Date: 20010522
Docket: A-56-00
Neutral Citation: 2001 FCA 160
CORAM: STRAYER J.A.
ISAAC J.A
EVANS J.A.
BETWEEN:
GREGORY H. BOWLAND
Appellant,
- and -
HER MAJESTY THE QUEEN
Respondent.
Heard atWinnipeg, Manitoba on Tuesday, May 22, 2001
JUDGMENT delivered from the Bench at Winnipeg, Manitoba
on Tuesday, May 22, 2001
REASONS FOR JUDGMENT BY: EVANS J.A.
Date: 20010522
Docket: A-56-00
Neutral Citation: 2001 FCA 160
CORAM: STRAYER J.A.
BETWEEN:
GREGORY H. BOWLAND
Appellant,
- and -
HER MAJESTY THE QUEEN
Respondent.
(Delivered from the Bench at Winnipeg, Manitoba,
on Tuesday, May 22, 2001)
EVANS J.A.
[1] The question in this appeal by the Crown is whether the Tax Court Judge erred when he held that the expenditures that the taxpayer undertook in 1992 and 1993 to restore his rental property following a fire were incurred as a capital cost. The Judge dismissed the appeal from the Minister's reassessment which disallowed the taxpayer's claim to deduct the full cost of the work from his income tax liability for the years 1993 and 1994 as a current expense. The taxpayer has appealed from this decision, which is now reported: Bowland v. The Queen, 99 DTC 998.
[2] Before the fire, the building was valued at $80,000, of which $5,000 was attributable to the land. According to the agreed statement of facts, the taxpayer had spent $83,240.84 on the renovations, of which he claimed that $66,472.00 was a repair and not an outlay of capital for the purpose of paragraph 18(1)(b) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1. In fact, it was accepted before the Tax Court Judge that the true cost of the disputed work was $63,681.54. In addition, in the course of the argument before us, counsel for the taxpayer conceded that the cost of replacing some items of relatively small value, namely, a washer, dryer and hot water tank, should be treated as a capital expenditure.
[3] Whether an expenditure should be characterized as a capital cost is a question of mixed fact and law. The Tax Court Judge correctly set out the various tests formulated for determining on which side of the line an expenditure falls. Hence, in the absence of some indication in his reasons that he misdirected himself in law with respect to the applicable tests, it cannot be said that he erred in law by applying the wrong legal test. We are not persuaded that, because the Judge only referred in his conclusion (at para. 18) to the "one-time-occurrence" and "enduring value" tests, he thereby erred in law by narrowing the range of relevant considerations and ignoring the other tests to which he had referred earlier in his reasons.
[4] For the most part, the application of the legal principles for determining whether an expenditure represents a capital cost or a current expense involves a question of fact. Accordingly, unless the Tax Court Judge applied the relevant principles unreasonably, or, in light of the evidence before him, committed some palpable and overriding error in making findings of fact, this Court will not intervene.
[5] Having considered the evidence as a whole, the Judge concluded (at para. 18) that the renovations were so substantial in nature that "the house was virtually rebuilt and resulted in a new capital asset" and, consequently, the cost of the work should be characterized as being of a capital nature. In our view, these essentially factual conclusions were open to the Judge on the evidence before him.
[6] For these reasons, the appeal will be dismissed with costs.
"John M. Evans"
J.A.
Winnipeg, Manitoba
May 22, 2001
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD
DOCKET: A-56-00
STYLE OF CAUSE: Gregory H. Bowland v. Her Majesty The Queen
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: May 22, 2001
REASONS FOR JUDGMENT OF
THE HONOURABLE MR. JUSTICE EVANS
DATED MAY 22, 2001
APPEARANCES:
Mr. Kris Saxberg for the Appellant
Mr. Lyle Bouvier for the Respondent
Department of Justice
301 - 310 Broadway
Winnipeg, MB R3C 0S6
SOLICITORS OF RECORD:
D'Arcy & Deacon for the Appellant
Barristers & Solicitors
1200 - 330 St. Mary Avenue
Winnipeg, MB R3C 4E1
Morris Rosenberg
Deputy Attorney General of Canada for the Respondent