Vukoje v. R., [1997] 2 CTC 2148

Watson DJ.T.C.:

This appeal was heard in Toronto, Ontario, on December 10, 1996.

In computing income for the 1991, 1992 and 1993 taxation years, the Appellant deducted the amounts of $2,268.57, $913 and $1,129.12 respectively. In reassessing the Appellant for these taxation years, the Minister of National Revenue (the “Minister”) disallowed these amounts as deductions of business losses.

In reassessing the Appellant, the Minister made the following assumptions of facts:

(a) in 1991 and 1993 the Appellant reported gross sales of $3,700 and $1,650, respectively, and gross profit (excess of income over cost of goods sold) of $1,11.627 and $350, respectively, arising out of a purported business of landscaping;

(b) in 1992, no sales were reported by the Appellant;

(c) in 1991, 1992 and 1993 the Appellant reported expenses of $3,384.84, $913 and $1,479.12, respectively, resulting in losses of $2,268.57, $913 and $1,129.12, respectively;

(d) information provided by the Appellant did not support the sales and expenses being reported;

(e) the purported business did not have a reasonable expectation of profit;

(f) at all relevant times, the Appelant was a full-time employee and earned the following employment income:

1991	$47,164.43
1992	$48,767.00
1993	$53,879.16

At the hearing, the Appellant admitted paragraphs (a) to (c) and (f) and denied paragraphs (d) and (e).

The Appellant was the only witness at the hearing; he gave the impression of being an honest hardworking person who relied entirely on the advice of his bookkeeper-accountant. Some of the expenses claimed were personal - for instance, the patio at his home that he used to illustrate the quality of his work to potential clients. In his notice of appeal, he stated that the “money spent was used to cover costs for advertising, mileage and materials for small non-paying jobs - used to provide proof of my job related abilities”.

The Appellant had a full-time job as a crane operator for the steel mill in Hamilton. He decided to put his days off to good use by offering landscaping services. He did not have to acquire any new equipment since he already owned an old truck, lawn-mowers, rollers and other tools which were used and stored at home. He operated the landscaping business usually in May and June; he then turned to sodding lawns and inlaid brickwork.

The Appellant relied entirely on the advice of his accountant as to the percentage to claim for personal and business use of his truck and its expenses. He did not record the details of his sales or expenses and there was no logbook for the truck which he used to get to and from work at the steel mill. In 1991, the Appellant claimed a gross revenue from his landscaping operations of $1,116.27 and expenses of $3,384.84 for a net loss of $2,268.57; there were no sales in 1992, but a net loss of $913; gross revenue in 1993 was $350, expenses of $1,479.12 for a net loss of $1,129.12.

His briefcase was stolen from his car which contained all the receipts and whatever records he had. He was not sure whether his accountant had copies of the lost receipts.

Taking into consideration all of the circumstances in the light of the well-established recent case law, I am satisfied that the Appellant has failed to establish, on a balance of probabilities, that he had a reasonable expectation of profit in his operation, that the expenses were made or incurred for the purpose of gaining or producing income, that the expenses were not personal and that they were reasonable in the circumstances.

The appeal is accordingly dismissed.

Appeal dismissed.