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Mr Sammeroff explained that his firm determined, after considerable review, that the leased cars should be carried on the financial statements as current assets — inventory — as opposed to fixed assets — equipment used in a business. ... A certain segment of customers — the leasing clientele — would not have done business at Plaza unless they could have leased automobiles. ... The calculation of the profit of the company, according to the financial statements — if that were used for income tax determination purposes — apparently would not be in issue before the Board. ...

EXPENSE STATEMENT — RELEVE DE DEPENSES Name of Employee Project No Nom de (’Employé CONRAD P GODBOUT No de Projet TRIP TO HAITI Date of Expenses Amount Date des Description Montant Date des Dépenses Montant June 4. 76 TOURIST CARDS 3 PERSONS 6.00 July 3. 76 HAITI AIR 2 PERSONS 36.00 d American Airlines Waybill 56.65 5/7/76 LIVING ACCOMMODATION PORT AU PRINCE 450.00 28/6/76 International Car Rental 120.00 3/7/76 Restaurant Receipt 4.20 24/6/76 India Palace 15.00 1/7/76 Pension Brise de Mer 40.00 Misc. Expenses 150.00 Tips & Gratuities 50.00 Misc. Meals 100.00 Entertainment 200.00 Gasoline for rental cars 75.00 Also misc. charges — Taxis & Transportation 100.00 1,402.00 Total Amount of Expenses Montant Total des Dépenses: $1,402.00 DATE 20/7/76 Signature Conrad P God bout It is quite possible that the appellant worked during the weeks of vacation he spent in Haiti, and that certain of his expenses are deductible (possibly even all of them). ...

The following are the addresses you request: Ruth & Co, c/o R I Hosp Tr Natl Bk, Box 1558, Providence RI 02901 Bull & Co, c/o Wachovia Bk & Tr Co, Box 3075, Winston, Salem NC 27102 Paine, Webber, Jackson & Curtis Inc, 25 Broad Street, New York, NY 10004 Galt & Co, New England Merchants Natl Bank, PC Box 4521, Tr Dept, Boston, Mass 02107 Hare & Co, c/o The Bank of NY, Box 11203, New York, NY 10249. Counsel for the appellant, at this point, referred to the reply to the notice of appeal (sic) and paragraph 5(a) thereof which reads as follows: the Appellant paid two registered holders amounts of interest as set out below and in so doing withheld (or deducted) and remitted to the Receiver General of Canada, tax purportedly pursuant to Part XIII at a rate of 15%, not at the rate of 25% established by Section 212(1): Amount Paid to Interest Interest Withheld & Registered Amount Amount Remitted Holder Gross Gross (at 15%) Hare & Co c/o Bank of New York New York, New York $4,875.00 $731.25 Paine, Webber & Co 25 Broad Street New York, New York $ 162.50 $ 24.38 He then stated as follows: And, if you turn to the reply to the Notice of Appeal, this is just to help the Board tie in to the assessment that has been made, in paragraph 5(a) of the reply, you will find that the figures there mentioned, which are the figures that tie into the assessment that is under appeal, relate to Hare & Co and Paine, Webber & Co, which is Paine, Webber, Jackson & Curtis, so that it would appear from that that the Department satisfied itself that the other three nominees were holding for US residents who owned beneficially, but Paine, Webber, Jackson & Curtis and Hare & Co were the two that, and I think my friend will know this better than I, I think simply didn’t respond to the enquiries made by the Department. ... Those two persons were: (a) Hare & Co c/o Bank of New York New York, New York; (b) Paine, Webber & Co 25 Broad Street New York, New York. ...

