Hamlyn,
J.T.C.C.:—The
essence
of
these
appeals
is
whether
the
appellant
or
a
corporation
associated
with
the
appellant
carried
on
business
for
the
taxation
years
in
question
and
whether
the
appellant
was
part
of
the
ownership
of
a
condominium
leased
out
for
rental
income.
The
appeals
were
heard
under
the
informal
procedure.
They
are
appeals
for
the
1987,
1988
and
1989
taxation
years.
The
Minister
of
National
Revenue
(the
"Minister")
pleads
in
1987
the
appellant
understated
business
income
by
$3,427
and
deducted
the
amount
of
$6,250
as
carrying
charges,
in
1988,
the
appellant
deducted
business
losses
amounting
to
$2,490.50
and
failed
to
report
rental
income
of
$732
and
business
income
of
$10,398
and
in
1989,
the
appellant
deducted
business
losses
amounting
to
$2,133.52
and
failed
to
report
rental
income
of
$2,479
and
business
income
of
$6,746.
In
reassessing
the
appellant
for
the
1987
taxation
year,
the
Minister
disallowed
the
deduction
of
carrying
charges
in
the
amount
of
$6,250
and
added
business
income
in
the
amount
of
$3,247.
For
the
1988
taxation
year,
the
Minister
disallowed
the
deduction
of
business
losses,
added
business
income
of
$10,398,
added
rental
income
of
$732
and
allowed
additional
capital
cost
allowance
of
the
rental
property
in
the
amount
of
$732.
For
the
1989
taxation
year,
the
Minister
disallowed
the
deduction
of
business
losses,
added
business
income
of
$6,746,
added
rental
income
of
$2,479,
allowed
capital
cost
allowance
for
the
rental
property
in
the
amount
of
$2,479
and
allowed
carrying
charges
in
the
amount
of
$889.
The
appellant's
position
From
the
notice
of
appeal:
My
objection
is
firstly,
to
the
assumption
that
any
business
carried
out
by
Trent-x
Electronic
Accounting
Services
duly
registered
and
owned
by
742267
Ontario
Inc.
(documents
attached)
[not
reproduced]
is
to
be
treated
as
a
that
of
a
SOLE
PROPRIETOR
instead
of
that
of
the
Corporation
named
in
the
registration
and
named
in
the
banking
resolutions
namely
“742267
Ontario
Inc.”
registered
October
29/87.
In
reassessing
the
appellant,
the
Minister
made
certain
assumptions
of
fact.
These
assumptions
were
accepted
by
the
appellant
at
the
first
day
of
trial
(June
30,
1993):
—the
appellant
operated
an
unincorporated
business
under
the
names
of
Trent-x
Electronic
Accounting
Systems/Services,
Trentx
Management
and
Trentx
Consulting
as
a
sole
proprietorship
(the
"sole
proprietorship”)
—the
address
of
the
sole
proprietorship
was
the
appellant's
residence;
—the
appellant
described
his
business
activity
as
supplying/installing
minicomputer
systems,
bookkeeping,
investment
consulting
and
preparation
of
tax
returns;
—the
appellant's
business
income
from
the
sole
proprietorship
for
1987,
1988
and
1989
was
$8,489.99,
$10,397.85
and
$6,746.21
respectively;
—the
appellant
incorporated
742267
Ontario
Ltd.
(the
"corporation")
on
October
29,
1987;
and
—the
assets
of
the
sole
proprietorship
were
neither
transferred
nor
rented
to
the
corporation.
Certain
other
matters
flowed
from
the
evidence
on
the
second
day
of
trial
(March
3,
1994)
that
confirmed
other
assumptions:
—accounting
records
were
not
maintained
for
the
corporation;
—the
income
statements
for
the
sole
proprietorship
submitted
with
the
appellant's
T1
returns
covered
the
12-month
period
from
January
1
to
December
31
of
the
years
in
question;
—the
first
and
only
T2
return
for
the
corporation
was
filed
on
December
9,
1989
for
a
purported
16-month
period
ended
March
31,
1989,
reporting
gross
revenue
of
$7,000
and
a
loss
of
$8;
and
—the
rental
income
from
50
Scarborough
Golf
Club
Road
for
the
1988
and
1989
taxation
years
amounted
to
$732
and
$2,479
respectively.
At
the
hearing
of
the
appeal
the
appellant
raised
the
issue
of
the
ownership
of
the
rental
premises.
In
the
notice
of
appeal
the
appellant
stated
the
ownership
was
joint
ownership:
The
third
objection
is
with
the
mortgage
interest
on
a
townhouse
rented
to
produce
income.
Jointly
owned
by
my
spouse
and
I,
we
lived
there
until
June
1,
1988.
Issues
The
issues
at
trial
addressed
the
following:
—was
the
appellant
or
was
the
corporation
carrying
on
business
for
the
years
in
question;
and
—in
relation
to
the
rental
income
—
who
was
the
landlord
of
the
rental
premises,
that
is,
was
it
the
appellant,
the
appellant’s
wife
or
the
appellant
and
his
wife.
Legislation
Taxation
year
Subsection
249(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
reads
as
follows:
249
(1)
For
the
purpose
of
this
Act,
a
“taxation
year”
is
(a)
in
the
case
of
a
corporation,
a
fiscal
period,
and
(b)
in
the
case
of
an
individual,
a
calendar
year,
and
when
a
taxation
year
is
referred
to
by
reference
to
a
calendar
year
the
reference
is
to
the
taxation
year
or
years
coinciding
with,
or
ending
in,
that
year.
