Luella Kerr Booth v. Minister of National Revenue, [1979] CTC 2654, 79 DTC 595

The Chairman:—The appeal of Luella Kerr Booth is from an assessment dated December 6, 1977 by which business expenses in the amounts of $3,621.39 and $4,059.08 claimed by the appellant in the 1975 and 1976 taxation years respectively, were disallowed. On October 2, 1978 the appellant was reassessed in respect of the 1975 taxation year for reasons which are unrelated to this appeal and in which the appellant’s 1976 assessment was confirmed.

In the Reply to the Notice of Appeal, counsel for the respondent submitted that the appellant on February 13, 1979 appealed from the reassesment dated October 2, 1978, which was more than 90 days after the reassessment date and indicated that an application would be brought before the Board to quash the appeal for the 1975 taxation year.

Mr George F Jones, appointed by Legal Aid to assist the appellant, waived the proposed application to quash. The appellant having filed her Notice of Appeal for the 1975 taxation year after the expiration of the delay set out in section 169 of the Income Tax Act, SC 1970-71-72, c 63, as amended, the appellant’s appeal for that year is invalid and the Board must quash the appeal for 1975.

Issue

The issue in this appeal relating only to the 1976 taxation year is whether the appellant in the exercise of her profession had a reasonable expectation of profit.

Facts

The appellant has written poetry for the past thirteen years. For the past four years she has done oil painting and drawing. By going to night school at York University she obtained her BA degree and subsequently, it is my understanding that she studied for, and received her MA degree in English in 1977 from the University of Toronto. In that period of time she is alleged to have worked in a law office, to have done some tutoring, some illustrations, paintings, drawings, and sold some of her paintings. She published seven booklets of poetry and sold some poems to the Canadian Broadcasting Corporation.

The appellant is presently studying sign language so as to communicate with deaf-mutes in relation to an upcoming book which would be based on sound poetry and commentaries on sound.

The appellant’s principal source of income is alimony and in 1976 she received a $1,000 grant from Canada Council. Very little income was received from her poetry or paintings in 1975, 1976, 1977 or 1978.

Finding of Facts

It is very difficult indeed to judge the talent and the potential of writers, artists, poets and even more difficult to determine whether they have a reasonable expectation of ever making a profit from their profession. I do not believe, however, that the lack of profit in the appellant’s professional activities since 1975 would warrant a decision that she has no reasonable expectation of ever making a profit from her activities. The six years of night school in obtaining her BA degree and the five years at Toronto University to obtain her MA in English in 1977 which are related to her profession are indicative of a keen desire and a strong determination to succeed in what she is doing. Her interests are clearly in the arts. Her friends, contemporary poets, painters, writers, have on occasion praised the appellant’s talents.

Although this might well be a borderline case, I feel it is too soon after obtaining her MA degree to decide that the appellant has no reasonable expectation of profit from her activities whether in poetry, painting, illustrating or drawing.

The instant appeal can be distinguished from the case of Gaston C Payette v MNR, [1978] CTC 2223; 78 DTC 1181, cited by the respondent. In that case, my learned colleague Mr Tremblay found that Gaston C Payette did not have suitable training in female psychology to succeed in publishing books on the subject and considered that the very expectation of profit was unreasonable.

In my opinion, the facts in the instant appeal do not permit such a conclusion at this time. After the studies the appellant has made and her present efforts in mastering sign language for use in her proposed book of poems, I feel she should be given the benefit of the doubt and allowed more time to realize the profit which she evidently expects from the exercise of her profession.

At the hearing the quantum in issue for the 1976 taxation year was not debated on the understanding that the figures would be agreed upon between the parties, once the decision in this appeal was rendered. It should be made clear that in allowing the appeal only those amounts which are directly related to the exercise of the appellant’s profession are deductible.

Conclusion

I conclude therefore that the appeal for the 1975 taxation year is quashed, and the appeal for the 1976 taxation year is allowed in part and referred back to the Minister for reassessment on the basis that the expenses directly related to the appellant’s business are deductible.

Appeal allowed in part.