Citation: 2013 TCC 196
Date: 20130621
Docket: 2012-1676(IT)I
BETWEEN:
LILY TCHENG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
and
Docket: 2012-3383(IT)I
BETWEEN:
LILY TCHENG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Masse D.J.
[1]
In this case, there are
two appeals. The first appeal is from reassessments dated May 30, 2011,
and June 8, 2011, for the 2007 taxation year. The second appeal is regarding a
notice of assessment dated October 31, 2011, for the 2010 taxation year. The
two appeals were heard on common evidence.
Docket 2012-1676(IT)I -
2007 taxation year
[2]
In filing her tax
return for the 2007 taxation year, the appellant claimed net commission losses
in the amount of $17,238. On May 30, 2011, the Minister of National
Revenue (the Minister) issued a reassessment disallowing, among other things, the
net commission losses claimed by the appellant as well as a deduction claimed
for carrying charges in the amount of $3,500. The Minister issued a
reassessment dated June 8, 2011, which had no effect on the amounts at issue. On
June 29, 2011, the appellant served on the Minister a notice of objection.
At the audit stage, the appellant filed a claim for a caregiver tax credit in
respect of three people, as set out in subparagraph 118(1)(c.1)(iii) of
the Income Tax Act, RSC 1985, c. 1 (5th Supp.) (the Act). At the
objection stage, the appellant filed a claim for a caregiver tax credit in
respect of a fourth person for a total amount of $16,076.
[3]
On March 2, 2012, the
Minister confirmed the reassessment. In addition, the Minister disallowed the
caregiver tax credit as claimed; hence this appeal.
Docket 2012-3383(IT)I -
2010 taxation year
[4]
In filing her income
tax return for the 2010 taxation year, the appellant claimed a rental loss of
$13,172 as "other deductions" in respect of a condo located at 407‑248
Corot Street, Montréal, Quebec (the condo). On October 31, 2011, the Minister
issued an assessment for 2010 disallowing that amount. On or around
December 13, 2011, the appellant served on the Minister a notice of
objection regarding the reassessment. At the objection stage, a claim was filed
in order to obtain a deduction of $2,500 as "service fees". On August
15, 2012, the Minister confirmed the reassessment and disallowed the deduction
claimed as service fees; hence this appeal.
Factual background
2007 taxation year
[5]
The appellant has been
retired since 2005. She holds a bachelor's degree in industrial relations from
the University of Montréal. She worked as a desk officer for the City of
Montréal, but today she receives a pension from the Montréal Urban Community.
[6]
She operated a business
selling wedding gowns between 1989 and 2001 under the name of La Noce Enrg. That
business was unsuccessful. It always had low revenues and very substantial
losses.
[7]
Since 2001, the
appellant has been selling beauty and health products. She acts as an intermediary.
The products are purchased from an American company called E. Excel
International Inc. and then sold to the appellant's clients. Therefore, they
are retail sales to the consumer of these products. She has few clients. All
her clients are in Quebec.
[8]
The appellant receives
5% commission on products sold. The appellant has no employees. Clearly, she
advertises very little, and, according to her, she promotes her business
through word of mouth, by posting flyers on bus shelters, and by faxing flyers.
It seems that most of her clients live in Chinatown, and, given the business's
sales figures, there are very few clients: friends, neighbours, family and
herself. She does not go door to door and sells very little to strangers.
[9]
There are no books or records
for the business because the appellant does no accounting. There are no
invoices or purchase orders. No invoice copies are given to clients when
products are sold.
[10]
The business has never
generated profits and has always experienced very significant net losses. These
losses are between 9 and 37 times the gross income amount. For the period from 2001
to 2007, the gross income she reported totalled only $6,044. However, she
deducted net losses of $110,817 for that same period of time. The following table
shows gross income and net losses experienced by the business from 2001 to 2007
taxation years.
|
Year
|
Gross income
|
(Net
losses)
|
|
|
|
|
|
2001
|
$564
|
($20,958)
|
|
2002
|
$2,089
|
($19,450)
|
|
2003
|
$1,278
|
($13,238)
|
|
2004
|
$828
|
($20,402)
|
|
2005
|
$803
|
($20,531)
|
|
2006
|
$0
|
$0
|
|
2007
|
$482
|
($17,238)
|
It is therefore clear that the business was doomed to
failure right from the start.
[11]
In her tax returns for
the 2007 taxation year (the taxation year), the appellant reported commission
income of only $482.91. However, she also reported net losses of $17,238.35. In
her Statement of Income and Expenses, she claimed the following amounts as
business expenses:
|
Expenses for
expanding sales
|
|
|
|
|
|
|
Vehicle:
|
|
|
|
|
|
Insurance
|
$984.90
|
|
|
|
Canadian Tire
|
$906,84
|
|
|
|
Toyota
|
$550.65
|
|
|
|
Gas
|
$1,300.00
|
|
|
|
Total
|
|
$3,742.39
|
|
Shipping costs
|
|
|
$901.66
|
|
Travel for
expanding sales
|
|
|
|
|
|
|
|
Airfare
|
$1,364.65
|
|
|
|
Accommodations
and meals
|
$3,700.00
|
|
|
|
Transportation
|
$12.56
|
|
|
|
|
|
|
|
|
Total
|
|
$5,077.21
|
|
|
|
|
|
|
Professional
services fees
|
|
$8,000.00
|
|
Total
expenses
|
|
$17,721.26
|
[12]
The professional
services fees of $8,000 mentioned above were supposedly paid to her brother,
Li-Han Tcheng, who is also her agent in this matter. She provided as supporting
documentation a receipt (see Exhibit I-1, tab 9), allegedly signed by her
brother, which states only the following:
|
RECEIVED from LILY TCHENG the amount
of $8,000.00 for 2007
as professional
services fees...
|
|
Han
Li T.
|
|
3/12/2007
|
[13]
In reality, she paid
nothing to her brother, but rather assumed his condo fees. She could offer only
few details regarding the services that her brother had rendered to her. She
said that she had not thought of obtaining invoices or other documentary
evidence as supporting documentation. She was unable to tell us exactly what
her brother had done to earn these fees. She told us only that her brother
helps her make calculations and make deliveries. The appellant does not know
what her brother does for a living; she has no knowledge of his activities. She
did not seem to be aware that her brother is a social assistance recipient. According
to the testimony of Yuk-Wing Chan, auditor for the Canada Revenue Agency (CRA),
her brother Li-Han Tcheng did not report the $8,000 as income in his 2007 tax
return.
[14]
In addition, the
appellant claimed as expenses the amount of $3,500 as carrying charges and
interest, paid to Chiatsun Pan. The supporting document in support of that
deduction is found in Exhibit I-1, tab 10. That document states only the
following:
|
My name is ChiaTsun Pan, I received
from Lily Tcheng for the year of 2007 the Financial and interest fees of $
3500.00 (three thousand and Five hundred canadian dollars Cash)
CHIATSUN
PAN
|
This document is undated. According to Yuk-Wing Chan,
Mr. Pan did not report that income in his 2007 tax return.
[15]
The appellant stated
that Mr. Pan was her father's friend and that he tried to find clients for her.
He certainly had not succeeded given the low income that she reported. He
brought her no more than two or three clients at first. She told the Court that
she had also borrowed $10,000 from Mr. Pan, but there was no written loan
agreement, and she cannot prove the amount that she allegedly paid on the loan.
There is no cheque or other supporting documents as all exchanges were done in
cash. No reason was given for this loan.
[16]
Finally, the appellant
is claiming the amount of $16,076 as a caregiver tax credit for four
dependants. These people are Tsou-Kang Tcheng, the appellant's father, Wei-Ming
Tcheng, the appellant's mother, Li-Chou Tcheng, the appellant's brother, and
Li-Han Tcheng, the appellant's brother, who is also her agent. Based on her
testimony, the appellant told us that she lived with these people during the
period at issue at the Centre Yee Kang located at 1075 De Bullion Street,
apartment 112, Montréal. The Centre Yee Kang is a residence for independent
older adults.
2010 taxation year
[17]
In this case, there is
a rental losses claim in respect of a condo located at 407‑248 Corot
Street, Verdun. This condo has belonged to the Tcheng family for a long time.
[18]
The expenses claimed by
the appellant for the taxation year are as follows:
|
Municipal
taxes
|
$3,403.82
|
|
School taxes
|
$614.38
|
|
Condominium
fees
|
$6,770.82
|
|
Insurance
|
$348.80
|
|
Maintenance
and repairs
|
$1,167.50
|
|
Vehicle:
|
|
|
Licence
and registration
|
$347.00
|
|
Gas:
$10 x 52
|
$520.00
|
|
Total
|
$13,172.30
|
[19]
The appellant testified
that the condo was furnished, but no one has lived there since 2000. She told
the Court that she keeps wedding dresses in two of the rooms. This apartment
has never generated any income. The only efforts she has made to find tenants
consisted in putting up flyers in bus shelters and supermarkets. She has never
advertised in newspapers, and she has never hired a real estate agent as it costs
too much to do so.
[20]
The appellant also
claimed the amount of $2,500 as a deduction for financial services allegedly
rendered by her brother, Li-Han Tcheng. The only supporting document (see
Exhibit I-1, tab 19, page 23) in support of this deduction is a receipt that
states the following:
|
Received from Lily TCHENG the amount of $2,500 (two thousand five
hundred) for 2010 for all professional services such as accounting, legal
information, advice on investments, etc…
Han Li T
30 Dec. 2010
|
[21]
There is no other
supporting documentation in support of that deduction.
Statutory provisions
[22]
The relevant sections
of the Act read as follows:
18.
(1) In computing the income of a taxpayer from a business or property no
deduction shall be made in respect of
(a) an outlay or expense except to the extent that it
was made or incurred by the taxpayer for the purpose of gaining or producing
income from the business or property;
. . .
(h) personal or living expenses of the taxpayer, other
than travel expenses incurred by the taxpayer while away from home in the
course of carrying on the taxpayer's business;
20.
(1) Notwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h),
in computing a taxpayer's income for a taxation year from a business or property,
there may be deducted such of the following amounts as are wholly applicable to
that source or such part of the following amounts as may reasonably be
regarded as applicable thereto
. .
.
67.
In computing income, no deduction shall be made in respect of an outlay or
expense in respect of which any amount is otherwise deductible under this Act, except
to the extent that the outlay or expense was reasonable in the circumstances.
. .
.
118.
(1) For the purpose of computing the tax payable under this Part by an
individual for a taxation year, there may be deducted an amount determined by
the formula
A × B
where
A
is
the appropriate percentage for the year, and
B
is
the total of,
. . .
(c.1)
in the case of an individual who, at any time in the year alone or jointly
with one or more persons, maintains a self-contained domestic establishment
which is the ordinary place of residence of the individual and of a particular
person
. . .
(iii) who is
(A) the individual's parent or grandparent and has attained the
age of 65 years before that time, or
(B) dependent on the individual because of the particular person's
mental or physical infirmity
the amount determined by the formula
$18,906 + E – E.1
where
E
is
(I) $2,000 if the particular person is dependent on the
individual by reason of mental or physical infirmity, and
(II) in any other case, nil, and
E.1
is
the greater of $14,624 and the particular person's income for the year,
. . .
230. (1) Every person carrying on business and every
person who is required, by or pursuant to this Act, to pay or collect taxes or
other amounts shall keep records and books of account (including an annual
inventory kept in prescribed manner) at the person's place of business or
residence in Canada or at such other place as may be designated by the
Minister, in such form and containing such information as will enable the taxes
payable under this Act or the taxes or other amounts that should have been
deducted, withheld or collected to be determined.
[Emphasis added.]
Analysis
2007
taxation year
[23]
In this case, did the
appellant incur the expenses at issue for the purpose of earning income from a
business or property?
[24]
In Stewart v. Canada,
2002 SCC 46, [2002] 2 S.C.R. 645, the Supreme Court of Canada dealt with the issue
of when it can be said that a taxpayer has a source of income within the
meaning of the Act. The Court held as follows:
[50] It
is clear that in order to apply s. 9, the taxpayer must first determine whether
he or she has a source of either business or property income. As has been
pointed out, a commercial activity which falls short of being a business, may
nevertheless be a source of property income. As well, it is clear that some
taxpayer endeavours are neither businesses, nor sources of property income, but
are mere personal activities. As such, the following two-stage approach with
respect to the source question can be employed:
a.
Is the activity of the taxpayer undertaken in
pursuit of profit, or is it a personal endeavour?
b.
If it is not a personal endeavour, is the source
of the income a business or property?
The
first stage of the test assesses the general question of whether or not a
source of income exists; the second stage categorizes the source as either
business or property.
. .
.
[53] .
. . Where the nature of an activity is clearly commercial, there is no need to
analyze the taxpayer's business decisions. Such endeavours necessarily involve
the pursuit of profit. As such, a source of income by definition exists, and
there is no need to take the inquiry any further.
[54] It
should also be noted that the source of income assessment is not a purely
subjective inquiry. Although in order for an activity to be classified as
commercial in nature, the taxpayer must have the subjective intention to
profit, in addition, as stated in Moldowan, this determination should be
made by looking at a variety of objective factors. Thus, in expanded form, the
first stage of the above test can be restated as follows: "Does the
taxpayer intend to carry on an activity for profit and is there evidence to
support that intention?" This requires the taxpayer to establish that his
or her predominant intention is to make a profit from the activity and that the
activity has been carried out in accordance with objective standards of
businesslike behaviour.
[55] The
objective factors listed by Dickson J. in Moldowan, at p. 486, were:
(1) the profit and loss experience in past years; (2) the taxpayer's training;
(3) the taxpayer's intended course of action; and (4) the capability of the
venture to show a profit. As we conclude below, it is not necessary for the
purposes of this appeal to expand on this list of factors. As such, we decline
to do so; however, we would reiterate Dickson J.'s caution that this list is
not intended to be exhaustive, and that the factors will differ with the nature
and extent of the undertaking. We would also emphasize that although the
reasonable expectation of profit is a factor to be considered at this stage, it
is not the only factor, nor is it conclusive. The overall assessment to be made
is whether or not the taxpayer is carrying on the activity in a commercial
manner. However, this assessment should not be used to second-guess the
business judgment of the taxpayer. It is the commercial nature of the taxpayer's
activity which must be evaluated, not his or her business acumen.
. .
.
[60] In
summary, the issue of whether or not a taxpayer has a source of income is to be
determined by looking at the commerciality of the activity in question. Where
the activity contains no personal element and is clearly commercial, no further
inquiry is necessary. Where the activity could be classified as a personal
pursuit, then it must be determined whether or not the activity is being
carried on in a sufficiently commercial manner to constitute a source of
income. . . .
[25]
It must therefore be
determined whether the appellant really intended to carry on an activity for
profit and whether there is evidence to support that intention. This requires the
taxpayer to establish that her predominant intention was to make a profit from
the activity and that the activity has been carried on in accordance with
objective standards of businesslike behaviour.
[26]
The Court must consider
the following factors:
Profits and losses in past
years
[27]
The analysis of past
commission income shows that, from 1989 to 2007, the appellant experienced
significant net losses. To start, it was the La Noce Enrg. business, which
never made a profit. Starting in 2000, it was the sale of health and beauty
products. Neither the wedding gown sale business nor the health and beauty
products sale business ever made profits. The net losses were up to 37 times
higher than the gross income. These net losses are not tenable. The appellant
has never operated a profitable business, and the businesses that she has
operated have been operated at a loss every year for a long time. The
small amount of gross income she earns and her history of net losses, which greatly
exceed her gross income, clearly show that she has never intended to carry on a
commercial activity. For her, it is only a pastime, not an activity carried on
in pursuit of profit.
The course
of action
[28]
The appellant has no
action plan or business plan. Her business is advertised through word of mouth
or through flyers in bus shelters and supermarkets. She sells her products to
family members, friends and herself. According to her, she does not go door to door
and only rarely sells to strangers. How could she grow her business if she does
not sell to strangers?
[29]
She has never put
accounting procedures into practice, and, in fact, she does no accounting at
all. She does not keep sale invoices or purchase orders. She stated that she
had never thought of keeping invoices, purchase orders or other business
documents. The appellant keeps no books or accounting records as required by subsection 230(1)
of the Act. She keeps no annual inventory register, and she has no list of
clients.
[30]
While the appellant is
an intelligent and well-educated woman and has a bachelor's degree, she shows
almost a complete lack of insight, diligence, knowledge and planning regarding
the management of her business. This shows that she has no subjective intention
to carry on a commercial activity.
The nature
of the product and of the target market
[31]
The appellant sells
beauty and health products, but she could not give any precise details about
these products. She could not give us a list, an inventory or catalogue of the various
products that she sold. These products are not sold in a store; instead, they
are sold from home. The appellant sells the products to only a few clients. Therefore,
the target market is very limited and the target customers are not numerous.
[32]
I am of the view that
these factors, namely, the nature of the products, the way in which they are
marketed, the target market and target customers seem to contradict the fact
that the appellant carried on a commercial activity.
Type of
expenses
Motor vehicle expenses
[33]
The appellant is
claiming an expense of $3,742 as a motor vehicle expense. She is claiming that
her personal vehicle is used 100% for the delivery of merchandise to clients. The
appellant explained that there is no mileage log because the car is used 100%
for business. She told the Court that her personal travel is in Chinatown;
therefore, a car is not necessary. She uses public transit if she needs to go
outside Chinatown.
[34]
I do not believe the
appellant. It is absolutely implausible that a personal vehicle would be used
100% for the purpose of earning a gross income of $482, and that, when one
needs to travel for personal reasons, said vehicle remains parked in the garage
or on the street. This claim is not at all credible.
[35]
In addition, I am of
the view that the amount claimed as vehicle expenses is completely unreasonable
and contrary to the scheme of section 67 of the Act, which sets out that "no
deduction shall be made in respect of an outlay or expense in respect of which
any amount is otherwise deductible under this Act, except to the extent that
the outlay or expense was reasonable in the circumstances". [Emphasis
added.]
[36]
Very little merchandise
is sold and delivered to only a few clients. The motor vehicle expenses
($3,742) are more than seven times the amount of gross income ($482). The fact
that the appellant claimed expenses of over $3,700 as motor vehicle expenses
only to deliver so few products to only a few clients clearly shows that she
had no objective intention or reasonable expectation to carry on an activity
for profit. A serious business person would never have incurred such expenses.
[37]
In this case, I am
satisfied that the vehicle expenses are only personal expenses.
Expenses
for shipping costs
[38]
The shipping costs of
$900 are almost twice as high as the gross business income. The appellant
cannot tell us why she incurred these costs except to say that it was to send
flyers or to deliver products. A serious business person would never have spent
such an amount of money in order to earn only $482 in income. The shipping
costs claimed are completely unreasonable. The appellant has not demonstrated
that the expense was made in order to earn income.
Trip
to China
[39]
The appellant spent
$5,000 on a 20-day trip to China, according to her, in order to boost sales. She
has made a business trip to China each year since 2000, except in 2006. None of
these business trips brought her a single client or a single product sale. Therefore,
it is clear that the appellant had no hope that the trip to China in 2007 could
generate additional income.
[40]
The appellant's
situation is similar to that of the taxpayer in Henrie v. The Queen,
2009 TCC 356 (CanLII). Justice Favreau stated at paragraph 9:
[9] The
travel expenses in this case are not expenses incurred to produce income from a
business or property, but rather personal or living expenses. The appellant did
not show a direct link between the expense incurred and the activity of earning
an income. It is in fact impossible to calculate how much each dollar of the
travel expenses in a given taxation year generates in terms of additional
income for the appellant's business in the year in question or in future years.
In this case, there is no cause and effect between the expense and the income.
[41]
In this case, the
appellant did not show any link between the expense incurred and the activity
of earning an income. She did not provide a list of potential clients or
businesses that she had visited with the purpose of growing her business. He
clientele in Quebec was not numerous, and the appellant did not explain to us
why it was necessary to go to China to find new clients when she put very
little effort into finding clients closer to home.
[42]
The trip was to her
country of origin for twenty days at the end of the year during the Holidays. The
trip cost over $5,000, 10 times more than the gross business income. I cannot
believe that a serious business person would have incurred such expenses to
earn such a small gross income. Given that the appellant had made several
business trips to China in the past, always during the Holidays, I conclude
that the expenses for that trip were of a personal, not commercial nature.
[43]
In addition, I find
that these travel expenses are completely unreasonable.
Professional
services fees
[44]
The alleged
professional services were supposedly provided by Li-Han Tcheng, the appellant's
brother. However, he never received the $8,000 that the appellant has claimed;
she told us that she had paid condo fees and property tax for him in exchange
for his professional services. According to Yuk-Wing Chan, the CRA auditor,
Li-Han Tcheng never reported that amount as income in his tax return for 2007. The
receipt that was provided as supporting documentation consists of one page,
which reads as follows: [Translation]
"Received from Lily Tcheng the amount of $8,000 for 2007 as professional
services fees" (see Exhibit I-1, tab 10). The appellant cannot give the
Court any details on the nature, the quantity or the frequency of the
professional services that were rendered to her by her brother. There are no
details of professional services on the receipt, and no other supporting
documents were provided in support of this expense. The appellant cannot
explain to the Court what her brother has done to earn those very generous
fees, except to say that he had made calculations and sometimes delivered
products.
[45]
It is difficult to see
why a health and beauty products retailer would need such expensive
professional services. There is nothing in all of the evidence that explains
the need for such an expense. A serious business person would never have
incurred such an expense without a good reason, and the appellant did not give
the Court a good reason for the expense. I am of the view that the fees claimed
are completely unreasonable.
Carrying
charges and interest
[46]
The appellant told us
that she had paid Chiatsun Pan the amount of $3,500 as carrying charges and
interest. She told us that Mr. Pan was her father's friend, and that she paid
him that amount so that he would introduce her to potential clients. According
to the appellant, Mr. Pan introduced her to only two or three clients. Mr. Pan
also loaned her some money. The interest on that loan is included in the total
of $3,500. The appellant provided a supporting document (see Exhibit I-1, tab
11), which states only that Mr. Pan had received from the appellant the amount
of $3,500 as carrying charges and interest for 2007. The Court has no way of
determining which portion of that amount is attributable to carrying charges
and which is attributable to interest. However, there are no details of the
professional services provided on the receipt obtained from Mr. Pan. There is
no written loan contract, and the appellant cannot show the amount that she had
paid on the loan. There is no cheque or other supporting document as all of the
transactions were made in cash.
[47]
I am of the view that
the carrying charges and interest are completely unreasonable in the
circumstances. I cannot believe that a serious business person would have
incurred such expenses.
[48]
The appellant's situation
is not very different from that of the taxpayer in John R. Coome v. The
Queen, 2007 TCC 493, [2008] 1 C.T.C. 2544, where Justice Morgan observed
the following:
[17] The
Appellant did not advertise in 2001 and 2002. He did not keep a log to record
the business use or personal use of his automobile. He did not maintain a diary
to record the appointments, meetings, open houses or other events connected
with his efforts as a real estate agent. He worked only as a subagent to a
highly successful agent (Ariette Kendall) receiving such contacts as she would
pass down to him, but he was required to share his commissions 50-50 with her.
