Tardif T.C.J.:
These appeals are from notices of reassessment for the 1990 and 1991 taxation years. The appellant, a CEGEP teacher, took courses at the same time that she was a teacher and obtained a master’s degree in 1983.
When she completed her new training, a number of friends and colleagues encouraged her to make her services and skills in relaxation and visualization available. She followed that advice.
Since she found that there was interest in and a demand for her services, she decided to get organized and structure courses that she would give as part of a small business doing business under the name “Lebel Relaxation et Visualisation Enr.”
Several institutions engaged her to provide services at various locations. The Université de Sherbrooke was the appellant’s most important client in 1990 and 1991. However, it hired her as an employee and therefore paid her a salary in the same way as a regular employee. The appellant also received a T-4, which she added to her employment income as a CEGEP teacher. The amounts paid by the university were paid as salary, not as fees.
In her testimony, the appellant admitted that she had classified the amounts received from the Université de Sherbrooke as employment income rather than income from her small business. She argued, however, that the knowledge she had acquired during her master’s studies was what enabled her to work for the university as well as for various groups that paid her as a contractor.
If the salary paid by the Université de Sherbrooke is added to the fees the appellant earned from the business she ran under the trade name “Yvette Lebel Relaxation et Visualisation Enr”, the result is a profit for 1990 and 1991.
If that income is not included, on the other hand, the result is an operating loss of $5,111 for 1990 and $4,204 for 1991. As for the periods before and after those two years, the figures and data relevant to the disposition of this appeal are as follows:
Financial History
| Yvette Lebel Relaxation et Visualisation Enr. (1988 TO 1994) | |
| 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | I |
| INCOME | |
| $2,880.00 | $2,619.00 | $1,200.00 | $2,446.00 | $4,672.81 | $ 640.00 | $2,160.00 | |
| MINUS | |
| EXPENSES | |
| HOME OFFICE EXPENSES: | |
| {*}Electricity | |
| 1,213.00 | 1,332.00 | 1,035.00 | 1,492.00 | 392.00 | |
| {*}Telephone | |
| 504.00 | 864.00 | 818.00 | 638.00 | 116.00 | |
| {*}Property taxes | |
| 647.00 | 695.00 | 823.00 | 793.00 | 234.00 | |
| {*}Insurance | |
| 368.00 | 369.00 | 387.00 | 370.00 | 93.00 | |
| {*}Mortgage interest | |
| 6,002.00 | 6,026.00 | 5,786.00 | 5,000.00 | |
| {*)Maintenance and repairs | |
| 984.00 | 505.00 | 228.00 | |
| Total gross home office expenses | |
| 9,718.00 | 9,791.00 | 9,077.00 | 8,293.00 | |
| Minus | |
| Personal use portion (75%) | |
| 1988 | 1989 | 1990 | 1991 | 1992 | I | 1993 | I | 1994 |
| 7,288.00 | 7,343.00 | 6,808.00 | 6,220.00 | |
| Total net home office expenses | |
| 2,430.00 | 2,448.00 | 2,269.00 | 2,073.00 | |
| Advertising | |
| 105.00 | |
| Office expenses and books | |
| 488.00 | 1,418.00 | 1,571.00 | 1,220.00 | 1,870.00 | | 93.00 |
| Training | |
| 2,285.00 | 1,028.00 | 602.00 | 1,198.00 | 2,231.00 | | 600.00 | | 1,092.00 |
| Professional fees | |
| 120.00 | 120.00 | 193.00 | 120.00 | |
| Travelling expenses | |
| 710.00 | 691.00 | 308.00 | |
| Motor vehicle expenses (25%) | |
| 491.00 | 489.00 | 690.00 | 760.00 | |
| Capital cost allowance | |
| 569.00 | 968.00 | | 596.90 | | 496.00 |
| TOTAL EXPENSES | |
| 5,308.00 | 6,215.00 | 6,311.00 | 6,650.00 | 5,816.00 | 1,196.90 | | 1,681.00 |
| PROFIT (LOSS) | |
| ( 2,428.00) ( 3,596.00) (5,111.00) ( | 4,204.00)*( | 1,143.19) ( | 556.90) | 479.00 |
Notes:
N.B.: The appellant stopped carrying on business in 1994.
* However, the business loss claimed for that year was $2,131.00.
September 17, 1996
Prepared by: Faby Lévesque
The appellant stated that the notices of assessment issued against her by Revenu Québec and Revenue Canada had traumatized her so much that she had told the Université de Sherbrooke that she was no longer available. She also said that she had decided to give up all the commercial activities associated with her business.
Based on the evidence, which consists of the testimony of the appellant and Jean-Rock Lévesque and documents on income and expenses, it is clear that the business was real. It was a very small business run by a person passionate about what she had learned and energetic about the idea of spreading its benefits. I have also noted that the financial aspect of the business was of limited or even secondary importance, the appellant’s primary interest being the delight and satisfaction of those to whom she presented what she knew.
Since the appellant herself recognized and admitted that the amounts paid by the Université de Sherbrooke were not income from her business, can the nature of that income be changed and can it be treated as business income? I do not think so, especially since the evidence adduced neither authorizes nor warrants such a correction.
To be successful, the appellant had to prove that she had the firm and definite intention to create a business that could potentially be profitable. This could have been shown by filing a business plan or providing a detailed description of the work done for the purpose of potentially making a profit.
The appellant did not provide any information or details that might prove she was concerned about profitability. Moreover, I doubt that the appellant was concerned about whether her business made a profit. Her primary interest lay in sharing her enthusiasm for this particular knowledge and in her desire to continue the training she had acquired through a master’s degree. Furthermore, her own witness noted how generous the appellant was in her business activities. Was this for promotional purposes, to develop goodwill?
The appellant may have intended her small business to be a business that could be profitable, since she said that she planned to become more actively involved in it after she retired as a CEGEP teacher. This is not sufficient to find in her favour, especially since the balance of the evidence showed rather that she was keenly interested in improving her learning, even to the detriment of developing her business.
The evidence about what she did to make her business profitable was totally deficient. Since she had the burden of proving the potential profitability of her business and since she did not adduce any evidence in this regard, I have no choice but to dismiss her appeals.
Appeal dismissed.
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