Docket: 2009-67(IT)G
BETWEEN:
HAROLD SHAPIRO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal
heard on December 14, 2010, at Toronto, Ontario
Before: The Honourable
Justice Valerie Miller
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Diana Aird
|
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under
the Income Tax Act for the 2005 year is dismissed in accordance with the attached Reasons for Judgment.
Costs are awarded to the Respondent.
Signed at Ottawa, Canada,
this 8th day of February
2011.
“V.A. Miller”
Citation: 2011TCC79
Date: 20110208
Docket: 2009-67(IT)G
BETWEEN:
HAROLD SHAPIRO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this
appeal is whether, for the 2005 taxation year, the Appellant was entitled to
deduct $57,201.85 which he paid as director’s liability under the Excise Tax
Act (ETA) and $3,195.85 which he paid for legal expenses.
[2]
The Appellant was a
director of Concept Imports International Inc. (Concept). It was the
Appellant’s evidence that he became director of Concept to establish a business
and to earn income for his family. Concept failed to remit Goods and Services
Tax (GST) to the Receiver General of Canada (the Receiver)
for the period July 1 to September 30, 1996 and by March 1997, Concept ceased
to carry on business.
[3]
By notice dated April
8, 2002, the Appellant was assessed $100,306.64 pursuant to subsection 323(1)
of the ETA for Concept’s failure to remit GST (director’s liability).
The Appellant appealed the assessment and the parties consented to Judgment
(the Consent). A Judgment of this Court, dated June 1, 2005, was issued in
accordance with the Consent wherein the Appellant was held liable to pay the
amount of $57,201.85.
[4]
The Appellant incurred
legal expenses of $3,195.85 with respect to the objection and appeal of the
assessment under the ETA.
[5]
The Appellant paid the
amounts of $57,201.85 and $3,195.85 in 2005 and claimed them as an expense made
in earning income on his 2005 income tax return.
[6]
It was the Appellant’s
position that his obligation to pay Concept’s debt arose in October 1996 when
Concept failed to remit GST to the Receiver. At this time, Concept was still in
business. The amount of GST and legal fees were paid to gain or produce income.
[7]
The Appellant’s payment
of his director’s liability to the Receiver was not made to gain or produce
income. It stems from GST which was paid to Concept by its customers as a tax
levy. The amount of $57,201.85 was collected by Concept who was deemed to hold
that amount in trust for Her Majesty in right of Canada[1]. In Concept’s hands, the GST was not
income, nor was it part of Concept’s income earning process[2]. Upon Concept’s
failure to remit, that liability was imposed on the Appellant, and the payment
is similarly not deductible.
[8]
The legal fees paid by
the Appellant to institute and prosecute his objection and appeal under the ETA
are also not deductible. Except where there is a specific provision in the Income
Tax Act (the Act), legal fees are deductible only to the extent that
they are incurred for the purpose of gaining or producing income from a
business or property and they are not made on account of capital[3]. In 2005, the
Appellant reported employment income, pension income and dividend income but no
self-employment income.
[9]
The specific provisions
of the Act are paragraphs 60(o) and 8(1)(b). They read:
60. Other
deductions -- There may be deducted in computing a taxpayer's income for a
taxation year such of the following amounts as are applicable:
(o) legal [or other] expenses [of objection or
appeal] -- amounts paid by the
taxpayer in the year in respect of fees or expenses incurred in preparing,
instituting or prosecuting an objection to, or an appeal in relation to,
(i) an
assessment of tax, interest or penalties under this Act or an Act of a province
that imposes a tax similar to the tax imposed under this Act,
(ii) a decision
of the Canada Employment and Immigration Commission, the Canada Employment and
Insurance Commission, a board of referees or an umpire under the Unemployment
Insurance Act or the Employment Insurance Act,
(iii) an
assessment of any income tax deductible by the taxpayer under section 126 or
any interest or penalty with respect thereto, or
(iv) an
assessment or a decision made under the Canada Pension Plan or a
provincial pension plan as defined in section 3 of that Act;
8. (1) Deductions
allowed -- In computing a taxpayer's income for a taxation year from an
office or employment, there may be deducted such of the following amounts as
are wholly applicable to that source or such part of the following amounts as
may reasonably be regarded as applicable thereto:
…
(b) legal
expenses of employee -- amounts paid by the taxpayer in the year as or on
account of legal expenses incurred by the taxpayer to collect or establish a
right to salary or wages owed to the taxpayer by the employer or former
employer of the taxpayer;
[10]
Legal fees incurred in preparing,
instituting or prosecuting an objection or an appeal with respect to the Income
Tax Act, the Employment Insurance Act and the Canada Pension Plan
are deductible pursuant to paragraph 60(o) of the Act. Legal
expenses of an employee are deductible if those expenses were incurred to
collect or establish a right to salary or wages[4].
Neither provision is applicable to the facts of this appeal.
[11]
For all of these reasons, the
appeal is dismissed with costs to the Respondent.
Signed at Ottawa, Canada, this 8th day of February 2011.
“V.A. Miller”
CITATION: 2011TCC79
COURT FILE NO.: 2009-67(IT)G
STYLE OF CAUSE: HAROLD SHAPIRO AND
HER
MAJESTY THE QUEEN
PLACE OF HEARING: Toronto,
Ontario
DATE OF HEARING: December 14, 2010
REASONS FOR JUDGMENT BY: The
Honourable Justice Valerie Miller
DATE OF JUDGMENT: February 8, 2011
APPEARANCES:
|
For the
Appellant:
|
The Appellant himself
|
|
Counsel for the
Respondent:
|
Diana Aird
|
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the
Respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa,
Canada
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