Christie,
A.CJ.T.C.:—The
years
under
review
are
1982,
1983,
1984
and
1985.
In
reassessing
the
appellants
liability
to
income
tax
for
those
years
the
respondent
assigned
specified
values
to
benefits
received
by
the
appellant
in
each
year
as
a
shareholder
of
Diroheath
Investments
Ltd.
("Diroheath").
The
benefits
pertain
to
the
use
by
the
appellant
of
a
condominium
and
two
yachts.
It
is
the
value
of
those
benefits
that
is
in
dispute.
What
is
in
paragraph
15(1)(c)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
that
applies
to
this
appeal
provides
that
where,
in
a
taxation
year,
a
benefit
has
been
conferred
on
a
shareholder
by
a
corporation,
the
value
thereof
shall
be
included
in
computing
the
income
of
the
shareholder
for
the
year.
This
table
summarizes
the
value
of
the
benefits
according
to
the
litigants
and
the
amounts
in
dispute.
Condominium
|
Appellant's
Value
Respondent's
Value
Amount
in
Dispute
|
|
1983
|
1,336
|
22,490
|
21,154
|
|
1984
|
1,686
|
25,039
|
23,353
|
|
1985
|
1,233
|
26,994
|
25,761
|
|
Yachts
|
|
|
Appellant's
Value
Respondent's
Value
Amount
in
Dispute
|
|
1982
|
$2,581
|
$11,981
|
$9,400
|
|
1983
|
4,218
|
8,700
|
4,482
|
|
1984
|
8,303
|
14,218
|
5,915
|
|
1985
|
7
,665
|
14,315
|
6,650
|
The
appellant
is
president
and
owns
50
per
cent
of
the
voting
shares
of
Diroheatn.
The
other
50
per
cent
are
held
in
trust
for
the
benefit
of
the
appellant’s
wife
and
three
children.
Diroheath
owns
50
per
cent
of
the
voting
snares
of
SeeSee
Holdings
Ltd.
("SeeSee")
and
the
other
50
per
cent
are
owned
by
another
holding
company.
SeeSee
in
turn
owns
all
of
the
shares
of
Seeburn
Metal
Products
Ltd.
("Seeburn")
which
manufactures
jacks
for
automobiles.
The
profits
of
Seeburn
flow
to
the
two
holding
companies
and
from
SeeSee
to
Diroheath.
This
is
the
source
of
nearly
all
of
funds
received
by
Diroheath.
Included
in
the
other
assets
of
Diroheath
have
been
three
condominiums
in
Florida
and
two
yachts.
Three
questions
require
answers
in
respect
of
the
yachts.
They
are:
(i)
Were
they
employed
primarily
for
business
or
personal
use?
(ii)
What
amount
of
time
is
to
be
allocated
for
personal
use?
(iii)
Were
they
purchased
for
a
business
purpose?
The
first
yacht
was
bought
in
1981
for
$80,000
and
the
second
for
$140,000
in
1984
as
a
replacement.
While
owned
by
Diroheath
they
were
berthed
at
a
marina
located
between
Lakes
Couchiching
and
Simcoe.
The
appellant's
home
is
in
Orillia
and
fronts
on
Lake
Couchiching.
Moored
there
were
two
other
power
boats
and
a
sailboat
owned
by
him.
Seeburn
operates
two
plants:
one
in
Beaverton
overlooking
Lake
Simcoe,
and
the
other
in
Tottenham,
which
is
inland
and
about
100
kilometres
by
road
to
the
southwest
of
Beaverton.
The
original
intention
in
purchasing
the
first
yacht
was
primarily
for
the
personal
use
of
the
appellant
and
some
business
use,
but
the
reverse
occurred
in
1981
soon
after
the
acquisition.
The
business
use
consisted
of
taking
parties
on
cruises
on
Lake
Simcoe,
Lake
Couchiching,
Georgian
Bay
and
the
Trent
canal
system
to
promote
the
commercial
interests
of
Seeburn.
These
groups
consisted
of
individuals
associated
with
customers,
suppliers,
banks,
auditors
and
legal
advisers
who
did
business
with
Seeburn.
Also
included
in
the
cruises
were
key
employees
of
Seeburn.
During
the
years
under
appeal
the
appellant
did
not
keep
a
log
for
the
yachts.
He
began
to
maintain
a
log
in
1989
on
the
advice
of
an
official
at
Revenue
Canada
given
at
a
meeting
about
the
reassessments
under
appeal.
