Watson
D.J.T.C.:
This
appeal
was
heard
at
Sherbrooke,
Quebec
on
April
24,
1996
under
the
informal
procedure.
The
appeal
relates
to
the
1991
taxation
year.
In
calculating
his
income
for
1991
the
appellant
deducted
the
sum
of
$3,750
from
his
rental
income
as
lost
rental.
On
October
20,
1994
the
Minister
of
National
Revenue
(“the
Minister”)
issued
a
notice
of
reassessment
for
the
1991
taxation
year
in
which
he
refused
to
allow
him
the
deduction
of
$3,750
for
lost
rental.
In
making
this
reassessment
the
Minister
assumed
the
following
facts:
[TRANSLATION]
(a)
on
June
1,
1988
the
appellant
purchased
immovable
properties
at
551
Ontario
Street
and
1255
Dominion
Street
in
Sherbrooke;
(b)
on
December
20,
1991
the
appellant
sold
the
said
immovable
properties;
(c)
during
the
period
from
June
1,
1988
to
December
20,
1991
the
appellant
reported
the
following
gross
rental
income
in
his
tax
returns:
|
Years
|
Gross
rental
|
|
|
income
|
|
|
1988:
|
$
11,490
|
(7
months)
|
|
1989:
|
$
16,840
|
|
|
1990:
|
$
16,220
|
|
|
1991:
|
$
6,810
|
(11
and
2/3
months)
|
|
(d)
|
in
the
aforesaid
years
the
appellant
reported
his
rental
income
on
a
cash
|
|
basis;
|
|
|
(e)
|
in
his
tax
return
for
the
1991
taxation
year
the
appellant
claimed
a
de
|
|
duction
of
$3,750
against
his
rental
income
as
lost
rental;
|
|
(e)
|
the
said
amount
of
$3,750
claimed
as
lost
rental
was
not
received
by
the
|
|
appellant
and
accordingly
was
not
previously
the
subject
of
an
inclusion
|
|
in
rental
income
reported
by
the
appellant
in
the
1991
and
earlier
taxa
|
|
tion
years;
|
|
|
(f)
|
the
said
amount
of
$3,750
claimed
as
lost
rental
is
not
an
eligible
ex
|
|
pense
within
the
meaning
of
the
Act.
|
|
At
the
hearing
the
appellant
admitted
the
facts
alleged
in
subparagraphs
(a)
to
(e)
and
denied
the
allegation
made
in
subparagraph
(f).
In
1991
the
appellant
owned
apartment
buildings
from
which
he
received
rental
income.
In
1989,
1990
and
1991
these
properties
were
managed
by
Georges
Hamblin.
In
1991
Mr.
Hamblin
did
not
turn
over
an
amount
of
some
$5,000
from
rental
owed
to
the
appellant.
In
1994
Mr.
Hamblin
declared
bankruptcy
and
so
far
the
appellant
has
been
unable
to
recover
the
amount
of
$3,750.
In
1991
the
appellant
reported
$6,810
as
rental
income
and
deducted
the
sum
of
$3,750
as
“lost
rental”,
an
amount
which
he
never
received
from
Mr.
Hamblin.
I
am
persuaded
that
the
amount
of
$3,750
is
not
an
expense
“incurred
...
for
the
purpose
of
gaining
or
producing
income
from
the
business
or
property”
within
the
meaning
of
s.
18(1
)(a)
of
the
Income
Tax
Act
and
is
not
an
“expense”.
The
appellant
reported
his
rental
income
on
a
cash
basis
from
1988
to
1991.
The
amount
not
received
was
not
reported
as
income.
There
is
no
basis
for
deducting
the
amount
of
the
payment
not
received
as
an
expense
from
the
income
reported
by
him.
The
appeal
is
dismissed.
Appeal
dismissed.
Email this Content