Date:
20021223
Docket:
2002-894-IT-I
BETWEEN:
VICTORIA
GALLO,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
Little,
J.
A.
FACTS
[1]
Jovic Plastifacture Inc. ("Jovic") was incorporated
under the laws of the Province of British Columbia on the 25th
day of March 1988.
[2]
Jovic was incorporated for the purpose of developing and
marketing a bicycle stop light sensor powered by a computer
device.
[3]
Funds were raised by Jovic to develop and market the
stoplight.
[4]
On the 6th day of March 1990 the shares of Jovic were owned as
follows:
Joseph Gallo, Jr.
233,890
Joseph Gallo,
Sr.
219,280
Victoria Gallo (the
Appellant)
32,000
[5]
Jovic was unable to obtain any further funds and it has been
inactive since 1994.
[6]
When the Appellant filed her income tax return for the 1998
taxation year she deducted carrying charges in the amount of
$3,977.00.
[7]
When the Appellant filed her income tax return for the 1999
taxation year the Appellant claimed an allowable business
investment loss ("ABIL") of $8,812.50 calculated on the
following basis:
32,000 shares at
$0.25
=
$ 8,000.00
375,000 shares at $0.01
=
$ 3,750.00
$11,750.00
75%
thereof
$ 8,812.50
[8]
By Notices of Reassessment issued on the 14th day of June 2001
the Minister reassessed the Appellant's 1998 and 1999
taxation years. In the Reassessment issued for the
Appellant's 1998 taxation year the Minister disallowed
carrying charges in the amount of $3,977.00. In the Reassessment
issued for the Appellant's 1999 taxation year the
Minister disallowed the ABIL of $8,812.50 that was claimed by the
Appellant.
[9]
The Appellant filed a Notice of Appeal to the Court. In the
Notice of Appeal dated March 4, 2002 the Appellant maintained
that she was entitled to deduct carrying charges of $3,977.00 for
the 1998 taxation year. The Appellant also stated that the ABIL
that was claimed by her in the 1999 taxation year should have
been calculated as follows:
32,000 shares at
$0.25
=
$ 8,000.00
Un-repaid loans
October 8,
1991
$2,400.00
May 6,
1992
$2,390.00
March 8,
1994
$3,000.00
$7,790.00
50% my
portion
$ 3,895.00
$11,896.00
75%
thereof
.
$ 8,922.00
B.
ISSUE
[10]
(1) Is the
Appellant entitled to deduct carrying charges of $3,977.00 in
determining her income for the 1998 taxation year?
(2) Is the
Appellant entitled to deduct an ABIL in the amount of $8,922.00
in determining her income for the 1999 taxation year?
C.
ANALYSIS
[11] Mr. Robert
Jamieson C.A. testified as a witness for the Appellant.
Mr. Jamieson said that he acted as the accountant for Jovic
and for the Appellant for a number of years. Mr. Jamieson
said that he was unable to provide satisfactory or acceptable
evidence to establish that the Appellant was entitled to deduct
carrying charges of $3,977.00 in determining her income for the
1998 taxation year. The appeal in respect of this issue will be
dismissed.
[12] Mr.
Jamieson testified that with respect to the ABIL he could only
establish from reviewing the records of Jovic that the Appellant
paid $8,000.00 for 32,000 shares of Jovic at $0.25 per share. Mr.
Jamieson said that he could not establish that the Appellant
purchased 375,000 shares of Jovic at $.01 per share. However,
Mr. Jamieson said that from a review of his working papers
and other records he has determined that the Appellant personally
made loans totalling $7,790.00 to Jovic.
[13] From the
evidence presented by Mr. Jamieson and from an analysis of the
Exhibits that were filed I have concluded as follows:
a)
Jovic was insolvent in 1994;
b)
Jovic did not carry on an active business after 1994;
c)
Subsequent to 1994 the fair market value of the shares of Jovic
was "NIL".
d)
Jovic was likely to be dissolved after 1994 and was dissolved in
June 2001.
[14] In
determining her income for the 1999 taxation year the Appellant
is entitled to claim an ABIL in connection with the shares of
Jovic that she purchased and the unpaid loans that she made to
Jovic. The ABIL should be calculated as follows:
32,000 shares at
$0.25
=
$ 8,000.00
Un-repaid loans
October 8, 1991 $2,400.00
May 6,
1991
$2,390.00
March 8, 1994
$3,000.00
$7,790.00
$ 7,790.00
$15,790.00
75%
$11,842.50
[15] The
Minister is instructed to allow the Appellant to claim an ABIL in
the amount of $11,842.50 in determining her income for the 1999
taxation year.
Signed at
Vancouver, British Columbia, this 23rd day of December
2002.
J.T.C.C.
COURT FILE
NO.:
2002-894(IT)I
STYLE OF
CAUSE:
Victoria Gallo and
Her Majesty the Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
December 16, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
December 23, 2002
APPEARANCES:
For the
Appellant:
The Appellant herself
Counsel for
the
Respondent:
Nadine Taylor-Pickering
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-894(IT)I
BETWEEN:
VICTORIA
GALLO,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeal heard
on December 16, 2002, at Vancouver, British Columbia,
by
the
Honourable Judge L.M. Little
Appearances
For the
Appellant:
The Appellant herself
Counsel for
the
Respondent:
Nadine Taylor-Pickering
JUDGMENT
The appeal from the assessment made under the Income Tax
Act for the 1998 taxation year is allowed, without
costs, and the assessment is referred back to the Minister of
National Revenue for reconsideration and reassessment in
accordance with the attached Reasons for Judgment.
Signed at
Vancouver, British Columbia, this 23rd day of December
2002.
J.T.C.C.
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