The
time
of
this
advice
is
not
precise,
but
the
reassessments
were
made
on
June
10,
1987
and
objected
to
by
the
appellant
on
September
1,
1987.
Confirmation
of
the
reassessments
is
dated
July
4,
1989.
Copies
of
pages
from
the
log
for
the
period
May
21,
1989,
to
September
16,
1989,
are
in
evidence.
Among
other
things
they
indicate
the
date
of
use,
point
of
origin,
destination
and
length
in
time
of
each
journey.
They
also
specify
whether
the
use
was
for
"Pleasure"
or
"Business".
This
would
be
expanded
upon.
For
example,
the
outing
on
May
21,
1989,
is
designated
“Pleasure”
and
states;
"Orillia
Fire
Works
Display
Family
&
Friends".
The
outing
on
June
7,
1989,
is
designated
"Business"
and
states;
"Stelco
(followed
by
a
number
of
names)
seafood
platter
from
John
Dory's
&
drinks".
Copies
of
similar
pages
for
1990
are
in
evidence.
They
relate
to
the
period
May
20,
1990,
to
September
16,
1990.
These
exhibits
show
the
time
spent
on
business
in
1989
as
56.6
hours
during
12
days
and
the
time
devoted
to
pleasure
in
that
year
as
32.55
hours
during
11
days.
The
same
figures
in
1990
are:
47.2
hours—10
days
and
29.25
hours—9
days.
In
percentages
the
hours
of
use
in
1989
was
business
63.5
and
pleasure
36.5.
The
same
percentages
for
1990
are
62
and
38.
The
appellant
described
these
figures
as
“fairly
representative"
or
"fairly
typical"
of
the
use
of
the
yachts
during
the
period
1982-1985.
In
fact
in
reporting
the
benefit
the
appellant
went
well
beyond
these
figures
and
fixed
25
days
in
each
of
the
years
under
review
as
personal
use
and
at
the
hearing
he
continued
with
that
number
even
though
it
was
said
by
counsel
for
the
appellant
to
be
excessive.
My
conclusion
on
the
evidence
is
that
during
1982,
1983,
1984
and
1985
the
primary
use
of
the
yachts
was
for
business
purposes
and
that
the
personal
use
oy
the
appellant
is
to
be
taken
as
25
days.
As
I
understand
it,
the
parties
agree
that
in
such
circumstances
the
amount
by
which
25
is
to
be
multiplied
to
arrive
at
the
value
of
these
benefits
is
the
figures
in
the
reply
to
the
notice
of
appeal
referred
to
as
“Per
Day
Rental"
minus
the
amounts
shown
as
"Expenses
paid
by
Shareholder".
They
are:
1982—$235
and
$3,294;
1983-$249
and
$2,007;
1984—
$455
and
$3,072
and
1985—$475
and
$4,210.
The
result
of
these
calculations
is
that
the
value
of
the
benefit
is
1982-$2,581,1983-$4,218,1984-$8,303,1985-
$7,665
which
are
the
values
reported
by
the
appellant.
With
respect
to
the
respondent's
submission
that
because
of
the
removed
relationship
of
Diroheath
to
the
operating
company
Seeburn,
the
former
cannot
be
regarded
as
having
acquired
the
yachts
for
a
business
purpose,
I
note
that
this
same
kind
of
argument
was
rejected
in
The
Queen
v.
Houle,
[1983]
C.T.C.
406;
83
D.T.C.
5430
(F.C.T.D.).
In
this
case
Joyce
Management
Ltd.
(“Joyce”)
purchased
a
37-foot
Canoe
Cove
vessel
called
the
"Sans
Souci”,
The
defendant
Houle
owned
all
of
the
shares
of
Joyce
and
it,
in
turn,
owned
all
of
the
shares
of
Houle
Electric
Ltd.
which
was
an
operating
company
engaged
in
electrical
contracting
in
a
large
way.
Collier,
J.
said
at
page
408
(D.T.C.
5431):
In
the
years
under
review,
the
vessel
was
not
technically
used
by
Joyce
for
business
promotion
purposes.
But
it
was
used
on
behalf
of
Houle
Electric,
Joyce's
source
of
income,
to
entertain,
and
to
promote
the
obtaining
of
private,
industrial
and
commercial
electrical
contracts
by
Houle
Electric.
In
rejecting
the
submission
”.
.
.
that
the
acquisition
or
ownership
of
the
yacht
by
Joyce
Management
Ltd.
had
no
business
purpose"
his
Lordship
said
at
page
410
(D.T.C.
