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Citation: 2003TCC807 |
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Date: 20031124 |
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Docket: 2002-604(IT)I |
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BETWEEN: |
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JOHN T. GLEN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
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For the Appellant: The Appellant himself
Counsel for the Respondent: A'Amer Ather
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REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Toronto, Ontario on January 31, 2003)
McArthur J.
[1] The issue in these appeals is whether the Appellant is entitled to deduct additional business or employment expenses of $34,560 and $10,730 in the 1998 and 1999 taxation years, respectively, details of which expenses are set out in Schedules "A" and "B" of the Reply to the Notice of Appeal. Prior to the trial, the Appellant requested an adjournment to permit settlement efforts. These talks commenced two days before the hearing and were at best in the preliminary stage. Upon my request, the parties appeared on the day and time set for the hearing of the appeals, which date had been set some months ago. They were prepared and the hearing proceeded. For reasons given by Judge Bowie in Solomons v. The Queen, 2003 DTC 505, I was not prepared to allow an adjournment unless a settlement was near and it was not.
[2] The Appellant is a highly knowledgeable real estate appraiser and part-time university professor. He has a B.A. and an M.A. from the University of Western Ontario, and belongs to several appraisal institutes. His curriculum vitae is impressive.
[3] In 1998 and 1999, he received T-4 slips from Jones Lang Wootton Canada in the amounts of $109,999.92 and $82,499.94 and from York University of $11,525.81 and $12,822.62. He in fact earned $140,000 from Jones Lang in 1998, but supported a corporate initiative by surrendering $30,000. I mention this fact for the purpose of taking it into consideration when comparing income proportionately to expenses. In 1998, the Appellant deducted $62,609.33 in expenses from an approximate income of $150,000. In the spring of 1999, he left Jones Lang and worked on his own account for the remainder of the year.
[4] The question is whether the Appellant can deduct the expenses claimed set out in Schedules "A" and "B" of the Reply. The auditor for Canada Customs and Revenue Agency did not give evidence, but his position is set out in the letter dated March 12, 2001 and filed in evidence as Exhibit A-2. The Minister of National Revenue relies primarily on section 8 of the Income Tax Act.
[5] The Appellant was the only witness. His evidence was comprehensive, but lacking in detail for amounts expended. Summarizing it briefly, he stated why he was required to travel extensively; why he required state-of-the-art computer equipment together with costly software and photographic equipment; why he incurred substantial printing costs preparing lectures and handouts for his University of York lectures; and why he used his home extensively to prepare his classes and meet students and work on his appraisals.
[6] The Respondent's position is that to claim employment expense, the Appellant must come within the statutory provisions of subparagraphs 8(1)(i)(i), (ii) and (iii), and subsections 8(2) and 8(13), the relevant portions of which read:
8(1) In computing a taxpayer's income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:
(a) ...
(i) amounts paid by the taxpayer in the year as
(i) annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,
(ii) office rent, or salary to an assistant or substitute, the payment of which by the officer or employee was required by the contract of employment,
(iii) the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for, ...
8(2) Except as permitted by this section, no deductions shall be made in computing a taxpayer's income for a taxation year from an office or employment.
8(13) Notwithstanding paragraphs (1)(f) and (i),
(a) no amount is deductible in computing an individual's income for a taxation year from an office or employment in respect of any part (in this subsection referred to as the 'work space') of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either
(i) the place where the individual principally performs the duties of the office or employment, or
(ii) used exclusively during the period in respect of which the amount relates for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of the office or employment; ...
[7] Through his accountant, the Appellant filed his 1998 and 1999 income tax returns and claimed employment expenses. The Appellant did not present that he was an independent contractor, although it would appear that he was for seven or eight months in 1999 with respect to his appraisal business. No breakdown of income was given in 1999 other than paragraph 8(a) of the Reply indicating that he received a T-4 from Jones Lang of $82,499.94 in 1999. No independent business income was noted. I proceed on the basis that all expenses were employment expenses and restricted by section 8 which applies.
