Citation: 2010TCC153
Date: 20100318
Docket: 2009-3692(IT)I
BETWEEN:
PATRICK J. LONG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The issue in
this appeal is whether the Minister of National Revenue correctly assessed the
Appellant, Patrick Long, for a taxable benefit for parking pursuant to
paragraph 6(1)(a) of the Income Tax Act:
(a) Value of
benefits – the value of board, lodging and other benefits of any kind whatever
received or enjoyed by the taxpayer in the year in respect of, in the course
of, or by virtue of an office or employment, except any benefit
…
[2] The undisputed
facts are these: in 2004 and 2005, the Appellant was employed as a mechanic by
Adelaide Motors Inc., a car dealership located in downtown Toronto.
Adjacent to the lot occupied by the dealership was a lot[1] (“Parking Lot”) in which some Adelaide Motors
employees parked their vehicles. The Appellant was not required to use a
vehicle in the performance of his duties as a mechanic. He did not have a
vehicle of his own but had access to one. While he sometimes drove a vehicle to
work and parked it in the Parking Lot, he also took public transport, rode his
bike or caught a ride to Adelaide Motors.
[3] In February 2007[2], the Minister conducted a payroll audit of Adelaide
Motors’ 2004 and 2005 taxation years which led, in turn, to the company’s
issuance of amended T-4’s to certain employees ascribing a taxable benefit for
the use of the Parking Lot during those years. The Appellant received a letter[3] from Adelaide Motors in May 2008 which included T-4
slips showing a taxable benefit for parking of $1,201.75 and $1,311,
respectively, and advising that he would be reassessed accordingly by the
Canada Revenue Agency.
[4] At the hearing of these appeals the Appellant represented himself and testified on his
own behalf. Apart from what struck me as a slight under-estimation of his
overall usage of the Parking Lot, the Appellant’s testimony was knowledgeable
and convincing; in particular, his description of the Parking Lot, its general
use and availability to employees and others, and the circumstances under which
he came to park a vehicle there.
[5] Also called on
the Appellant’s behalf was Victoria Cunningham. Ms. Cunningham said they
had been together since 1996 and that during the taxation years under appeal,
the Appellant had access to her two vehicles.
[6] The Respondent’s
only witness was Tammy Tsakonas. Ms. Tsakonas was employed by Adelaide Motors
as a controller from April 2003 until it ceased business operations in 2006. As
such, she was responsible for bookkeeping, banking, paying bills and doing the
payroll. Her position did not confer on her any authority over the Parking Lot,
its use or availability to employees.
[7] While both Ms.
Cunningham and Ms. Tsakonas were generally credible witnesses, their testimony
suffered from the same weakness: each tried to frame her answers to be
favourable to the position taken by the party who called her to testify. Ms.
Cunningham’s allegiance to the Appellant’s position arose out of their personal
relationship; Ms. Tsakonas was more closely aligned with Adelaide Motors,
probably because of her responsibilities as controller, her involvement in the
company’s payroll audit, and having had to act as a sounding board for
complaints about parking.
[8] The Minister’s assessment was based on the assumptions
of fact set out in paragraph 11 of the Reply to the Notice of Appeal:
11. In determining the Appellant’s tax liability for
the 2004 and 2005 taxation years, the Minister made the following assumptions
of fact:
(a)
the employer provided free
parking to the Appellant, which the Appellant made use of, while he was working
at the employer’s place of business, in each of the 2004 and 2005 taxation
years;
(b)
the Appellant was a car salesman
working out of a dealership that was next door to where the dealership leased
the parking spots at issue;
(c)
the parking was not considered
to be “scramble” parking and the number of leased parking spaces available,
accommodated most, if not all, of the employees, who were assigned, and
specifically designated, the use of them;
(d)
the Appellant had the use of a
motor vehicle throughout the 2004 and 2005 taxation years;
(e)
the Appellant occasionally
commuted to work by public transit or by other means;
(f)
the Appellant did not regularly
use a motor vehicle in the performance of his duties;
(g)
the direct cost to the employer
of one leased parking space was $95 per month plus PST of $7.60 and GST of
$6.65, a total of $109.25 per month;
(h)
the Appellant’s parking benefits
were computed as follows:
2004 $109.25 x 11 months = $1,201.75
2005 $109.25 x 12 months = $1,311
[9] The Appellant
had the onus of rebutting the assumed facts with which he disagreed. For the
reasons set out below, I am satisfied that the Appellant successfully
demolished the key assumptions underpinning the Minister’s 2004 and 2005
assessments and has proven that he did not receive a taxable benefit for
parking in 2004 and 2005.
[10] I accept the
Appellant’s evidence that Adelaide Motors had never, directly or indirectly,
discussed the use of the Parking Lot with him. It was only by word of mouth
that he learned of the practice adopted by other employees who sometimes parked
there. Further, he never expected or asked to have parking made available to
him as part of his employment. I also accept his evidence that had he known
parking was to form part of his remuneration, he would not have accepted it nor
would he have used the Parking Lot.
[11] As for his employer, I do not believe that Adelaide Motors ever considered the question of
parking, either as a business deduction, a taxable benefit to its employees, or
in any other respect, until the Minister’s intervention during its payroll
audit. Support for this finding lies in the letter from Adelaide Motors of May
6, 2008[4] and Ms. Tsakonas’ testimony that, notwithstanding her
position as controller and her involvement in the audit, she was as surprised as
anyone to find herself on the wrong end of a taxable benefit assessment for
parking.
