Docket: 2008-1091(IT)I
BETWEEN:
BRIAN JOHN TAYLOR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on November 24, 2008 at Calgary, Alberta
By: The Honourable Justice
Judith Woods
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Valerie Meier
|
____________________________________________________________________
JUDGMENT
In respect of
assessments made under the Income Tax Act for the 2005 and 2006 taxation
years, it is ordered that:
1. the appeal in respect of the 2005 taxation
year is quashed; and
2. the appeal in respect of the 2006 taxation year is
allowed, and the assessment is referred back to the Minister of National Revenue
for reconsideration and reassessment on the basis that legal fees in the amount
of $ 200 are deductible in computing income.
Each party shall
bear their own costs.
Signed at Ottawa, Canada this 4th day
of December 2008.
“J. Woods”
Citation: 2008TCC664
Date: 20081204
Docket: 2008-1091(IT)I
BETWEEN:
BRIAN JOHN TAYLOR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1] The appellant, Brian Taylor, appeals assessments made
under the Income Tax Act in respect of his 2005 and 2006 taxation
years.
[2] The 2005 taxation year will be considered first. The
appeal with respect to this year will have to be quashed because Mr. Taylor did
not take the necessary procedural steps to file a notice of objection with
respect to this year. Mr. Taylor conceded at the hearing that no objection had
been filed.
[3] I now turn to the 2006 taxation year. Mr. Taylor seeks
two adjustments with respect to this year.
[4] The first concerns withdrawals that Mr. Taylor made
from RRSPs in the amount of $33,657.78. This amount was included in Mr.
Taylor’s income and he seeks to have it excluded.
[5] The second item in dispute is a deduction that Mr.
Taylor claimed for legal fees in the amount of $8,108.90. The Minister has disallowed
this deduction in its entirety.
[6] Mr. Taylor filed separate notices of appeal for each
of the issues. In each, the reasons stated for the appeal concern alleged
improper actions by employees of the Canada Revenue Agency.
[7] In regards to the RRSP issue, the notice of appeal
states:
I feel I have a right
to not pay the tax on the RRSPs I had to take out to investigate what should
have been promptly investigated by the CRA. I had to take RRSPs out and pay the
CRA that was breaking their own laws.
[8] In regards to the legal expense issue, the other
notice of appeal states:
The
Appellant submits a claim to legal fees on grounds the Respondent breached the
Privacy Act and the Income Tax Act.
[9] At the hearing, Mr. Taylor provided an organized and
detailed account of the events surrounding alleged misconduct by certain
employees of the Canada Revenue Agency.
[10] In general, the events include alleged improper access
to CRA computer records of tax information regarding Mr. Taylor and his relatives.
The persons alleged to have taken this action were CRA employees, including an
employee who is related to Mr. Taylor’s former wife.
[11] Following complaints registered by the alleged
victims, an investigation was conducted by the CRA, which concluded that a
relative had indeed improperly accessed the CRA computer records relating to
Mr. Taylor and his brother.
[12] Meanwhile, the 2004 taxation year of Mr. Taylor was
under review by the CRA, in a process that Mr. Taylor described as the “nasty
audit.” The tax returns of other relatives were also being reviewed.
[13] The problem that Mr. Taylor has in the appeal for the
2006 taxation year is that the jurisdiction of this Court is limited. The only
matter that can be decided in relation to the assessment for the 2006 taxation
year is whether the tax assessed has properly determined in accordance with the
provisions of the Income Tax Act.
[14] Several judicial decisions of the Federal Court of
Appeal that are binding on this Court have held that improper conduct of CRA
employees during an audit is not sufficient grounds to vacate or reduce the
assessment: Superior Filter Recycling Inc. v. The Queen, 2006 DTC 6491;
2006 FCA 248. That principle is applicable here.
[15] Mr. Taylor raised several arguments, including
arguments under the Taxpayers’ Bill of Rights and sections 7 and 24 of the Canadian
Charter of Rights and Freedoms.
[16] I make no finding as to whether there have been
breaches of these rights. Even if there had been breaches, it would not be a
sufficient reason to give the relief that Mr. Taylor seeks.
[17] That is not the end of the matter, however, because
the respondent raised the issue of whether all or part of the legal fees were
deductible under paragraph 60(o) of the Income Tax Act.
[18] Paragraph 60(o) permits a deduction in computing
income for fees paid in the year in preparing, instituting or prosecuting an
objection or appeal to an assessment. The relevant part of paragraph 60(o)
provides:
60(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,
[19] During cross-examination, Mr. Taylor testified that
the legal fees that are claimed relate to an objection of an income tax
assessment for the 2004 taxation year.
[20] The legal fees that were incurred relate to family law
matters and privacy complaints. I am not satisfied that there were significant
legal fees paid in 2006 that reasonably relate to the income tax assessment of
Mr. Taylor’s 2004 taxation year. However, I do think that it would be
appropriate to allocate a small amount of the legal fees paid in 2006 to the
objection process.
[21] Mr. Taylor submitted into evidence an invoice for
legal services by Pierre Boileau dated March 15, 2006 in the amount of
$638.41. The detail in the invoice contained one entry relating to the
equivalent-to-spouse deduction, which was the subject matter of the income tax
objection. As this was only one of nine entries in the invoice, I have
concluded that $100 of these legal fees are deductible on the basis that they
relate to the prosecution of the objection.
[22] Mr. Taylor also submitted an invoice for legal
services from Lacourciere Associates dated May 31, 2006. The total amount of
the invoice was $1,070. This invoice appears to relate entirely to pursuing a
complaint regarding alleged misconduct by CRA employees.
[23] The privacy matter is not directly related to the
income tax matter, but there is some connection because Mr. Taylor staunchly
believes that the CRA misconduct led to the audit of his 2004 taxation year.
Nevertheless, Mr. Taylor admits that Mr. Lacourciere was only tangentially
involved with the income tax objection. I have decided to allow a modest
allocation of Mr. Lacourciere’s invoice to advice regarding the income tax
objection. $100 will be allocated.
[24] In the result, the following orders will be issued:
1.
the appeal in respect of the 2005
taxation year will be quashed; and
2.
the appeal in respect of the 2006
taxation year will be allowed, and the assessment will be referred back to the
Minister of National Revenue for reassessment on the basis that legal fees in
the amount of $200 should be allowed.
[25] Since Mr. Taylor was for the most part unsuccessful in
the appeal, there will be no order as to costs.
Signed at Ottawa, Canada this 4th
day of December 2008.
“J. Woods”
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