Citation: 2009TCC489
Date: 20090930
Docket: 2009-371(IT)I
BETWEEN:
SANDY RAWLINSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] The issue in
this appeal is whether the Appellant is entitled to claim certain amounts as
expenses in computing her income in 2003.
[2] The Appellant started
work as a real estate salesperson in 2003 with Prudential Achievers Realty. She
indicated that she had previously been a real estate salesperson, but had been
out of the business for awhile and had to start all over again in 2003. When
she initially filed her tax return for 2003, she claimed that her commissions
were $37,400 and her expenses were $34,709 with the result that her net
business income was $2,691. She was reassessed for 2003 to include $35,399 in
unreported income from Achievers Real Estate Ltd. (which presumably was the
company that was carrying on business as Prudential Achievers Realty).
Following this reassessment the Appellant filed an amended income tax return
claiming additional business expenses to reduce her net business income to
$12,107.
[3] Of the expenses that were claimed by the Appellant,
the following amounts have been allowed as a deduction in computing her income
for 2003:
|
Item
|
Amount Claimed on
Original Return
|
Amount Claimed on
Amended Return
|
Amount Allowed
|
|
Tax, fees, licences etc.
|
$927
|
$927
|
$927
|
|
Insurance
|
$516
|
$516
|
$516
|
|
Meals and entertainment at
50%
|
$512
|
$512
|
$512
|
|
Telephone and utilities
|
$1,654
|
$1,654
|
$1,654
|
|
Internet
|
$238
|
$238
|
$238
|
|
Total:
|
$3,847
|
$3,847
|
$3,847
|
[4] The following
amounts that had been claimed as expenses on the original return (and in the
amended return) filed by the Appellant have not been allowed:
|
Item
|
Amount Claimed on
Original Return
|
Amount Claimed on
Amended Return
|
Amount Allowed
|
|
Subcontracts
|
$6,000
|
$28,500
|
$0
|
|
Advertising
|
$3,527
|
$5,782
|
$0
|
|
Motor
Vehicle
|
$9,797
|
$11,027
|
$0
|
|
Office
|
$2,622
|
$2,622
|
$0
|
|
Rent
|
$6,115
|
$6,115
|
$0
|
|
Gifts
|
$2,801
|
$2,801
|
$0
|
|
Total:
|
$30,862
|
$56,847
|
$0
|
[5] The issue in
this appeal is whether the Appellant is entitled to claim as expenses in
computing her income for the purposes of the Income Tax Act for 2003 all
or any part of these amounts that have been disallowed.
[6] In many appeals
the difficulty that an appellant faces is the absence of documentation to
support the expenses as claimed. In this particular case it is not the absence
of documents but the authenticity of the documents that were produced that is a
problem for the Appellant. Prior to the hearing the Appellant provided to the Respondent,
a number of “invoices” for various items. These were purported to be invoices
that the Appellant had received from Prudential Achievers Realty, the
Appellant’s spouse, and the person who had printed flyers for the Appellant.
Notwithstanding that the “invoices” were purportedly from various persons who
would be dealing with each other at arm’s length, all of these “invoices” have
identical formatting (including layout and font) and all include the statement
“paid in full” typed in the “invoice”.
[7] In addition to
the obvious identical appearance of the various “invoices”, the following
should also be noted:
(a) The “invoice” that purports to
be for the real estate fee charged by Prudential Achievers Realty states that
it is from “Prudendal realty” [sic]. The amount shown in the “invoice”
is $4,578. The total amount claimed by the Appellant for tax, fees, licences,
etc. was $927 and this amount was allowed. It does not appear that any amount
was claimed by the Appellant in relation to real estate fees.
(b) The “invoice” that purports to
be from the Appellant’s husband for distribution of flyers identifies the
person issuing the invoice as “L. Rawlinston” [sic]. Not only is
the last name not spelled correctly, but also the Appellant’s husband’s name is
Dennis Ross Rawlinson.
(c) The “invoice” which, according
to the accountant for the Appellant, supported the fact that the Appellant had paid
rent for the office space that she had at the premises of Prudential Achievers
Realty, identified the company issuing the “invoice” as “Prudental realty” [sic].
The description in the “invoice” was “FLYER DISTRUBUTION” [sic]. There
is no reference to rent in this “invoice”. Not only was “Prudential” not
spelled correctly in either one of the “invoices” that purportedly were from
“Prudential Achievers Realty”, it was misspelled differently in each invoice.
