Date:
20130627
Docket:
A-354-12
Citation:
2013 FCA 172
CORAM: SHARLOW
J.A.
DAWSON J.A.
STRATAS
J.A.
BETWEEN:
GEORGE
J. BRAKE
Appellant
and
HER
MAJESTY THE QUEEN
Respondent
Heard
at St. John’s, Newfoundland and Labrador, on June 27, 2013.
Judgment
delivered from the Bench at St. John’s, Newfoundland and Labrador, on June 27, 2013.
REASONS FOR JUDGMENT OF THE COURT
BY: SHARLOW J.A.
Date:
20130627
Docket:
A-354-12
Citation:
2013 FCA 172
CORAM: SHARLOW
J.A.
DAWSON J.A.
STRATAS
J.A.
BETWEEN:
GEORGE
J. BRAKE
Appellant
and
HER
MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
OF THE COURT
(Delivered
from the Bench at St. John’s, Newfoundland and Labrador, on June 27, 2013)
SHARLOW J.A.
[1] Mr. George Brake is
appealing a judgment of Justice Valerie Miller of the Tax Court of Canada (2012
TCC 315). She dismissed Mr. Brake’s appeal of a reassessment of tax payable
under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) for 2008. The
reassessment disallowed Mr. Brake’s claim for a deduction for bad debts in the
amount of approximately $11,400.
[2] The deduction was
disallowed on the basis of the Minister’s determination that the conditions of
subparagraph 20(1)(p)(i) were not met. Under that provision, a taxpayer
may claim a deduction in a particular year for a debt that became uncollectible
in that year, but only if the debt was included in the taxpayer’s income in
that year or in a prior year.
[3] The debts in issue were
the result of loans Mr. Brake made to a corporation owned by himself and his spouse,
and loans he made to his spouse in connection with her own sole proprietorship,
to enable them to pay their respective business expenses. It is undisputed that
the debts became uncollectible in 2008.
[4] Mr. Brake submitted in
the Tax Court, and repeated in this Court, that the loans were included in his
income at some point, because he made the loans out of his own after-tax income
and he did not claim a deduction for the loans when he made them.
[5] Justice Miller did not
accept Mr. Brake’s argument because it is based on a misunderstanding of
subparagraph 20(1)(p)(i). We agree with Justice Miller, substantially
for the reasons she gave.
[6] For the purpose of
subparagraph 20(1)(p)(i), a debt owed to a taxpayer can be said to have
been included in the taxpayer’s income only when the debt represents unpaid revenue
that has been earned by the taxpayer in connection with a business or property,
if the revenue was included in income. The facts of this case do not meet that
condition.
[7] Subparagraph 20(1)(p)(ii)
cannot assist Mr. Brake either, because it applies only to a taxpayer that is
an insurer, a financial institution, or a taxpayer whose ordinary business
includes the leading of money. The record before this Court is not capable of
establishing that Mr. Brake falls into any of those categories.
[8] Mr. Brake also seeks to
rely on paragraph 8 of Intepretation Bulletin IT-442R. That does not assist Mr.
Brake, for two reasons. First, that paragraph addresses circumstances that do
not arise in this case. Second, and perhaps more importantly, that paragraph
does not and could not, as a matter of law, amend subparagraph 20(1)(p)(i).
[9] For these reasons, this
appeal will be dismissed with costs fixed in the amount of $1,200, inclusive of
all taxes and disbursements.
“K. Sharlow”
FEDERAL COURT OF
APPEAL
NAMES OF COUNSEL AND
SOLICITORS OF RECORD
DOCKET: A-354-12
STYLE OF CAUSE: GEORGE
J. BRAKE v. HER MAJESTY THE QUEEN
PLACE OF HEARING: St. John’s, Newfoundland and Labrador
DATE OF HEARING: June
27, 2013
REASONS FOR JUDGMENT
OF THE COURT BY: SHARLOW,
DAWSON, STRATAS JJ.A.
DELIVERED FROM THE
BENCH BY: SHARLOW
J.A.
APPEARANCES:
|
George
J. Brake
|
FOR
THE APPELLANT
|
|
Cecil
S. Woon
|
FOR
THE RESPONDENT
|
SOLICITORS
OF RECORD:
|
William
F. Pentney
Deputy
Attorney General of Canada
|
FOR THE RESPONDENT
|
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