Fiscal
period
Subsection
248(1)
of
the
Act
reads
as
follows:
"fiscal
period"
means
the
period
for
which
the
accounts
of
the
business
of
the
taxpayer
have
been
ordinarily
made
up
and
accepted
for
purposes
of
assessment
under
this
Act
and,
in
the
absence
of
an
established
practice,
the
fiscal
period
is
that
adopted
by
the
taxpayer
(but
no
fiscal
period
may
exceed
(a)
in
the
case
of
a
corporation,
53
weeks,
and
(b)
in
the
case
of
any
other
taxpayer,
12
months,
and
no
change
in
a
usual
and
accepted
fiscal
period
may
be
made
for
the
purposes
of
this
Act
without
the
concurrence
of
the
Minister).
Books
and
records
Subsection
230(1)
of
the
Act
reads
as
follows:
230(1)
Every
person
carrying
on
business
and
every
person
who
is
required,
by
or
pursuant
to
this
Act,
to
pay
or
collect
taxes
or
other
amounts
shall
keep
records
and
books
of
account
(including
an
annual
inventory
kept
in
prescribed
manner)
at
his
place
of
business
or
residence
in
Canada
or
at
such
other
place
as
may
be
designated
by
the
Minister,
in
such
form
and
containing
such
information
as
will
enable
the
taxes
payable
under
this
Act
or
the
taxes
or
other
amounts
that
should
have
been
deducted,
withheld
or
collected
to
be
determined.
Evidence
analysis
—
Was
the
corporation
or
the
sole
proprietorship
carrying
on
business
With
slight
variation,
the
overall
evidence
impression
was
the
business
was
that
of
the
appellant
as
a
proprietorship
and
not
the
corporation.
No
separate
accounting
records
were
kept
for
the
corporation.
The
corporation
did
not
appear
to
have
any
assets.
Corporation
tax
returns
were
not
filed
except
for
the
return
of
December
9,
1989
and
the
validity
of
the
contents
of
that
return
is
questionable.
The
business
appeared
to
operate
under
several
names
including
Trent-X,
Trentax,
Trentx
Management,
Trent-X
Electronic
Accounting
Services,
Trent-X
Electronic
Accounting
Systems,
Trent-X
Accounting
Systems/Services,
Tentx
Consulting,
Trent-X
Systems,
Tren-Tax,
Trent-X
Inc.
and
Trentax
Accounting
Services.
The
statements
filed
with
the
individual
returns
of
the
appellant
and
the
one
questionable
corporation
return
were
not
supported
with
the
records
kept.
Bank
deposits
did
not
correspond
with
revenues
stated.
In
particular,
for
the
questionable
corporate
return
that
was
filed,
the
appellant
could
not
show
any
record
to
support
the
stated
revenue
or
the
stated
expenditures.
Moreover,
with
respect
to
that
return
the
corporation
did
not
obtain
permission
in
accordance
with
the
Act
to
change
its
year
end
and
more
particularly,
and
in
any
event,
the
tax
year
of
the
corporation
as
claimed
by
the
corporation
was
beyond
the
scope
of
the
Act.
It
is
of
significance,
at
the
audit
stage
the
appellant
told
the
auditor
the
filing
was
done
in
error.
The
tax
auditor
from
Revenue
Canada,
who
gave
his
evidence
in
a
clear
forth
right
manner
said
he
spent
considerable
time
and
effort
going
over
all
the
appellant’s
business
affairs
and
he
could
not
find
anything
in
terms
of
financial
records
to
show
that
the
corporation
had
carried
on
business,
as
alleged.
Outside
the
documentation
filed
(i.e.,
the
incorporation
papers,
two
provincial
filing
declarations,
a
letter
from
the
Toronto-Dominion
Bank
and
the
disputed
T2
filing)
all
other
documentation
including
a
trust
declaration
and
agreement
from
the
National
Trust
and
cancelled
cheques
indicate
the
business
was
that
of
the
appellant
and
not
the
corporation.
As
a
conclusion,
I
am
of
the
opinion
the
business
activity
was
that
of
the
appellant
and
not
the
corporation.
Evidence
analysis
—
rental
property:
Was
it
a
sole
proprietorship
or
joint
proprietorship?
All
the
registered
documentation
supported
the
ownership
of
the
rental
property
as
being
in
the
joint
ownership
of
the
appellant
and
his
wife.
The
appellant’s
wife
was
not
called
to
give
evidence
although
the
appellant
did
file
a
letter
from
his
wife
indicating
she
was
the
sole
owner
of
the
property.
This
letter,
in
the
absence
of
any
other
supporting
documentation
or
other
supporting
evidence,
was
given
very
little
weight.
I
conclude
the
condominium
rental
business
was
a
joint
operation
of
the
appellant
and
his
wife.
Conclusion
This
Court
concludes
the
appellant
and
not
the
corporation
for
the
taxation
years
in
question
carried
on
the
business
under
review
and
the
Minister
was
correct
in
his
assessments
of
the
appellant
for
the
1987,
1988
and
1989
taxation
years.
This
Court
further
concludes
in
relation
to
the
rental
income
the
source
of
income
(the
condominium)
was
owned
and
operated
equally
by
both
the
appellant
and
his
wife
for
the
1989
taxation
year.
Decision
The
appeals
are
dismissed.
Appeals
dismissed.
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