Joel Gerry Connor v. Minister of National Revenue, [1992] 2 CTC 2761, 92 DTC 2384

Beaubier, T.C.C.J.:—This appeal was heard in Victoria, British Columbia, on September 30, 1992. It is an appeal under the old procedure of this Court.

There were two witnesses called by the appellant, Terrance Bruce Carr and himself. No witnesses were called by the Minister of National Revenue.

At issue are various deductions claimed by the appellant for his 1981 and 1982 taxation years. At the conclusion of trial, counsel for the Minister conceded the following claims by the appellant:

(a) A M.U.R.B. deduction pursuant to a certificate filed at trial for:

(b) The sum of $150 rental loss claim allowed specifically in (f) of the reply.

(c) $6,257 spent for office furniture in 1981 to constitute the basis for capital cost allowance claim commencing in that year.

Mr. Carr testified that he managed property in the Comox area of British Columbia in 1979 and 1980 and knew the appellant made various secured loans there at that time.

The appellant was at all material times a stockbroker in Victoria, British Columbia employed by Midland Doherty.

The appeal will be dealt with by the headings contained in the reply respecting disallowed deductions claimed by the appellant in 1981 and 1982 and thereafter claims made by the appellant through amended pleadings will be dealt with. The claims outlined in the reply will be dealt with in the order contained in the reply.

1. Commission entertainment expenses

This claim was supported by a bunch of receipts filed in evidence with little testimony to support them except to say that these expenditures occurred in the year in question, and that they were associated with his brokerage business. A number of the receipts were for single meals and all are open to serious question as to whether they were previously allowed by the Minister of National Revenue and returned to the taxpayer. The appellant was unable to give any detailed description respecting the deductibility of any other receipts submitted and any examination or cross-examination respecting particular receipts was, essentially, answered by supposition or example by the appellant. The appellant did not prove his claim. The assessment of the Minister of National Revenue respecting these items is confirmed.

2. Commission travel expenses

The evidence in support of this claim is contained in Exhibit A-7. This claim consists of various travel charges which the Minister disallowed to the extent of 25 per cent of the total. The appellant did not deal with the expenses in detail and prove that all of the expenses originally claimed were expended by him in relation to his commission income. He did not lead enough evidence related to any specific transaction or occurrence to cause the Court to set aside the assessment as made by the Minister of National Revenue. In these circumstances the assessment respecting these items is confirmed.

3. Commission expenses—Business use of home facilities

These sums are simply claimed by the appellant. There is no evidence as to the percentage of the household accounts that they constitute or why each amount is what it is or what each relates to by way of deductible office expenses in the home.

In these circumstances the assessments are confirmed.

4. Commission expenses—automobile capital cost allowance

The appellant claims two automobiles for business use. There is no reason advanced as to why he needs two automobiles for business. The Minister of National Revenue allowed one. The automobile disallowed is a Fiat X 19 which the appellant purchased in 1982 and which he drives in the summer, but not in the winter in Victoria.

This assessment of the Minister of National Revenue is confirmed.

5. Business expenses—accounting and legal

The 1981 claim was represented by an invoice for $189.75. With the greatest respect to this appellant, his evidence and demeanour are such that the Court cannot believe that this appellant would claim less than $189.75 with such an invoice and there is no explanation as to why he claimed less. The claim for $150 in 1981 is not proved.

The 1982 claim for $4,540 is supported by Exhibit A-14. The only part of that which verifies a billed and paid legal account in 1982 is one for $125 dated February 11, 1982 which was paid on March 30,1982. The sum of $125 is allowed and the rest of the assessment respecting the 1982 claim of $4,540 is confirmed.

This matter is referred back to the Minister of National Revenue for reconsideration and reassessment accordingly.

6. Business Expenses—Advertising

This was established as newspaper advertising relating to the appellants commission business and was supported by a paid account of $64 (Exhibit A-15). Of this claim, the sum of $64 is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment accordingly.

At the opening of trial the appellant was allowed to amend his appeal to claim a bad debt on account of the following loans for his 1981 taxation year:

1. Unsecured promissory notes (Exhibit A-2) to British American Mortgage Corporation Ltd. (hereinafter called "BA") by notes dated and amounts as follows:

The appellant established to the satisfaction of the Court that he was in the lending business in years prior to 1980 and that he has earned income from loans of the nature in question. He states that the debts in question went bad with the failure of BA in early 1981 and that he could not get any lawyer to take a suit on a contingency basis respecting these unsecured notes. In cross- examination he admitted that other creditors got judgments against BA in 1984.

The appellant did not claim the alleged bad debts when he filed his 1981 income tax return although he signed it and dated it April 30, 1982. This fact, plus the date when others obtained judgments against BA, causes the Court to find that the appellant failed to establish that these alleged debts were bad debts in 1981. These claims for deduction of bad debts in 1981 are not allowed.

A second debt which is alleged to have been bad in 1981 is on account of a promissory note dated September 6, 1979 to the appellant from K. & J. Hicklen. This loan was not written off by the appellant in his 1981 income tax either. The appellant filed a list of loans in Exhibit A-4 which describes one Hicklen loan. In his 1980 income tax return the appellant wrote off a Hicklen loan in the amount of $1,351; when cross-examined respecting this, the appellant maintained there were two Hicklen loans. The Court does not believe there were two loans. The Court believes that there was one Hicklen loan which was written off in 1980. In view of the facts cited, the Court finds that the appellant has failed to establish this as a bad debt in 1981. The claim is not allowed.

These matters are therefore referred back to the Minister of National Revenue for reconsideration and reassessment on the foregoing basis.

There is no order as to costs.

Appeal dismissed for the most part.