Bert Winter v. Minister of National Revenue, [1988] 1 CTC 2191, 88 DTC 1143

Sherwood, D.J.T.C.: —In his income tax return for the 1984 taxation year, the appellant claimed an employment expense deduction of $7,616.73. In assessing the appellant's tax liability for 1984, the respondent disallowed that employment expense deduction and in its place allowed the standard deduction of $500 which the appellant had failed to claim. A notice of objection was filed by the taxpayer, confirmation was filed by the respondent, and this appeal followed.

The appellant was employed in 1983 in Calgary as a construction foreman or superintendent by George and Asmussen Limited, masonry contractors, who maintained a western office in Calgary. I will refer to the employer hereinafter as "George".

In 1984, George won the masonry contract for the Provincial Court House in Medicine Hat, about 150 kilometres from Calgary. The contract involved both new construction and restoration of the existing stone court-house. From August 1 to December 31, 1984, the appellant was George's site foreman at this job and worked about 50 hours weekly. George did not establish a site office at Medicine Hat. The appellant and three other George employees used a trailer which served as a storage place for tools and a lunch room and had a table and telephone. Any meetings on site were held in the general contractor's office.

The appellant reported regularly to George's Calgary office either in person or by telephone. He initially maintained in evidence that he had to travel to the Calgary office every weekend for progress meetings or to pick up tools or materials. He drove from Medicine Hat to Calgary every Friday night or Saturday and returned to Medicine Hat for the following work week. In cross-examination it became evident that some of his trips to Calgary were necessary and some were simply convenient. The appellant had secured lodging at Medicine Hat for the period of his employment there but his family stayed at home in Calgary and that seems to explain some of his weekend trips. The appellant was also required to do some troubleshooting at George job sites in Red Deer and Swarthmore which are both in Alberta but a considerable distance from both Medicine Hat and Calgary.

Exhibit R-1 is a letter from George to the Justice Department regarding the appellant's employment. It points out that 1984 was a bad year for construe- tion in Alberta. The industry was depressed, few were employed, there was no bricklayers union contract, and those few who were employed were in no position to make any demands. George confirmed that the appellant had no written employment contract and that he was frequently required to report at the Calgary office and periodically trouble-shoot at other locations.

In the Form 2200, supplied by George to the appellant and filed with his 1984 tax return, George has indicated:

(a) That this employee was required to pay any expenses incurred in the performance of his assigned duties.

(b) That this employee was ordinarily required to carry out duties of employment away from his employer's place of business or in different places.

(c) That this employee was reimbursed for expenses to the extent of $625, being $125 per month for room and board at Medicine Hat.

(d) That this reimbursement was not included as income.

The deductions claimed by the appellant as employment expenses in 1984 were:

The respondent's position, both in his reply to notice of appeal and in his submissions, was that:

(1) It was not a term of the appellant's contract with his employer that he pay for the expenses he sought to deduct.

(2) The expenses were not incurred while travelling in the course of his employment because:

(a) They were incurred while working at his employer's place of business in Medicine Hat, and;

(b) He was not travelling because he settled in Medicine Hat for approximately five months, and;

(c) The expenses in question were personal and living expenses.

To be entitled to deduct travelling expenses in addition to the standard $500 employment expense deduction, the appellant must establish that he qualifies under subparagraphs 8(1)(h)(i), (ii) and (iii) of the Income Tax Act.

Under subparagraph (i) he has to show that he "was ordinarily required to carry on the duties of his employment away from his employer's place of business or in different places’. Compliance with this requirement is confirmed by the Form 2200 supplied by George, by the letter from George (Exhibit R-1), and by the appellant's evidence. I consider it unreasonable to treat Medicine Hat as the employer's place of business in relation to the appellant during the period in question. The facts are that George was not the main contractor or controlling mind of the project, had only three workmen plus the appellant as foreman at the site, provided only a minimal trailer for tool storage and lunch plus one table and telephone, clearly supervised the appellant from Calgary and frequently required him to report there. All of these factors seem to me to distinguish this case from Madsen v. M.N.R., [1970] Tax A.B.C. 713; 70 D.T.C. 475 and Donald Campbell Davey v. M.N.R., 27 Tax A.B.C. 306; 61 D.T.C. 531, wherein employer's construction sites were considered to be the employer's place of business in relation to employees at that site. I consider that Calgary remained George’s place of business in relation to the Medicine Hat contract but this finding actually makes no difference. If I am wrong in that respect then Medicine Hat was George's place of business and by requiring the appellant to report frequently to Calgary and trouble-shoot in other locations they required him to work in different places and he still meets the requirement of subparagraph (i).

