Rittinger v. R., [1997] 2 CTC 2507

Dubienski DJ.T.C.:

This appeal was heard at London, Ontario, on November 18, 1996. This is an appeal from assessments of income tax years made for the taxation years 1992 and 1993.

The taxpayer stated he was employed at all relevant times as an employee of MJR Office Furniture Liquidators Inc., a company owned by his spouse. He was employed in the capacity as the day-to-day manager; the company dealt in distressed and liquidated commodities, furniture, etc: purchased at a discount and then resold. The Appellant never was a shareholder and had no interest in the company in any way whatsoever, neither being on the board of directors in a nominal capacity nor through any trust or fiduciary relationship with his wife. His employment came to an end when the company went into bankruptcy.

During the period in question, the Appellant and his wife were separated and proceedings for divorce were commenced by his wife in the Fall of 1993.

Besides what is stated above the Appellant’s duties at the business included buying and selling of stock and many administrative matters, such as bookkeeping, drawing and filing returns for GST and income tax deductions.

His wife last worked on a daily basis in 1991 but had thereafter maintained a constant involvement with the business calling in person almost daily, signed all cheques and other business documents until December 1993 when the business ended with the bankruptcy. The taxpayer formed his own company in January 1994.

This appeal concerns assessments made by the Minister of National Revenue (the “Minister”) involving various matters.

Additional Employment Income

The Minister alleges employment income that the taxpayer failed to report in the amount of $6,263 for his 1993 taxation year.

As stated, in his administrative duties, he kept payroll records and prepared the T4 summary and slips for employees and for 1993 reported his employment income as $17,748.

An accounting of the company records showed income from January 1 to June 30, 1993, as being $10,500, from July 1 to December 31, 1993, $10,361 plus alimony payments remitted on his behalf from the company $3,150 for a total of $24,011.

It can be therefore seen that the difference between the amounts shown in the company records as against his reported employment income is $6,263 which was not accounted for.

The taxpayer had no explanations as to this discrepancy between the T4 return and the salary records. His answer to the amount of $3,150 described in the alimony remittances was by a convoluted explanation concerning an allegation that he was being charged twice against his income. However, although he prepared the company records, there were none or documentation to substantiate his position. The figures available to the Minister would allow no other conclusion but that the alimony remitted must be added to the salary paid as received by the taxpayer.

Automobile benefits

The Minister assessed the taxpayer alleging a taxable benefit for the availability and use of a motor vehicle, a GMC conversion van, owned by the company.

The evidence was that the van was used for business trips to various locations, small deliveries, transport of customers and staff. He had his own car that he used for attending work and any other matters.

The Minister alleges that the vehicle was a benefit as it was available to him and it made, on one occasion, a trip to Florida.

The taxpayer is clear that the vehicle was no more available to him than any other employee of the company and particularly the owner, his wife, who had it in her possession most of the time. The taxpayer, at that time, had two or three automobiles of his own and had no use for the van except during the course of his employment for the use above set forth. The company had in fact use of 14 foot cube furniture vans for the main use of deliveries of furniture, etc.

With reference to the trip to Florida, the taxpayer states that the trip was a combine of business and pleasure. The business was to contact possible source of business and to pick up his wife who had been vacationing there. There was no evidence that there was any other use and that he had called at various persons and companies to develop business contacts and search out possible sources of commodities.

It was clear from the taxpayer’s evidence that the van was available for the business and was to be used by the employees for the business. He never used it for himself.

I am satisfied that the Income Tax Act in paragraph 6(l)(e) where it states: “The employer made an automobile available to the taxpayer” means an automobile for the taxpayer’s use personally and his personal benefit which could be seen as some gain to the taxpayer beyond his income and other tangible benefits received from the company.

Reference was made to the case of Papa v. Minister of National Revenue ((1987), 87 D.T.C. 529 (T.C.C.)). A consideration of the facts in the Papa's case disclosed that the vehicle in question was used by the owner and president of the company, not only on company business by used to go to and from work and probably for other personal use. It was in fact referred to as “Papa’s car’. It could be used by staff on behalf of the company and therefore it was argued that because it was not used exclusively by Pappa and it was an error to charge stand-by to him. The Court held that there was no requirement for exclusivity for the charge to be levied. However, it was clear that the evidence disclosed Papa has sufficient use to ensure a clear benefit to him that would make it subject to a stand-by charge.

In the present case, the evidence is quite the contrary. The van was always owned by the company and operated by his wife who used it the majority of the time. Further evidence discloses that the only time the taxpayer might have benefit personally for the use of the van is the enjoyment he had in driving his mother-in-law to Florida to bring back his wife who had been holidaying in that area. The expenses of the trip would be charged to the company for his wife’s benefit and the business search conducted on the sale with possibly some benefit to the taxpayer is too negligible to measure.

lam satisfied from the evidence that the van did not represent any benefit to the taxpayer and would not be subject to a stand-by charge to be added to his income.

Boat rental benefit

The Minister also assessed standby charge for a boat owned by the company. Evidence clearly shows that the boat was purchased for resale by the company. It was held for sale at a marina where the taxpayer also had his own boat docked. The taxpayer denies ever using the boat in question for pleasure. He may have shown the boat to prospective buyers with his wife and may have been on it with his wife, but usually used his own boat and no evidence discloses to me that he had any benefit, any use of any kind of the boat.

It is clear that this boat formed part of the commodities and items owned by the company for sale and was not available for the personal use of the taxpayer.

I follow the same reasoning as I did with regard to the van. The mere fact that the boat was an asset of the company does not make it “available” as I interpret it to be contemplated by the Income Tax Act. There is no evidence that would satisfy me that the availability was such as to allow the Appellant to use the boat as he wished nor did he.

Benefits for personal trips and car repairs

The Minister during his assessment ascertained that the Appellant had charged to the company some repairs to his automobile. The taxpayer admitted the error and confirmed that the Cadillac repairs in the amount of $592.76 should be properly charged to him. I am satisfied the balance of the assessment relating to personal trips and car repairs is part of the business referred to as above and being unable to ascertain with any degree of certainty I set the benefit to the taxpayer at one half of the remainder, that is as per accounting in Exhibit 4 - letter from Revenue Canada

In accordance with my decision, one half of $1,167.61 to be added to the Appellant’s income is $583.80 plus the $592.76 (repairs) is $1,176.56.

To sum it up, I allow the appeal to the extent that I find that the Appellant is not to be assessed for: a) benefits for automobile; b) benefits for boat rentals; c) and one half of the personal trips and car repairs in the amount of $583.80.

Appeal allowed in part.