[12] It goes without
saying that an assessment is not incorrect by virtue only that the taxpayer was
not aware of his vulnerability to tax under the Act[5]. However, before a taxable benefit can accrue under paragraph
6(1)(a), there must be evidence of the receipt of a benefit; surely that
finding must be predicated on at least a smattering of evidence of an intention
on the part of the employer to provide, and on the part of the employee, to
accept something identified as being of benefit to the employee.
[13] In the present
case, at no time during the taxation years under appeal had Adelaide Motors
turned its mind to the implications, either for itself or its employees, of the
use of the Parking Lot. That question did not arise until the 2007 audit. Also
mitigating in the Appellant’s favour is what was “provided” in the way of parking.
Both the Appellant and Ms. Tsakonas testified that during 2004 and 2005, there
were no assigned parking spaces. I accept the Appellant’s evidence that there
were, at most, 12 spots for a minimum of 15 employees; I did not, however, give
much weight to the Respondent’s list of employees[6] who were entitled to use the Parking Lot because it
was prepared long after the fact and then, for the purposes of the audit. The
same is true of the map of the Parking Lot[7] marked “as at Jan 4/06” which purported to show
that certain spots had been assigned to particular employees. It was only then
that Adelaide Motors instituted an “assigned parking” policy; by that time, the
Appellant was on leave from work because of an injury.
[14] Finally, I accept
the Appellant’s evidence that available spaces in the Parking Lot were sometimes
occupied by the vehicles of unidentified non-employees, including an old van
that remained in one of the spaces for several months and the cars of clients
of a neighbouring business, Berkley Studios Inc. Although not intended for this
purpose, Ms. Tsakonas’ evidence confirmed this description of the Parking Lot’s
use. She explained, with some understandable frustration, that it was not her
job to track down these interlopers and force them to remove their vehicles. Further,
even if there had been a clear policy in respect of parking at Adelaide Motors,
she did not have the necessary authority to designate spaces for the use of
individual employees or to enforce such designations. This left her in the
unenviable position of having to listen to complaints about the Parking Lot
over which, ultimately, she had no control. As for her suggestion that while
there were no assigned spaces, the Appellant was guaranteed a spot because his
shift started earlier than those of other employees, that, in itself, does not
suffice to convert “scramble parking” into the sort of assigned parking
considered in decisions like Adler v. R.[8] and Schroter v. R.[9]. In those cases, the taxpayers were senior executives
in a large corporation with an express policy on assigned parking which had
been disclosed to the employees in question and was made available to them as a
result of their status in the company, quite the opposite of the present
circumstances.
[15] Finally, the
evidence left me in some doubt as to the nature of the relationship between
Adelaide Motors and the (apparent) owner of the Parking Lot, Berkley Studios
Inc. Ms. Tsakonas produced one invoice dated October 1, 2005[10] as proof that Adelaide Motors paid a monthly rental
for the Parking Lot to Berkley Studios Inc., such rental charges having formed
the basis for the Minister’s calculation of each employee’s taxable benefit. The
Appellant alleged that the two companies were somehow controlled by the same
person and suggested the value assigned to the Parking Lot had more to do with
providing Adelaide Motors with a sizeable business expense deduction than reflecting
the actual value of individual parking spaces.
[16] There
was insufficient evidence before me to make specific findings as to the
relationship between the two companies but I am persuaded that there was more
to the story than was revealed in the Minister’s assumptions. Whatever their
connection and even if Adelaide Motors was renting the Parking Lot from Berkley
Studios Inc., its purpose in doing so remains a mystery. In any event, the
Appellant succeeded in putting the valuation of the parking into question
thereby shifting the onus to the Minister. There being no persuasive evidence
from the Respondent as to the actual value of the parking, I am unable to
conclude that the amount ascribed to the assumed benefit was correct.
[17] In summary, the
Appellant found himself in a similar position to that of the taxpayer in Rachfalowski
v. R.[11], a case in which an insurance executive was assessed
for the value of a golf club membership notwithstanding that he “… hated golf,
could not golf and did not golf”[12].
At the time the membership was made available to him by his employer, the
taxpayer tried, in vain, to refuse it, to substitute it for a membership in a
curling club, or to be paid its cash equivalent. In the circumstances, Chief
Justice Bowman allowed the appeal on the basis that, from an objective
perspective, if there was any benefit in the membership, it accrued more to the
employer than the taxpayer.
[18] In the present
matter, the availability of parking in the Parking Lot was of no benefit to
Adelaide Motors because the Appellant’s employment duties did not require him
to have a vehicle on the premises. As for what the Appellant got out of it, on
the few days he drove to work, he had, at best, a chance of finding an
available space for his car in the Parking Lot. This put him in no better
position that the unidentified interlopers mentioned above who took advantage
of Adelaide Motors’ unregulated parking practices to use the Parking Lot for
free. In all the circumstances and notwithstanding the well-researched and
clearly presented submissions of counsel for the Respondent, I am unable to
conclude that the Appellant received a taxable benefit within the meaning of
the legislation in the 2004 and 2005 taxation years.
[19] The appeals are allowed and the assessments of the Minister of National
Revenue are vacated.
Signed at Ottawa, Canada, this 18th day of March, 2010.
“G. A. Sheridan”
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