Date: 20021129
Docket: 2001-4018-IT-I
BETWEEN:
JOHN GULAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Little, J.
A. FACTS
[1] The Appellant owns an 80-acre farm located in Sliding Hills, Saskatchewan (the "Farm").
[2] In the years under appeal (1998 and 1999) the Farm was operated by a person described by the Appellant as a Rancher.
[3] The Appellant said that the Rancher paid all of the operating expenses of the Farm. If there was any profit realized from the operation of the Farm approximately two-thirds of the profit would be distributed to the Rancher and approximately one-third of the profit would be distributed to the Appellant.
[4] The Appellant also testified that he and his father had established a gravel crushing business approximately 25 years ago. The gravel crushing business was operated by the Appellant and his father as a Partnership. The Appellant said that the Partnership had purchased expensive crushing equipment and other pieces of equipment.
[5] The Appellant said that his father became ill in 1992-1993 and the gravel crushing business stopped when his father became ill. The Appellant said that his father died in July 1998.
[6] The Appellant said that the gravel crushing business was not operated in the 1998 and 1999 taxation years. The Appellant testified that he attempted to maintain some of the equipment during the years under appeal.
[7] When the Appellant filed his personal income tax returns for the 1998 and 1999 taxation years he reported income and expenses as follows:
1998 Taxation Year
RENTAL INCOME
Income $ 3,541.68
Expenses:
Maintenance 1,631.22
Motor Vehicle 2,165.22
Office Expenses 1,631.50
Professional Fees 424.32
Travel 952.78
Utilities 2,405.11
Other Expenses 460.00
$ 9,670.59
Net Income (Loss) ($6,128.91)
1999 Taxation Year
RENTAL INCOME
Income $ 1,979.09
Expenses:
Maintenance & Repairs 3,309.64
Professional Fees 589.84
Other Expenses 1,260.18
$ 5,159.66
Net Income (Loss) ($3,180.57)
1999 Taxation Year
BUSINESS INCOME
Income $ 300.00
Expenses:
Business tax, fees, licence 878.00
Insurance 372.00
Meals & Entertainment
Travel Expenses 1,147.23
Rent 2,198.50
Telephone 2,957.11
Total $7,552.84
Net Income (Loss) ($6,128.91)
[8] On the 29th day of April 1999 the Minister of National Revenue (the "Minister") reassessed the Appellant's 1998 taxation year to disallow the rental expenses claimed in the year.
[9] On the 11th day of May 2000 the Minister reassessed the Appellant's 1999 taxation year to disallow the rental expenses and business losses claimed by the Appellant.
B. ISSUE
[10] Is the Appellant entitled to deduct the following expenses:
1998 1999
Rental Expense $9,670.59 $5,159.66
Business Expense - $7,552.84
C. ANALYSIS
Re: Farm - 1998
[11] No receipts were provided by the Appellant with respect to the rental expenses claimed for the 1998 taxation year. However the Appellant testified that he used the industrial loader twice to pick rocks and dig trenches on the Farm. I will allow the amount of $500.00 as an expense in the year re the use of the industrial loader on the Farm. Since no records were filed to substantiate the other expenses that were claimed, the expenses claimed are denied.
Re: Farm - 1999
[12] The Appellant stated that the Rancher paid all of the operating expenses of the Farm. I see no basis for allowing the maintenance and repairs of $3,309.64. However, I will allow the Appellant to deduct the amount of $500.00 re rock picking and trenching on the Farm. I will also allow the sum of $589.84 claimed as professional fees on the income tax return. All other expenses are denied.
Re: Business - 1999
[13] As noted above, the Appellant testified that he was not operating the gravel crushing business in 1998 and 1999. However he claimed business expenses of $7,552.84 in connection with the gravel crushing business in determining his income for the 1999 taxation year. Since the gravel crushing business was not an economic enterprise and was not operating in 1999, all expenses claimed in connection with the business are disallowed.
[14] The appeals will be allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment to permit the Appellant to deduct the amounts specified above. In all other respects the appeals are dismissed.
Signed at Vancouver, British Columbia, this 29th day of November 2002.
|
"L.M. Little" |
J.T.C.C.
COURT FILE NO.: 2001-4018(IT)I
STYLE OF CAUSE: John Gulak and
Her Majesty the Queen
PLACE OF HEARING: Regina, Saskatchewan
DATE OF HEARING: November 18, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little
DATE OF JUDGMENT: November 29, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Anne Jinnouchi
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-4018(IT)I
BETWEEN:
JOHN GULAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on November 18, 2002 at Regina, Saskatchewan, by
the Honourable Judge L.M. Little
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Anne Jinnouchi
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1998 and 1999 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment to permit the Appellant to deduct the amounts specified above. In all other respects the appeals are dismissed in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 29th day of November 2002.
|
"L.M. Little" |
J.T.C.C.