Tax Court of Canada Judgments

Date: 20000706

Docket: 97-3825-IT-I

BETWEEN:

JULIA YAKUBCHUK,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Beaubier, J.T.C.C.

[1] This appeal pursuant to the Informal Procedure was heard at Saskatoon, Saskatchewan on June 27, 2000. The Appellant's son, Terry, testified for the Appellant. He is 45. Julia is 79. She attended in Court but did not testify.

[2] Carl Thoma, Revenue Canada's auditor on the file testified for the Respondent.

[3] This appeal was adjourned at the Appellant's request on July 23, 1998 at which time the Court suggested that the documents to be relied on by the Appellant should be submitted to the Respondent two or three weeks before the hearing, since the nature of expenses was then a problem. This hearing opened at 9:30 a.m. Thereafter the Appellant required two ½ hour adjournments to sort her own documents which consisted of a pile which the Court reviewed briefly and which, in that partial review, consisted entirely of invoices and documents in other people's names.

[4] The appeals are for the Appellant's 1993, 1994 and 1995 taxation years. Paragraphs 4 to 7 of the Reply describe the issues in appeal. They read:

4. In computing income for the 1993, 1994 and 1995 Taxation Years, the Appellant deducted the following amounts as net farming losses. ("Farm Losses"):

1993 ($19,395.84)

1994 ($20,355.01)

1995 ($23,944.65)

5. In reassessing the Appellant for the 1993, 1994 and 1995 Taxation Years, the Minister of National Revenue (the "Minister"):

(a) disallowed the Appellant's Farm Losses;

(b) reclassified the gross income each year reported by the Appellant as income from farming to income from property;

(c) allowed expenses for land taxes and hail insurance, resulting in net income from property as follows and as detailed in Schedule 1 (for 1993), Schedule 2(for 1994) and Schedule 3(for 1995).

1993 $ 8,452.78

1994 $13,898.00

1995 $ 5,857.83

6. In so reassessment the Appellant, the Minister made the following assumptions of fact:

(a) the Appellant owns farmland in Saskatchewan;

(b) the Appellant was not actively involved in farming in the 1993, 1994 and 1995 Taxation Years and was not carrying on a farming business;

(c) the Appellant rented out her farmland to a third party during the years under appeal;

(d) the Appellant's source of income is from sharecropping which is income from property and is not income from any farming activity;

(e) the Minister reclassified the Appellant's farming income as rental income;

(f) the Appellant has reported farm losses since at least the 1982 Taxation Year, as follows:

Taxation Year	Gross Farming Income	Net Farming Losses
1982	$ 7,523	($ 8,460)
1983	3,027	( 6,367)
1984	4,804	( 7,186)
1985	165	( 7,219)
1986	1,028	( 8,130)
1987	76	( 13,561)
1988	2,370	( 12,951)
1989	3,145	( 14,213)
1990	3,862	( 15,625)
1991	6,585	( 16,953)
1992	8,535	( 19,730)
1993*	9,896	( 19,395)
1994*	13,898	( 20,355)
1995*	7,774	( 23,944)
1996	12,833	( 20,373)
Total	$85,521	($214,462)

*Denotes year under appeal.

(g) the Appellant claimed 100% of the Farm Losses as a proprietorship;

(h) the Appellant claimed CCA on a 1993 Ford;

(i) during the years under appeal, the Appellant did not have a 1993 Ford registered in her name;

(j) the Appellant's claims for CCA on a 1993 Ford are not valid;

(k) the Appellant has not provided any documentation to prove the expenses were incurred;

(l) expenses in excess of the amount allowed by the Minister were not incurred, and if incurred were not for the purpose of gaining or producing income from a business or property, but were personal and living expenses of the Appellant.

B. ISSUES TO BE DECIDED

7. The issues are:

(a) whether the Minister properly reclassified the Appellant's farming income as rental income;

(b) whether expenses in excess of the amount allowed by the Minister were incurred by the Appellant;

(c) and if the expenses were incurred by the Appellant whether the expenses were incurred for the purpose of gaining or producing income from a business or property.

[5] Assumptions 7(b), (d), (e), (f), (g), (h), (i), (j) and (l) were not refuted. Assumption 7(k) was responded to by testimony from the Appellant's son, Terry; that testimony will be dealt with in the course of this Judgment.

[6] The Appellant did not testify although she sat through the hearing from 9:30 a.m. until after 6:00 p.m. and appeared to give instructions to her counsel and to counsel her son Terry.

[7] The evidence respecting her appeal has a number of difficulties, including:

1. She allegedly owns two quarter sections of land near Prince Albert. In fact, NE 17 is owned by the Appellant's husband's estate executor as, it seems, is SW9. Her husband died in 1981. The Letters Probate were not placed in evidence. As a result, the Court finds that the Appellant did not own the two quarter sections in question. There is no evidence that she has any interest in the land, since neither title in her name nor a lease from the Estate to the Appellant was placed in evidence. Terry testified that she operated the farm; the Court does not accept this testimony. Her "activities" consisted of occasionally moving a vehicle for him or picking him up while he was farming. Terry stated that from 1981 until 1995 the Appellant always conducted herself and her alleged business in the same manner.

2. Terry also testified that the Appellant owned her late husband's farm machinery. Because the title to NE17 is in the estate, and the equipment (except for one piece) is now about 19 years old, it would appear to be in the estate too. The Appellant never listed it as hers in her income tax returns during the years in dispute. She did not testify herself. Without corroboration, Terry is not believed. Therefore the Court finds that the farm equipment is not hers. While the Court does not so find, the evidence indicates that it is owned by her husband's estate.

