Gestion Fortier Inc. v. R. – TCC: GST assessments upheld based on personal use of corporate motor home

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Gestion Fortier Inc. v. The Queen[1] (October 25, 2014) involved GST assessments in respect of an expensive ($295,000) motor home purchased by the appellant and allegedly used for the personal benefit of Réal Fortier:[2]

[1]             On March 1, 2011, the respondent, through the Minister of National Revenue (the Minister), assessed the appellant pursuant to Part IX of the Excise Tax Act (the ETA), R.S.C. (1985), c. E-15, for the periods of June 1, 2006, to June 31, 2006, January 1, 2007, to March 31, 2007, October 1, 2007, to March 31, 2008,  July 1, 2008, to September 30, 2008, January 1, 2009, to March 31, 2009, October 1, 2009, to December 31, 2009, and April 1, 2010, to June 30, 2010 (the period in question). This assessment resulted from two distinct elements. First, the Minister submits that Gestion Fortier Inc. (Gestion Fortier) was not eligible for the input tax credits (ITC) it had claimed regarding, first, the purchase of a motor home and second, for maintenance of said motor home. With regard to the ITC, the assessment was made outside the normal assessment period set out in the ETA. It is therefore the Minister’s burden to prove that the appellant made a misrepresentation of the facts, whether by neglect, carelessness or wilful default. Essentially, the Minister alleges that the motor home was purchased for personal, not commercial, purposes.

[2]             Second, the Minister submits that Gestion Fortier should have collected taxes on the benefits represented by Réal Fortier’s use of the company’s vehicles for his personal travel. With regard to these benefits, the assessment was made during the normal assessment period. It is, therefore, the appellant who must show that the assessment is without merit.

Mr. Fortier claimed that the motor home was purchased for resale.  The evidence was that the motor home was in Florida during the winter months but Mr. Fortier testified that he and his wife did not use it and that when they were in Florida they stayed in a condominium:

[6]             According to Mr. Fortier, over the winter, he rented the motor home for two or three weeks total. The motor home was parked at a campground in Florida every winter. Mr. Fortier admitted that he spent two to three months per year in Florida and claimed that he lived in a condo. Occupation of the condo was not proven. According to Mr. Fortier, the rest of the year, meaning other than in the winter, the motor home was parked in a warehouse belonging to Gestion Fortier.

[7]             Certain discrepancies were identified with regard to the motor home rentals. First, payments were made directly to Mr. Fortier. The amount of these payments was then deducted from Mr. Fortier’s advances from the company to reflect the transactions in the company’s accounting. Additionally, the rental contracts were rather incomplete (no proof of insurance or driver’s licence, etc.), Mr. Fortier explained that he only leased to friends who did not even drive the motor home and who had sufficient insurance.

[8]             The motor home was decorated with metal plates with Mr. Fortier’s and his wife’s first names. Mr. Fortier explained that friends had given him these plates and engraved them, for the purpose of making the motor home more [translation] “attractive and different”.

[9]             The evidence shows that Gestion Fortier was a member of the Fédération québécoise de camping et de caravaning, meaning it benefited from a discount on insurance for the motor home. Mr. Fortier stated that Gestion Fortier was only a member in order to benefit from the discount. The insurance policy had a special proviso that commercial activities, including commercial rental, was not covered. In short, the insurance only covered personal use.

[10]        The evidence also showed that Mr. Fortier had already rented a motor home before acquiring the one in question in this case. This was therefore an activity with which he had some experience.

The court found Mr. Fortier’s evidence unpersuasive:

[18]        The overall evidence shows that no serious action was taken to sell the motor home before 2011. It is strange that Mr. Fortier was so quick to make improvements only to then not be proactive about reselling it. I do not believe that a seasoned businessman would wait so long before putting ads in the newspapers and on the Internet. If his true goal was to flip the motor home, more concrete steps would have been taken than mere word of mouth. Added to that is the evidence suggesting a more private than commercial use of the vehicle. In short, for all these reasons, I believe that the Minister has met his burden of proving the appellant’s misrepresentation due to negligence. The evidence shows that the appellant did not have the intention to resell the motor home when he claimed the ITC. Having reached this conclusion, I feel that the Minister has met his burden of proving the existence of circumstances that allow for an assessment to be made outside the normal assessment period.

[22]        As to the issue of the benefits related to the use of the vehicles, Mr. Fortier has the burden to show that the Minister erred in his assessment. Since the periods during which these benefits were received were within the normal assessment periods, the parties agree on this issue. Mr. Fortier provided unconvincing evidence, based on his testimony and the log reconstructed from his memory of events. Since he did not have a personal vehicle in his name, it would not be surprising if Mr. Fortier had used the company’s vehicles for his personal travel.

[23]        In short, Mr. Fortier was unable to prove that the Minister erred when making the assessment regarding the benefits related to the use of the vehicles.

As a result, the appeal was dismissed with costs.

[1] 2013 TCC 337.

[2] While it is not evident from the reasons for judgment, presumably he was a director, shareholder or officer of the appellant.