Lorenzo P. Orsetto v. Her Majesty the Queen (Informal Procedure), [1993] 2 CTC 2320

Christie, A.C.T.C.C.J.:— This appeal is governed by the informal procedure prescribed by section 18 and following sections of the Tax Court of Canada Act, R.S.C. 1985, c. T-2.

The year under review is 1990. The notice of appeal reads:

I am writing to request an informal procedure appeal for my 1990 tax return.

Revenue Canada has denied my business mileage to our U.S. head office which is just outside of Windsor, Ontario (i.e., just across the border). Also, they have disallowed the T2200 form that was submitted with my taxes. I understand their reason for disallowing this form is because of the signature. My T2200 was signed by the Controller ana not the President.

Paragraphs 1 to 6 inclusive of the reply to the notice of appeal read:

1. Except as expressly admitted hereinafter, he (the Deputy Attorney General of Canada) denies the facts alleged in the notice of appeal.

2. In respect of the second paragraph of the notice of appeal he admits that the appellant did not file with his return of income for the 1990 taxation year a prescribed form T2200 signed by his employer.

3. In computing income for the 1990 taxation year the appellant deducted the amount of $6,502.35 as other employment expenses which he reported as follows:

Accounting and legal fees	$ 200.00
Automobile expenses	5,771.23
Entertainment	347.58
Office expenses	183.54
Total	$6,502.35

4. In assessing the appellant for the 1990 taxation year, the Minister of National Revenue (the "Minister") disallowed the deduction of other employment expenses.

5. In so assessing the appellant, the Minister made the following assumptions of fact:

(a) the appellant was, at all material times, employed by Louis A. Wright & Associates [1] (the employer");

(b) in his income tax return for the 1990 taxation year, the appellant reported employment income in the amount of $7,141.15;

(c) in the 1990 taxation year the appellant earned no commission income;

(d) in the 1990 taxation year the appellant was employed from January 1 to March 15,1990 and received unemployment insurance benefits for the remainder of the year;

(e) the employer ceased operating in May of 1990;

(f) the appellant did not file prescribed form T2200 (declaration of conditions of employment) with his income tax return for the 1990 taxation year and form T2200 subsequently filed by the appellant was dated April 1991 and was not duly authorized by the employer;

(g) the appellant was not required under his contract of employment with the employer to pay the employment expenses.

B. ISSUES TO BE DECIDED

6. the issue is whether the appellant is entitled to deduct employment expenses pursuant to paragraphs 8(1)(f), 8(1)(h), 8(1)(h.1), 8(1)(i) or 8(1)(j) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the"Act").

The appellant testified that from January 1 to March 15, 1990, he was employed by Louis A. Wright & Associates Canada Inc. which he said was “a Canadian division” of Louis A. Wright Inc., a United States corporation based in Plymouth, Michigan. The business was that of marketing IBM mid-range systems. The appellant was a sales representative in southern Ontario and he was expected to incur "some expenses" including automobile. He said he did not receive an allowance or reimbursement for any of the travelling or automobile expenses he incurred in 1990. The appellant added that with his return of income for that year he filed a declaration of conditions of employment. This form is usually referred to as a T2200. He was notified by Revenue Canada that a T2200 had not been filed with the return and the claimed expenses were disallowed. The appellant says that he resubmitted a T2200 along with receipts. Revenue Canada raised questions about whether this document complied with the law. The agent for the appellant, Mr. R.J. Jackson, produced a copy of a 12200 and the appellant confirmed that it was a copy of the T2200 he filed with his return. It is Exhibit A-1.

The foregoing is the substance of the appellant's evidence in chief.

It should be noted at this point that in the course of argument Mr. Jackson abandoned the appeal regarding the accounting and legal fees, entertainment and office expenses set out in paragraph 3 of the reply to the notice of appeal. This reduced the issue to be decided to automobile expenses in the sum of $5,771.23.

In cross-examination a letter dated December 13, 1991, addressed to the appellant from Revenue Canada was placed in evidence. It requested: "A duly authorized T2200 form. Receipts and vouchers to verify expenses claimed in the amount of $6,502.35.” The T2200 that was sent to Revenue Canada on January 2, 1992, in response to this request was placed in evidence as Exhibit R-7.

Exhibit A-1 is a T2200 form revised by Revenue Canada in 1988. Exhibit R-7 is a T2200 form revised in 1989. Although these forms are substantially the same, no explanation was given about why in response to the letter of December 13, 1991, the appellant did not simply provide a copy of Exhibit A-1. Also there is no explanation with respect to white out marks" on Exhibit A-1. Both forms relate to a 1988 Chevrolet Caprice and these statements are made in both:

2. The number of kilometres (KM) driven for employment use in the year: 8,000.

3. The total number of KM travelled by the automobile in the year while it was owned or leased: 8,000.

4. The number of days in the year the automobile was owned or leased: 365.

5. The number of days in the year the automobile was used for employment: 365.

The forms also say that the employment in 1990 was from January 1, 1990, to March 15, 1990. Both give Ontario as the "area of travel". Exhibit A-1 is dated April 5,1991, and is signed by Karen Elliott as Assistant Controller of L.A. Wright & Associates. She also signed Exhibit R-7 in that capacity. It is dated April 1991 but no date is specified.

Also placed in evidence is Exhibit R-8, a" mileage log" submitted to Revenue Canada by the appellant. It relates to January 8, 1990 to February 5, 1990. The total is 8,000 kilometres. About 4,600 kilometres relate to travel in the United States to Plymouth, Michigan, where, as previously indicated, the parent company of the appellant's employer was located. All but a relatively small percentage of the travel occurred in January 1990.

Mr. Emil Varden, an appeals officer with Revenue Canada, stated that there was no evidence in Revenue Canada's file that a T2200 was filed with the appellant's 1990 return of income. In the course of argument it was confirmed by the appellant that his employer ceased to exist as an operating company in May 1990. It may even have ceased to exist as a corporate entity at that time.

In Youngman v. Canada, [1990] 2 C.T.C 10, 90 D.T.C. 6322 (F.C.A.), Mr. Justice Pratte in delivering the reasons for judgment of the Court said at pages 13-14 (D.T.C. 6325):

I will deal first with the question of onus of proof. The rule is well known. When the Minister has, in his pleadings, disclosed the assumptions of facts on which the assessment was made, and when, as is the case here, it is not contested that the assessment was in fact based on those assumptions, the taxpayer has the onus of disproving the Minister’s assumptions.

No contest of the kind stated arises in respect of this appeal. The onus referred to can be discharged on a balance of probability. But applying that standard of proof I am not satisfied on the evidence above that the T2200 was filed with the appellant’s return of income for 1990 as required by subsection 8(10) of the Income Tax Act. Further I am not satisfied that the automobile expenses were incurred under circumstances allowing them to be deducted in computing the appellant's income. Additionally there is nothing before the Court from which it can conclude that the deductions sought meet the “reasonable in the circumstances" test set out in section 67 of the Act. In short, this appeal lacks the evidentiary support to enable it to succeed. Accordingly it is dismissed.

Appeal dismissed.