Bell
T.CJ.:
The
issue
in
this
appeal
is
whether
the
Appellant,
in
respect
of
her
1983
taxation
year,
was
carrying
on
a
business
as
a
result
of
having
entered
into
arrangements
by
virtue
of
which
she
obtained
the
right
to
sell
“Speed
Read”
courses
in
an
area
of
the
U.S.A.
and
claimed
a
deduction
of
“advance
royalties”
for
each
of
two
such
areas.
This
is
one
of
several
hundred
cases
in
which
the
facts,
as
outlined
by
the
Appellant
and
as
admitted
in
the
Reply
to
the
Notice
of
Appeal,
are
substantially
the
same
as
those
outlined
in
some
detail
in
Bendall
v.
R.,
(1995),
96
D.T.C.
1626
(T.C.C.).
Shortly
stated,
Applied
Research
Ltd.,
(“Applied”)
a
Grand
Cayman
Island
company,
owned
the
copyright
to
a
self-taught
course
of
instruction
in
speed
reading.
This
company
was
associated
with
H.N.
Thill
&
Associates
Inc.
(“Thill”)
which
promoted
the
sale
to
Canadians
of
licenses
to
sell
the
course
in
specified
territories
in
the
U.S.A..
For
each
territory,
the
licensee
(the
Appellant)
was
to
pay
a
license
fee
of
$100
and
an
“advance
royalty”
of
$20,000.
Another
related
company,
Omni
Educational
Marketing
Corp.
(“Omni”),
held
itself
out
to
be
prepared
to
market
the
courses
on
behalf
of
the
licensees.
Omni
offered
each
licensee
a
cash
performance
bond
of
$17,500
in
support
of
its
promise
to
market
the
courses.
The
Appellant
purchased
the
rights
in
respect
of
two
areas.
With
respect
to
both
territories,
the
cash
bond
payment
to
the
Appellant
was
made
and
was
used
by
her
as
part
payment
of
the
$20,100
payable
to
Applied.
The
Appellant
deducted
$40,000
as
“Royalties
Pd”
in
her
1983
income
tax
return
which
was
prepared
by
Thill.
The
Appellant
paid
$2,600
in
respect
to
the
first
contract
but
paid
nothing
in
respect
of
the
second
contract.
She
received
a
refund,
which
upon
reassessment
was
reversed
on
the
basis
that:
...the
reported
business
loss
of
$40,000.00
has
been
disallowed...
It
is
in
respect
of
this
disallowance
that
the
appeal
is
brought.
The
Appellant
stated
that
the
amount
of
tax
reassessed
in
the
sum
of
$11,118.14
(at
slight
variance
with
the
Notice
of
Reassessment)
together
with
interest
is
now
more
than
$31,000.
The
Appellant
testified
that
she
had
terminated
a
relationship
with
a
partner
in
a
courier
business
and
was
looking
for
a
source
of
income
and
genuinely
believed
that
this
business
venture
would
be
successful.
Representing
herself,
she
produced
a
copy
of
schedules
she
had
prepared
using
various
sales
assumptions
to
compute
the
potential
net
income
to
her
which
ranged
between
$39,085
in
1985
to
$18,770
in
1988
and
higher
amounts
for
other
years
between
1985
and
1991.
These
computations
were
based
upon
sales
to
1%
of
the
population
of
the
territories
in
question.
The
Appellant
stated
that
she
did
not
receive
information
from
the
Department
of
National
Revenue
(“Department”)
when
requested
and
was
denied
the
opportunity
of
having
her
case
heard
sooner.
She
explained
that
this
occurred
by
virtue
of
her
having
received
a
form
from
the
Department
with
a
letter
advising
that
if
she
wished
to
have
her
Notice
of
Objection
held
in
abeyance
pending
the
decision
of
the
Court
in
similar
issues,
she
should
sign
and
return
the
form.
She
did
not
do
so
and
as
stated
in
her
Notice
of
Objection:
I
understood
this
to
mean
that
if
I
did
not
return
the
signed
form,
my
case
would
be
dealt
with
without
further
delay.
This
was
what
I
wanted.
Therefore,
I
did
not
return
the
form.
She
said
that
she
did
not
know
until
1995
that
the
interest
was
compounded
and
that
she
would
not
be
liable
for
the
tremendous
amount
of
tax
and
interest
assessed
had
the
matter
been
dealt
with
earlier.
