Brulé,
J.T.C.C.:—These
appeals,
heard
on
common
evidence
under
the
informal
procedure
provisions
of
the
Tax
Court
of
Canada
Act,
R.S.C.
1985
c.
T-2,
involve
the
Minister
of
National
Revenue
("Minister")
reassessing
the
appellants
with
a
rental
benefit
of
$5,100
each
for
the
1987
and
1988
taxation
years
and
also
disallowed
certain
business
expenses.
At
the
outset
of
the
trial
counsel
for
the
appellants
advised
the
Court
that
the
appeal
concerning
the
business
expenses
was
being
withdrawn.
Facts
The
appellants
were
each
50
per
cent
owners
of
Desantis
Enterprises
Ltd.
("corporation").
In
February
of
1983
the
corporation
acquired
property
at
107
Woodfern
Place,
Calgary,
the
home
of
the
appellants
which
was
and
continued
to
be
their
personal
residence
during
the
taxation
years
under
appeal.
They
did
not
pay
any
rent
to
the
corporation
for
use
of
the
property,
nor
did
they
report
any
rental
benefit
on
their
tax
returns
for
use
of
the
property.
There
was
no
dispute
that
the
fair
market
rental
value
of
the
property
was
$10,200
per
annum.
Issue
The
sole
issue
to
be
determined
is
whether
or
not
a
rental
benefit
was
conferred
upon
the
appellants
in
1986
and
1987.
Appellants’
position
There
were
two
arguments
presented
to
the
Court
why
the
appeal
should
be
allowed:
1.
The
property
was
used,
besides
as
a
residence
for
the
appellants,
for
business
purposes
including
a
showroom,
storage
of
equipment
and
a
corporate
office.
2.
There
were
large
shareholder
loans
which
the
corporation
owed
the
appellants
and
any
rental
benefit
was
offset
by
these
loans.
The
appellant,
Mr.
Desantis,
gave
evidence
as
to
the
use
of
the
premises
while
a
Mr.
McCormick,
a
public
accountant,
who
prepared
the
corporation
tax
returns
for
some
ten
years
gave
evidence
as
to
the
loans.
His
statements
were
prepared
on
a
review
basis
rather
than
on
audit
basis.
In
support
of
their
position
counsel
for
the
appellants
presented
to
the
Court
certain
authorities.
The
case
of
Youngman
v.
The
Queen,
[1990]
2
C.T.C.
10,
90
D.T.C.
6322
(F.C.A.),
indicated
that
any
rental
benefit
should
have
been
reduced
by
a
amount
equal
to
the
interest
that
should
normally
have
been
paid
on
the
balance
of
the
loan.
This
was
similar
to
the
present
case
in
the
opinion
of
the
appellants’
counsel.
Dudelzak
v.
M.N.R.,
[1987]
2
C.T.C.
2195,
87
D.T.C.
525
(T.C.C.),
illustrates
a
situation
where
a
home
owed
by
a
corporation
and
used
by
a
shareholder
as
a
residence
was
not
liable
for
rent
as
the
home
was
used
extensively
for
business
purposes.
In
Tremblay
v.
M.N.R.,
[1991]
2
C.T.C.
2147,
91
D.T.C.
1012
(T.C.C.),
the
Court
held
that
a
rental
benefit
should
be
assessed
only
in
relation
to
the
amount
of
the
property
used
by
the
appellant
in
relation
to
its
total
area.
Finally
in
Docherty
v.
M.N.R.,
[1991]
1
C.T.C.
2409,
91
D.T.C.
537
(T.C.C.),
the
Court
held
that
there
was
no
requirement
for
a
written
contract
to
effect
a
set-off
of
benefits
between
parties.
Credible
evidence
was
required
and
counsel
said
that
in
the
present
case
this
had
been
provided.
Respondent's
position
Counsel
commenced
his
argument
by
pointing
out
the
provisions
of
section
15
of
the
Income
Tax
Act
wherein
if
any
benefit
or
advantage
has
been
conferred
on
a
shareholder
by
a
Corporation
the
amount
is
to
be
included
in
income
of
the
shareholder.
This,
of
course,
only
relates
to
the
salient
parts
of
the
section
as
found
in
the
present
case.
A
history
of
the
property
and
its
transactions
was
presented
to
the
Court
showing
the
appellants’
interest
therein.
The
construction
costs
of
the
house
were
paid
for
by
the
corporation
according
to
Mr.
Desantis.
There
was
no
evidence
given
as
to
how
the
loans
arose
and
the
appellants
have
not
shown
the
reassessments
to
be
wrong.
Appellants’
counsel
had
not
provided
any
records
to
the
Court
to
verify
what
Mr.
Desantis
and
Mr.
McCormick
alleged
in
evidence
and
without
such
evidence
the
Court
cannot
find
the
reassessments
to
be
wrong.
Certain
authorities
were
also
presented
to
the
Court
but!
do
not
find
them
to
be
of
much
help.
Analysis
It
would
seem
that
Mr.
Desantis
was
somewhat
confused
in
his
testimony
and
Mr.
McCormick
did
not
present
to
the
Court
any
factual
information
about
the
loans,
who
was
owed
what
amount,
what
was
the
interest
rate
and
certainly
he
could
not
point
to
any
entries
showing
an
offset
to
rent.
Such
information
was
needed
to
help
the
appellants’
cause.
Subsection
230(1)
of
the
Act
provides:
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
his
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.
In
addition
Regulation
5800
to
the
Act
provides
guidelines
as
to
what
records
are
necessary.
Without
these
records
and
testimony
relating
thereto
there
is
no
way
the
Court
can
make
a
determination
as
to
whether
or
not
the
rental
involved
and
assessed
in
these
appeals
is
correct.
The
appellants
did
not
prove
the
Minister’s
assumptions
to
be
wrong
and
therefore
the
Court
dismisses
the
appeals.
Appeals
dismissed.
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