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Citation: 2004TCC387
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Date: 20040528
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Docket: 2004-461(IT)I
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BETWEEN:
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KENTON BROWN,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier,
J.
[1] This
appeal pursuant to the Informal Procedure was heard at Grande Prairie, Alberta
on May 20, 2004. The Appellant was the only witness.
[2] Paragraphs
2 to 10 inclusive of the Reply to the Notice of Appeal outline the matters in
dispute. They read:
2. In computing income for
the 1999 taxation year, the Appellant deducted a net business loss of
$20,133.00 from a business known as Mulberry Lane Variety, (hereinafter the
"Business"). The net business loss reported by the Appellant was
calculated as follows:
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Net Loss for
1999 from the Business
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$40,267
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50% Reported by
the Appellant
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$20,133
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3. The Appellant's 1999 income tax return was
initially assessed on September 11, 2001, and the net business loss reported by
the Appellant was allowed as claimed.
4. By Notice of Reassessment dated January 13,
2003, the Minister of National Revenue (the "Minister"), disallowed
the business loss claimed of $20,133.00 as the Appellant did not participate in
the Business as a partner or otherwise.
5. On April 9, 2003, the Appellant filed a
Notice of Objection to the Notice of Reassessment of January 13, 2003.
6. The Minister confirmed the reassessment of
the 1999 taxation year by means of a Notification of Confirmation dated
November 12, 2003.
7. In so reassessing the Appellant for the
1999 taxation year and in so confirming the reassessment, the Minister relied
on the following assumptions of fact:
(a) during the 1999 year, the
Appellant's spouse, Beverly Brown, was the sole proprietor of the Business;
(b) on filing her return for the
1999 year, Beverly Brown reported, among other things, a net loss from the
business of $40,267, being 100% of the net loss from the Business;
(c) on filing her return for the
years 1996, 1997 and 1998, Beverly Brown reported 100% of the loss from the
Business;
(d) on filing his returns for the
1996, 1997 and 1998 years the Appellant did not report any amount from the
Business;
(e) during the 1999 year, the
Appellant was not a partner of the Business, nor did he have any interest in
the Business.
B. ISSUES TO BE DECIDED
8. The issue is whether the Appellant is
entitled to claim a share of the loss from the Business.
C. STATUTORY PROVISIONS RELIED ON
AND RELIEF SOUGHT
9. He relies on sections 9, 96 and
103 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp) (the "Act")
as amended for the 1999 taxation year.
10. He submits that the Appellant is
not entitled to a deduction for any portion of the loss incurred from the
Business as he did not have a partnership interest, nor any other interest in
the Business during the 1999 year.
[3] Assumptions
7 (b), (c) and (d) were not refuted.
[4] The
evidence is that the Appellant and his wife, Beverly, purchased the Business
together on January 10, 1996 (Exhibit A-2). They registered the Business under
the Excise Tax Act in both names with a GST registration number
891717852RT (Exhibit A-1).
[5] Nonetheless,
Beverly then reported everything, including the sale of the Business, for
Income Tax purposes as being 100 per cent hers. Upon sale the Appellant
reported an additional 50 per cent of the concluding business loss as his.
[6] None
of the documents respecting the sale, and none of the reporting GST documents
were put in evidence.
[7] Based
on the reporting by Beverly described in assumptions 7 (b), (c) and (d) and the
lack of documentation after the date of purchase, it is entirely possible that
the entire business was transferred to Beverly after it was purchased.
[8] The
Appellant stated that all of their other businesses were in both their names
and that their accountant reported the 100 per cent in Beverly's name from 1996
until 1999 in error. If all of their businesses were in both names and they
were (as stated) using that accountant for everything, that "error"
is amazing since he would have been filling out forms for everything else in
both names and then, unusually, Mulberry Lane Variety, in Beverly's name.
[9] Moreover,
Kenton and Beverly were signing Income Tax returns similarly through those
years and allegedly failed to notice this unusual item.
[10] In these circumstances, without the supporting testimony of the
accountant in question and the GST documents for the years in question and any
other supporting evidence, it is quite possible that the business was indeed
100 per cent Beverly's, as assumed, and Kenton's testimony, by itself, has
failed to refute the remaining assumptions. In fact testimony by an accountant
or another professional person, admitting such an error, is not unusual where
such a thing actually occurs.
[11] For these reasons the appeal is dismissed.
Signed
at Ottawa, Canada, this 28th day of May 2004.
Beaubier,
J.
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