Adriaansen v. The Queen, docket 1999-3829-IT-I (Informal Procedure)

Date: 20000915

Docket: 1999-3829-IT-I

BETWEEN:

BOB ADRIAANSEN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Sarchuk J.T.C.C.

[1]            These are appeals by Robert F. Adriaansen from assessments of tax with respect to his 1995, 1996 and 1997 taxation years. In computing his income for those years the Appellant reported employment income which included standby charges in the amounts of $779, $829 and $788, respectively. By way of reassessment dated October 13, 1998, the Minister of National Revenue (the Minister) increased the standby charges and thereby included additional employment income in the Appellant's income in the amounts of $5,578.25, $6,009.89 and $5,981.37. Subsequently, the Minister reassessed to reduce the standby charges for 1995 and 1996 in the amounts of $1,350 and $1,000.

[2]            In assessing the Appellant, the Minister made the following assumptions of fact:

(a)            the Appellant is an employee with Westward Ford Credit Ltd. (the "Employer");

(b)            the Appellant was principally employed in selling or leasing automobiles;

(c)            an automobile owned by the Employer was made available by the Employer to the Appellant;

(d)            the Employer has acquired one or more automobiles;

(e)            the cost of the Employer owned vehicle in the 1995, 1996 and 1997 taxation years was determined by dividing the cost to the Employer of all new automobiles acquired by the Employer in the year for sale or lease in the course of the Employer's business by the number of automobiles acquired resulting in the following amounts:

	1995	1996	1997
Average Cost of New Vehicles Purchased	$23,086.00	$24,556.00	$23,340.00
Provincial Sales Tax	1,616.02	1,718.92	1,633.80
Cost including PST	$24,702.02	$26,274.92	$24,973.80

(f)             the automobile was made available to the Appellant for 365 days during each of the 1995, 1996 and 1997 taxation years;

(g)            the Appellant was required by the Employer to use the automobile in connection with or in the course of the office or employment;

(h)            all or substantially all of the distance travelled by the automobile during the days the automobile was available were not made in the course of the office or employment with the Employer.

[3]            The Appellant is a shareholder in Westward Ford Credit Ltd., an automobile dealership located in Portage la Prairie, Manitoba. He testified that vehicles were made available to him and to his wife by the dealership, and that at all times, his wife had the full standby charge added to her income as required. For his part, he reported a reduced standby charge in each of the taxation years as previously noted. According to Adriaansen the vehicle assigned to his wife during the years in issue was usually a "mini-van or something like that" which vehicle was utilized for most of the family travel.

[4]            The Appellant's duties amongst other things required him to travel to vehicle auctions in Headingly at least once a week and to the "odd Ford meeting in Winnipeg" about once a month. As a general rule, the Appellant had the use of a number of company vehicles in the course of a year and that his practice was to affix the dealer's plate to whatever vehicle he was driving at any given time. He noted that any vehicle assigned to him at a particular point of time was usually available as a courtesy vehicle and for other general dealership use. In September 1996, he moved to Wellwood, Manitoba, some 70 kilometres west of Portage la Prairie. He described this as an area where the dealership does approximately 25% of its business and that as a result, he frequently used the vehicle assigned to him as a "service loaner". By that he meant that he would pick up vehicles from customers in Wellwood for service or repairs and would leave his assigned vehicle for the customer to use. He did say that when his vehicle was put to such use and his duties required him to go elsewhere, a number of other vehicles owned by Westward Ford were available for that purpose.

[5]            During the taxation years in issue the Appellant had not kept a logbook because discussions with Revenue Canada left him with the impression that the standby charges he reported were reasonable. Notwithstanding the audit, the Appellant still does not keep any form of logbook or other record of his vehicle usage. He did, however, produce a list prepared by the service department consisting of work order numbers which he said reflected the times he brought a customer's vehicle in for servicing. This list covered the period September, October, November and December of 1998. The Appellant was not, however, able to say with respect to any of the entries on this document how long the customer's car remained in the shop and conceded that if it was to be for longer than one day, he would "take an actual licensed service loaner home" and use it until the customer's vehicle was ready for redelivery. He further said that Westward Ford had three or four vehicles that were usually licensed for "that particular use" and argued that it would be impractical to attempt to keep track of the kilometres driven by him in any of these vehicles.

Conclusion

[6]            The relevant provisions of the Income Tax Act require an employee who enjoys a benefit as a result of the employer paying operating expenses to include it in income. The value of this benefit for that purpose is an amount equal to the portion of the operating costs paid by the employer that relates to the personal use, i.e. in this case, a reasonable standby charge, plus the equivalent to the GST thereon. The standby charge may be reduced to the extent that personal use kilometres are less than 1,000 times the number of months the automobile was available to the employee. The entitlement to reduce the standby charge in this fashion is only available where the automobile is used all or substantially all of the time in connection with the employment. Accordingly two conditions must be satisfied in order to substantiate a reduced standby charge. First, the taxpayer must establish on a balance of probabilities that the personal use kilometres were less than 1,000 times the number of months the automobile was available to him, and second, that the automobile itself was used all or substantially all of the time in the course of employment. It follows that a taxpayer must maintain adequate records of personal and business usage to support his claim for the reduced standby charge. This Appellant has failed to accept that basic fact. He took exception to the need to do so stating: "so then I am going to have to go out and write the serial number or the license number of this car that I went to place. And then when I come back that car is lent out to somebody and I got to go pick up the mail, and I got to write down another licence plate and say that I drove here".

[7]            I accept that given the manner in which the Appellant was required to use the employer's vehicles a precise allocation does present problems. However, it is equally obvious that it was the Appellant's failure to set up a simple system and to use it on a consistent basis which prevented him from providing a reasonable foundation for the claimed allocation between personal and business use.

[8]            Since the Appellant failed to adduce any evidence capable of establishing the ratio between personal and business use for the taxation years in issue the appeals must be dismissed.

Signed at Ottawa, Canada, this 15th day of September, 2000.

"A.A. Sarchuk"

J.T.C.C.

COURT FILE NO.:                                                 1999-3829(IT)I

STYLE OF CAUSE:                                               Bob Adriaansen and Her Majesty the Queen

PLACE OF HEARING:                                         Winnipeg, Manitoba

DATE OF HEARING:                                           August 16, 2000

REASONS FOR JUDGMENT BY:      The Honourable Judge A.A. Sarchuk

DATE OF JUDGMENT:                                       September 15, 2000

APPEARANCES:

Agent for the Appellant:                     Jerry Lupkowski

Counsel for the Respondent:              Sidney Restall

COUNSEL OF RECORD:

For the Appellant:                

Name:                                N/A

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

1999-3829(IT)I

BETWEEN:

BOB ADRIAANSEN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on August 16, 2000, at Winnipeg, Manitoba, by

the Honourable Judge A.A. Sarchuk

Appearances

Agent for the Appellant:            Jerry Lupkowski

Counsel for the Respondent:      Sidney Restall

JUDGMENT

          The appeals from assessments of tax made under the Income Tax Act for the 1995, 1996 and 1997 taxation years are dismissed.

Signed at Ottawa, Canada, this 15th day of September, 2000.

"A.A. Sarchuk"

J.T.C.C.