SEXTON J.A.
SHARLOW J.A.
BETWEEN:
CLARITA JARQUIO
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, Thursday, February 13th, 2003.
Judgment delivered from the Bench at Toronto, Ontario,
on Thursday, February 13, 2003.
REASONS FOR JUDGMENT OF THE COURT: SEXTON J.A.
CONCURRED IN BY:
STRAYER J.A.
SHARLOW J.A.
Date: 20030213
Docket: A-477-01
Neutral citation: 2003 FCA 80
CORAM: STRAYER J.A.
SEXTON J.A.
SHARLOW J.A.
BETWEEN:
CLARITA JARQUIO
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario,
on Thursday, February 13, 2003)
SEXTON J.A.
[1] This is an application for judicial review of a decision of the Tax Court in which the Tax Court dismissed the appeals of the Applicant relating to re-assessments for the 1996 and 1997 taxation years.
[2] The Applicant along with one of her sisters acquired a property in Scarborough, Ontario in May 1997. The property is a two storey residence containing four bedrooms.
[3] The Applicant took the position that the decision to acquire this residence was made for the purpose of earning rental income along with providing accommodation for her family and she sought to deduct rental losses on the property from her income. From 1987 to 1995 the Applicant resided in the house along with her two sisters and their mother. After the mother died in 1995, only the Applicant and her two sisters lived in the house through the taxation years in question..
[4] In dismissing the Applicant's appeal, the Tax Court judge made the following findings of fact:
a) The Expenses were incurred for the benefit of the Applicant and her family and for their use of the property;
b) the Applicant did not have a marketing plan, business cards, a separate business phone, nor did she advertise;
c) When the mother died in 1995 only the Applicant and her two sisters continued to live on the property and the Applicant did not attempt to rent the room which had been previously occupied by her mother.
d) the Applicant did not behave in a manner that "one would expect of someone engaged in an ordinary commercial enterprise";
e) with respect to the Applicant's intentions regarding her expectation of profit, her motivation appeared "more in keeping with accommodating her sisters than seeking a profit";
f) the Applicant's expenses, including financing costs, consistently exceeded her rental income, and the Applicant's calculations projecting future profitability were not realistic;
g) the Applicant did not carry on business with a reasonable expectation of profit; and
h) no business existed.
Reasons, Applicant's Record, p. B4 and B8, paras. 7 and 16 - 20
In our view, there was evidence before the Tax Court which would justify these conclusions.
[5] The Applicant, argued that the reason she did not rent the vacant room after her mother's death was that she was ill. However, the Tax Court judge found her evidence somewhat contradictory on this point.
[6] The Tax Court's decision was rendered prior to the release of the Judgment by the Supreme Court of Canada of his decision in Stewart v. Canada, 2002, D.T.C. 6969. In Stewart the Supreme Court modified the test set out in Moldowan v. The Queen [1978] 1 S.C.R. 480. 1 S.C.R. 480. In Stewart the Supreme Court said at paragraph 60
In summary the issue of whether or not the taxpayer has a source of income is to be determined by looking at the commerciality of the activity in question. Where the activity contains no personal element and is clearly commercial, no further inquiry is necessary. Where the activity could be classified as a personal pursuit, then it must be determined whether or not the activity is being carried on in a sufficiently commercial manner to constitute a source of income.
[7] The Court, in Stewart, held that in determining whether there was a sufficient degree of commerciality in situations where a personal element is involved, the Court can take into account the factors set out in Muldowan such as profit and loss experience in past years, the tax payer's training, the taxpayer's intended course of action, the capabilities of the venture to show a profit, and the reasonable expectation of profit.
[8] The Tax Court judge found that the Applicant derived personal benefit from the ownership of the property by having her family live on the premises with her. The evidence supports this conclusion..
[9] It was therefore proper for him to consider then, whether the Applicant had a reasonable expectation of profit, along with other factors mentioned in Moldowan. The other factors considered by the Tax Court judge were:
1. The Applicant did not have a marketing plan, nor did she advertise.
2. After her mother died she took no steps to rent the vacant room.
3. The Applicants expenses consistently exceeded her rental income and the Applicant's calculations as to future profitability were not realistic.
[10] The Tax Court judge carefully considered these factors and concluded that the Applicant had not carried on a business in 1996 and 1997.
[11] In spite of the fact that the Tax Court judge did not have the benefit of the reasons of the Supreme Court in Stewart, we nevertheless are of the view that his analysis is consistent with the reasoning in the decisions in Stewart and Moldowan.
[12] We are unable to detect any reversible error in the Tax Court judge's assessment of the evidence or his analysis of the appropriate factors to be considered in determining whether or not the Applicant was carrying on a business.
[13] The application will therefore by dismissed.
"J. E. Sexton"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: A-477-01
STYLE OF CAUSE:CLARITA JARQUIO
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: THURSDAY, FEBRUARY 13, 2003
REASONS FOR JUDGMENT
OF THE COURTBY: SEXTON J.A.
DATED: THURSDAY, FEBRUARY 13, 2003
APPEARANCES BY: Ms. Clarita Jarquio
For the Applicant
Mr J.Paul Malette, Q.C.
Ms. Brianna Caryll
For the Respondent
SOLICITORS OF RECORD: Clarita Jarquio
Scarborough, Ontario
For the Applicant
Morris Rosenberg
Deputy Attorney General of Canada
For the Respondent
FEDERAL COURT OF CANADA
Date: 20030213
Docket: A-477-01
BETWEEN:
CLARITA JARQUIO
Applicant
- and -
HER MAJESTY THE QUEEN
Respondent
REASONS FOR ORDER