https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/422969/index.do
Crocket v. The Queen (October 8, 2019 – 2019 TCC 203, MacPhee J.).
Précis: The taxpayer deducted operating losses from “a vacation rental home, owned by the Appellant’s mother but rented by the Appellant, located in Tulameen, British Columbia. The amounts of claimed losses in issue were $28,938.34 in 2013 and $25,903.43 in 2014.” [Para. 1]. The taxpayer was self-represented. The Court found that the taxpayer’s predominant purpose was to earn a profit from the rental property and accordingly allowed him to deduct the losses in full. There was no order as to costs since this was an informal procedure appeal.
Decision: In a nutshell, the Court found the taxpayer’s evidence credible and persuasive:
[19] The Appellant argues that from 2013, when he entered into a verbal contract to rent his mother’s home, until 2015, when the business was no longer viable, the Appellant did all he could to create and run a viable active business. In addition to the repairs and upgrades he carried out, he listed the property on a local Tulameen website for people seeking rentals (as part of his marketing campaign he named the home Buckhorn). He also advertised on Facebook, and in Canada 411. He made rent payments to his mother by covering the mortgage, interest and all ongoing expenses of the home.
[20] On the revenue side, the Appellant set up a Pay Pal account to collect rental payments. He collected some rent while he was still fixing up the property. These amounted to approximately $1925 in 2013 and $3567 in 2014. He hired cleaners each time the property was rented.
[21] Going forward, after all renovations were completed on the property, the Appellant hoped the he could charge $200 per night for the whole property, or $125 a night for the upstairs (3 beds) and/or $125 per night for the downstairs. Based on his calculations, if he could rent out the property for two weeks a month he would cover all expenses and have a small profit. Tulameen is a year round vacation destination. He hoped to reach profitability by year three. I accept that this was a reasonable belief held by the Appellant.
[22] Other factors I considered were as follows. The Appellant only stayed in the property when he was working on it. He did have a business number with CRA for the rental business. Finally he did not purchase commercial insurance on the property, but instead left it insured as residential. He testified that he was willing to accept the risk of doing so.
[23] All these factors convince me that the Appellant’s predominant intention with respect to the property was to earn a profit. The Appeal is allowed in its entirety.
Thus the Court allowed the taxpayer to deduct the losses in full. There was no order as to costs since this was an informal procedure appeal.