Prince v. The Queen, docket 1999-4552-IT-I (Informal Procedure)

Date: 20000726

Docket: 1999-4552-IT-I

BETWEEN:

ROBERT PRINCE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

MacLatchy, D.J.T.C.C.

[1]            This appeal was heard in Kitchener, Ontario, on May 30, 2000.

[2]            In computing income for the 1996 taxation year, the Appellant deducted the amount of $34,142.00 as other employment expenses (the "Expenses").

[3]            The Minister of National Revenue (the "Minister") assessed the Appellant for the 1996 taxation year and in so assessing, Expenses in the amount of $18,480.00 were disallowed.

[4]            The Appellant was employed by Tele-Direct Publications as a commission salesman employed under a collective agreement that was entered into evidence at this hearing.

[5]            The Appellant's evidence was carefully given, explaining that repeat business and renewals were paid at a fixed rate of commission which was a substantially lower rate than the commission rate paid for new business written and sold by the Appellant. He indicated that most of his income was derived from the commissions earned for new business.

[6]            The Appellant's sales territory covered a large portion of Southern Ontario and included many major centres such as Hamilton-Wentworth, Kitchener, Guelph and all areas through St. Catharines to Windsor. This territory was acknowledged as one that required the Appellant to be "on the road" for extended periods and that contained hundreds of clients that he would have to contact for both renewals and fresh business. Clients' needs would have to be considered and recommendations made for improving the effectiveness of the existing advertising and proposed improvements.

[7]            The Appellant made an arrangement with his wife to perform preparatory services on his clients' lists (provided by his employer) and to make recommendations to improve those clients' listings for the Appellant to present on his calls on such clients. The arrangement was that the Appellant would pay his wife $250.00 per week on account for her services that would be later billed to him at an hourly rate previously agreed. His wife was uniquely experienced in the business as she had previously been employed by Tele-Direct to perform the very same services. This assistance could save the Appellant much valuable time and improve his ability to increase new sales commissions.

[8]            It was vigorously advanced by the Appellant that his wife should be considered as an independent contractor as she was hired under a contract for services and thus any monies paid to her could be deducted from his commission earnings. The Appellant gave evidence that pursuant to the provisions of section 8 of the Income Tax Act, he was hiring his wife as a substitute or assistant and monies paid to her could be claimed as expenses so long as they were "reasonable" in the circumstances. However, the Income Tax Act further provides that such assistant or substitute must be required by the employer of the Appellant. The collective agreement referred to above does not provide that requirement.

[9]            The Appellant and his wife at all times were in a relationship of employer/employee. The clients' lists were those of the Appellant and were controlled by him. Any profit and/or loss would be suffered by the Appellant and not his wife. It was clearly the business of the Appellant. Once it became clear that the master and servant relationship existed the determination on the appeal followed.

[10]          Accordingly, the appeal is dismissed.

Signed at Toronto, Ontario, this 26th day of July 2000.

"W.E. MacLatchy"

D.J.T.C.C.