Peach – Federal Court of Appeal distinguishes between not challenging a taxpayer’s business acumen and measuring by what a reasonable business person would have done
In his 2011 taxation year, the taxpayer earned $27 in revenue and deducted over $19,600 in business expenses from a business of selling life insurance and mutual funds to a client base largely consisting of friends and family. In confirming the findings of the Tax Court that the taxpayer’s business expenses, beyond those allowed by CRA, were unreasonable, Rennie JA stated:
The appellant relied on Keeping to argue that the Tax Court erred in holding that his business expenses were not deductible based on his poor business judgment. This case does not assist the appellant. Keeping establishes that the Tax Court’s role is not to evaluate a taxpayer’s business acumen, a principle the Tax Court respected … . The Tax Court evaluated what a reasonable business person would have done in the appellant’s position, without relying on hindsight or second-guessing the appellant’s choices.
Perhaps this could be paraphrased as saying that a taxpayer’s business acumen can be challenged, but only indirectly by measuring against a reasonable business-person standard.
Neal Armstrong. Summaries of Peach v. Canada, 2022 FCA 163 under s. 67, s. 3(a) – business and s. 152(4)(a)(i).