Jean-Charles Beauchemin v. Minister of National Revenue, [1977] CTC 2029

Guy Tremblay:—This case was heard at Montreal, Quebec on September 23, 1976.

1. Summary

The Board must decide whether a claim for 75% of his automobile expenses, and more specifically for two automobiles in the same year, is reasonable in the case of Dr Jean-Charles Beauchemin, a specialist in plastic surgery. The years in question are the 1970, 1971 and 1972 taxation years.

2. Burden of Proof

The appellant has the onus of showing that the respondent’s assessment is unjustified. This burden of proof is not derived from a particular section of the Income Tax Act, but from a number of judicial decisions, one of which is the judgment delivered by the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.1. The taxpayer, who is a speciaist in plastic and reconstructive surgery, began his practice in January 1970.

3.2. During 1970, 1971, and until April 1972 he lived at 7565 Lacordaire Street, which is a 10-minute walk from the Santa Cabrini Hospital where he worked as a regular doctor. In April 1972 he moved to Nuns’ Island, which entailed a round trip of 25 miles between his home and the said hospital.

3.3. In 1970 there was no plastic surgery service at the Santa Cabrini Hospital. Dr Beauchemin said in his testimony that in order to establish such services in this location and set up a practice, he took the following steps:

(a) He responded to emergency calls as quickly as possible so as to become well-Known. On the whole, he was on call 24 hours a day, two weeks out of every three.

(b) Moreover, he also gave his services to the Ste-Jeanne d’Arc Hospital, the St-Vallier Hospital of Valleyfield, the St-Joseph Hospital at Lachine, the Lasalle General Hospital and the Maisonneuve Hospital, either to replace plastic surgeons during weekends or when they were on vacation, or because some of these hospitals did not have a permanent team of specialists in plastic surgery. The evidence showed that, when plastic surgery has to be performed in an emergency, no doctor other than a specialist in plastic surgery can do it.

(c) In April 1970 Dr Beauchemin opened an office at Domus Medica on Belanger Street, less than one block from the Santa Cabrini Hospital.

3.4. The taxpayer explained that in emergency cases referred to as “terminal”, that is, when the patient is expected to die within a few days, he visits the patients even if only for humanitarian reasons. When other doctors were on vacation or an operation had to be performed, several visits to patients would be required, even on Saturdays and Sundays. When the patient had suffered burns, the taxpayer visited him every 8 hours for at least a week. All these visits required additional trips to the various hospitals.

3.5. He was unable to work from December 10, 1970 to April 23, 1971 as the result of a broken leg. He thus lost the practice he had worked so hard to build up.

3.6. He started again from zero in April 1971, and continued during that year and in 1972 to do the same work as he had done in 1970.

3.7. In 1972 the taxpayer bought himself two automobiles, a 1972 Porsche 911 in June at a cost of $11,254, and a 1973 Chevrolet Blazer jeep in December which cost $6,700. As the purchase of these two vehicles and, in particular, the disallowance of depreciation thereon by the respondent in that 1972 year, are among the principal points at issue in the appeal, the Board considers it appropriate to cite part of the appellant’s notes given during his testimony:

I had two automobiles at that time, a 1966 Corvair, which was not remarkable for its safety and which was getting old, and a front-wheel drive 1970 Simca 1204 which was eaten through by rust.

I therefore thought about purchasing a car to meet very specific requirements. The first requirement was safety, so that I could make the same trips with less fatigue and greater peace of mind. You tend to think about safety when you spend many hours driving, particularly when you treat a large number of victims of automobile accidents, and I thought that I could provide just as available service if I used an automobile built by a firm whose reputation for the comfort, safety and reliability of the models it builds is lengendary. I also considered that an automobile with some prestige could only have the effect of increasing the size of my practice and, consequently my income.

I chose a 1972 Porsche 911, which was the safest of all the models produced by this manufacturer—with a hard top, brakes, responsiveness and with the same suspension as the more powerful 911S.

However, this automobile, like all others, had a disadvantage: it was not suited io the Canadian winter. As I wanted to be able to answer all emergency calls, I decided to buy a four-wheel drive vehicle for the winter, and chose a 1973 Chevrolet Blazer which would get me around (although not very comfortably since it is a truck) in almost any winter temperature. However, one disadvantage of this vehicle is that the roof is made of fibreglass and will collapse if the car overturns. I therefore had a protective bar installed so as to protect the occupants if the car did overturn.

Although the purchase of two automobiles in one year was a considerable investment, I knew that as I was the only person driving them and their life would therefore be doubled in the long run, the investment was equivalent to purchasing one automobile, and moreover would allow me to travel with safety, confidence and peace of mind, thus putting me in a better mood to answer any call, no matter what the weather. I should also add that if one of the cars breaks down I am still able to provide the same service with the same frequency.

