Emberley v. The Queen, docket 1999-2228-IT-I (Informal Procedure)

Date: 20000602

Docket: 1999-2228-IT-I

BETWEEN:

WADE EMBERLEY,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

O'Connor, J.T.C.C.

[1] These appeals were heard at St. John's, Newfoundland on May 23, 2000.

Issues

[2] The issues are whether in the 1994 and 1995 taxation years the Appellant is entitled to a reduction of $390.00 from a taxable benefit of $2,180.88 related to the personal use of an employer provided vehicle and secondly whether the Appellant is entitled to gasoline expenses of $3,425.00 in 1994 and $3,275.00 in 1995.

[3] The Reply to the Notice of Appeal states as follows:

5. In computing his income for the 1994 and 1995 taxation years the Appellant deducted, in addition to expenses not at issue, the amount of $390 per year as demo expenses and the amounts of $3,425 and 3,275 respectively as gasoline expenses ("gas expenses).

6. By Notices of Reassessment dated June 2, 1997, the Minister reassessed the Appellant's 1994 and 1995 income tax returns to disallow, in addition to amounts not at issue, the demo expenses and the gas expenses.

7. The Appellant filed a valid Notice of Objection related to the demo expenses of $390 for the 1994 and 1995 income tax years and the gasoline expenses of $3,425 for the 1994 income tax year and $3,275 for the 1995 income tax year.

8. In so assessing the Appellant, the Minister relied on, inter alia, the following assumptions:

a) the Appellant was, at all material times, employed as a car salesman by The Royal Garage Limited (the "Employer");

b) commissions comprised more than 87% of the Appellant's income for the 1994 and 1995 taxation years;

c) during the calendar years 1994 and 1995, the Employer deducted an amount of $7.50 each week from the Appellant's pay cheque for the Appellant's use of a demonstrator vehicle;

d) on each of the T-4's issued to the Appellant for 1994 and 1995, the Employer reported an amount of $2,180.88 as a taxable benefit related to the personal use of an employer provided vehicle;

e) in calculating the taxable benefit related to the personal use of an employer provided vehicle for the 1994 and 1995 taxation years, the Employer reduced the benefit by $390 which represents the 52 weekly deductions of $7.50 from the Appellant's pay cheque for the use of the demonstrator vehicle;

f) the Employer's calculation of the Appellant's taxable benefit related to the personal use of the employer provided vehicle allowed a full deduction of the demo expenses deducted from the Appellant's pay cheque;

g) the Employer provided $25 per week in gas to compensate the Appellant for work related gas consumption;

h) the appellant did not provide invoices to prove that he incurred gas expenses in excess of the $25 per week in gasoline provided by the Employer;

i) the Minister allowed an additional deduction of $200 for gasoline expenses related to the 1994 and 1995 taxation years as an estimate of the maximum reasonable amount in the absence of supporting documentation;

[4] Testimony was given by the Appellant and by Hector Walters, an appeals officer with Revenue Canada during the years in question.

[5] The Appellant did not submit receipts for gas expenses nor a log showing personal use versus business use mileage. He maintained that they were in his possession at home and that they had been submitted previously to Revenue Canada and he did not think there was any need to submit them to the Court.

Analysis and Decision

[6] In my opinion the Respondent has established that in calculating the taxable benefit ($2,180.88) related to the personal use of an employer provided vehicle for 1994 and 1995, the employer, in arriving at the amount stated in the T-4s issued to the Appellant, deducted the amount of $390 representing 52 weekly deductions of $7.50. This was one of the assumptions contained in the Reply and it has not been destroyed or refuted by any testimony or evidence submitted by the Appellant. Consequently, it is presumed to be true.