He considered that the appropriate expenses showing the net income as stated below should be deducted from the added net income: Added gross income Expenses claimed Net income 1968 $ 7,905.84 $ 6,566.54 $ 1,339.00 1969 6,708.45 3,855.45 2,853.00 1970 15,007.42 9,076.92 5,930.50 1971 24,962.35 22,419.92 2,542.43 1972 15,715.19 9,978.04 5,737.15 The 1972 gross income includes $4,530.65 in accounts receivable as of December 31, 1972. 4.21. As can be seen from the tax returns, the appellant’s reported gross and net income for the years in question are as follows: Reported Reported gross income net income Percentage 1968 $ 27,925.15 $ 3,878.68 13.8895% 1969 32,749.13 4,232.80 12.9249% 1970 34,060.75 5,243.95 15.3958% 1971 41,517.00 5,870.70 14.1404% 1972 31,891.24 6,046.26 18.9589% TOTAL $168,143.27 $25,272.39 On average, therefore, the net income constitutes 15% of the gross income. 4.22. ... The result is the following table: Total gross income Taxed net income Percentage 1968 $ 35,830.99 $10,203.35 28.4% 1969 39,457.58 9,599.56 24.3% 1970 49,078.17 17,249.89 35.1% 1971 66,479.35 24,730.57 37.2% 1972 47,606.43 18,618.42 39.1% $238,452.52 $80,401.79 The general average for taxed net income is 33.7%. ...

Mr Tozer had detailed the disallowed amounts in his tax returns as follows: Details — Additional Expenses (1978) Extras on leased car $ 810 Travel (Misc — tolls, checking, porters, parking, pay phones, etc) 275 Office (Other than allowable portion) Stationery, file boxes & folders, shelves, misc supplies 75 Postage (out of town) 55 Dues 60 Promotion & Entertainment (Other than normal during mill visits) customers met in bars, lounges, airports, during flights, weekends at horn and cottage 425 Local transportation Use of personal car by wife for business when I am out of town. ... Use of personal 4-wheel-drive jeep for promotional & winter use.) $ 565 Out of town travel not reimbursed (tolls, checking, porters, pay phones, laundry) 340 Office Expenses Stationery, file folders, misc 80 Postage 60 Promotion & Entertainment (Customers met in bars, lounges, airports, during flights, and wekend entertainment at home and cottage.) 430 Membership 60 TOTAL $1,535 At the hearing, the appellant noted that he was withdrawing his claim for the amounts shown above to the extent of the $810 and $75 in 1978 and the $80 in 1979. ... It is clear from the evidence and testimony in the appeal that such claiming for expenses and appropriate reimbursement was part and parcel of the terms under which the appellant performed his duties — in other words, “the contract of em- ployment”. ...

The changes are as follows: 1975 Previous Support Payments $11,333 Revised Support Payments 7,200 Decrease $ 4,133 1976 Previous Support Payments $16,100 Revised Support Payments 7,200 Decrease $ 8,900 1977 Previous Support Payments $18,400 Revised Support Payments 7,200 Decrease $11,200 1978 Previous Support Payments $11,052 Revised Support Payments 7,200 Decrease $ 3,852 Mr Renwick essentially agreed with the testimony of Mrs Renwick but added that he had always felt new ag reements and arrangements had been made as a result of their conversations and he had regularly increased the payments to keep up with inflation and added expenses as the children grew older. ... However, in counsel’s opinion, even accepting any application of paragraph 60(b) (as proposed by counsel for the appellant) did not invalidate the Minister’s assessments — the only amounts deductible remained the basic $7,200 called for under either Exhibit A-1 or Exhibit A-2. ... In the instant case, the appearance of agreement for increased payments, and the reference material associated therewith, are not adequate to alter the basic agreements — either Exhibit A-1 or Exhibit A-2 — upon which the deductibility of the payments depend. ...