It should also be noted that, when you answer an emergency call for plastic surgery from a non-university hospital such as Santa Cabrini, Ville Lasalle, St-Joseph de Lachine or Ste-Jeanne d’Arc, you have to go to the hospital yourself every time, or almost every time, because the call is made by a doctor who has no specialized surgical training, whereas in a university hospital there is a resident on the spot with at least two years of specialized surgery, and therefore, the plastic surgeon can most of the time, give instructions on the telephone and does not have to go to the hospital in person.

It is expensive to keep a Car in good running order, but it provides you with greater safety and the patient with more reliable service.

The Chevrolet Blazer is also popular for hunting and fishing, but I am neither a hunter nor a fisherman, and for me it is a utilitarian vehicle, somewhat uncomfortable but reliable.

3.8. The appellant demonstrated the need for a jeep in winter by explaining that emergency cases requiring plastic surgery were always the result of automobile accidents. Accidents occur very frequently during snow storms, and he therefore needed a vehicle which would get him to the hospital whatever the weather. In his view, the Chevrolet Blazer met that need. The Valleyfield Hospital, for example, is: about 100 miles from his residence.

3.9. Dr Beauchemin has used his automobile to go to the Santa Cabrini Hospital only since the end of April 1972, that is, since he moved to Nuns’ Island.

3.10. The taxpayer was unmarried during the years in question.

3.11. During the years in question, the taxpayer made only one so- called pleasure trip, namely, a journey of approximately 1,100 miles in July 1972.

3.12. The applicant sought to show the mileage for each of the years 1970, 1971 and 1972 by extrapolating on the basis of the average annual mileage of the Blazer and the Porsche since they were purchased in June and December, respectively, of 1972.

3.13. For the years 1970, 1971 and 1972 the taxpayer claimed 75% of his car expenses:

3.14. The respondent did not deny that the expenses had been incurred, but allowed only 25% as business expenses and disallowed depreciation on the Porsche for 1972 while allowing it in the case of the Blazer.

3.15. The appellant appealed this decision to the Board on March 2, 1976.

3. Problem

The Board must decide

(a) whether depreciation on the Porsche in 1972 should be allowed;

(b) whether the claim for 75% of the expenses is justified.

4. Comments

4.1. Two Automobiles in 1972

One of the principal arguments of the respondent is that, if they are to be allowed, the expenses must be reasonable, in accordance with subsection 12(2) of the Income Tax Act, RSC 1952, c 148, as amended, and section 67 of the Income Tax Act, SC 1970-71-72, c 63, as amended.

The respondent contends that it was unreasonable to claim depreciation and expenses for two automobiles in the same year, particularly as one of the vehicles was a Porsche and the other a Blazer jeep.

Counsel for the respondent cited a number of precedents: G H Chambers (Northiam Farms) Ltd v Watmough (HM Inspector of Taxes), 36 TC 711; Niessen v MNR, 25 Tax ABC 62; 60 DTC 489; No 485 v MNR, 18 Tax ABC 358; 58 DTC 69: Zakoor v MNR, 35 Tax ABC 338; 64 DTC 392: W J Kent & Co Ltd v MNR, [1971] Tax ABC 1158; 72 DTC 1018.

These cases held that expenses claimed for vehicles considered as luxuries (Bentley, Cadillac, Rolls-Royce) were unreasonable expenses. The taxpayers had not shown that in fact their business required the use of a vehicle considered to be a luxury.

According to the evidence submitted in the case at bar, the Board is of the opinion, first, that the use of a special vehicle appropriate for winter driving, namely, the Blazer jeep, was justified. The urgent and frequent need of his medical services, particularly when a storm was raging, justified this expenditure.

The evidence has shown that another automobile was also needed for the rest of the year. The Board does not consider, however, that an automobile as costly as a Porsche was required. The appellant’s argument to the effect that the purchase of an automobile with a certain prestige could only promote an increase in the size of his practice does not convince the Board, just as such arguments did not earlier satisfy the courts. The Board accordingly allows, in respect of a second automobile, half the cost of the Porsche, namely, $5,627. The purchase of an automobile at that price in 1972 would have been reasonable for the professional needs in question.

4.2. Percentage of the Expenses

With respect to the percentage of the expenses, the appellant cited two judgments: Upenieks v MNR, [1973] CTC 2284; 73 DTC 218, and R v Gourlay, [1975] CTC 161; 75 DTC 5193.

It was held in the aforementioned cases, one of which is under appeal to the Federal Court of Appeal, that, as a result of the evidence satisfactory to the Board, percentages of 75% and 70%, respectively, were allowed for the automobile expenses incurred.

The Board considers that in the case at bar the evidence justifies the rate of 75% claimed for business use and 25% for personal use. In particular, during that period the appellant was not married and the personal use was limited driving from his residence to the hospital and vice versa, and one 1,100-mile trip made in July 1972. The number of miles actually covered each year is of little importance here in determining the percentage of business expenses.

5. Conclusion

The Board accordingly allows the appeal in part, and refers the matter back to the respondent for reassessment in accordance with the above conclusion.

Appeal allowed in part. and Isobel M Chaplin, Appellants,