Peddle v. R., [1998] 1 CTC 2984, 97 DTC 1386

Brulé T.C.J. (orally):

REGISTRAR: I will call the first matter, file APP-356-96-IT between Doug B. Peddle and Her Majesty The Queen. There is no one present at the moment Your Honour for the appellant. The respondent is represented by Arnold Bornstein.

Shall I let the matter stand down sir?

HIS HONOUR: Yes.

REGISTRAR: I will call file APP-356-96-IT between Doug B. Peddle and Her Majesty the Queen. The appellant appears in person. The respondent is represented by Arnold Bornstein.

HIS HONOUR: Thank you.

Mr. Peddle, I am sure you are not familiar with the procedure?

MR. PEDDLE: No I’m not.

HIS HONOUR: I will run over it quickly for you.

MR. PEDDLE: Also I would like to apologize.

HIS HONOUR: Well, we appreciate that, because if we hadn’t got the phone call you would have been gone.

So, anyway, the procedure is as follows. First of all you come forward and be sworn. And then you go back to your papers and you will tell the court the facts, and only the facts, involving this application of yours.

When you finish that, Mr. Bornstein will have the right to cross-examine yOu.

And when that is finished and there are no other witnesses of his, you will tell the court why, according to the Income Tax Act, because that is what must govern all our decisions, why your appeal for an application for extension should be allowed.

And you will hear a counter argument from Mr. Bornstein and you will finally have a say in the matter.

Now if anywhere along the line you are not sure what to do, you make sure you interrupt us and we will straighten the things out.

So come forward and be sworn and then you can go back to the papers.

Douglas Blaine Peddle - Sworn:

REGISTRAR: Your occupation sir?

MR. PEDDLE: I’m on disability right now.

REGISTRAR: What would your occupation be normally?

MR. PEDDLE: I worked for Canada Employment and Immigration.

REGISTRAR: Federal civil servant?

MR. PEDDLE: Yes.

HIS HONOUR: All right. You can go back to your papers.

REGISTRAR: Can I have your address sir?

MR. PEDDLE: 755 Scarborough Golf Club Road, Scarborough.

REGISTRAR: Thank you. Please keep your voice up sir and direct your answers to the Judge and you can return to the counsel table.

HIS HONOUR: Now tell the court, for the record, just as you envisage this.

MR. PEDDLE: Basically I had an investment, this is prior to this, three years ago and the department denied the allocation of monies for tree farming. So I appealed it. It was on January 11, 1996.1 appealed it and basically I can read the objection if you want. I don’t think you have a copy of the original.

HIS HONOUR: Go ahead.

MR. PEDDLE: It says farming losses. I have pictures of the trees and have been audited and the accountant has seen the land and the trees that were farmed.

I put money into these properties and feel the moneys I have earned in the future will have to be added to my income. So any expense against this production should be allowed as I was going to use this to supplement my pension.

And then I received evidently a reply, according to the records, back in — this is for me and it’s a supervisor that I worked for at one time. And this is dated April 15th.

Now I phoned him on August 12 of 1996 and I asked him what happened to my appeal that I sent in. And he said, “Oh, we sent out a confirmation notice”, on I guess it was back in April they sent it out, April 15. And I said, “Well, I didn’t receive it”. I said, “Can you send a faxed coy of the documents”, which he did.

Later I spoke to Ian, as he was my supervisor when I worked at Revenue Canada a few years ago prior to this. He indicated it was sent out by priority post. I don’t recall receiving that from Revenue Canada. I told him that at the time.

So consequently I phoned the Tax Court and proceeded to get information from them how to address my further appeal.

During this time I found out, through Revenue Canada, that “Your appeal has been over the time limit”. So I requested an extension and I proceeded to do that. And then I sent in papers on September 16. I got the fax information from Ian on August 15 and then I got information from the Tax Court which they sent me.

And then in the proceeding days after that I drafted a letter to the Tax Court saying that I would like an appeal based on the fact that I don’t recall receiving the letter, and to get an extension.

And they asked me to include my original appeal, which I did as well, which I submitted on the same date, September 16.

HIS HONOUR: Right. Now what happened further to that? You sent it in. You applied for an extension once before?

MR. PEDDLE: No, no.

HIS HONOUR: This is the first time?

MR. PEDDLE: First time. Like when I say I phoned Ian on August 12, he faxed me over the information that came from the Minister on April 15, and then I proceeded to find out exactly what I needed to do to appeal the decision further. But I didn’t realize at the time that, you know, I would have to appeal for an extension as well.