And lastly, in 2001, he earned no commissions at all but recorded expenses of
$16,566. In 2002, he earned only one commission of $329.94 on the purchase of a
home for himself and his wife. In summary, he had no clients in 2001 and 2002
after holding his real estate agent's licence for more than 10 years.
[18] .
. . On the profit and loss experience of past years, Schedule "A" to
these reasons shows that in each year from 1989 to 2002, the Appellant's real
estate expenses exceeded his real estate revenue. Even in his two best years, .
. .
[19] There
is no evidence that the Appellant's efforts as a real estate agent have the
capability to show a profit. . . .
[20] Although
the Appellant's activity as a licensed real estate agent is not a hobby or a
personal endeavour, I find that he did not carry on that activity in a
commercial manner or with businesslike behaviour. . . .
[49]
I reached the same
conclusion regarding the appellant. She did not exercise her activities in a
commercial manner or with businesslike behaviour. In addition, the expenses she
claimed are completely unreasonable in the circumstances.
Caregiver credits
[50]
The appellant claimed
the amount of $16,076 in caregiver credits under paragraph 118(1)(c.1)
of the Act. I accept that, during the 2007 taxation year, the appellant's
parents lived at the Centre Yee Kang, located at 212-1075 De Bullion Street in
Montréal. The Centre Yee Kang is a centre for independent older adults. The
Centre offers services to tenants such as a meal service. Based on the
testimony of Christine Tu, manager of the Centre Yee Kang, only tenants stated
on the lease have the right to live at the Centre. In accordance with the
Centre's rules, tenants' children are not permitted to live on site. However,
children have the right to visit the tenants, and they have the right to stay
there, but for no longer than one week. According to Ms. Tu, although the
appellant visited her parents in 2007 and although she stayed the night fairly
often, the appellant did not reside there. Only the people stated on the lease
as tenants have the right to reside there.
[51]
The appellant stated
that her usual place of residence was 212‑1075 De Bullion Street in
2007, where she lived with her parents and her brother Li‑Chou Tcheng
as dependants. It is clear that she cannot claim any credits for her brother Li‑Han
Tcheng because he was not 65 years old and had no mental or physical infirmity.
The issue to be decided is where the appellant's usual place of residence was
since, to be entitled to the caregiver tax credit, both the appellant and her
dependants must have the same place of residence, namely, 212‑1075
De Bullion Street, Montréal.
[52]
I am not persuaded that
the appellant resided at 212-1075, De Bullion Street during the taxation year
at issue. The address 407-248 Corot Street, Verdun, is found on all the
appellant's tax returns until 2007 as her home address. Starting in 2008, the
appellant's address is indicated as 1075 De Bullion Street on her tax returns.
Although the address on her tax returns is De Bullion Street, almost all of the
information slips sent to the appellant have a different address than 1075 De
Bullion Street. For example:
a.
T1 General 2007 -
407-248 Corot (Exhibit I-1, tab 1)
b.
T4A 2007 - pension
benefit from the City of Montréal addressed to 407-248 Corot Street (Exhibit
I-1, tab 1)
c.
T4RIF 2007 - income
from a registered fund sent to 248 Corot Street (Exhibit I-1, tab 1)
d.
T5 2007 - investment
income sent by Desjardins Securities to 248 Corot Street (Exhibit I-1, tab 1)
e.
T5 2007 - investment
income sent by CIBC to 248 Corot Street (Exhibit I-1, tab 1)
f.
Letter dated March 25,
2008, from the Capitale Assurances générales addressed to 248 Corot Street
(Exhibit I-1, tab 1)
g.
T4A (P) 2010 – Quebec
Pension Plan benefits - address obscured (Exhibit I-1, tab 19)
h.
T4RIF 2010 – Desjardins
Trust – Corot Street (Exhibit I-1, tab 19)
i.
T4A 2010 - City of
Montréal - Corot Street (Exhibit I-1, tab 19)
j.
T5 2010 – CIBC – Corot
Street (Exhibit I-1, tab 19)
k.
T5 2010 – Caisse
Desjardins – address obscured (Exhibit I-1, tab 19)
l.
La Capitale - insurance
premium for 2010 - Corot Street (Exhibit I-1, tab 19)
[53]
It is the same for the
information slips and other documents for the 2008 and 2009 taxation years. Sometimes,
the appellant uses the address 3-1010 De L'Hôtel de Ville Avenue, Montréal, as
her address (see Exhibit I-1, tab 26, page 7, T4A P for 2009).
[54]
I agree with Ms.
Poirier when she says that the appellant's true address is a bit of a mystery. The
appellant told us that she lives at 212-1075 De Bullion Street, but she has no
right to live there: it is a centre for older adults and she is not the tenant.
Ms. Tu, the manager of the Centre, told us that, although the appellant is
very often on the premises, she does not live at 1075 De Bullion Street. The
appellant receives correspondence and information slips at a different address than
De Bullion Street.
[55]
The appellant's
testimony was not credible. The appellant had to satisfy me on the balance of
probabilities that she lived at 1075 De Bullion Street during the taxation year
at issue. She did not satisfy me of this fact.
2010 taxation year
Rental losses
[56]
With regard to the
condo located at 407-248 Corot Street, it is clear that the appellant has taken
no steps since 2000 to rent out the condo, except for flyers posted in bus
shelters and supermarkets. She put no ads in newspapers and hired no real estate
agent to find tenants because a real estate agent's fees were too expensive. She
did nothing to make the apartment more attractive to tenants. She must
demonstrate that she attempted to rent out the condo for profit in order to be
able to claim a rental loss. The condo was supposedly vacant since 2000, even
though it was furnished and a person could live there.
[57]
The appellant made no
effort to rent out the condo and was content to claim the expenses she incurred
as rental losses in order to reduce her taxes. Evidently, she never intended to
make a profit from this property. A serious business person would have at least
hired a real estate agent to find a tenant. The fact that the appellant refused
to hire a real estate agent and that she was content to keep the condo vacant
in order to claim expenses as rental losses clearly shows that she had no
intention of making a profit from it.
[58]
With regard to the
expense of $2,500 as professional services rendered to the appellant by her
brother Li-Han Tcheng, suffice it to say that I do not accept that these
services were rendered or that the appellant paid for them. A serious business
person would have hired real professionals, not somebody who is unemployed. In
addition, if this expense was actually paid, it is completely unreasonable in
the circumstances.
Conclusion
[59]
I am satisfied that the
appellant's claim for a caregiver tax credit is unfounded. Shared residence is
an essential condition for being entitled to the caregiver credit. The
appellant did not persuade me that her usual place of residence was 212-1075 De Bullion
Street with the persons who were supposedly her dependants during the taxation
year at issue.
[60]
I am satisfied that all
the expenses claimed as net commission losses and rental losses regarding the
condo are absolutely and completely unreasonable. The appellant's activities
were not carried on in accordance with objective standards of businesslike
behaviour. These activities are certainly not commercial in nature. The
appellant was unable to show on the balance of probabilities that her
predominant intention was to make a profit from a business or property. The
expenses were incurred almost entirely for personal purposes. In addition, I
find that these expenses were claimed solely for the purpose of reducing the
appellant's taxes to zero and that they were not incurred with a view to make a
profit from a business or property.
[61]
For these reasons, the
appellant's two appeals from notices of assessment for the 2007 and 2010
taxation years are dismissed.
Signed at Montréal, Quebec, this 21st day of June 2013.
"Rommel G. Masse"
Translation certified true
on this 6th day of August 2013
Margarita Gorbounova, Translator
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