To meet the requirement of subparagraph (ii) the appellant must show that under his contract of employment he was required "to pay the travelling expenses incurred by him in the performance of the duties of his . . . employment". George and the appellant did not have a written contract of employment. Once again, George's Form 2200 for the appellant, George's letter (Exhibit R-1) and the appellant's evidence satisfy me that George and the appellant had an unwritten contract which meets the necessary requirement. George's unwritten contract with the appellant clearly required him to travel and, by agreeing only to give some assistance in relation to room and board, George required him to pay his own travel expenses. In reaching this conclusion, I am assisted by the logical and persuasive reasoning of Strayer, J. in Rozen v. The Queen, [1986] 1 C.T.C. 50; 85 D.T.C. 5611.

To meet the requirement of subparagraph (iii), the appellant must not have received an allowance for travelling expenses that was not included in income by virtue of subparagraph (v), (vi), or (vii) of subsection 6(1) of the Income Tax Act. In this case the appellant received nothing from George for travelling expenses. The only assistance he received was for room and board. The appellant therefore satisfies the requirements of all of the subparagraphs of section 8(1)(h).

The Court enquired of the appellant whether the $625 he received from George was included in his income. He replied in the affirmative but I am satisfied that he was honestly mistaken. His Form 2200 states that the amount was not included in income and his 1984 T-4 form supports that conclusion by showing no allowance or benefit and a gross salary less than the total salary shown in Form 2200 plus $625. I assume that the room and board allowance was not included in income by virtue of subsection 6(6) of the Income Tax Act, "an allowance (not in excess of a reasonable amount) . . . for. . . board and lodging at a special work site”.

Having established that the appellant was entitled to deduct travelling expenses from his 1984 income, the Court must now look at the expenses he seeks to deduct.

The appellant's claim for "travel" is not for amounts actually expended in travelling. Travelling expenses include such items as air, rail and bus fares and, in the case of a personal automobile, such expenses as gasoline, oil, repairs, insurance and similar costs (sometimes including capital cost allowance or interest on money borrowed to acquire a necessary vehicle). Any portion thereof not attributable to necessary business travel is not deductible. Precise records of actual expenditures and distances travelled for employment purposes must be kept by the taxpayer. Vouchers are retained by the prudent taxpayer so that they can be made available to tax officials on request. The appellant bases his travel expense claim entirely on his own unsupported ex post facto formula seeking to deduct 42 trips to Calgary of which an unknown proportion were not required by his employment and at a very generous rate for 1984 of $0.28 per kilometre. He frankly conceded in evidence that he had kept neither records nor vouchers. The respondent properly disallowed the travel deduction.

The appellant's claim for “living expenses", which obviously relates to food consumed during the week while at Medicine Hat and not travelling, fails to fit into any of the special provisions of the Income Tax Act permitting such a deduction. In addition, as with his travel expenses, the appellant kept no records of his expenditures for food and seeks to deduct a totally unsupported per diem amount. As held in Wahl v. M.N.R., [1969] Tax A.B.C. 1178; 69 D.T.C. 783 it is useless to claim expenses that cannot be legally proven.

In his notice of appeal the appellant claims to have fully complied with tax bulletin IT-272R. Tax bulletins are opinions intended to assist in interpreting tax laws. They are helpful but do not have the force of law. Bulletin IT-272R relates to automobile and other travelling expenses. In paragraph nine, the bulletin makes it clear that travel expenses claimed on a cents per kilometre basis are not acceptable. In paragraph 45, the bulletin deals with the actual cost of meals consumed while travelling. The appellant's claim is not for actual cost of meals but for a per diem deduction and during a period in which he was not travelling. The appellant's claim does not comply with the bulletin.

The remaining claim is the appellant’s deduction as an employment expense of an amount for rent and utilities from which he should have subtracted the $625 paid by George. Again these expenses were incurred, not while travelling, but while working at Medicine Hat and they do not fit into any of the special provisions of the Income Tax Act permitting such a deduction, for example, to railway employees.

This final issue can best be disposed of by quoting from the decision of the Tax Appeal Board (now the Tax Court of Canada) in Madsen v. M.N.R., [1970] Tax A.B.C. 713; 70 D.T.C. 475, which also dealt with a construction foreman assigned to one of his employer's construction sites (subsection 5(2) referred to therein is now subsection 6(6)):

It appears to follow that, while the Income Tax Act does provide relief for construction workers in subsection (2) of section 5 by permitting the exclusion from income of allowances received from their employer for away-from-home expenses, or the value thereof if provided by the employer free of charge, there is no provision whereby construction workers in the circumstances of the appellant are permitted to deduct moneys paid out of their own pockets for their personal or living expenses, even though such moneys are laid out in connection with employment accepted at some distance from their ordinary places of residence.

The respondent properly disallowed the appellant's claim for a rent and utility deduction.

For the above reasons this appeal is dismissed.

Appeal dismissed.