Tremblay T.C.J.:
1 These appeals were heard on common evidence pursuant to the informal procedure at Québec, Quebec on January 11, 1996.
1. Point at Issue
2 According to the notices of appeal and the replies to the notices of appeal, the issue is whether the appellants were correct in claiming together for the 1990 and 1991 taxation years rental losses of $3,508 in 1990 and $2,089 in 1991, that is $1,754 each in 1990 and $1,044 in 1991.
3 The respondent established a figure of $1,490.50 each instead of $1,754 for 1990 and $97.50 instead of $1,044 for 1991.
2. Burden of Proof
4 2.01 The onus is on the appellants to show that the respondent's reassessments are incorrect. This burden of proof arises from a number of judicial decisions including a judgment by the Supreme Court of Canada in Johnston v. Minister of National Revenue, [1948] S.C.R. 486, 3 D.T.C. 1182, [1948] C.T.C. 195 (S.C.C.).
5 2.02 The facts presumed by the respondent in the instant case are described in subparagraphs (a) to (1) of paragraph 7 of the reply to the notice of appeal (95-485(IT)I, Jean Lachance). They read as follows:
7. In reassessing the appellant for the 1990 and 1991 taxation years, the Minister assumed the following facts, inter alia:(a) the property that was the subject of the said rental losses had the street address 1060 Boulevard du Lac in Lac Beauport, Quebec; [ admitted]
(b) this property is a single family residence with an apartment in the basement; [ admitted, but apartment is above ground]
(c) during the taxation years in issue, the appellant was a co-owner of this property with his spouse Marcelle M. Lachance [ admitted]
(d) during the taxation years in issue, the appellant lived apart from his spouse Marcelle M. Lachance; [ denied]
(e) during the 1990 and 1991 taxation years, the taxation years in issue, the apartment in the basement of the said building was occupied by a tenant who was dealing with the appellant at arm's length; [ admitted]
(f) during the 1990 and 1991 taxation years, the appellant's spouse lived with her minor son Frédéric on the ground floor of 1060 Boul. du Lac in Lac Beauport; [ denied]
(g) in his returns of income for the 1990 and 1991 taxation years, the appellant claimed the deduction for expenses incurred in respect of 1060 Boul. du Lac in Lac Beauport without subtracting any portion for personal use by his spouse, a co-owner, in computing the net rental losses; [ admitted]
(h) the rental income declared by the appellant in respect of the part of the property occupied by his spouse apparently came from rent paid by her son Frédéric during the 1990 and 1991 taxation years; [ denied with respect to the spouse's occupation, but admitted with respect to the rest]
(i) the appellant and his son Frédéric apparently did not enter into any written lease respecting this part of the said property; [ admitted, but oral lease]
(j) the revised rental income and expenses for the 1990 and 1991 taxation years in respect of the property situated at 1060 Boul. du Lac in Lac Beauport are as follows:
| 1990 | 1991 | |
|---|
| Revised gross rental income | $3,325 | $5,260 |
| LESS: | | |
| Eligible expenses | $6,306 | $6,499 |
| Revised net rental loss | $2,981 | $1,239 |
| Appellant's interest, 50% | $1,490.50 | $ 619.50 |
| [denied] | | |
(k) the appellant did not show that, in 1990 and 1991, he had in fact received rental income or incurred rental expenses in addition to the amounts allowed by the Minister for those years in respect of the property situated at 1060 Boul. du Lac in Lac Beauport; [ denied]
(l) he did not show that the expenses incurred by the appellant in addition to the amounts authorized by the Minister for the 1990 and 1991 taxation years were made or incurred for the purpose of gaining or producing income from a business or property within the meaning of paragraph 18(1)(a) of the Act. [ denied]
3. Evidence of the appellant Jean Lachance
6 3.01 The appellants' contention respecting the rental income and expenses in issue is described in their income tax returns for the 1990 and 1991 taxation years. The figures read as follows respecting the property situated at 1060 Boulevard du Lac in Lac Beauport:
[TRANSLATION]
| 1990 | 1991 | |
|---|
| Gross rental income | $ 9,105 | $ 10,910 |
|---|
| LESS: | | |
|---|
| Electricity | 0 | $ 1,077 |
| Property taxes | $ 1,064 | $ 1,365 |
| Maintenance | $ 2,055 | $ 3,233 |
| Loan interest | $ 261 | $ 164 |
| Mortgage interest | $ 6,410 | $ 5,861 |
| Insurance | $ 1,944 | $ 1,241 |
| Other expenses | $ 866 | $ 58 |
| Plumbing | $ 13 | 0 |
| Total expenses | $ 12,613 | $ 12,999 |
| Net rental losses | $ 3,508 | $ 2,089 |
| 50% interest — Net loss | $ 1,754 | $ 1,044 |
7 3.02 The appellant Jean Lachance totally denied allegation 7(d) of the reply to the notice of appeal, that is that Marcelle M. Lachance lived apart from the appellant during the periods in issue and lived at 1060 Boulevard du Lac, Lac Beauport. He has always lived with his spouse and still lives with her.
8 3.03 In support of her statement, the respondent said that the appellant Marcelle M. Lachance had given her address in her 1990 and 1991 returns as 1060 Boulevard du Lac, Lac Beauport, and the appellant gave 612 Marie-Victorin, St-Nicolas. The appellant Jean Lachance explained that his spouse wanted to have her own post office box and that one can only have one per dwelling. As their son Frédéric lived in one of the apartments at 1060 Boulevard du Lac, Lac Beauport, his spouse decided to have her post office box there. She has her own bank account and likes to have control of her personal affairs.
9 3.04 The appellant Jean Lachance explained that he and his spouse jointly owned a number of apartment buildings. Their returns moreover show gross rental income of $41,500 in 1990 and $80,880.41 in 1991.
10 3.05 The respondent admitted that the quantum of the expenses was not at issue, but contended that the rental income paid by the son Frédéric, 17 or 18 years of age at the time, was not proven.
11 The appellant Jean Lachance contended that Frédéric paid rent equal to that of the other tenant, with whom the appellants were dealing at arm's length, that is, a rent varying from $475 to $550, including electricity. Frédéric paid by cheque or in cash. The appellant Jean Lachance did not provide his bank book to show the funds received.
12 3.06 The appellant Jean Lachance said that his son was not attending school full time, but only part time and therefore had to get along alone. The witness said that it was not possible that he had received help from his mother, but he was not aware of the situation. He also suggested that he had had odd jobs.
4. Analysis
13 4.01 With regard to the main point at issue, that is whether during 1990 and 1991 the appellant Marcelle M. Lachance lived apart from the appellant Jean Lachance and lived at 1060 Boulevard du Lac, Lac Beauport, the Court does not question the credibility of the appellant Jean Lachance in his testimony on this point (3.02).
14 4.02 As to the payment of rent by the son (3.06), fairly substantial rent (3.05), it is the Court's view that a portion was provided by the mother to her son. As the mother was a co-owner of the property, the problem remains. The burden of proving payment was on the appellant Jean Lachance. The Court arbitrarily sets the amount of rent actually paid by Frédéric at 60 per cent.
5. Conclusion
15 For the above reasons, the appeal is allowed and the matter is referred back to the Minister for reconsideration and reassessment in accordance with the above reasons for judgment.
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