Citation: 2014TCC92
Date: 20140325
Docket: 2012-4137(IT)I
BETWEEN:
ALVIN BURLANDO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
Mr. Burlando appeals
the reassessment of his 2008 and 2009 taxation years. The issue is whether he
incurred employment expenses of $19,500 and $20,000, which the Appellant states
were wages he paid to his spouse in 2008 and 2009 respectively.
[2]
The Appellant is
employed as a sales manager with an automobile dealership in Coquitlam, British Columbia. In 2008 and 2009, he reported that he earned commission income of $135,355
and $115,113 respectively with total earnings of $141,409 and $121,615.
[3]
In his income tax
returns for 2008 and 2009, the Appellant reported that he had incurred total
employment expenses of $39,333 and $40,104 respectively. According to his
returns, the employment expenses included referral fees of $23,340 and $22,280
in 2008 and 2009.
[4]
At the audit stage of
this case, the Appellant wrote that, in 2008 and 2009, he had “misreported” the
amounts of $19,500 and $20,000 as referral fees. He wrote that these amounts
were assistant fees which he had paid to his spouse, Bonita.
[5]
Both the Appellant and
his spouse, Bonita, testified at the hearing of this appeal. They stated that
Bonita worked from home for the Appellant. Her hours were four to four and one
half hours a day, five days a week. Her hourly wage was $18 and she was paid by
cash or set off. The Appellant explained that he and his spouse had only one
bank account and it was a joint account. He didn’t see the sense of paying her
by cheque which she would deposit in their joint account. Instead, any amounts
which Bonita withdrew from the bank account or purchased with the debit card or
the Appellant’s credit card were set off against the wages she earned.
[6]
The Appellant submitted
the bank statements for their joint account for 2008 and 2009. He also
submitted a chart for each year which showed the amounts purportedly paid to
Bonita by way of set off. These amounts totalled $21,407.60 and $17,204.72 in
2008 and 2009.
[7]
The Appellant and
Bonita both described her duties as networking for the Appellant. She
telephoned people who had recently immigrated from South Africa to ascertain if
they were looking for a vehicle. She also checked Craigslist to see if there
was someone who was looking for a vehicle. If there was someone who was
interested in buying a vehicle, she would refer them to the dealership where
the Appellant worked. Bonita estimated she would make 4 to 6 telephone calls
some days and other days she would make no calls. She also sent birthday cards
to the Appellant’s customers.
[8]
It is my view that
neither the Appellant nor Bonita gave credible evidence. Their testimony was
inconsistent within itself and with the documentary evidence. Those
inconsistencies were as follows.
[9]
During cross
examination, Bonita stated that she stopped working for the Appellant in June
2013 and she had worked for him for three years. When she was reminded by
counsel that the years under appeal were 2008 and 2009, Bonita nevertheless
insisted that she worked for her spouse for three years. According to Bonita’s
evidence she did not work for the Appellant in 2008 and 2009 because she only
started to work for him in 2010.
[10]
Both witnesses
testified that Bonita worked four to four and one half hours for five days each
week making telephone calls and checking Craigslist. I found this testimony to
be self serving and unbelievable.
[11]
At the objection stage
of this case, the Appellant wrote to the Canada Revenue Agency (“CRA”) that
Bonita was his assistant and that he has misreported her wages on his income
tax return as referral fees. He described the duties she performed as his
assistant as follows:
The
assistant’s duties included the greeting of customers, demonstration of the
targeted vehicles, followed up calls from customers, communicated with stores
for accessories requested by customers, delivered sold vehicles to customers,
handled after sale services to include the pick up (sic) the vehicles
for routine services which was inherent to the sales.
The
assistant was usually around or available on call to the taxpayer and paid once
a month depending on the work done.
These duties bear no resemblance to those
which the Appellant and Bonita described at the hearing.
[12]
There was no
documentary evidence to support that the Appellant paid Bonita any wages. His
testimony that he paid her by setting off her wages against the amount she
charged on his credit card was not supported by any receipts. It is my opinion
that he randomly chose amounts from his bank statements and stated these
amounts were Bonita’s wages. For instance, some months he included his
daughter’s gym membership as part of Bonita’s wages and other months the gym
membership was not included as part of her wages. In 2008, the items he chose
as Bonita’s wages totalled $21,407.60 and in 2009, the items totalled
$17,204.72. There were no documents to support that the credit card charges,
the debit card payments or the cash withdrawals were made by Bonita.
[13]
Counsel for the
Appellant stated that the circumstances of this appeal were similar to those in
Noel v The Queen, 2011 TCC 27. I disagree. In Noel, Hogan J of
this court found that Ms. Noel had the skills to perform the duties for which
she was responsible and that she was paid by cheque for her services to her
spouse’s law firm. It was never an issue whether Ms. Noel actually worked in
her spouse’s business.
[14]
Counsel for the
Appellant submitted that neither witnesses’ testimony was contradicted by other
testimony or documentary evidence and that I should accept their testimony as
true. I note that Courts are not required to believe witnesses, even if they
are not contradicted. Their evidence may be implausible as a result of
circumstances revealed by documents, or simply on the basis of common sense: Lacroix
v R, 2007 TCC 376 at paragraph 12.
[15]
In the circumstances of
this appeal, I have concluded that the Appellant’s evidence was implausible. In
addition, his evidence with respect to Bonita’s duties and wages was not in
accord with prior statements he made to the CRA.
[16]
In conclusion, it is my
view that the Appellant has not satisfied the onus on him of showing that the
reassessment was incorrect. He has not shown that Bonita actually worked for
him or that he paid her any wages. In a situation such as existed in this
appeal, where there is an alleged working relationship between non-arm’s length
parties, there should have been some documentation or independent evidence to
support that working relationship. In this case, neither was given.
[17]
The appeal is dismissed.
Signed at Ottawa, Canada, this 25th
day of March 2014.
“V.A. Miller”
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