Docket: 2006-444(IT)I
BETWEEN:
MICHAEL PICARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
____________________________________________________________________
Appeal
heard on September 21, 2006, at Montréal, Quebec.
Before: The Honourable
Justice Louise Lamarre Proulx
Appearances:
|
For the Appellant:
|
The Appellant himself
|
|
Counsel for the Respondent:
|
Jean Lavigne
|
____________________________________________________________________
JUDGMENT
The appeal from the assessment
under the Income Tax Act for the 2003 taxation year is allowed and the
assessment is referred back to the Minister of National Revenue for
reconsideration and reassessment on the basis that an amount of $1,166.96 must
be deducted from the Appellant's unreported income along with an amount of
$1,500 for business expenses. The amount of the penalty must be computed
accordingly. The whole in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 29th day of September 2006.
"Louise
Lamarre Proulx"
Translation certified true
on this 24th day of July 2007
Monica F. Chamberlain,
Translator
Citation: 2006TCC531
Date: 20060929
Docket: 2006-444(IT)I
BETWEEN:
MICHAEL PICARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre Proulx J.
[1] This is an appeal, under the informal
procedure, pertaining to the 2003 taxation year.
[2] The facts set out in paragraphs 6 and
7 of the Amended Reply to the Notice of Appeal (the "Reply") are
as follows:
[TRANSLATION]
6. In making and confirming the assessment in respect of the
2003 taxation year, the Minister relied on the same assumptions of fact,
namely:
(a) during the taxation year in issue, the Appellant and his
son distributed "Public-Sacs" [plastic bags containing advertising
flyers] in the "Aux quatre vents" district for Marcel Hamel, Jr.;
(b) until June 26, 2003, the Appellant was remunerated by
cheque payable to his son Jesse Parent Picard;
(c) these cheques were endorsed both by the Appellant and his
son;
(d) from June 26 to July 31, 2003, the cheques that Mr.
Hamel remitted to the Appellant were payable to "cash";
(e) those cheques were endorsed only by the Appellant;
(f) From July 31, 2003 to the first week of December 2003,
the Appellant was paid in cash; and
(g) The remuneration from this source received by the
Appellant in the course of the taxation year in issue totalled $10,510;
7. The facts relied upon in imposing the penalty under
subsection 163(2) of the Act for the 2003 taxation year, are as follows:
(a) the Appellant reported no business income during the
taxation year in issue; and
(b) the Appellant's unreported income for the taxation year
in issue represents 29% of his employment income and 22% of his total income.
[3] Marcel Hamel, Jr. is the Appellant's
next-door neighbour. In 2002, Jesse Parent Picard, the
Appellant's son, got a contract from that neighbour to distribute advertising
flyers to roughly 245 households in the vicinity twice a week. His father,
Michael Picard, supported him in these efforts. Jesse is now 18 years old,
which means that he was 15 in 2003.
[4] Later on — in
June 2003, he says — the Appellant told Mr. Hamel
that his son wanted to increase his income. Mr. Hamel told the Appellant about a
neighbourhood where a car would have to be used, and in which 2,400 households
were to be covered twice a week. Mr. Hamel said that the contract could
only be entered into with an adult who had a car, and that the Appellant was
the person who agreed to carry out the work. The Appellant says that it
was his son Jesse who did so.
[5] Throughout his
testimony, the Appellant claimed that he had very little to do with this
agreement, and that it was
Jesse who looked after everything with his mother and little brother.
Nathalie Parent, Jesse's mother, also said that she was the person who
drove the car for the purposes of Jesse's work.
[6] However, this is
not what Mr. Hamel
testified. He said that Nathalie Parent helped put the advertising flyers
in the bags, but that he never saw her with her son Jesse and the Appellant
while advertising bags were being distributed.
[7] The remuneration
was at least $400 per week. Jesse said that he gave all this money to his
father. He did not deposit this money into a personal bank account. He did not
keep any specific books; he relied on his father.
[8] Mr. Hamel
declared bankruptcy. Ginette
Borduas, a Canada Revenue Agency officer, audited the bankrupt's books to
determine the claims of the Minister of National Revenue
(the "Minister") in the bankruptcy. Several people worked for
Mr. Hamel's business. The auditor issued T4 slips in respect of those
people. Exhibit I‑1 is the auditor's compilation of the amounts that
Mr. Hamel paid the Appellant.
[9] As stated in the Reply, the auditor saw
that the cheques issued until June 26, 2003, were payable to
Jesse Parent Picard. They were endorsed by both the father and the
son. Both the father and the son explained that the son's bank account did not
permit immediate access to funds. The son preferred that his father cash the
cheques, which explains why handed them over to him.
[10] The larger amounts
of money paid subsequently were either in the form of cash, or cheques payable to
"cash." According to
Mr. Hamel, the payments of these amounts began when the route became much
longer and needed to be done by car.
Analysis and
conclusion
[11] I am of the opinion
that the evidence has disclosed that the initial service agreement was
genuinely between Mr. Hamel
and Jesse Parent Picard. This version is common to all the parties
and is plausible considering the factual circumstances of this case.
The route could be done by a teenager, and that was who the cheques were
payable to. The amounts paid totalled $1,166.96.
[12] I am also of the opinion that, starting in
June, the service agreement was between Mr. Hamel and the Appellant. In
order to perform that agreement, a car was needed. The Appellant's son did not
have a driver's licence or a car at the time. According to the payor's books,
the cash and the cheques payable to "cash" were given to the
Appellant. The son did not deposit these amounts into his bank account and did
not account for the amounts received. In this regard, he trusts his father.
In fact, he did not act like the owner of this income in any way.
[13] The Minister determined that this income
was income from a business in the Appellant's hands. The Appellant could have
sought to deduct business expenses such as the use of his car and fuel. He
also appears to have made certain payments to Jesse and his friends. In
early 2004, the Appellant appears to have purchased a $4,000 car for his
son to compensate him for his efforts, and Jesse appears to have purchased a $1,800
sound system.
[14] The Appellant did
not itemize any expenses incurred to earn the business income. Business income
is rarely earned without incurring expenses. Normally, it is up to taxpayers to
keep a record of their expenses. However, this is a case in which the Appellant
is not represented by counsel. I believe that in view of the work that was
performed, namely, running a delivery route twice a week, I can allow motor
vehicle expenses of $1,500. It would be difficult for me to grant any
remuneration at all to the people who were involved in the business because
none of them reported any income.
[15] As for the penalty imposed under
subsection 163(2) of the Income Tax Act, I must take account
of the fact that the Appellant clearly intended to omit certain income from his
tax return. Thus, I am of the opinion that the penalty must be maintained.
[16] The appeal is allowed to the extent that
the unreported income must be reduced by $1,166.96, which was genuinely earned
by Jesse, and by $1,500 for business expenses. The amount of the penalty must
be determined accordingly.
Signed at Ottawa, Canada, this 29th day of September
2006.
"Louise Lamarre Proulx"
Translation certified true
on this 24th day of July 2007
Monica F. Chamberlain,
Translator
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