It seems logical to assume that if the invoices had been produced by Prudential
Achievers Realty, that the name of the issuer would have been spelled correctly
and the invoice would have included the full business name.
(d) The “invoices” that were
purportedly from N. Khan for printing flyers not only referred to printing, but
also to “distribution” and to “flyer distribution”. An amount was shown for
“distribution” but no amount was shown for “flyer distribution”. The Appellant
stated that her husband had distributed the flyers.
[8] It seems obvious
that these were not the original invoices that the Appellant had received from
any of these persons. Not only do these invoices not support the claims for the
amounts incurred by the Appellant but the actions of the Appellant in sending
these to the Respondent as if they were such invoices (which has resulted in
these invoices being introduced into evidence as such invoices) affects her
credibility. As a result, the Appellant is not entitled to claim any expenses
for subcontracts, real estate fees, advertising, or rent in computing her
income for 2003.
[9] The Appellant’s
claim for the amounts claimed as office expenses is unsubstantiated. The
Appellant introduced a photocopy of a spreadsheet showing two separate
schedules identified as “office”. Both schedules show a column of numbers
without any indication of what may have been acquired for each particular
amount. The total for one column is stated to be $1,387 and the total for the
other column is stated to be $4,196, without any explanation for the
discrepancy. It also appears that capital assets (a computer and a desk) may
have been included in the amounts claimed as expenses. Neither of the two
amounts in the schedule matches the $2,622 amount that was claimed by the
Appellant. The Appellant has not established that she incurred office expenses
totalling $2,622 or what other amount she actually incurred in 2003. No amount
will be allowed for office expenses.
[10] Counsel for the
Respondent in closing arguments stated that the Respondent was conceding that a
portion of the motor vehicle expenses should be allowed. Counsel for the
Respondent indicated that the Respondent would accept that the business use of
the motor vehicle was 72% of the total use of the vehicle. The Appellant drove
a Ford Focus in carrying on her business. The Appellant claimed the following
amounts in relation to this motor vehicle in her original tax return and in her
amended tax return:
|
Item
|
Original Amount
|
Amended Amount
|
|
Fuel
|
$1,596
|
$2,825
|
|
Insurance
|
$3,576
|
$3,576
|
|
Licence
and registration
|
$74
|
$74
|
|
Lease
payments
|
$4,552
|
$4,552
|
|
Total:
|
$9,798
|
$11,027
|
[11] Counsel for the
Respondent stated that the receipts for gas submitted by the Appellant added up
to $812 and this is the amount the Respondent would accept as the amount spent
on gas. The Appellant did not introduce any evidence to contradict this finding
of the Respondent. Therefore I accept that the Appellant incurred $812 for gas
in 2003.
[12] The Appellant
claimed $3,576 as the cost of insuring the vehicle. In support of this, the
Appellant introduced a copy of an amended certificate issued by ING Insurance
Co. of Canada. In this document, someone crossed out the two digits for the
year in the part identified as “EFFECTIVE” and wrote in “03”. The date shown as
the policy effective date on the right hand side (July 29, 2002) was unchanged
but the year part of the expiration date was changed by pen to “03”.
[13] It appears that
the effective date and the expiration dates were changed to suggest that this
policy was in effect in 2003. It appears from the form that the cost of
insuring the Ford Focus for the period from either July 29, 2002 to December 6,
2002 (or July 29, 2003 to December 6, 2003) was $1,237 and counsel for the
Respondent stated the Respondent would accept a claim for insurance costs of
$1,237 for 2003.
[14] The insurance amount of $1,237 was for the period from
July 29 to December 6. This would mean that the cost of insurance was approximately $290 per month. The Appellant also
submitted another amended certificate (in which only the first name of the
insured was changed by pen) which indicated that the cost of insuring the Ford
Explorer for the period from May 14, 2002 to December 6, 2002 was $1,626 or
approximately $240 per month.
[15] In this case I
accept that the Appellant incurred insurance costs of $290 per month for 2003
in relation to the Ford Focus. Since as noted below, it appears that the
vehicle may not have been leased for the full 12 months, 11.2 x $290 =$3,248 is
the amount that will be accepted as having been spent on insuring this vehicle
in 2003. It also seems to me that the licence and registration would have been
required and the amount claimed to have been incurred ($74) seems to be a reasonable
amount and counsel for the Respondent acknowledged that the Respondent would
accept that the licence and registration cost was $74.
