Roland
St-Onge:—The
appeal
of
Charles
B
Davidge
came
before
me
on
July
16,
1980,
at
the
City
of
Yellowknife,
Northwest
Territories,
and
the
issue
is
whether
the
rent
paid
by
the
partnership
to
one
of
the
partners
should
be
included
in
the
appellant’s
income
in
his
1975
and
1976
taxation
years.
The
facts
of
this
appeal
are
well
spelled
out
in
the
reply
to
notice
of
appeal
as
stated
in
the
paragraphs
quoted
below:
Statement
of
Facts
2.
During
the
1975
and
1976
taxation
years
the
Appellant,
in
partnership
with
one
John
Walker,
operated
a
business
called
“The
Carpet
Shoppe”
in
Hay
River,
Northwest
Territories,
the
profits
of
which
were
allocated
57%
to
the
Appellant
and
43%
to
his
partner.
3.
For
the
1975
and
1976
taxation
years
the
partnership
subsidized
the
Appellant’s
housing
costs
by
paying
$1,047.90
and
$1,600
respectively
towards
the
rent
for
the
Appellant’s
apartment.
4.
By
Notices
of
Reassessment,
dated
July
28,
1978,
the
Respondent
reassessed
the
Appellant
by
adding
57%
of
the
rent
expense
claimed
by
the
partnership
to
the
Appellant’s
income
for
the
1975
and
1976
taxation
years.
9.
By
Notices
of
Reassessment
dated
April
5,
1979,
the
Respondent
reassessed
the
Appellant
by
adding
the
remaining
43%
of
the
rent
expense
claimed
by
the
partnership
to
the
Appellant’s
income
for
the
1975
and
1976
taxation
years.
6.
In
so
reassessing
the
Appellant
for
the
1975
and
1976
taxation
years,
the
Respondent
acted,
inter
alia,
on
the
following
assumptions:
(a)
In
1975
the
partnership
paid
the
total
rent
for
the
Appellant’s
apartment
and
in
1976
the
Appellant
contributed
$480
towards
the
apartment
rent.
(b)
The
partnership
acquired
business
premises
in
Hay
River,
Northwest
Territories
in
1975.
(c)
The
relationship
between
the
partnership
and
the
Appellant
was
not
that
of
an
employer
and
employee.
(d)
The
apartment
rent
was
not
an
outlay
or
expense
made
or
incurred
for
the
purpose
of
gaining
or
producing
income
from
business
but
was
a
personal
or
living
expense
of
the
Appellant.
As
may
be
seen,
the
respondent
added
the
amounts
of
$1,047.90
and
$1,600
as
income
because,
pursuant
to
paragraph
18(1
)(h)
of
the
Income
Tax
Act,
these
amounts
constituted
personal
or
living
expenses
of
the
appellant.
The
appellant
felt
that
his
position
paralleled
that
of
an
employee
of
the
Federal
and
Territorial
Governments
and
Crown
Corporations
in
Northern
Canada
whose
policy
was
to
subsidize
the
housing
costs.
Consequently,
he
contended
that
the
portion
of
the
rent
actually
paid
by
the
partnership
should
be
an
allowable
deduction
from
the
income
of
the
partnership.
The
Board
cannot
agree
with
this
proposition
because
the
expense
always
remains
a
personal
or
living
expense
and
is
not
deductible
by
virtue
of
paragraph
18(1
)(h)
of
the
Act.
The
Board
has
no
other
choice
but
to
conform
to
the
Act,
however
inequitable
it
may
appear
to
a
particular
taxpayer.
Consequently,
the
appeal
is
dismissed.
Appeal
dismissed.
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