Sobier
J.T.C.C.:
—
Many
are
the
plans
that
people
start
out
with
which
go
astray.
I
think
what
we
have
here,
in
dealing
with
the
interest
and
other
expenses,
is
such
an
occasion.
I
will
deal
first
with
the
1991
and
1992
taxation
years
that
deal
with
the
rental
losses.
As
joint
owners.
of
a
home
at
5
Broadleaf
Road
in
Don
Mills,
the
Appellants
chose
to
rent
a
room
to
a
friend
and
they
chose
to
rent
to
their
son.
In
order
to
have
a
business,
one
must
have
a
source
of
income.
There
must
be
something
more
than
the
casual
rent
paid
by
a
roomer
in
order
to
have
a
business.
It
was
recently
pointed
out
in
Tonn
v.
R.,
[1996]
1
C.T.C.
205,
96
D.T.C.
6001
(F.C.A.),
that
what
is
being
looked
at
more
closely
are
instances
where
the
revenue
is
not
looking
at
a
business
decision
to
see
whether
it
is
bad
or
good,
or
to
see
whether
there
was
a
reasonable
expectation
of
profit,
but
to
see
whether
the
deduction
of
expenses
from
house
rentals,
for
example,
and
that
was
an
example
used
by
Mr.
Justice
Linden
in
Zonn
(supra),
was
driven
by
an
ability
to
deduct
expenses
from
what
are
otherwise
not
deductible.
Here
we
have
the
appellants
attempting
to
deduct
40
percent
of
the
total
expenses
of
running
and
operating
their
home
by
renting
a
room
to
a
roomer,
letting
him
have
the
run
of
the
house,
and
accepting
room
or
board
from
their
son.
This
is
not
a
business.
And,
therefore,
not
being
a
business,
the
expenses
which
run
with
it
are
not
deductible.
Therefore
the
rental
losses
incurred
by
a
appellants
are
also
not
deductible,
and
therefore
the
appeal
with
respect
to
that
portion
for
1991-92
are
dismissed.
This
leaves
us
with
the
deduction
for
interest
and
carrying
charges
and
certain
non-recoverable
expenditures
such
as
fire
insurance,
property
taxes
and
mortgage
interest
incurred
by
the
appellants
and
the
appellants’
partners.
What
we
have
here
is
Mr.
Rizos
causing
a
corporation,
Expert
Cuts
and
Services
Limited,
to
be
incorporated
with
a
co-shareholder,
and
the
two
of
them
have
the
corporation
enter
into
a
venture
to
build
a
luxury
home.
It
is
the
corporation’s
business
to
build
a
home,
and
not
the
business
of
Mr.
Rizos
and
his
partner.
In
order
to
be
deductible,
interest
expense
must
be
incurred
under
section
18.
All
expenditures
under
paragraph
18(l)(a)
must
be
made
for
the
purposes
of
gaining
or
producing
income
from
a
property
or
a
business.
They
had
no
business,
they
had
no
property.
It
was
the
corporation
that
had
the
business
and
it
was
the
corporation
which
had
the
property.
They
chose
to
incorporate,
but
were
not
aware
of
suffering
the
consequences.
It
appears
that
if
they
had
not
chosen
to
incorporate,
they
would
very
likely
be
entitled
to
the
deduction
of
these
expenses.
However,
the
moneys
were
borrowed
not
for
the
purposes
of
gaining
or
producing
income
from
property
or
a
business,
but
for
the
purpose
of
advancing
to
the
corporation,
without
any
return
on
that
investment
from
the
corporation.
Their
return
in
the
future
might
have
been
by
way
of
dividends,
but
that
was
not
the
case.
Interest
payments
are
deductible
if
the
amount
was
borrowed
for
the
purpose
of
earning
income.
It
was
not
for
the
purpose
of
earning
income,
it
was
for
the
purpose
of
advancing
to
the
company
the
moneys
so
that
the
company
could
pay
its
own
bills,
somewhat
like
the
case
of
Parr
v.
R.,
[1996]
1
C.T.C.
2372
(T.C.C.),
which
was
cited
by
counsel.
They
were
not
the
expenses
of
Mr.
and
Mrs.
Rizos;
they
were
the
expenses
of
the
corporation
and
these
expenses
were
paid
by
them
on
behalf
of
the
corporation.
Any
losses
which
were
incurred
were
the
losses
of
the
corporation
and
not
of
Mr.
and
Mrs.
Rizos.
They
have
put
themselves
in
the
position
where
they
are
unable
to
deduct
the
expenses,
because
they
are
not
their
expenses.
Therefore,
for
these
reasons,
the
appeals
with
respect
to
1990,
1991
and
1992
as
they
deal
with
interest
and
other
expenses
are
also
dismissed.
Appeals
dismissed.
Email this Content