Jackson v. R, [1999] 3 CTC 2573 (Informal Procedure)

Beaubier T.C.J.:

These appeals pursuant to the Informal Procedure were heard jointly at Regina, Saskatchewan on June 25, 1999 by consent of the parties. The Appellants are brothers. They are also partners in a drywall applicating business at Regina who carry on business under the name “Jacksons Drywall Boarding”. Both Appellants testified and the Respondent called the appeals officer on the file, Norman Bacon.

In 1994 Douglas deducted material expenses of $1,023 and in 1995 he deducted material expenses of $22. He established these expenses with receipts in Court and they were not disputed by the Respondent. The way they did their records these partnership expenses were in fact Douglas’. These deductions are allowed to Douglas.

The remaining claims relate to vehicle expenses. Neither Appellant kept any log or record of his vehicle business expenses or his business mileage for the years under appeal. They just deducted them all. Both are bachelors and were in the years under appeal. They appear to be in their 40’s. Each owned one vehicle. Dexter had a large 1987 car that he bought second hand. Douglas had a 1979 Thunderbird that he traded in for an old second hand van in 1994. Each used his vehicle in the business. They carried on their trade in Regina and in an area within 80 kilometres of Regina. They own their own small tools and saw horses and at times they carry other construction equipment to jobs. Often they carry their own equipment to and from the jobs because of theft problems or because of moves from house to house or job to job. At times they work on jobs separately.

They filed their own income tax returns and it is clear that they are not overly educated, or acquainted with accounting procedures or particularly literate in business matters. Douglas was told at one time by a Revenue Canada phone person that they didn’t need a vehicle log book and they never had one. They kept track of their income and expenses by accumulating receipts. They never invoiced for jobs.

In summary, they are average small drywall applicators who struggle to make a modest living in a self-learned trade which has poor pay and offers jobs and payment at the whims of contractors, developers and the marketplace. They rely on the oral advice of Revenue Canada and others. When things turn out badly, they are hurt and they have no practical recourse.

The gross partnership income (of the two of them) in 1994 and 1995 was accounted for by Douglas and reassessed by Revenue Canada as de- scribed in paragraphs 3 and 4 of the Reply to the Notice of Appeal. They read:

3. In computing income for the 1994 and 1995 Taxation Years, the Appellant deducted the amount of $4,052.00 and $8,012.00 respectively as business ex- penses calculated as follows:

		1994		1995
Partnership Income		$24,706		$23,610
Less: Partner’s Share		10,293		10,884
				$12,726
Less Expenses:
Vehicle expenses	$3,029		$7,990
Material expenses	1,023	4,052	22	8,012
				$ 4,714

4. In reassessing the Appellant for the 1994 and 1995 Taxation Years, the Minister of National Revenue (the “Minister”) disallowed the business expenses in the amount of $2,836.00 and $5,593.00 respectively calculated as follows.

		1994		1995
	Claimed	Disallowed	Claimed	Disallowed
Vehicle expenses	$3,029	$2,120	$7,990	$5,593
Material expenses	1,023	716	22	0
Total	$4,052	$2,836	$8,012	$5,593

Both Dexter and Douglas worked out of their separate homes. Douglas did more administration than Dexter and he operated the van which was designed to carry more equipment. At times they travelled together. Dexter was allowed 10 percent of his vehicle expenses for 1994 and 1995 which he appealed. Douglas was allowed 30 percent of his vehicle expenses for 1994 and 1995 which he appealed. In support of their appeals Douglas filed the contractors’ statements of their jobs in 1994 (Exhibit A-7) and 1995 (Exhibit A-5). They show that the overwhelming majority of their jobs in each year was in the City of Regina. This would not require extensive mileage or a large percentage of vehicle expenses from either Appellant for business purposes.

The onus for upsetting the assessments was on the Appellants. They did not establish sufficient evidence to upset the reassessments respecting their vehicle expenses. Therefore:

(a) Dexter’s appeals are dismissed;

(b) Douglas’ appeals are allowed respecting the amounts claimed for material expenses and his assessments for 1994 and 1995 are referred to the Minister of National Revenue for reconsideration and reassessment accordingly.

Appeal allowed in part.