HIS HONOUR: All right. Well, maybe you should answer any questions that Mr. Borenstein may have.

MR. PEDDLE: Sure.

Cross-Examination by Mr. Borenstein:

Q. Sir, in April of 1996 you were living at 755 Scarborough Golf Club Road in Scarborough?

A. Yes.

Q. With postal code MIG 1H9?

A. Yes.

Q. When you objected to Revenue Canada’s refusal to allow you the expenses you claimed, were you represented by a lawyer?

A. No.

Q. Were you represented or did you have the help of an accountant?

A. No.

Q. Did you consult any other tax professional?

A. No. I think that has to do with more of a money question than anything else. Being on a disability you are not allowed very much income so therefore I could not afford an accountant or a lawyer to fight this.

Q. You alleged in your Notice of Appeal that you were a self-employed tree farmer, correct?

A. That was the investment, yeah.

Q. And you also alleged that you were involved in a reforestation project and that project was handled in a systematic business-like way.

A. Right. But I didn’t have any hands on — like I was just the investor.

Q. What I am asking you is what you wrote in your Notice of Appeal.

A. The initial notice?

Q. What do you mean by “initial”?

A. Objection.

Q. No, I mean the Notice of Appeal that was attached to the application to extend the time. It would be this document here.

A. Okay. Right. This one?

Q. Yes sir. So what I said is what you wrote sir?

A. That’s what I wrote, yes.

Q. And you also wrote that you are entitled to restricted farm losses, correct?

A. That’s right.

Q. You had already made these arguments to Revenue Canada, didn’t you?

A. Yes I did.

Q. Not necessarily in your Notice of Objection, but otherwise?

A. Yes because I was requested by Tax Court to do so. You see speed was involved too.

Q. Before you sent your Notice of Appeal, before you tried to appeal the decision to the Tax Court, you made the same representations to Revenue Canada that you made in your Notice of Appeal?

A. Actually I made more than this.

Q. But those are some of what you —

A. Those are some of the objections.

Q. You served your Notice of Objection on the Minister of National Revenue in January of 1996; correct?

A. Yes, that’s right.

Q. You also knew in March that Revenue Canada had not accepted your Objection?

A. I didn’t know that until I phoned in August.

Q. Why did you wait until August to call Revenue Canada sir?

A. Well, I think I know appeals take a long time and I didn’t realize, you know, I figured I would have got a registered letter.

Q. I see.

A. And this is why I was concerned when I phoned Ian and asked them. And he stated that, “No, we sent it out long ago”.

Q. Okay.

A. That’s why he faxed me over the documents. And Ian can attest to my validity of what I said.

Q. You spoke to Mr. Tebbutt in mid August of 1996; is that right?

A. That’s right.

Q. And the information you requested you received by fax the same day, didn’t you?

A. Exactly the same day.

Q. Then you waited another month?

A. No, that’s not true. I phoned the Tax Court right away.

Q. Yes.

A. I phoned and they sent me documents.

Q. Documents on how to proceed?

A. How to proceed. Actually the same day, August 12th I received.

Q. Okay. And you finally — you didn’t send in your application to extend time to file your Notice of Appeal until September 16, 1996; correct? More than a month after you found out —

A. After various phone calls, because you have got to remember that, you know, I have a disability and formulating this took a lot of time and effort. And this is where the time factor went in.

Q. All right. Thank you.

HIS HONOUR: Mr. Peddle, let me ask you a couple of questions. First of all, you are claiming losses for the 1993 year. Is the project still under way?

MR. PEDDLE: Still under way.

HIS HONOUR: And you still have those non capital losses?

MR. PEDDLE: Still have the losses for 1993, 1994 and 1995.

HIS HONOUR: All right. Now I will come back to that later on.

MR. PEDDLE: Also, if I can make a point?

HIS HONOUR: Yes, surely.

MR. PEDDLE: There is more than forty, fifty other people that are in the same situation.

HIS HONOUR: Well you don’t have to worry about them.

MR. PEDDLE: No, but just to let you know it’s not just me as an individual.

HIS HONOUR: You mentioned in your Notice of Appeal, or at least your Objection, rather, that you had farming losses as defined by 237.1; is that correct?

MR. PEDDLE: This is in the Objection part.

HIS HONOUR: I am looking at, no the Notice of Appeal, excuse me.

MR. PEDDLE: Oh I see. To be honest with you, this is something that I read over obviously and copied from the original accounting.

