|
Citation: 2009 TCC 11
|
|
Date: 20090108
|
|
Docket: 2006-252(IT)G
|
|
BETWEEN:
|
|
AAPEX DRIVING ACADEMY LTD.,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Little J.
A.
FACTS
[1] Aapex Driving Academy Ltd. (“Aapex” or
the “Appellant”) was incorporated under the laws of the Province of Ontario in 1994.
[2] At all material times, Christine Raby
(“Raby”) and her brother, Michael Racine (“Racine”), owned 51% and 49% of the common shares respectively of Aapex.
[3] The Appellant owned and operated a
driving school that offered both classroom instruction and in-car driving
lessons to its customers.
[4] The
classroom instruction and driving lessons were taught by driving instructors
employed by the Appellant.
[5] Raby maintains that she was an employee
of the Appellant.
[6] Raby maintains that she received a
salary from the Appellant in the following amounts (Transcript, p. 110, lines
20 – 21):
(a)
2000
- $28,000;
(b)
2001
- $30,000; and
(c)
2002
- $0.
[7] Raby stated that she owned between 22
to 27 automobiles and one truck (the “Vehicles”) during the relevant taxation
years.
[8] The Vehicles were registered and licensed
in Raby’s name (Transcript, p. 103, lines 2 – 5).
[9] Raby said that she provided the
Vehicles to the Appellant for its use in operating its business; the Vehicles
were used by the driving instructors during driving lessons.
[10] The Minister of National Revenue (the
“Minister”) determined that Raby charged the Appellant a fee for the use of the
Vehicles based upon a per kilometre rate (“Vehicle Fees”).
[11] The Vehicle Fees for each of the 2000,
2001 and 2002 taxation years were calculated based on rates prescribed under
Regulation 7306 of the Income Tax Regulations (“Regulations”).
[12] At the end of each taxation year, the
Appellant credited the Vehicle Fees in a shareholder account shared by Raby and
Racine (the “Shareholder Account”). The following amounts were used in the
respective taxation years:
(a)
2000
- $273,991;
(b)
2001
- $343,959; and
(c)
2002
- $431,946.
[13] The Minister determined that the Vehicle
Fees credited in the Shareholder Account were divided equally between Raby and
Racine.
[14] The Appellant paid all of the operating
expenses relating to the use of the Vehicles including gas, loan payments,
license payments, insurance, maintenance and repairs (the “Vehicle Operating
Expenses”).
[15] At the end of the 2000, 2001 and 2002
taxation years the Appellant made an adjusting entry in its books to reverse
most of the Vehicle Operating Expenses for the year by debiting the amount of
the Vehicle Operating Expenses in the Shareholder Account.
[16] The following Vehicle Operating Expenses
were not adjusted in the books of the Appellant (the “Unadjusted Operating
Expenses”):
(a)
2001
- $19,914 for insurance;
(b)
2001
- $34,383 for maintenance and repairs; and
(c)
2002
- $7,619 for interest on loan payments for the Vehicles.
[17] Raby maintains that her portion of the
Vehicle Fees credited in the Shareholder Account was never received by her.
Instead, Raby maintains that she received cash payments of approximately $580 a
week from the Appellant for the use of the Vehicles (“Cash Payments”).
[18] Raby maintains that the Appellant made
the following Cash Payments to Raby for the use of the Vehicles:
(a)
2000
- $31,660;
(b)
2001
- $48,010; and
(c)
2002
- $30,160.
[19] The net of the amounts debited and
credited in the Shareholder Account that were in excess of the Cash Payments
remained in the Shareholder Account.
[20] In computing its income, the Appellant:
(a)
sought
to carry‑back a non-capital loss of $62,541 from its 2001 taxation
year to its 1998 taxation year; and
(b)
sought
to carry‑back non-capital losses of $17,816 and $33,457, respectively,
from its 2001 taxation year and 2002 taxation year to its 2000 taxation year.
B.
ISSUES
TO BE DECIDED
[21] The issues are as follows:
(a)
whether
the Appellant is entitled to claim non-capital losses of $62,541 in computing
its income for its 1998 taxation year;
(b)
whether
the Appellant is entitled to claim non-capital losses of $17,816 and $33,457
carried over from the 2001 and 2002 taxation years, respectively, in computing
its income for the 2000 taxation year.
C.
ANALYSIS
[22] The Minister determined that the
Appellant did not incur the Unadjusted Operating Expenses of $54,297 and $7,619
in the respective 2001 and 2002 taxation years.
[23] The Minister also determined that it was
not reasonable for the Appellant
to pay for any Vehicle Operating Expenses in addition to the Vehicle Fees that
it paid to its shareholders.
[24] The Minister reassessed the Appellant’s
1998 and 2000 taxation years and reduced Aapex’s available non-capital loss
carry-back in each of Aapex’s 1998 and 2000 taxation years.
[25] The Minister stated that the
reassessments and the revised amounts are as follows:
|
Taxation Year
|
Aapex Assessed Income Tax
|
|
|
Losses Originally Claimed
|
Reduction in Application of Losses from 2001 and 2002
|
Available non-capital loss carry-back
|
|
1998
|
$ 62,541
|
$ 36,481
|
$ 26,060
|
|
2000
|
51,273
|
25,435
|
25,838
|
[26] During the hearing, neither counsel for the Appellant nor
counsel for the Respondent made any submissions or arguments with respect to
the Notices of Reassessment issued by the Minister of Aapex’s income tax under
this appeal.
[27] Canadian courts have established that the onus is on the
taxpayer to prove that the reassessments are incorrect. Based on the lack of
any evidence and argument regarding available carry-back or carry‑forward
of losses, I reject the Appellant’s position on the issues under appeal.
[28] The appeals are dismissed, without
costs.
Signed at Vancouver,
British Columbia, this 8th day of January 2009.
Little
J.
Email this Content