Date:
20080124
Docket: A-425-06
Citation: 2008 FCA 29
CORAM: LÉTOURNEAU
J.A.
SEXTON
J.A.
PELLETIER
J.A.
BETWEEN:
JAMES W. LANG
Appellant
and
HER MAJESTY THE QUUEN
Respondent
REASONS FOR JUDGMENT
SEXTON J.A.
[1]
This is an
appeal of the decision of Beaubier J. of the Tax Court of Canada (the Tax Court
judge) who determined that certain expenses of the appellant claimed for the
2002 and 2003 taxation years could not be deducted as business losses pursuant
to section 18(1)(a) of the Income Tax Act R.S.C. 1985, c. 1 (5th
Supp) (the Act). The expenses in question included, among other things, the
cost of purchasing certain war artifacts, Legion and Genealogical Society
membership dues, trips to attend gun shows, trips to visit veterans, and the
purchase of supplies including bookcases, display cases, a computer monitor, a
photo printer and scanner. The appellant states that these expenses are for the
business purpose of writing and publishing a reference book about medals and
awards of all the countries involved in the Korean War. The appellant, himself,
is a veteran of the Korean War.
[2]
The
Minister of National Revenue pleaded a number of assumptions. They included the
following:
·
the
appellant did not commence a business as an author or trader in collectibles;
·
the
appellant has not produced any literary works for the period from 1998 to 2003;
·
the
appellant does not have a marketing/promotional plan for any literary work, if
and when it is complete;
·
the
appellant’s primary purpose of acquiring war items (artifacts) was to enhance
his private collection and not to sell for profit;
·
expenditures
incurred in 2002 and 2003 for the purchase of pins in respect of the Canadian
Parachuting Association were not incurred for the purpose of earning income
from a business but were personal expenses of the appellant;
·
expenditures
for meals and entertainment in 2002 and 2003 were not incurred for the purpose
of earning income from a business but were personal expenses of the appellant;
·
expenditures
claimed as office expenses in 2002 and 2003 included bookcases, display cases,
a computer monitor, a photo printer and scanner that were personal expenditures
of the appellant and not incurred for the purpose of earning income from a
business;
·
trips to
attend guns shows in Texas, Kamloops, and Penticton in 2002 were not incurred by the
appellant for the purpose of earning income from a business;
·
international
trips in 2003 to Louisville-Nashville, and Omaha in the USA, Argentina, Uruguay, and Greece were not incurred by the appellant for
the purpose of earning income from a business;
·
trips to
Calgary, Edmonton and Burnaby in 2003 were not incurred by the
appellant for the purposes of earning income from a business;
·
the
appellant did not use any portion of his home in 2002 and 2003 to earn income
from a business.
·
the
appellant did not have a reasonable expectation of profit from his alleged
business activity.
A taxpayer’s assessment is deemed to be valid under section
152(8) of the Act and the onus is on the taxpayer to refute the Minister’s
assumptions.
[3]
The Tax
Court judge, as a finding of fact, found that these assumptions had not been
refuted. A finding of fact will only be reviewed by an appellate court where
there has been an overriding and palpable error: Housen v. Nikolaisen,
[2002] 2 S.C.R. 235 at paragraph 23. In this case, I am unable to find such an
error.
[4]
The Tax
Court judge further found that the appellant was not in any business in 2002 or
2003.
[5]
The
Supreme Court of Canada has established a two stage approach to be used to
determine whether a particular activity constitutes a source of income from
business or property from which expenses may be deducted.
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?
Stewart v. Canada [2002] 2 SCK 645 at para 50.
[6]
It is
clear from the facts before the Tax Court judge that the appellant had not
established that he had a source of income within the meaning of those words in
the Act.
[7]
The
appellant argued that the trial judge had made an error of natural justice by
failing to review a number of the documents presented at the hearing, namely a
letter and a number of reference books on the subject of medals. With respect
to the letter, the respondent correctly points out that because the letter was
read aloud to the Tax Court judge, the letter has formed part of the record as
part of the transcript of proceedings. With respect to the books, I fail to see
how marking them as exhibits would have led the Tax Court judge to come to a
different conclusion. Judging from the transcript, the books in question appear
to be a compilation of medals and awards from wars. The appellant apparently
wished to introduce these books as evidence to suggest that there is a business
in making books about medals. However, the trial judge did not conclude that
there does not exist a potential business in making books about medals; he
simply concluded that the appellant was not engaged in such a business. I can
find no error as argued by the appellant.
[8]
For these
reasons I would dismiss the appeal with costs limited to one counsel fee on the
appeal.
“J.
Edgar Sexton”
“I
agree
Gilles
Létourneau J.A.”
“I
agree
J.D.
Denis Pelletier J.A.”
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