HIS HONOUR: The only reason I asked you that, you mentioned it so I took it that you are familiar with the section.

MR. PEDDLE: I’m not familiar with the sections as such. I mean I’m going by the accountant that originally did the project.

HIS HONOUR: Because it seems to me that you ignored the provision of 237.1(6) which is in the Notice of Confirmation, that you had to follow that form.

MR. PEDDLE: You see I wasn’t aware of that.

HIS HONOUR: All right.

MR. PEDDLE: I mean I’m only putting down what the accountant — I mean he knows all the amounts and I haven’t got a clue what that section means.

So I’m just taking it from what they have stated on their paper and put it in here because I was in a hurry and I obviously couldn’t put down my own words which unfortunately — maybe if you had a copy of the Objection. Like I say, I wouldn’t know one section from another unfortunately.

HIS HONOUR: Well that section is important in that it would appear to take you out of the situation where your application, your Appeal, even had you filed an appeal properly, you would not win.

Now I want to tell you something that can be useful to you. That if this tree farm shows a profit, that is it should or else you wouldn’t be in it, you should, under section 111, now mark that down some place, of the Act, under section 111, you have the right up to seven years to take those losses and apply them against any gains, regardless of an appeal.

So in the meantime, and I am not hearing any real argument and I don’t think I have to, your application for an extension is going to be dismissed. Because even if you were granted it, following the terms of the Act, 231.7(6) you would not win the appeal, so there is no point.

So under section 111 of the Act it is set out, if there is a profit made, you may refer back to Revenue Canada with that section and claim these losses that you now are suffering.

MR. PEDDLE: Could I just make another point?

HIS HONOUR: Yes.

MR. PEDDLE: Mr. Bill Rumfeld, who is the chief of appeals for Mississauga, states he hasn’t made a final review on this and he’s looking favourably at appeals claiming the initial outlay, rather than the overall farming loss, which could be $3500 or so per year.

MR. BORENSTEIN: This is hearsay.

HIS HONOUR: It has got nothing to do with this. I think Mr. Peddle is just making a comment.

MR. PEDDLE: This is a statement of fact.

HIS HONOUR: Yes. But do you see what I mean about section 237.1(6)? It says right there that unless you file a special form, you cannot claim these losses. So there would be no point in having your appeal go forward.

But I am telling you the losses may come in, if you have a profit within seven years from 1993 you may come in and claim them under there.

In the meantime, if Revenue Canada gives you any benefit from their review of the case, all the better for you.

MR. PEDDLE: But I am questioning the term “tax shelter”.

HIS HONOUR: Yes, but in order to have that, you have got to file a special form. It’s right there in the Act.

MR. PEDDLE: That’s right, but we are saying it’s not a tax shelter, it’s a business.

HIS HONOUR: It doesn’t matter.

MR. PEDDLE: Therefore we don’t need to file a form. We are disputing the fact they are saying it’s a tax shelter and we didn’t file the form. We are saying it’s a business, we don’t have to file the form.

HIS HONOUR: That has not come before us here.

MR. PEDDLE: I’m bringing that now. I have always had this argument. The same as they have had this argument.

HIS HONOUR: I think the best place to get it is if you show a profit in the next four years.

MR. PEDDLE: The other factor is I have got to return to Revenue Canada money that I don’t have now, which makes an undue hardship on myself.

HIS HONOUR: Well mention to them about section 111. You may get a postponement if your tree farm is going to show any kind of a profit.

MR. PEDDLE: Well they seem to have applied the money that I now owe to my income tax, which I can’t pay.

HIS HONOUR: Well, you know, that has got nothing to do with me. MR. PEDDLE: Can you do anything with the penalties and the interest? HIS HONOUR: No.

MR. PEDDLE: You can’t?

HIS HONOUR: No I can’t. I have no right to do any of that. I think you will have to go back to them.

MR. PEDDLE: It’s adding up all the time.

HIS HONOUR: Oh I know. I appreciate that. When do you think your farm is going to show a profit?

MR. PEDDLE: In seven years.

HIS HONOUR: In seven years?

MR. PEDDLE: Yes, from the start to recover, when the trees start to grow.

HIS HONOUR: Well in that case you have seven years to recover your losses.

MR. PEDDLE: Yes, but if I have to pay interest in seven years, that will be hard.

HIS HONOUR: Well in the meantime it’s just not a case for allowing your application for an extension. I hereby dismiss it.

We will adjourn Mr. Registrar.

Application dismissed.