Longval v. The Queen, docket 98-2635(IT)I (Informal Procedure)

[OFFICIAL ENGLISH TRANSLATION]

98-2635(IT)I

BETWEEN:

RENÉ LONGVAL,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on March 15, 2000, at Trois-Rivières, Quebec, by

the Honourable Judge Alain Tardif

Appearances

Counsel for the Appellant:                             François Daigle

Counsel for the Respondent:                         Alain Gareau

JUDGMENT

          The appeal from the assessments made under the Income Tax Act for the 1993, 1994 and 1995 taxation years is dismissed in accordance with the attached Reasons for Judgment.

         

Signed at Ottawa, Canada, this 12th day of April 2000.

"Alain Tardif"

J.T.C.C.

Translation certified true

on this 21st day of October 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Date: 20000412

Docket: 98-2635(IT)I

BETWEEN:

RENÉ LONGVAL,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Tardif, J.T.C.C.

[1]      This is an appeal concerning the 1993, 1994 and 1995 taxation years.

[2]      The issue was correctly set out in the Reply to the Notice of Appeal. It is stated as follows:

                   [TRANSLATION]

. . .

to determine whether the expenses claimed annually in respect of the operation of the business, "Multi-Service R. L. Enr.", were incurred by the appellant during the 1993, 1994 and 1995 taxation

years for the purpose of gaining or producing income from a business;

. . .

[3]      The burden of proof is on the appellant. During his examination-in-chief, he testified convincingly that he had thought up and later created a business dedicated to landscaping.

[4]      The business's activities were to revolve around a very new concept in which landscaping plans would be worked out by computer. The appellant argued that he had the expertise in this area that was needed to carry out a project such as this. He also said that he had planned a cost-effective timetable spread out over three years. The name of the new business was "Multi-Services R. L. Enr".

[5]      Along with this new enterprise, the appellant was also the principal stakeholder in another business having virtually the same raison d'être. This structure was operated under the name of "Tournesol Inc." According to the appellant's testimony, the two entities had their own missions; their activities were to be both separate and inter-related. In other words, the two businesses were complementary, so to speak.

[6]      The cross-examination yielded quite a different picture, however. The appellant, who was obviously ill at ease, constantly referred to the accountant, a certain "Gélinas", who was, he said, the one solely responsible for entering the various numbers. Gélinas was not present and therefore never testified.

[7]      On a number of occasions, the appellant was unable to answer or explain certain facts that were nonetheless elementary, requiring no in-depth knowledge of accounting.

[8]      In fact, the documentary evidence, which basically consisted of documents provided by the appellant himself during the pre-trial stage showed clearly and unequivocally that the entity, "Multi-Service R.L. Enr.", was, in point of fact, a bogus business. There was absolutely nothing in the documentary evidence that supported the existence of a real business.

[9]      The appellant may indeed have wanted to translate his imaginary structure into a reality so that he could earn income. However, in actual fact, what existed was instead an incomplete creation where year-end adjustments were made in an attempt to make real something that was essentially imaginary.

[10]     The weight of the evidence was that the idea, the project, the appellant's intention were never logically and rationally carried out. Thus, there was never any real business.

[11]     On many occasions, the courts have recognized that a taxpayer can legitimately structure his affairs so as to reduce his tax burden to the extent that the provisions of the Income Tax Act are respected and the facts are consistent with the plans decided on or chosen.

[12]     In the case at bar, the appellant conceived some kind of planning but in fact never acted in accordance with his project. The evidence established that there was confusion in the two organizations where the figures and accounting entries were inconsistent with the claims made by the appellant.

[13]     The onus was on the appellant to demonstrate the merits of his claims. The weight of the evidence has established that the appellant's theoretical plans and intentions never translated into action.

[14]     The Court must decide on the basis of real facts and not on what the appellant may have wanted to do, especially since the documentary evidence very clearly showed that the appellant's theoretical plans had never really gone beyond the mental threshold.

[15]     For these reasons, the appeal is dismissed.

Signed at Ottawa, Canada, this 12th day of April 2000.

"Alain Tardif"

J.T.C.C.

Translation certified true

on this 21st day of October 2003.

Sophie Debbané, Revisor