Warren v. The Queen, docket 2000-2706-IT-I (Informal Procedure)

[OFFICIAL ENGLISH TRANSLATION]

2000-2706(IT)I

BETWEEN:

JULES WARREN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on December 10, 2001, at Québec, Quebec, by

the Honourable P.R. Dussault

Appearances

For the Appellant:                                The Appellant himself

Counsel for the Respondent:                Dany Leduc

JUDGMENT

The appeal from the assessment for 1995 is allowed and the assessment is referred back to the Minister of National Revenue (the "Minister") for reconsideration and reassessment on the basis that the appellant's income shall be reduced by the amount of $12,480 and that he shall be allowed a deduction of $2,270 in respect of expenses relating to a lot used for his businesses for that year.

The appeals from the assessments for 1996 and 1997 are allowed and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the appellant shall be allowed a deduction of $2,939 in respect of expenses relating to a lot used for his businesses for each of those years.

The whole in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 1st day of March 2002.

"P.R. Dussault"

J.T.C.C.

Translation certified true

on this 12^th day of May 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Date: 20020301

Docket: 2000-2706(IT)I

BETWEEN:

JULES WARREN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

P.R. Dussault, J.T.C.C.

[1]      These are appeals from assessments for the 1995, 1996 and 1997 taxation years. As a result of certain difficulties in identifying the points at issue, which difficulties necessitated an Amended Reply to the Notice of Appeal and subsequent discussions, it appears that an adjustment to the balance of the undepreciated portion of the capital cost of immovables owned by the appellant made by the Minister of National Revenue (the "Minister") on December 31, 1994, reducing that balance by $236,897, in no way affects the assessments made for the 1995, 1996 and 1997 taxation years. The Court therefore has no authority to rule on the validity of that adjustment.

[2]      Furthermore, counsel for the respondent acknowledged that the Minister had added $12,480 to the appellant's reported income in 1995 when the appellant had previously reported that amount. This error must therefore be corrected by the reassessment for that year.

[3]      A single point remains in issue between the parties. It concerns the disallowance of expenses of $3,405, $4,409 and $4,409 for 1995, 1996 and 1997 respectively. Those amounts represent interest expenses and property taxes in respect of a lot acquired by the appellant.

[4]      The appellant operates a real estate leasing business and a retail sales business. He is also a shareholder of a corporation by the name of Superlogique, of which he holds 75 percent of the shares. That corporation also owns a property. The lot was acquired by the appellant from that corporation. However, the contract of sale was not registered. After being disallowed the expenses relating to the lot for the years in issue, the appellant in turn apparently transferred the lot to the corporation.

[5]      According to the appellant, the City of Québec requires that the owners of apartment buildings make parking spaces available to tenants. The lot is thus used by the appellant's tenants and by those of Superlogique. It is also used by the appellant for his retail sales business.

[6]      During the years in issue, the appellant claimed all the expenses relating to the lot, even though the lot was also used for the purposes of Superlogique's business and no monetary compensation was given by Superlogique for its use.

[7]      According to the appellant, however, there was a form of exchange of services between the three businesses such that he was justified in claiming all the expenses relating to the lot. No valuation of those services was provided.

[8]      Assuming that the lot was used in roughly equal proportions for each of the three businesses, two of which were operated directly by the appellant, and giving him the benefit of the doubt as to its use for the sole purposes of the three businesses, I believe that he would have been entitled to deduct two-thirds of the expenses relating to the lot for the three years in issue.

[9]      Having regard to the foregoing, the appeal from the assessment for 1995 is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the appellant's income shall be reduced by the amount of $12,840 and that he shall be allowed a deduction of $2,270 in respect of expenses relating to a lot used for his businesses for that year.

[10]     The appeals from the assessments made for 1996 and 1997 are allowed and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the appellant shall be allowed a deduction of $2,939 in respect of expenses relating to a lot used for his businesses for each of those years.

Signed at Ottawa, Canada, this 1st day of March 2002.

"P.R. Dussault"

J.T.C.C.

Translation certified true

on this 12^th day of May 2003.

Sophie Debbané, Revisor