Lucyk v. R. - TCC: Court rejects most expense claims in the absence of evidence

Lucyk v. R. - TCC:  Court rejects most expense claims in the absence of evidence

Lucyk v. The Queen  (January 8, 2016 – 2016 TCC 9, Sommerfeldt J.).

Précis:  Mr. Lucyk ran a successful carpet-laying business through a wholly-owned corporation, 101103269 Saskatchewan Ltd. (“101SK”).  CRA assessed Mr. Lucyk with respect to various expenses that were paid by 101SK which CRA treated as personal benefits to Mr. Lucyk and his wife.  These included car expenses, meals, telephone and other items.  Mr. Lucyk appealed to the Tax Court.  At trial in the Tax Court the issues were narrowed down to car expenses, meals and telephone.  Neither Mr. Lucyk nor his wife testified.  The Court largely rejected the claims in the absence of any evidence to rebut the position of CRA.  The Court did however allow a de minimus amount, 10%, for corporate use of the home phone.

There was no order as to costs as this was an informal procedure appeal.

Decision:   Mr. Lucyk was represented in the Tax Court by a friend, Mr. Munchinsky, who also happened to be his insurance agent.  He did not call either Mr. Lucyk or his wife.  The result was predicable:

[32]        In reflecting on the submissions made during the hearing by Mr. Munchinsky on behalf of Mr. Lucyk, my sense is that both gentlemen perceived the Reassessments to be more onerous than they actually were. For instance, it appears that they understood that the CRA had treated the cost of meals in respect of split jobs as being a taxable benefit, whereas the CRA had actually allowed 101SK to deduct the cost of those meals and had not included that cost in computing Mr. Lucyk’s income. As well, Mr. Munchinsky and Mr. Lucyk appeared to be of the view that the CRA had included half of the monthly cost of Mr. Lucyk’s cell phone in computing his income, whereas the CRA had actually recognized the full cost of his cell phone as a business expense and, insofar as the cell phones were concerned, had included only the cost of Mrs. Lucyk’s cell phone in computing his income. In addition, it seems that Mr. Munchinsky, and perhaps Mr. Lucyk, were of the view that the CRA had calculated the amount of the Van-related taxable benefit by reference to an allowance paid by 101SK at the rate of $0.80 per kilometer, whereas the rate used by the CRA in calculating the amount of the benefit was only $0.60 per kilometer. Furthermore, the CRA allowed Mr. Lucyk to deduct significant motor vehicle travel expenses, which greatly reduced the impact of the Reassessments.

[33]        Apart from the modest amount of business usage that I have allocated to the telephone in Mr. Lucyk’s home, I am of the view that the Reassessments were correct. However, by reason of my finding in respect of the home telephone, this Appeal is allowed in part, without costs, and the Reassessments are referred back to the Minister for reconsideration and reassessment on the basis that 10% of the usage of the telephone in Mr. Lucyk’s home pertained to the business of 101SK. Subject to the direction noted in the preceding sentence, the remaining portions of the Reassessments are upheld.