Date:
20021002
Docket:
2002-1746-IT-I
BETWEEN:
ROBERT
DEBOU,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Judgment
Bowie
J.
[1]
The Appellant is a lawyer who lives in Richmond, B.C., and has
his office in West Vancouver. His practice is largely in the
field of litigation and it takes him to courthouses and various
other locations all over the lower mainland, and occasionally to
the interior of B.C. He is appealing to this Court from
reassessments of his income tax for the years 1998 and 1999.
Initially, he disputed the disallowance of the expenses that he
had claimed for advertising and promotion, meals and
entertainment, motor vehicle expenses and travel. At the
beginning of the hearing he abandoned his claims for advertising
and promotion and for meals and entertainment.
[2]
The dispute with respect to travel expense
involves three trips in the year 1999. Two of these were to
Osoyoos, B.C. in connection with a personal injury claim in which
he initially expected to act for the plaintiff. The other was a
trip to Calgary, Alberta where he consulted a computer technician
in whom he had exceptional confidence in connection with a crash
of his personal organizer, and the consequential potential loss
of data, and also in connection with some difficulties
encountered with his laptop computer.
[3]
The Appellant made the first trip to Osoyoos at
a time when he thought that he would be retained by a young man
who had been seriously injured while in Vancouver. He did some
investigation there, and hired a private investigator to do more.
He did not have a signed retainer, but it would appear that he
and the young man did have a solicitor-client relationship.
Eventually other counsel was retained, and the Appellant did not
recover his expenses from the client. The Respondent opposed the
deduction of the cost of this trip on the basis that it should be
regarded as a debt due from the client. I do not agree. There
does not appear to have been any agreement by the client to pay
these expenses and he was never billed for them. The case, had it
been conducted by the Appellant, would have been on a
contingent-fee basis. The trip to do some basic investigation and
to seek the retainer was a legitimate expense of the Appellant's
business. The Appellant made the second trip to Asoyus to attempt
to get a retainer signed by this same individual. Counsel for the
Respondent accepted during the hearing that this was a legitimate
business expense. In my view both these trips were.
[4]
The Appellant's trip to Calgary was also made
for a legitimate business purpose. The fact that he took the
trip, and the purpose of it, were not seriously challenged during
the hearing. It might be argued that it is not reasonable to go
from Vancouver to Calgary to consult a particular computer
consultant about a personal organizer and a laptop computer.
However, the Minister has not pleaded section 67 of the Income
Tax Act. Moreover, I do not think it can be said that this
expense is one that no reasonable businessperson would make. It is not for either the
Minister of National Revenue or the Court to tell the Appellant
where to get technical service for his computer. The Appellant's
travel expenses should be allowed as claimed by him.
[5]
I turn now to the Appellant's claim for motor
vehicle expenses. The Appellant has placed himself at a
considerable disadvantage in respect of this issue by not
maintaining a contemporaneous log of his vehicle use. The amounts
he claimed for business use are $8,743 for 1998 and $13,499 for
1999. These amounts were based on the total use of one vehicle,
as the Appellant uses one vehicle for his work, including
commuting between his home and his office, and has another
vehicle that is used for travel that is not related to his
business. The Minister allowed 50% of the amount claimed in each
year, on the basis that the use of the vehicle is divided evenly
between commuting from home to the office and travel from the
office, or home, to a courthouse, client's home or office, or
some other work place. The Appellant testified that prior to the
hearing before me he had gone through all of his client billing
sheets for the years under appeal and had calculated the mileage
driven by him on business, and had thereby established that the
ratio of business to non-business use was 80% in each year.
However this ratio is predicated on the assumption that when he
went out of his way to pick up his secretary or his legal
assistant on the way to the office, as he often did, then the
trip was a deductible one. Excluding these trips yielded a ratio
of slightly less than the 50% that the Minister allowed. The
Appellant concedes that his numbers are estimates, but he
maintains that they are conservative estimates. It appears to me
that when the personal use for travel to the place of work and
back is excluded the 50% allowed by the Minister is a reasonable
estimate, and certainly more in line with reality than the 80%
claimed by the Appellant.
[6]
At the hearing, the Minister sought to exclude
from the automobile expense total the amount of repairs made to a
vehicle that the Appellant had taken in payment of an unpaid
debt, on the basis that it was for repairs which were of such a
substantial nature that they should be capitalized. However, this
amount, as I understand it, had been allowed by the Minister in
his assessment, and had not been put in issue in the appeal; in
any event, I do not have sufficient evidence before me to
determine that the outlay was on capital rather than current
account. The Appellant has failed to discharge the onus
disproving the Minister's assumption, specifically pleaded,
that his motor vehicle expenses incurred to earn income did not
exceed $4,371.50 in 1998 and $6,749.50 in 1999. The appeal fails
on this issue.
[7]
In the result, then, the appeal for 1998 is
dismissed. The appeal for 1999 is allowed, and the assessment is
referred back to the Minister for reconsideration and
reassessment on the basis that the Appellant is entitled to
deduct the full amount claimed by him for travel expense. There
will be no costs to either party.
Signed at
Ottawa, Canada, this 2nd day of October, 2002.
J.T.C.C.
COURT FILE
NO.:
2002-1746(IT)I
STYLE OF
CAUSE:
Robert Debou and
Her Majesty the Queen
PLACE OF
HEARING:
Vancouver, British Columbia
DATE OF
HEARING:
September 27, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge E.A.
Bowie
DATE OF
JUDGMENT:
October 2, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel
for the
Respondent:
Ron D.F. Wilhelm
COUNSEL OF
RECORD:
For the
Appellant:
Name:
N/A
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-1746(IT)I
BETWEEN:
ROBERT
DEBOU,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Appeals
heard on September 27, 2002, at Vancouver, British Columbia,
by
the
Honourable Judge E.A. Bowie
Appearances
For the
Appellant:
The Appellant himself
Counsel
for the
Respondent:
Ron D.F. Wilhelm
JUDGMENT
The appeal
from the assessment of tax made under the Income Tax Act
for the 1998 taxation year is dismissed.
The appeal from the assessment of tax made under the Act
for the 1999 taxation year is allowed and the assessment is
referred back to the Minister of National Revenue for
reconsideration and reassessment on the basis that the Appellant
is entitled to deduct the full amount claimed by him for travel
expense.
There will be no costs to either party.
Signed at
Ottawa, Canada, this 2nd day of October, 2002
J.T.C.C.
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