5433):
The
evidence
of
the
defendant
satisfies
me
this
vessel
was
acquired
by
Joyce,
in
1970,
for
a
business
purpose.
It
was
for
use
to
promote
business
contacts
and
to
assist
in
obtaining
contracts
for
Joyce's
wholly
owned
subsidiary,
Houle
Electric.
Counsel
for
the
respondent
seeks
to
distinguish
Houle,
supra,
from
the
case
at
hand
on
the
basis
that
Seeburn
is
not
a
wholly-owned
subsidiary
of
Diroheath.
I
do
not
believe
that
because
the
holding
company
SeeSee
is
interspersed
between
Seeburn
and
Diroheath
this
makes
the
conclusion
in
Houle
inapplicable
to
the
case
at
hand.
Turning
now
to
the
condominium.
The
essential
disagreement
regarding
it
pertains
to
the
period
of
time
during
each
of
the
years
under
review
that
the
condominium
constituted
a
benefit
to
the
appellant.
The
appellant
says
that
the
actual
use
by
him
and
his
family
did
not
exceed
eight
weeks
per
year
spread
over
the
period
commencing
typically
during
the
long
weekend
of
Canadian
Thanksgiving
in
October
to
May
and
that
eight
weeks
should
be
regarded
as
the
benefit
period.
The
respondent
treats
all
of
1983,
1984
and
1985
as
the
benefit
period.
The
appellant
made
personal
use
of
the
condominium
after
it
was
purchased
in
June
of
1982,
but
the
value
of
that
benefit
is
not
in
issue.
The
rental
value
of
the
condominium
in
the
other
years
under
review
consists
of
peak
rates
and
other
rates.
These
rates
were
supplied
by
the
appellant
to
and
accepted
by
Revenue
Canada.
The
peak
monthly
rates
and
other
rates
in
US
currency
are:
1983—$2,075
and
$1,500;
1984—$2,200
and
$1,575;
1985—$2,300
and
$1,653.
Annual
expenses
about
which
there
is
no
quarrel
are,
again
in
US
currency:
1983—$3,057;
1984—$3,083;
1985—$3,685.
There
is
a
dispute
about
how
much
should
be
allocated
to
the
peak
rates
and
the
other
rates.
The
appellant
says
the
peak
rates
should
not
apply
to
more
than
two
or
three
months
in
a
year.
The
respondent
contends
that
in
each
year
six
months
is
applicable
to
the
peak
rates
and
the
remainder
to
the
other
rates.
The
appellant
calculates
the
condominium
benefit
as
two
times
the
peak
rate
minus
expenses
or:
1983,
2
x
$2,075
$4,150
—
$3,057
$1,093
x
conversion
factor
$1.2228
—
$1,336
Cdn;
1984,
2
x
$2,200
=
$4,400
—
$3
083
—
$1,317
x
$1.2797
$1,686
Cdn;
1985,
2
x
$2,300
=
$4,600
-
$3685
=
$915
x
$1.3475
=
$1,233
Cdn.
The
respondent
uses
the
same
approach
only
he
assigns
the
peak
rates
to
six
months
and
the
other
rates
to
six
months
in
each
year
and
thereby
calculates
the
benefit
in
each
year
in
Canadian
currency
to
be
1983—
$22,490;
1984—$25,039;
1985-$26,994.
The
condominium
was
acquired
by
Diroheath
on
June
9,
1982.
It
consists
of
three
bedrooms,
being
unit
24
at
4695
Chandlers
Ford,
Sarasota,
Florida
("the
Chandlers
condominium").
It
is
one
of
a
cluster
of
48
units
called
villas,
about
one-half
of
which
have
two
bedrooms
and
the
remainder
three.
The
villas
are
attached
in
groups
of
two
or
three.
The
layout
of
the
two-bedroom
villas
is
identical
as
is
that
of
those
with
three
bedrooms.
There
are
a
number
of
these
48
unit
groups
in
a
complex
called
Meadows
which
consists
of
1,400
to
1,600
acres.
In
his
notice
of
appeal
the
appellant
states:
All
costs
of
maintaining,
insuring
and
operating
the
property
have
been
paid
by
or
charged
to
the
personal
account
of
the
Taxpayer
from
the
time
of
purchase
to
date.
Diroheath
has
not
claimed
capital
cost
allowances
on
the
property
nor
taken
any
deduction
for
mortgage
interest
and
mortgage
insurance.
The
property
was
not
rented
to
third
parties.
