1992
Total FMV $93,800
Land FMV $4,700 $89,100 x 40% $35,640.00
Revised capital cost - business $97,811.00
Minus: Proceeds of disposition $74,000
Minus: Land $4,700 $69,300.00
Revised terminal loss $28,511.00
(c) the $25,000 the appellant had to repay the insurance
company is an amount he was obliged to lay out because he was
found to be partly liable in respect of the fire at his first
home in 1987;
(d) the professional fees of $1,636 are lawyer’s fees
relating to the appellant’s defence against the claim by
the insurance company referred to in the preceding paragraph;
(e) the insurance repayment and the professional fees
totalling $26,636 should not be considered in calculating the
undepreciated capital cost of the property for the 1993 taxation
year, since they are actually personal or living expenses of the
appellant;
(f) the net rental loss on the property for the 1993 taxation
year was correctly revised down to $28,622;
(g) that net rental loss has now been completely absorbed in
the 1993 taxation year;
(h) accordingly, the non-capital loss was revised down to nil
for the 1993 taxation year and the loss carrybacks to the 1990,
1991 and 1992 taxation years were correctly disallowed.
[3] Before the hearing began, the Court explained clearly to
the appellant that he bore the burden of proving the soundness of
his claims.
[4] The appellant thereupon briefly explained that the home of
which he was renting a part to his daughter had been completely
destroyed by a fire.
[5] The appellant was compensated for the losses he incurred,
and he rebuilt after acquiring his daughter’s title to the
land. After he had rebuilt, it was proved that his daughter had
caused the fire.
[6] As a result of that finding, the insurance company that
had compensated the appellant brought legal proceedings seeking
repayment of part of the compensation paid. The appellant
retained a lawyer to represent him in those proceedings, and a
settlement was reached pursuant to which he was required to pay
an amount of $25,000 plus $1,636 for professional fees.
[7] Relying on interpretation bulletins IT-467R (February 19,
1992), IT-99R4 (August 2, 1991), IT-487 (April 26, 1982),
IT-143R2 (August 10, 1983) and IT-143R2 (Special Release)
(October 30, 1992), he submitted:
[TRANSLATION]
In our tax returns, we claimed the $25,000 in compensation and
the legal expenses associated therewith.
The appellant argued as well that the amounts referred to
above could be claimed against his rental income. Without
elaborating any further, he simply asked that his appeal be
allowed.
[8] On the evidence submitted by the appellant it is not
possible to allow his appeal, since he has not at all discharged
the burden of proof that lay upon him.
[9] Moreover, it was absolutely essential that he prove on the
balance of evidence that the amounts in question were not
personal or living expenses exclusively attributable to him.
[10] For these reasons, the appeal must be dismissed.
Signed at Ottawa, Canada, this 17th day of February 1999.
“Alain Tardif”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of October
1999.
Erich Klein, Revisor
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