[16] The Appellant
stated that she leased the vehicle in 2003 and that the lease payments were
approximately $405 per month. I accept that the Appellant leased the Ford Focus
in 2003 and that the monthly lease payments were $405. For 12 months the
lease payments would be $4,860. The total amount claimed on the tax return was
$4,552 as lease payments so it appears that the vehicle may not have been
leased for the entire year. Based on $405 per month for the lease, it appears
that the vehicle was leased for 11.2 months. I accept that the Appellant
incurred a total of $4,552 as lease payments for the vehicle used in carrying
on her business in 2003.
[17] As noted above,
counsel for the Respondent stated that the Respondent would accept that 72% of
the use of the vehicle was for business use. The Appellant was unable to
provide any accurate evidence with respect to the actual number of kilometres
driven for business purposes or personal purposes. She stated she would drive
her vehicle from her home to the office and to meet her son for lunch. Therefore
there would be some personal use of the vehicle. The Appellant did not
introduce any evidence that would contradict a business use of 72% as proposed
by the Respondent. Simply stating that the vehicle was only used for business
when it was clearly used to drive from her home to the office is not sufficient
to change the percentage of business use as proposed by the Respondent. I
accept the percentage of business use as proposed by the Respondent.
[18] Therefore, the
total amount that will be allowed as motor vehicle expenses is the following:
|
Item
|
Amount
Accepted
|
|
Fuel
|
$812
|
|
Insurance
|
$3,248
|
|
Licence
and registration
|
$74
|
|
Lease
payments
|
$4,552
|
|
Total:
|
$8,686
|
|
Business
Use (72%):
|
$6,254
|
[19] The Appellant
also claimed a deduction for gifts in the amount of $2,801. She also had very
little evidence to support this claim. There are some receipts for items that
she claimed she purchased as gifts but there was no reconciliation of the
receipts to the total amount claimed of $2,801. She stated that she bought a
fridge for one person to complete a deal, but no receipts were provided for the
purchase of the fridge and therefore it is impossible to determine whether that
purchase occurred in 2003 or the amount that was spent on the fridge.
[20] Without adequate
receipts and without an adequate explanation with respect to the amounts spent
on gifts the Appellant cannot succeed with respect to her claim for $2,801 for
gifts in 2003.
[21] In Chrabalowski
v. The Queen, [2005] 1 C.T.C. 2054, Associate Chief Justice Bowman
(as he then was) stated as follows:
8 It boils
down to this. I am sure that there are probably buried in the expenses claimed
amounts that should be allowed, but I cannot determine what they are because
they are mixed in with so many unproved or implausible claims.
…
12 One problem
faced by an appellant in a case of this sort is that if there is a series of
excessive, implausible or unreasonable claims it casts doubt on all of the
claims. In other words, once a pattern of implausibility or excessiveness is
established the court is inclined to scrutinize with greater care claims that,
standing alone, might be sustainable. In other words, any gaps left in the
evidence are filled in, and any doubts resolved, in a manner that is consistent
with the pattern….
[22] In this case, it
seems to me, the Appellant probably should have expenses that she incurred in
relation to her activities as a real estate sales representative for Prudential
Achievers Realty in addition to the amounts that have been allowed. However, in
this case, as noted above, the Appellant put forward a number of “invoices”
that obviously were not from the sources that the Appellant claimed that they
were from. As noted, this affects her credibility and casts doubt on other
claims that the Appellant is making. The Respondent has conceded that expenses
related to the motor vehicle should be allowed. As a result, the Appellant will
only be entitled to claim the expenses in relation to the motor vehicle. The
expenses proposed by the Respondent are adjusted to reflect a greater amount
incurred for insurance and the lease payments incurred by the taxpayer, but
otherwise the Appellant is not entitled to claim any additional amounts.
[23] As a result, the
appeal is allowed, without costs, and the matter is referred back to the
Minister of National Revenue for reconsideration and reassessment on the basis
that the Appellant is entitled to claim additional motor vehicle expenses in
computing her income for 2003 in the amount of $6,254.
Signed at Toronto, Ontario, this 30th day of September, 2009.
“Wyman W. Webb”
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