These
facts
are
admitted
in
the
reply
to
the
notice
of
appeal.
The
appellant
said
that
the
Chandlers
condominium
was
purchased
primarily
as
an
investment
in
respect
of
which
capital
appreciation
was
expected.
It
was
not
acquired
for
the
purpose
of
deriving
rental
income.
It
has
not
been
rented
or
offered
for
rent.
It
is
still
an
asset
of
Diroheath
and
used
by
the
appellant
and
his
family.
At
one
time
Diroheath
also
had
a
50
per
cent
interest
in
two
other
two-
bedroom
units
in
the
Meadows
development
called
Chartwell
Green
and
Villa
Majorca.
One
was
furnished
and
rented
on
a
seasonal
basis.
The
other
was
unfurnished
and
was
rented
on
an
annual
basis.
Chartwell
Green
was
sold
in
1989
and
Villa
Majorca
in
1990.
While
I
am
prepared
to
accept
that
the
appellant
and
his
family
only
used
the
Chandlers
condominium
in
the
order
of
two
months
in
each
year,
it
strikes
me
that
simply
multiplying
this
number
by
the
agreed
market
value
of
monthly
rent
for
the
premises
and
deducting
expenses
does
not
produce
the
annual
value
of
the
benefit
to
the
appellant.
The
conclusion
to
be
drawn
from
the
evidence
is
that
Diroheath
acquired
the
Chandlers
condominium
and
made
it
exclusively
available
to
the
appellant
for
his
personal
use
year
round.
The
fact
that
he
did
not
actually
use
the
asset
as
a
residence
during
the
entire
year
does
not
suggest
to
me
that
the
respondent
erred
in
calculating
the
benefit
conferred
on
the
basis
of
the
use
and
availability
for
use
by
the
appellant
of
the
Chandlers
condominium
throughout
the
years
1983,
1984
and
1985.
I
believe
this
is
entirely
in
harmony
with
what
was
said
by
Rip,
T.C.J.
in
Soper
v.
M.N.R.,
[1987]
2
C.T.C.
2199;
87
D.T.C.
522.
On
the
other
hand
I
think
there
was
error
in
relating
six
months
in
each
year
to
the
peak
rate.
Three
to
four
months
is
suggested
by
evidence.
I
will
take
35
months
as
the
period
for
the
purposes
of
this
appeal.
On
this
basis
the
value
of
the
benefits
conferred
on
the
appellant
regarding
the
Chandlers
condominium
in
Canadian
currency
are;
1983—$20,733;
1984—$23,040;
1985—$24,815.
The
final
matter
is
the
appellant's
argument
that
whatever
the
benefits
are,
a
percentage
should
be
attributed
to
the
appellant's
wife
and
three
children
because
of
their
relationship
to
Diroheath.
This
appears
to
have
been
raised
for
the
first
time
at
the
hearing.
At
the
time
of
the
hearing
the
children
were
aged
20,
15
and
11.
The
short
answer
is
that
whatever
benefits
the
wife
and
children
derived
there
is
nothing
before
me
to
indicate
that
they
were
conferred
on
them
by
Diroheath
and
received
by
them
qua
shareholders.
They
are
the
beneficiaries
of
a
trust
and
the
trust
property,
i.e.,
the
shares,
are
held
by
the
trustee.
In
summary
the
appeal
is
allowed
and
the
matters
referred
back
to
the
respondent
for
reconsideration
and
reassessment
on
the
basis
that
the
value
of
the
benefits
conferred
on
the
appellant
by
Diroheath
in
respect
of:
(a)
the
yachts
are:
1982—$2,581;
1983—$4,218;
1984—$8,303;
1985—$7,665;
and
(b)
the
Chandlers
condominium
are;
1983—$20,733;
1984—$23,040;
1985—
$24,815.
As
stated
at
the
commencement
of
these
reasons,
it
is
the
value
of
the
benefits
conferred
by
Diroheath
on
the
appellant
that
is
in
dispute
in
this
appeal
and
the
total
amount
involved
has
been
reduced
by
about
30
per
cent.
There
being
no
other
fact
specially
pertinent
to
costs
the
appellant
has
not
“substantially
succeeded
in
the
appeal"
within
the
meaning
of
subsection
5(1)
of
the
Tax
Court
of
Canada
Rules
of
Practice
and
Procedure
for
the
Award
of
Costs
(Income
Tax
Act).
This
precludes
awarding
costs.
Appeal
allowed
in
part.
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