[OFFICIAL ENGLISH TRANSLATION]
97-458(IT)I
BETWEEN:
ALAIN DOIRON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on February 9, 1998, at Québec,
Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the
Appellant:
The Appellant himself
Counsel for the Respondent: Simon
Crépin
JUDGMENT
The appeal
from the assessments made under the Income Tax Act for the
1992, 1993 and 1994 taxation years is dismissed in accordance
with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 31st day of March 1998.
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980331
Docket: 97-458(IT)I
BETWEEN:
ALAIN DOIRON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This appeal concerns the 1992,
1993 and 1994 taxation years. The appellant testified in support
of his appeal. It emerged from his testimony that he had
purchased a large house in 1988.
[2] After several months, seeing that
there was considerably more room than his family needed, he
decided to put in an apartment and rent it to a friend of his
companion's, at a price below the market rate, as he himself
admitted.
[3] Thus, the rent for the apartment
for the 1992 taxation year was set at $300 for a period of five
months and $350 for a period of two months.
[4] Major renovations were carried out
in the same year, resulting in a loss of income for a period of
five months.
[5] In 1993, the apartment was rented
again.
[6] For the 1993 and 1994 taxation
years, the rental income was $200 per month, or $2,400 per year.
Again, the consideration was far below fair market value.
[7] The appellant himself indicated
that, in the period in question, the rent for an apartment like
his was between $400 and $500 per month.
[8] During that period-1992, 1993 and
1994-the fixed costs were the following:
FIXED COSTS
1992
1993
1994
TAXES
$2,448
$1,751
$1,435
INTEREST
4,171
5,141
4,876
INSURANCE
481
596
632
HEATING
1,515
1,730
1,846
TOTAL
$8,615
$9,218
$8,789
45% BUSINESS
$3,876
$4,148
$3,955
LESS:
INCOME
2,200
2,400
2,400
LOSS
$1,676
$1,748
$1,555
[9] These figures show that the gross
rental income did not even cover the fixed costs. Although such
results might occur in very special circumstances without
jeopardizing the concept of a reasonable expectation of profit
from the activity of renting a property, this is not the case
here.
[10] The decision to rent and above all the
amount of rent that was set were essentially guided by
humanitarian and charitable considerations. The rental was a
function of the tenants' personal problems and their ability to
pay; it should have been set based on the market, taking into
account the quality of the apartment, supply, demand, setting,
location, and so on, but it never should have been based on the
tenants' ability to pay. The only housing for which the
tenants' ability to pay is taken into account is low-rental
housing; this is housing in buildings having social and
humanitarian purpose and it generally operating at a loss.
[11] The appellant's generosity and concern
are fine and appealing qualities to be sure, but they cannot be
taken into consideration, especially when the fixed costs for the
space rented far exceed the rental income. This state of affairs,
moreover, continued throughout the three years at issue when the
apartment was rented to various persons.
[12] The mathematical reality is very
revealing and is moreover corroborated by the appellant's
intentions when he bought the house; he acknowledged in fact that
he had bought the property solely for use as a family residence.
The change in use arose from a combination of circumstances in
which the appellant's generosity was the outstanding feature in
the unfolding of the situation.
[13] I find, therefore, that the appellant
really did not have a reasonable expectation of profit from the
activity of renting part of the property in which he lived. In
point of fact, he never viewed the apartment as a commercial
undertaking. He was far more desirous of sharing excess space he
had available with people he felt sorry for, and he could afford
to do so. This was a rental that was never part of a housing
pool; the appellant never advertised the apartment or rented it
to strangers. The apartment at the centre of this dispute was
rented from time to time to help out people in the appellant's
circle.
[14] As for the deduction for childcare
expenses, the appellant argued that the law was unfair but
acknowledged that this Court was no doubt not the appropriate
forum to argue that point. In this regard, I can only agree that
his conclusion was correct, namely that only the legislature has
the authority to change the law.
[15] Lastly, as indicated at the hearing,
the Court does not have the authority to reduce or cancel the
interest added to an assessment. Only the Department has that
jurisdiction. The same is true with respect to spreading out, or
granting terms regarding, the payment of amounts owed by a
taxpayer.
[16] In the circumstances and since,
moreover, the appellant has admitted that the very great majority
of the facts on which was based the assessment for the 1992, 1993
and 1994 taxation years are correct and since he has not
discharged the burden of proof that was on him, I must dismiss
the appeal.
Signed at Ottawa, Canada, this 31st day of March 1998.
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor
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