[7] As to the gasoline expenses, the Respondent, through the appeals officer, Hector Walters, submitted a chronology of what he did in attempting to verify the gasoline expenses. That chronology (Exhibit R-1) reads, in part, as follows:

October 19, 1998	10:15 a.m.	Called objector to obtain additional information. He is to check with his employer and advise the writer the number of demonstrator vehicles he had in 1995. I also asked that he provide the telephone numbers for the following individuals whose names were submitted among others that he had loaned his demonstrator vehicle to: Eli Myles, Jim Bolt, Morley Caines, Paul Priest, Mike Kearney, Elizabeth power, Dick Farrell, John Fewer, and Theresa Dober. These names as well as others were taken from notes he kept throughout each week and recorded in the log as submitted at the end of each week. The objector was also advised that one receipt for a month's supply of gas was not acceptable documentation for gas expenses however under the circumstances we would allow reasonable amounts based on our review of the file. Objector agreed to get the requested information and call the writer later.
...	...	...
November 3, 1998		Called various parties to determine the usage of the objector's demonstrator and/or used vehicle for customer use as it related to his claim for vehicle expenses. Following are the notes as taken from my discussion with the parties contacted: a) Eli Myles – spoke to his spouse who advised Mr. Myles died in Dec/94 and therefore did not have a loaner in 1995. His spouse stated she did not recall her late husband ever having the loan of a vehicle from Mr. Emberley. The deceased had a 1990 Van prior to his death and did not have very much of the service work done at the Royal Garage. b) Jim Bolt – Mr. Bolt stated he had a vehicle from Avis Rentals once while his vehicle was being repaired however the cost of the rental was paid by Chrysler Corporation and he himself paid for any gas. He stated he would have driven approx 540 kms as is indicated in the information provided to the writer by the objector however the objector would not have incurred any expense in relation to this. Another time Mr. Bolt stated he was provided a loaner by Mr. Emberley for a day or so. As the total mileage was less than 20 miles he did not put any gas in the car. Mr. Bolt lives about 1 km from the garage. c) Paul Priest – I called the number provided and this was for the College of the North Atlantic. He no longer works there and may now be working in Montreal. No other number available. d) Morley Caines – Attempted to call several times. No success. e) Mike Kearney – Spoke with Mr. Kearney and he stated he recalled having the loan of a Dodge vehicle from Mr. Emberley for a day or two. He stated there was a full tank of gas in the vehicle when he received it and he returned it full. He was not charged any amount for use of the vehicle but did have to pay for the gas. f) Elizabeth Power – Called and spoke to Ms. Power who stated she could not recall ever having a loaner from Mr. Emberley. g) Dick Farrell – Despite several calls no contact made. h) John Fewer – I called and spoke to Mrs. Fewer who stated she did recall her spouse having a loaner for a day and that he did not pay for any gas during its use. The 67 km driven as noted in the information provided by the objector sounded reasonable to her. i) Theresa Dober – Despite several calls no contract made.
		From the above information gathered it is reasonable to conclude that the $25/week provided in gas to Mr. Emberley by the dealership should be adequate to cover the cost of loaning vehicles to his customers and test driving vehicles. As a means of acknowledging the idea that additional costs may have been incurred and to be as reasonable as possible with the objector a further discussion will be held with him to allow an additional amount.
Dec 10, 1998	12:15 p.m.	Called objector and advised I had contacted several of the individuals he had provided to support his vehicle expenses and that from the information available we would allow an additional $200.00/year to acknowledge the idea that some additional gas costs may have been incurred above and beyond the amount provided by the garage. Mr. Emberley did not express an opinion on our decision therefore he was advised information on proceeding to the Tax Court of Canada would be sent to him shortly.

[8] The Appellant stated principally that his sales area was large and he definitely incurred gasoline expenses over and above the $25.00 reimbursed to him weekly by the employer, namely the amounts that he claimed - $3,425.00 for the 1994 year and $3,275.00 for the 1995 year. Counsel for the Respondent made a calculation which would indicate that had those amounts claimed by the Appellant been allowed, it would have amounted to approximately $90 per week of additional expenses and counsel submitted that that appeared excessive.

Analysis and Decision

[9] In my opinion the Respondent has made its case with respect to the $390. The assumption contained in the Reply has not been demolished or refuted. Consequently, the appeal on that issue must be dismissed.

[10] With respect to the additional gas expenses claimed, Exhibit R-1 indicates the efforts Mr. Walters made to attempt to verify the additional gas expenses and, although his survey of certain customers and their gas expenses was limited, there is a strong indication that the Appellant could not reasonably been seen to have incurred the additional gas expenses claimed. Furthermore, the Appellant has the burden of proof and in my opinion that burden has not been discharged.

[11] Consequently, the appeal on that issue is also dismissed.

[12] As a result, the appeals are dismissed.

Signed at Ottawa, Canada this 2nd day of June 2000.

"T.P. O'Connor"

J.T.C.C.