REASONS
FOR JUDGMENT
Woods J.
[1]
David Steubing is employed in power line
maintenance and construction in various locations in Alberta. This appeal
concerns the 2010 taxation year, in which Mr. Steubing claimed a deduction for
employment expenses in the amount of $43,611 and a corresponding GST rebate.
The reassessment at issue reduced these amounts to $2,934, for employment
expenses, and $139.71, for the GST rebate.
Preliminary matters
[2]
There are two preliminary matters.
[3]
First, the notice of appeal requests relief on
account of corroborating documents that were provided to the Canada Revenue
Agency (CRA) and not returned to the appellant. This is no longer an issue, and
the supporting documentation has been entered into evidence.
[4]
Second, Mr. Steubing’s representative informed
the Court at the commencement of the hearing that the items under dispute
relate to expenses with respect to a truck, cell phone, tools, and food. The
representative stated that an issue with respect to lodging was resolved prior
to the hearing.
General observations
[5]
With respect to the items in dispute, Mr.
Steubing appears to have reduced the amounts that he is claiming. A revised
statement of expenses was entered into evidence in page 6 of the Book of
Documents (Ex. A-1). I have assumed that this document reflects Mr. Steubing’s
current position.
[6]
Accordingly, the total amount of expenditures
now being claimed is $28,248.30. This includes an amount for lodging in the
amount of $2,934 which was previously allowed in a reassessment.
[7]
As a general comment, Mr. Steubing does have
supporting documentation to establish that almost all of the expenditures were
incurred, but he has very little supporting documentation to establish that the
expenditures relate to employment rather than personal use. This was a focus of
the cross-examination, and Mr. Steubing’s responses were often too vague to be
persuasive.
[8]
Finally, I would comment that many of the
expenditures being claimed are clearly non-deductible, and yet Mr. Steubing
persisted in claiming them at the hearing. This approach made the task of Crown
counsel and the Court more difficult than it should have been. I would have
considered an award of costs against the appellant, but the Crown did not ask
for them.
[9]
I now turn to the specific items in dispute.
Tools
[10]
Mr. Steubing claims a deduction for tools in the
amount of $333.35. This deduction should be disallowed because the applicable
legislation does not permit a deduction for a tradesperson’s tools unless the
expenditures exceed $1,050 (s. 8(1)(s) and 8(2) of the Income Tax Act).
[11]
Mr. Steubing’s representative acknowledged the
restriction in the legislation but argued that it is unfair to disallow the
expense. This argument based on fairness cannot succeed.
Clothing
[12]
Mr. Steubing claims a deduction for
employment-related clothing in the amount of $299.93. This amount will not be
allowed because the employer submitted a form stating that clothing
expenditures would be paid for, or reimbursed by, the employer (Ex. A-1, page
4). I am not satisfied that Mr. Steubing incurred any expenditure for clothing.
Meals
[13]
Mr. Steubing’s revised claim seeks a deduction
for food/meals in the amount of $7,318.50, which is approximately one-half of
the food receipts that were submitted.
[14]
These expenditures will not be allowed because
Mr. Steubing received a meal allowance from the employer.
[15]
Pursuant to s. 8(1)(h) of the Act,
travel expenses cannot be deducted if the taxpayer receives an allowance from
the employer that was not included in income by virtue of s. 6(1)(b)(vii).
Since this provision permits a reasonable meal allowance to be excluded from
income, I have concluded that this allowance likely was not included in Mr.
Steubing’s income. Accordingly, the deduction for food is prohibited by s.
8(1)(h).
Fuel for truck
[16]
Mr. Steubing submits that he incurred fuel expenses
in the amount of $5,065.01 and that approximately 88.6 percent of this amount
is attributable to employment and should be deductible (A-1, page 6). Many of
these expenditures relate to travel between home and the work sites, which were
usually a considerable distance away.
[17]
These expenses are generally reasonable and will
be allowed, but the personal use proportion will be increased to 20 percent.