The appellant produced as exhibit A-1 financial statements concerning the 1972, 1973 and 1974 taxation years in which the $50,000 appeared as an asset: “Investment loan Secor Industries—$50,000’’. 3.5 The appellant was the president of the two companies. 3.6 During the taxation years in question the appellant borrowed from Secor Industries Limited and reimbursed the following monies: Year Borrowed Repaid Repaid Amount Owing 1970 $11,113.42 $ 3,000.00 $ 8,113.42 1971 $11,663.42 $11,113.42 $ 550.00 These figures were admitted by the appellant. 3.7 During the taxation years in question, Anndean Holdings Ltd borrowed from Secor Industries Limited and reimbursed the following monies: Year Borrowed Repaid Repaid Amount Owing 1970 $22,215.45 $ 8,100.00 $14,215.45 1971 $32,215.45 $22,215.45 $10,000.00 As the appellant owns 50% of the common shares of the company, the respondent included in his income $7,057.72 in the 1971 taxation year and $5,000 in the 1972 taxation year. 3.8 According to Mr Noël Frenette, witness for the respondent, those figures had not been disputed by the appellant before. 3.9 According to the appellant, however, the amounts not paid by Anndean Holdings Ltd must in fact be considered as reimbursements made by Secor Enterprises Limited to Anndean Holdings Ltd on the loan of $50,000 made by Anndean Holdings Ltd (see paragraph 3.4). 4. ...

For those years, the Minister regarded the appellant company as having residence in Canada and reassessed the company on the following amounts of income: 1971 — $137,772.47 1972 — $102,430.00 1973 — $ 44,300.00 The decision in this appeal will be determinative of the issues raised in the other appeal of Gini International Inc as to the applicability of withholding tax on dividends paid to Gini International Inc. ... Referring to Sulley v The Attorney General (1860), 5 H and N 711, Lovell & Christmas, Limited v The Commissioner of Taxes, [1908] AC 46 and Grainger & Son v Gough (1896), 3 TC 462, he stated that the function of purchasing goods for export abroad is not the carrying- on of a business in the country of export. ... According to counsel for the respondent, there were two important differences between the case of Firestone Tyre & Rubber Co Ltd (as agents for Firestone Tire & Rubber Co of Akron, Ohio, USA) v Lewellin (H M Inspector of Taxes) 37 TC 111 cited by the appellant and the case at bar. ...

Despite a counter-offer of $80,000 cash, the price of $100,000 was maintained. 4.04 With the aid of one of their customers, an accountant, the actual appellants fixed the price as follows and the same amounts appear in the agreements (exhibits A-1 and R-1): Business and goodwill $ 59,000 Equipment $ 2,000 Land and building $ 39,000 $100,000 4.05 The vendors accepted to finance the purchasers for $50,000, a mortgage being registered on the sold property. 4.06 Mr Bing Fee Mah, substantially confirmed the testimony of Mr For Yip Chan concerning the price and the conditions of payment and the way the transaction was passed. 4.07 Fifty percent of the payment of the said mortgage would be sent to Mr For Yip Chan’s brother, Mr Bing Chan, who is now living in New York. 4.08 In filing their 1972 income tax return, neither Mr For Yip Chan nor his wife had declared the sold goodwill and paid the involved taxes. 4.09 By reassessment the respondent added, among others, in the actual appellant’s income the following amounts resulting from the sale of goodwill: For Yip Chan $5,900 Carol S Chan $5,900 4.10 The actual appellants are before the Board because of those additions. 4.11 The deemed appellants, in filing their 1972 income tax return, claimed the appropriate deductions concerning the goodwill they had bought in the amount of $59,000. 4.12 The fair market value of the total amount of $100,000 is not in dispute in the present case. 5. ... Canadian Propane Gas & Oil Limited v MNR, [1972] CTC 566; 73 DTC 5019; 3. ...

In his financial statements for 1979 (Exhibit R-1), the appellant added to the item “Reconciliation of net income” in computing his income for the 1979 taxation vear: Reserve — 1978 $148,617 Reserve — 1979 193,613 X 143,500 111,134 250,000 $ 37,483 For tax purposes, however, the appellant divided the income of $37,483 equally with his former wife Mrs Lucienne Raymond (Lachapelle), and reported his income for 1979 as being $18,742. ...