Bowman T.C.J.:
I will render my judgment now.
This is one of the long line of cases involving the assertion the taxpayer did not have a “reasonable expectation of profit”.
What it really boils down to is, as I have said in other cases, is this a business or does it have the normal indicia of commerciality.
As I said in Cheesmond v. R. [[1995] 2 C.T.C. 2567 (headnote only (T.C.C.)] or even in a more recent case that has not been reported yet called Kaye v. R. (April 9, 1998), Doc. 97-2772(IT)I (T.C.C.) I prefer to put it on that basis, is this or is this not a business. And in the Kayedecision I said, “Would a reasonable person, looking at this operation, say this is a business”.
Let us look at the facts. The appellant and his wife bought a house on Joshua Avenue. He and his wife, I understand, are joint tenants of the house or joint owners. Therefore, quite apart from everything else, I should have thought that 50% of the loss would have been his wife’s unless the attribution rules under 74.1 apply. But, that aside, he claims 50% of all of his expenses, mortgage interest, municipal taxes, repairs, maintenance, utilities. There is no real basis for this division.
The tenants that he had were obviously rather unsuitable. In the front part was a one bedroom apartment. It was a single mother and her child. And in the back part there were two people. He thinks that if he got what he hoped to get, he would have been getting about $11,500.00 a year. As it turns out, all he got was $3,600.00.
It seems that the person in the front part of the house was very popular. She seemed to have a number of boyfriends who would turn up and then go bothering the people at the back. The police kept turning up. These people were on welfare. They were paying their rent part of the time and for a large part of the time the property stood vacant.
If the expression “no reasonable expectation of profit” has any meaning, it would certainly apply to this one. I think it is more accurate to say this really was not a commercial operation at all. This was an attempt to, and there is nothing wrong with this, to defray part of the cost of the house the person bought.
Now it is obvious that Mr. Balkissoon and his wife are hardworking people and I do not have any problem accepting his evidence. He is an honest man and I think he has to be commended for hard work in buying a house. But in the final analysis it is an attempt, I think, through the significant losses, to finance the purchase of a house using the tax system and that, in my view, is simply unacceptable.
There was some discussion too of reasonableness. It does seem to me to be rather unreasonable to charge this amount, with large expenses totalling $12,000.00 to produce income of $3,600.00.
So for all of those reasons, although I have some sympathy for the appellant, I am obliged to dismiss the appeal.
Appeal dismissed.
Email this Content