Michaud v. R., [1998] 3 CTC 2517

Watson D.J.T.C.:

This appeal was heard at Québec, Quebec, on September 10, 1997.

When the appellant filed his tax returns for the 1991, 1992 and 1993 taxation years, he claimed the following amounts, in computing his income for those years, as rental losses for a condominium on Bélanger Boulevard in Beaupré, Quebec: $10,222 in 1991, $8,915 in 1992 and $31,878, including a $30,000 terminal loss, in 1993.

By notices of reassessment dated May 30, 1995, for the 1991, 1992 and 1993 taxation years, the Minister of National Revenue (“the Minister”) denied the appellant the rental losses. The appellant is disputing the reassessments.

In making the reassessments, the Minister considered the following allegations of fact to be true:

[TRANSLATION]

(a) since 1988, the appellant has always reported rental losses on his condo based on the following income and expenses:

TAXATION YEAR	GROSS	EXPENSES	NET LOSS
	INCOME
1988 $5,600		$14,516	$8,916
1989 $7,075		$13,638	$6,563
1990 $5,105		$16,673	$11,568
1991 $8,104		$18,326	10,222
1992 $6,182		$15,097	8,915
1993 $700		$2,578	$1,878
1993	terminal loss		$30,000

(b) the gross income has been declining since the 1991 taxation year;

(c) the carrying charges were higher than the gross rental income;

(d) the appellant’s primary intention when he acquired the condo was to be able to live there when he retired;

(e) the appellant did not do what was necessary to remedy the situation in order to make renting his condo profitable;

(f) the appellant invested very little of his own money, since the mortgage was for $110,000, or 95 percent of the cost of the assets;

(g) the appellant had no reasonable expectation of making a profit from the rental of real estate during any of the 1991, 1992 and 1993 taxation years;

(h) the expenses claimed by the appellant were not incurred for the purpose of gaining or producing income from a business or property, but were rather the appellant’s personal or living expenses;

(i) the appellant has not shown that he incurred expenses for the purpose of gaining or producing income from a business or property for the 1991, 1992 and 1993 taxation years;

(j) the appellant has not shown that he incurred a terminal loss as a result of selling real estate used for the purpose of gaining or producing income from a business or property for the 1993 taxation year.

At the hearing, the appellant admitted the facts alleged in subparagraphs (a) to (c) and denied the facts alleged in the other subparagraphs.

The only issue is whether the appellant had a reasonable expectation of making a profit from the rental of the condominium during the 1991, 1992 and 1993 taxation years.

The burden of proof is on the appellant, who must show on a balance of evidence that the reassessments dated May 30, 1995, for the three years in question are ill-founded in fact and in law. Each case turns on its own facts.

Considering all the circumstances of this case, including the testimony, the admissions and the documentary evidence, in light of recent well-settled case law, I am satisfied that the appellant has not shown on a balance of evidence that he had a reasonable expectation of making a profit from the rental of the condominium in Beaupré, Quebec, during the three years in question.

Accordingly, the appeal is dismissed.

Appeal dismissed.