J Wayne Bryant v. Minister of National Revenue, [1980] CTC 2529, 80 DTC 1428

Guy Tremblay:—This case was heard in Montreal, Quebec, on March 21, and May 14, 1979.

1. Point at Issue

The point is whether the appellant, a medical representative, may claim an expense of $1,261.50 as a portion of rent which he paid in 1975 for premises occupied as living quarters by himself and his wife.

2. Burden of Proof

The burden of proof is on the appellant’s shoulders. The reasessment issued by the respondent, indeed, is deemed to be correct and also the assumptions of facts on which the respondent based the reassessment. These assumptions of facts are also deemed to be correct unless the appellant contradicts them. These principles are explained by the Supreme Court of Canada in fl W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. The respondent's assumptions of fact

The respondent gives the assumptions of fact on which he based the reassessment issued on March 8, 1977. This paragraph reads as follows:

(a) the appellant was employed by Hoffman-La Roche Limited as a medical representative;

(b) the appellant was not required by his contract of employment to pay office rent or any other office expenses including the cost of supplies consumed directly in the performance of the duties of his employment;

(c) the expense in the amount of $1,261.50 claimed by the appellant was in respect of a portion of rent which he paid for an apartment consisting of a kitchen, a living room and one bedroom occupied as living quarters by himself and his wife;

(d) the expense claimed was not reasonable in the circumstances.

4. The facts according to the appellant

4.01 During the taxation year 1975, the appellant was employed by Hoffman-La Roche Limited as a medical representative.

4.02 After addressing an application for employment dated July 8,1974 (Exhibit A-9), the appellant received a letter dated July 25, 1974 (Exhibit A-8) confirming his employment with Hoffman-La Roche commencing August 1, 1974.

4.03 This confirmation, however, was subject to certain conditions:

Please note that final consideration for employment and continuing employment with Roche will be conditional upon:

1. À satisfactory pre-employment medical examination and subsequent periodic medical examination by the company’s doctor, as required.

2. Acceptance of fidelity bond by bonding company.

3. Satisfactory completion of reference checks.

4. Observation of the company’s rules, regulations and instructions as made known at the time of employment or at any subsequent time.

5. Become an accredited Pharmaceutical Medical Representative at the earliest possible date.

Your basic starting salary will be $750 per month, plus car, expenses and other benefits as discussed with Mr Gould. Your headquarters will be in Halifax.

4.04 Mr Stanley L Robertson, Controller of Hoffman-La Roche Limited testified that in fact the appellant, just as the 49 other representatives of the company, has to maintain an office and telephone in his own home in order to carry out his responsibilities.

4.05 Mr Robertson confirmed what he wrote in a letter dated May 12, 1978 (Exhibit A-2) concerning conditions of employment of the appellant:

We certify to the following:

(1) As a condition of employment he is requested to maintain a room in his home where he could perform the required clerical duties, such as:

(a) completing various reports

(b) phoning customers

Also use this room for:

(a) storing of stationery and various reports

(b) storing of sales literature

(c) storing of medical information, text and reference books, etc

(d) maintain a business contact for his customers on a local basis.

(2) A company automobile is supplied to Mr Bryant and /3 of the rental value of the car was shown as a taxable benefit on his T-4 earning slip.

(3) All substantiated business related expenses incurred by him are reimbursed by us. No travelling or automobile allowance is paid.

(4) His territory was Halifax, Dartmouth, the south shore and the Annapolis Valley.

4.06 Mr Robertson said that all those conditions are explained to the salesmen. They must have at their disposal more than ten boxes of different documents.

4.07 In his testimony the appellant proved (Exhibit A-3) to the satisfaction of the Board that 75% of the amount claimed was for an apartment in Dartmouth (January 1 to June 30) and % of the rent for an apartment in Halifax (July 1 to December 31). He claimed $697.50 (Dartmouth) and $470 (Halifax) totalling $1,167.50. In fact, this amount was admitted by both parties.

5. Law—Precedent Cases—Comments

5.1 Law

The main section of the new Income Tax Act involved in the case at bar is subparagraph 8(1 )(i)(ii). It reads as follows:

In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:

(i) amounts paid by the taxpayer in the year as

(ii) office rent, or salary to an assistant or substitute, the payment of which

by the officer or employee was required by the contract of employment.

5.2 Precedent Cases

The counsel for the respondent referred to the following cases:

1. Ronald D Knudson v MNR, [1970] Tax ABC 223; 70 DTC 1153;

2. George O Hill v MNR, 34 Tax ABC 169; 64 DTC 1;

3. Perry Brooks v HMQ, [1978] CTC 761; 78 DTC 6505;

4. Gordon J Skinner and Gerald Gross v MNR, [1973] CTC 2260; 73 DTC 208;

5. Winifred I Potter v MNR, 19 Tax ABC 30; 58 DTC 157.

5.3 Comments

Based on the legal provision as quoted above, the argument of the respondent is that in the contract of employment (described in paragraph 4.03) the appellant was not required to rent an office.

It is the Board’s opinion that the requirements described in the contract were not necessarily all the conditions of the employment.

It is not said that the appellant had to be a driver. It is not said that the appellant had to transport more than 10 boxes of samples for distribution to pharmacists and physicians, or that he had to keep them in his apartment.

The evidence shows that the written contract was completed by verbal agreement, and that the reality conforms to the contract and the law.

6. Conclusion

The appeal is allowed and the matter is referred back to the respondent for reassessment in accordance with the above reasons for judgment.

Appeal allowed.