I
found
the
Appellant
to
be
intelligent
and
earnest
and
I
accept
her
belief
that
this
venture
would
be
productive.
However,
as
outlined
in
both
Moloney
v.
R.,
(1989),
89
D.T.C.
5099
(Fed.
T.D.)
and
Bendall
(supra),
the
Appellant
never
intended
to
carry
on
the
business
of
marketing
the
speed
reading
course
herself.
Although
she
believed
Omni
would
market
the
courses,
one
of
the
unrebutted
assumptions
set
forth
in
the
Notice
of
Appeal
is
that
Omni
did
not
have
a
marketing
program
nor
did
it
have
any
employees
to
carry
out
marketing
and
distributing.
I
agree
with
Respondent’s
counsel’s
submission
based
on
the
reasoning
of
the
Federal
Court
of
Appeal
in
Tonn
v.
R.,
(1995),
[1996]
2
F.C.
73
(Fed.
C.A.).
He
submitted
that
the
primary
use
of
the
objective
test
as
to
whether
a
business
has
a
reasonable
expectation
of
profit
is
the
prevention
of
inappropriate
reductions
in
tax
and
is
not
intended
as
a
vehicle
for
the
wholesale
judicial
second
guessing
of
business
judgment.
I
agree
with
the
Court’s
finding
that
this
test
should
be
applied
sparingly
where
a
taxpayer’s
“business
judgment”
is
involved,
where
no
personal
element
is
in
evidence,
and
where
the
deductions
claimed
are
not
on
their
face
questionable.
His
submission
continued
to
the
effect
that
where
circumstances
suggest
that
a
personal
or
other-than-business
motivation
existed,
or
where
the
expectation
of
profit
was
so
unreasonable
as
to
raise
suspicion,
the
taxpayer
would
be
called
upon
to
justify
objectively
that
the
operation
was
in
fact
a
business.
As
per
lacobucci
J.
in
Symes
v.
R.,
(1993),
94
D.T.C.
6001
(S.C.C.),
at
601:
As
in
other
areas
of
law
where
purpose
or
intentions
behind
actions
is
to
be
ascertained,
it
must
not
be
supposed
that,
in
responding
to
this
question,
courts
will
be
guided
only
by
a
taxpayer’s
statements,
ex
post
facto,
or
otherwise,
as
to
the
subjective
purpose
of
that
particular
expenditure.
Courts
will,
instead,
look
for
objective
manifestations
of
purpose,
and
purpose
is
ultimately
a
question
of
fact
to
be
decided
with
due
regard
for
all
of
the
circumstances.
Unfortunately,
in
spite
of
the
Appellant’s
earnest
quest
for
what
she
believed
to
be
business
profit
and
overall
assessment
of
the
circumstances
including
the
failure
of
Omni
to
produce
sales
and,
therefore,
income,
I
agree
with
the
decisions
in
the
Maloney
and
Bendall
cases
and
conclude
that
the
appeals
must
be
dismissed.
In
so
doing,
I
must
state
that
the
accumulation
of
interest
on
the
Appellant’s
tax
assessment
is
huge
and
penal
in
nature
when
the
Appellant
sought
to
advance
her
case
and
conclude
same
at
an
early
date.
It
is
not
sufficient
for
the
Respondent
to
take
the
position
that
the
Appellant
could
have
filed
a
Notice
of
Appeal
after
the
expiration
of
a
certain
period
following
the
Notice
of
Objection.
This
Appellant,
probably
like
most,
if
not
all
other
Appellants
in
these
transactions,
is
not
sophisticated
in
the
ways
of
taxation
and
should
not
be
expected
to
have
followed
the
paths
that
were
available
and
that
might
be
pursued
by
knowledgeable
lawyers.
The
delay
in
the
hearing
of
her
case
seems
to
be
tied
to
the
number
of
cases
in
issue
and
the
procedures
followed
in
order
to
resolve
same.
If
this
Court
had
the
ability
to
waive
interest
I
would
do
so
in
this
case.
Subsection
220(3.1)
of
the
Income
Tax
Act
provides
that
a
taxpayer
may
apply
for
waiver
of
interest
and
that
the
Minister
may
waive
all
or
any
portion
of
interest
otherwise
payable
under
the
Act.
I
recommend
strongly
that
the
Minister
do
so
upon
application
by
the
Appellant.
The
appeal
is
dismissed.
Appeal
dismissed.
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