Rudolf Betzema v. Minister of National Revenue, [1992] 1 CTC 2729, 92 DTC 1333

Tes key, T.C.C.J.:—The appellant appeals from a reassessment of income tax, for the 1986 taxation year.

During the course of the trial, the appellant acknowledged that his appeal was concerning three issues, namely:

Firstly

The gross income assessed was either overstated by $4,588.30 or by $4,339.62

Secondly

Additional expenses to be deducted from his income of $7,236.66 should be allowed. The breakdown of these claimed additional expenses are:

Dues	$50.00
Legal fees	550.00
Car Insurance	405.00
Rental of Office in residence of Mr. Seddon	1,500.00
Office rental and renovation in Villa	1,520.00
Telephone	2,219.66
Miscellaneous	100.00
Travel and Entertainment	892.00
Total	$7,236.66
Thirdly
Additional expenses in relationship of an office in his home.

Facts

The appellant claimed that his total income for 1986 was commission income earned by selling insurance.

He acknowledged that he failed to file his 1986 income tax return and was assessed, pursuant to subsection 152(7) of the Income Tax Act, R.S.C. 1952,

c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

On March 23, 1989, the appellant filed a formal income tax return with a Notice of Objection. The statement of facts and reasons in the Objection simply says "See T1 General Taxation 1986 submitted herewith".

The appellant alleged that T4 #04-353-031 in the amount of $4,588.30 issued by Citadel Assurance ("Citadel") represents the same income as shown on T4 #24-500-202 for $4,339.62. He could not explain why the T4A and T4 showed different amounts nor could he say which was the correct amount. I am not prepared to find that the income shown on either the T4A or the T4 from Citadel is a duplication without receiving some evidence from Citadel explaining the inconsistency in the two forms and why an extra form was issued. When the appellant filed his 1986 T1 tax return, both amounts appeared in his gross income. His appeal on this issue is dismissed.

Concerning the expenses that he is claiming against his insurance commission income, the Court was left by the appellant in a very poor position to properly adjudicate these expenses. The appellant produced cancelled cheques, but no invoices for any of the items. I am prepared to accept the appellants sworn testimony in regards to some of these expenses. I accept that his dues expenses should be increased by $50. His legal bills which were not produced were not proven to my satisfaction to have been money spent to earn income in 1986 and the claim is disallowed. I accept his claim for the rent paid to Mr. and Mrs. Seddon, as claimed at $1,500. I also accept that he rented an office for November and December in 1986 from Villa Investments at $395 a month for a total of $790. I am not satisfied at the alleged renovations of $680 or the claim of $50 for cleaning. His telephone claim of $2,219.66 is accepted as reasonable in the circumstances.

Miscellaneous expenses of $100 is a very small claim and is reasonable. Concerning Travel and Entertainment, the evidence is very weak. I am satisfied that a self-employed person such as the appellant does entertain in order to earn commissions. However, the evidence falls far short of being acceptable. Therefore, all I can do is arbitrarily fix a low figure. I fix that sum at $200. This leaves his automobile insurance premium of $405.60, which I accept as the amount he paid for one year. I also accept that the family had two cars. There is no evidence that the one car was used exclusively for business. Going to and from the office is not a business expense. The appellant says that he went to people's homes to sell life insurance and people came to his to buy general insurance. Lacking better evidence, I can only set the business portion of the automobile expenses at 20% or $81.12.

Therefore, the appellant shall be allowed additional expenses of $4,940.78 in summary as follows:

Under the third and last claim, the appellant believed that he should be allowed 67.5% of his house expenses as rent for his in-home office. The respondent reassessed at 15%, in light of the evidence the respondent was overly generous. I will not change the reassessed amount.

The appeal is therefore allowed, and the assessment referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the appellant is permitted to deduct additional expenses in the amount of $4,940.78 in computing his income for 1986; in all other respects, the appeal is dismissed. Since the appellant did not file his income tax return on time and was obviously not co-operative, there will be no order as to costs.

Appeal allowed in part.