A Gancher v. Minister of National Revenue, [1977] CTC 2596, 78 DTC 1005

Delmer E Taylor:—This is an appeal against income tax assessments for the years 1972 and 1973 in which the Minister of National Revenue added amounts of $369 and $420 respectively to the taxable income of the appellant, such amounts being the calculated costs of trips taken outside Canada by the appellant’s wife. These trips were paid for by Star Bedding Products Limited (hereinafter called “Star”). The respondent relied, inter alia, upon sections 3, 4, subsection 5(1), paragraph 6(1)(a), subsections 15(1) and 248(1) of the Income Tax Act, RSC 1952, c 148 as amended by SC 1970-71-72, c 63, section 1.

Facts

During the times material the appellant had been a wholesale representative for Star. In 1972 the appellant and his wife went to Acapulco, Mexico, at a cost to Star of $738, and in 1973 to the Caribbean, at a cost of $840. One half of these amounts in each case represents the matter at issue.

Contentions

It was contended by the appellant that:

the trips were sales seminars conducted for dealers and their wives;

these seminars were beneficial and sales have increased accordingly;

his wife was needed on the trips to assist in the entertainment of the wives of retail dealers from his area.

The respondent asserted that:

the appellant at all material times was employed by Star Bedding Products Limited as a commission salesman;

the appellant’s wife was not required to attend any meetings or perform any duties during the course of the trips;

the appellant was in receipt of a benefit, taxable as income, as a result of the provision of expense-paid trips to his wife.

In summary, the respondent’s position was that the amounts paid by the appellant’s employer in respect of trips taken by his wife were benefits conferred upon the appellant by virtue of his employment within the meaning of paragraph 6(1 )(a) of the Income Tax Act.

Evidence

The appellant stated he was not an employee but in business for himself; the trips involved were organized by Star, allowing participation by the retail furniture dealers he served, if they met certain pre- established volume levels; he represented many manufacturers in addition to Star: his attendance was for all practical purposes a necessity according to Star; and the retail dealers in his area almost always took their wives. He agreed that his wife rarely attended any of the scheduled business meetings, but was kept busy almost as a “co-hostess”, working with him to ensure the success and value of the trip to all concerned.

Argument

The appellant gave little in the way of argument other than his Submitted views on the matter.

Counsel for the respondent acknowledged the difficulty facing the Board when 50% of the amounts involved had been allowed by Revenue Canada as non-taxable to the appellant since the trips were regarded as “partly business’’, while the remaining 50% had been taxed as a benefit conferred upon him as an employee. However, in counsel’s view, as an employee he came squarely within the provisions of the Act dealing with such benefits, even though there was some possible contradiction in dealing with the trips as “partly business" and partly benefit to an "employee".

The appellant did not argue there had been a benefit to him by virtue of his wife’s attendance on the trips. Indeed, it was the very basis of his case that her attendance had been a major contribution to greater sales and income for him.

Findings

The value of the trips to the appellant as a wholesale representative for Star was extolled by him. From the limited information available to the Board, it must also be concluded that it was considered important by Star for that company's purposes that he (and his wife) be on the trips. There did not appear to be any particular criteria for him to meet to be eligible for the trips and the provision of the trips by the company can only be regarded by the Board as a “bonus” of some kind, in addition to his regular commissions earned. It is probably helpful to visualize the situation as if the appellant had received the value of the trips ($738 in 1972 and $840 in 1973) in cash from Star (although it is acknowledged that this was not permitted by Star), and then had subsequently expended the same funds to pay for the specific trips. This is in practical terms what occurred and that Star itself took care of both parts of the transaction without the involvement of the appellant may only serve to cloud the issue. The acceptance of the trips by the appellant (constituting receipt) would characterize them as income in his hands.

It would appear to me that the Minister has dealt with the appellant as a specific kind of employee—a commission salesman—and this would seem appropriate under paragraph 8(1)(f) of the Act. The assertion by the appellant that his wife was of considerable value as a business assistant to him on the trips could undoubtedly be supported and, had his working companion on the trips been someone other than his wife, his argument that the entire cost of the trips would have been deductible might deserve consideration. This Same consideration, however, does not extend to expenses incurred on behalf of the spouse of a taxpayer, under the circumstances outlined in this case. I am unaware of any provision of the Income Tax Act which would permit him to deduct from this income an amount greater than that judged to have been applicable to his portion of the value of the trips (presumably 50%).

Decision

The appeal is dismissed.

Appeal dismissed.