3. Terry alleged that the losses the Appellant claimed were amounts paid by her by cheque or cash or, in a few cases, by cross credits with Terry. However, she only had one bank account and it shows no record of payments in large amounts, or in cheques or withdrawals sufficient to pay the losses she claimed. The Court finds that Terry's testimony respecting these allegations is false. Tab 25 of R-1 describes her recorded income and the sources from which she claimed to receive it during named years. For 1993, 1994 and 1995 it reads:

Client: Julia Yakubchuk Auditor: Carl Thoma

Account #: 617-271-838 Date: 23-Jun-00

Year End: 1982 to 1999

Subject: All years, Total and Net Farm Income as reported on the T1 Return of Income

Taxation Year	Gross Farming Income	Net Farming Income (Loss)	T4 Earnings	Old Age Pension and Net Federal Supplement	CPP Pension	Other Pension	Other Income	Social Assistance	Income Tax Paid
1982	$7523.00	($8,460.00)	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1983	3,027.00	(6,367.00)	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1984	4,804.00	(7,186.00)	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1985	165.00	(7,219.00)	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1986	1,028.00	(8,130.00)	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1987	76.00	(13,561.00)	$1,151.00	$3,628.00	$1,921.00	$6,373.00	$0.00	$0.00	$0.00
1988	2,370.00	(12,951.00)	1,453.00	3,779.00	2,055.00	6,596.00	0.00	0.00	0.00
1989	3,145.00	(14,213.00)	1,262.00	3,949.00	2,088.00	6,814.00	0.00	0.00	0.00
1990	3,882.00	(15,625.00)	2,085.00	4,147.00	2,188.00	7,073.00	0.00	0.00	0.00
1991	6,585.00	(16,953.00)	2,560.00	4,380.00	2,293.00	7,342.00	0.00	0.00	0.00
1992	8,535.00	(19,730.00)	2,316.00	9,726.00	3,295.00	7,680.00	0.00	915.00	0.00
1993-1	9,896.00	(19,395.00)	2,248.00	9,526.00	3,165.00	7,795.00	0.00	570.00	0.00
1994-1	13,898.00	(20,355.00)	2,163.00	9,650.00	3,245.00	7,912.00	1,239.00	561.00	0.00
1995-1	7,774.00	(23,944.00)	1,846.00	9,792.00	3,261.00	7,943.00	1,914.00	609.00	0.00
1996	12,833.00	(20,373.00)	1,853.00	10,309.00	3,320.00	8,062.00	1,659.00	861.00	0.00
1997	6,099.00	(20,572.00)	1,570.00	10,617.00	3,370.00	8,159.00	348.00	1,080.00	0.00
1998	9,240.00	(21,055.00)	2,386.00	10,726.00	3,434.00	8,282.00	189.00	1,080.00	0.00
1999	3,154.00	(26,610.00)	0.00	10,853.00	3.465.00	8,340.00	0.00	1,080.00	0.00
Total	$104,014.00	(282,699.00)	$22,893.00	$101,082.00	$37,100.00	$98,371.00	$5,349.00	$6,756.00	$0.00

Notes: 1) Taxation Years before the Tax Court of Canada. Tax information as per original Notice of Assessment.

2) N/A - Not Available at this time.

3) Julia's Date of Birth is August 20, 1921, and she has been retired for at least 13 years.

4) Julia's employer - R.M. of Garden River #490, located in Meath Park Sask.

5) Total Farm Income reported after 18 years of Farming activity - $104,014.00, total Farm losses - $282,699.00.
6) Total Income Taxes paid for the last 13 yeas - NIL.

The losses she claimed each year were sufficient to make the Appellant non-taxable. Mr. Thoma, Revenue Canada's auditor, compiled the entire table at Tab 25 which extends from 1982 to 1989 inclusive, and his testimony confirms the truth of this Exhibit.

4. The Appellant alleges that she was a farmer during the years in question. She never registered for G.S.T. purposes in those years.

5. In Exhibit R-1, the Appellant's income tax returns reported her gross income from the farm itself as follows:

1993 "Crop share payment $5,000.00" (Tab 1)

1994 "Bonnie Hawryluk (Grain Share) $6,000.00

Terry Yakubchuk (Grain Share) $6,500.00" (Tab 3)

1995 Wheat $2,500.00 (Tab 5)

Mixed grains $ 540.34

Canola $1,234.12

$4,274.46

6. The permit book for 1993-3 shows the Appellant as a "landlord". The permit book application for 1993-4 shows her as a landlord. Because Terry states that the Appellant operated the same way from 1981 to 1995, the Court finds that she was shown in permit books for the years in dispute as a landlord. This confirms assumption 6(e). Whether her alleged income is from sharecropping or, legally, from the estate is not clear from the evidence and as a result assumption 6(d) is not refuted.

7. None of the Appellant's alleged farm income amounts described in subparagraph 5 were deposited to her credit union chequing account, which was her only "bank" account.

[8] On the evidence as a whole, during the years in question the Appellant was not a farmer, and she did not own farm land or farm equipment. She was not in the business of farming. However, her actual arrangements with her husband's estate are not known. Moreover, there is no evidence that she required the 1993 Ford for the purposes of earning income or that during the periods under appeal the 1993 Ford was registered in her name or used for the purpose of gaining income. In fact, the evidence is that it was purchased by, and registered in, Terry's name.

[9] For these reasons the assessments are confirmed and the appeals are dismissed.

Signed at Ottawa, Canada this 6th day of July, 2000.

"D.W. Beaubier"

J.T.C.C.