This takes into account that Mr. Steubing did not keep a mileage log and that
work-related travel was incorrectly calculated from the employer’s place of
business instead of Mr. Steubing’s home.
[18]
The total amount of the deduction that will be
allowed is $4,052.
[19]
In light of the percentage exclusion for
personal use, it is not appropriate to make a further adjustment for specific
receipts identified by the Crown as likely personal expenditures.
Capital cost
allowance
[20]
Mr. Steubing claims a deduction for capital cost
allowance on a trailer that he hauled to work sites with his truck. He stated
that he preferred to stay in the trailer rather than a motel. Capital cost
allowance on the trailer (not the truck) has been claimed as a motor vehicle
expense. This claim will be disallowed because the trailer is not a motor
vehicle.
[21]
In argument, Mr. Steubing’s representative
suggested that the trailer could be claimed as lodging and that the truck could
be claimed as a motor vehicle. It is too late to make these arguments after the
evidence has been presented.
[22]
The Crown would be prejudiced in several ways if
these arguments were accepted. For example, Mr. Steubing’s representative
informed the Court at the commencement of the hearing that issues related to
lodging had been resolved. In addition, there was no corroborating evidence as
to the cost of the truck. Since the Crown did not have sufficient opportunity
to consider a response to these new arguments, they will not be allowed.
Insurance
[23]
Mr. Steubing submits that he paid insurance on
the truck in the amount of $5,800. Supporting evidence for the expenditure was
provided in the form of bank statements showing monthly payments to an
insurance company. The statements showed two monthly payments for insurance,
and the higher amount was claimed as on account of the truck.
[24]
I agree with the Crown that there is not
sufficient evidence to tie this expenditure to the truck. In addition to
insurance for the truck, Mr. Steubing had insurance for the trailer, a truck used
by his spouse, a boat and a home. It is not possible to break out the amounts
attributable to the truck.
[25]
In the absence of sufficient supporting
documentation, only one-third of this expenditure will be allowed as
attributable to the truck. This amount is $1,933. After deducting the personal
use proportion (20 percent), the amount allowed as a deduction will be $1,546.
Cell phone
[26]
Mr. Steubing claims cell phone expenditures in
the amount of $3,053.99.
[27]
The receipts that were provided show that these
expenditures relate to four cell phones. Mr. Steubing acknowledged on
cross-examination that three of the cell phones belong to family members.
[28]
Another problem with the cell phone claim is
that Mr. Steubing has no supporting documentation regarding personal use. The
Crown suggested as an alternative argument that Mr. Steubing’s long distance
expenditures only be allowed. This amount could be verified and is $1,114. This
is a reasonable approach given that the record-keeping is poor.
Other truck
expenses
[29]
Mr. Steubing submits that he incurred
miscellaneous expenditures on his truck as follows: maintenance and repairs in
the amount of $1,557.64, registration and licensing in the amount of $113.80,
and washes in the amount of $89.60.
[30]
Through a scrutiny of the receipts on
cross-examination, the Crown established that likely only $206.58 of the
maintenance and repairs was related to employment and the rest were personal
expenditures.
[31]
As for registration and licensing, the Crown submits
that there was not sufficient evidence to tie the expenses to the truck. There
were three receipts. The Crown suggested that only the largest amount, $70.45,
should be allowed. I agree with this approach.
[32]
The expense claimed for washes is reasonable.
[33]
After a deduction for personal use (20 percent),
the amount allowed will be $293.
GST rebate
[34]
There is no dispute about the GST rebate. It
will follow from the results of the income tax deductions.
Conclusion
[35]
The appeal will be allowed on the basis that additional
expenditures in the amount of $7,005 will be allowed as a deduction in
computing income and a corresponding GST rebate will be allowed. Each party
will bear their own costs.
[36]
Finally, I wish to acknowledge the excellent
submissions of counsel for the Crown in this appeal, which required a review of
a significant number of receipts. The submissions were of great assistance.
Signed
at Ottawa, Ontario this 23rd day of July 2014.
“J.M. Woods”
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