[8] I will examine the Respondent's argument. After being inspired by the comment of Judge Bowman in McCann v. The Queen, [2002] 3 C.T.C. 2422 at paragraph 15 where referring to the Respondent's submissions, he stated:
This is indeed a formidable array of arguments. The easy solution would be to accept some or all of them and dismiss the appeals. Nonetheless the claim is a most deserving one and I think this court has an obligation to the Appellant to examine with some care the Crown's arguments. Unrepresented Appellants make up a large and important part of the work of this court, particularly in the informal procedure. The course of least resistance is to dismiss the appeal because usually the Crown's arguments have some semblance of plausibility and if the trial judge accepts them and dismisses the appeal he or she can take comfort from the fact that the unrepresented litigant is unlikely to appeal to the Federal Court of Appeal. Our obligations as a court of first instance with exclusive jurisdiction to hear appeals under the Income Tax Act and other federal statutes go far beyond adopting superficially plausible arguments.
[9] I found the Appellant to be an impressive witness. He obviously is immersed in the academic profession, albeit as a part-time professor. He is a highly skilled appraiser who has been retained by the giants of the industry such as Cadillac Fairview, Cambridge, Olympia & York and several banks. He lectures to approximately 80 students during the evenings twice weekly, sharing his appraisal expertise. His remuneration is modest from the University, approximately $12,000 annually. He has considerable computer expertise and can provide his students with the most up-to-date techniques. He uses or purchases the latest computer hardware and software. Students frequently telephone him after work hours, and by "after work hours", I am referring to the work with his full-time job with Jones Lang. He saw 30 or 40 students in his home condominium office over a four-month period. The University made no office space available to him.
[10] He attended international conferences or seminars at his own expense to keep up with the times and to retain his accreditation. One of these conferences during the relevant period was in Kuala Lumpur. He is obviously very thorough and precise in preparing his appraisals. He retains title searchers from time to time. In his teaching profession, he retains the assistance of an exam marker.
[11] Dealing with specific items claimed by the Appellant, it is unfortunate that for the most part, no amounts were given. The parties could not put a number to some of these items included in the expenditures and I have attempted to deal with them in the same manner as they were presented.
(i) I agree with Respondent's counsel that payments made by the Appellant to his accountant in 1998 and 1999 are not deductible. There is no provision in section 8 in that regard, and I refer to the case Blair-Lawton v. The Queen, [2001] T.C.J. No. 335, where Judge Sarchuk of this Court dealt with a similar situation.
(ii) Payments to the marker at the University of York are not deductible under subparagraphs 8(1)(i)(i) and (ii). There was no evidence that a marker was required in the contract of employment.
(iii) I find the cost of the computer software claimed by the Appellant is included under cost of supplies set out in subparagraph 8(1)(i)(iii). The software was consumed directly in the performance of the Appellant's teaching duties and his contract surely implies that to perform his duties, he needed updated software.
(iv) Now dealing with his home expenses. The Respondent submits that there are the two components because of Mr. Glen's two sources of income. I find the Appellant used his condominium office as his principal location for the university employment. While he lectured at the university, I have no difficulty in finding that over 50% of his duties were performed in his home office preparing his lectures and speaking to his students, either in person or by telephone. I find as a fact that his office space was exclusively for use of discharging his teaching employment obligations and I accept that he used 20% of his condominium for that purpose and the expenses are deductible in 1998 and 1999.
[12] As the Respondent acknowledges, appraisal dues are deductible. In addition, I am prepared to allow the travel expense of $9,936.08 claimed in 1998. I find that the Appellant had to travel extensively in Canada and internationally at his own expense to complete appraisals, usually for large corporate property owners. I fully accept the Appellant's evidence in this regard. I accept the Respondent's position with regard to all other expenses, including food, beverages, supplies, accommodation, travel, car, taxis, train expenses, vehicle rental, and meeting expenses, other than those amounts and items specifically allowed previously in this judgment.
[13] I have tried to follow the Respondent's counsel's submissions in the order presented. Should any matters require clarification, I invite the parties to arrange a telephone conference, although I am confident that they can follow the direction contained herein. The appeals are allowed and referred back to the Minister of National Revenue for reconsideration and reassessment to allow deductions under subsection 8(1) of the Act in the computation of the Appellant's income for 1998 and 1999 from his office or employment as specifically provided in this judgment. No costs are awarded.
Signed at Ottawa, Canada, this 24th day of November, 2003.
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"C.H. McArthur" |
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CITATION: |
2003TCC807 |
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COURT FILE NO.: |
2002-604(IT)I |
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STYLE OF CAUSE: |
John T. Glen and Her Majesty the Queen |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
January 30, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice C.H. McArthur |
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DATE OF JUDGMENT: |
February 14, 2003 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
A'Amer Ather |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
N/A |
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Firm: |
N/A |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |