Emjo Holdings Ltd. v. R. – TCC: Deductions of life insurance expenses denied – taxpayer failed to establish an evidentiary basis for the deductions

Jun 06, 2018 By Bill Innes

Précis: The taxpayer corporation sought to deduct life insurance expenses of $8,612, $8,556 and $8,556 for each of the 2013, 2014 and 2015 taxation years. Two separate life insurance policies were involved, each on the life of the corporation’s president, Lee Rusnak. One universal policy in the amount of $1,000,000 (later increased to $2,000,000) was acquired in 2002 and the other, a term policy in the amount of $3,000,000, was acquired in 2011. In both cases the Tax Court held that the evidence adduced did not support the deductions claimed. As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
Emjo Holdings Ltd. v. R. – TCC: Deductions of life insurance expenses denied – taxpayer failed to establish an evidentiary basis for the deductionsREAD MORE »

Barbour v. R. – TCC: Tenured professor denied claim for business expenses while on sabbatical

May 10, 2018 By Bill Innes

Précis: The taxpayer was a tenured professor at Ontario College of Art and Design University (OCADU) in Toronto. She claimed deductions for business expenses and losses in 2012 and 2013. During that period she was on sabbatical from July 2012 to June 2013. The Court found that the taxpayer was not carrying on any business during the years in question. While some of the disputed expenses might have qualified as expenses from employment, that was not pleaded or proven and there was no form T2200 from OCADU verifying that such expenses were conditions of employment. As a result the appeal was dismissed, without costs.
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Van Steenis v. R. – TCC: Interest on funds used for personal purposes not deductible

May 04, 2018 By Bill Innes

Précis: In 2007 Mr. Van Steenis borrowed $300,000 to purchase units of a mutual fund. Between 2007 and 2015 he received a return of capital from the fund of $196,850. He used some of that return to repay a portion of the loan but used the majority for personal purposes. Nevertheless he continued to deduct the full amount of interest on the loan. CRA reassessed denying an interest deduction for the returns of capital that had been used for personal purposes. The Tax Court dismissed the appeal. There was no order as to costs since this was an informal procedure appeal.
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Blott v. R. – TCC: Salary paid to spouse not deductible

Feb 26, 2018 By Bill Innes

Précis: The taxpayer was a market dealer with Walton Capital Management Inc. During each of the 2012 and 2013 taxation years he claimed a deduction of $12,000 for a salary paid to his spouse. CRA denied the deduction and the taxpayer appealed to the Tax Court. The Tax Court dismissed his appeal on the basis that there was insufficient evidence to substantiate that the payments to his spouse were deductible expenses. There was no order as to costs since this was an informal procedure appeal.
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Ngai v. R. – TCC: Realtor has mixed success on expenses claimed

Feb 23, 2018 By Bill Innes

Précis: The taxpayer was a real estate broker. He reported gross commission income of $154,678 in 2005 and $380,953 in 2006. CRA denied roughly $75,000 in expenses claimed by the taxpayer in 2005 and roughly $200,000 claimed in 2006. CRA allowed some deductions (the “Conceded Expenditures”) which are set out in detail in paragraph [116] of the decision. The Court allowed roughly $3,000 in additional expenses and some additional depreciation on a camcorder and accessories. There was no order as to costs since the success was mixed.
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Kassa v. R. – TCC: Home health care service provider entitled to reasonable car expenses

Nov 22, 2017 By Bill Innes

Précis: Ms. Kassa worked as a home health care service provider which required her to have the use of a car to drive to visit her clients. She claimed various deduction including roughly $10,000 per year in car expenses. CRA denied her claims and she appealed three taxation years to the Tax Court. The Court allowed her appeal in part. She was entitled to a reasonable allowance for car expenses which worked out to roughly 40% of the amount she had claimed.. Although this was an informal procedure appeal the Court took the unusual step of awarding Ms. Kassa her costs.
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Plains Midstream v. R. – TCC: Assumption of debt did not give rise to interest expense

Oct 23, 2017 By Bill Innes

Précis: As part of a complex restructuring of Dome Petroleum Limited (Dome Petroleum) and Dome Canada Limited (Dome Canada) in the late 1980’s and early 1990’s, Amoco Canada Petroleum Company Ltd. (the predecessor of the appellant corporation) assumed liability for a $225 million loan payable by Dome Canada to Arctic Petroleum Corporation of Japan in 2030. As consideration for the assumption of such liability Amoco received $17.5 million and additional consideration. In this appeal the taxpayer argued that it was entitled to deduct the difference between $225 million and $17.5 million as a form of interest. Although the original claim was based on a straight-line deduction at trial the appellant reduced its interest deduction claim to $1,043,700 per year. This amount was determined by applying a simple interest rate of 5.964% to the $17.5 million. The original expense claimed had been roughly $4.8 million per year. In characterizing the deduction claimed as simple interest the taxpayer relied upon subsection 16(1) and paragraph 20(1)(c) of the Income Tax Act.
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Shenanigans Media v. R. – TCC: Taxpayer allowed small portion (roughly 10%) of disallowed expenses

Oct 12, 2017 By Bill Innes

Précis: This case involved both corporate expense claims and assessments against the shareholder for taxable benefits. The shareholder was an extremely young (14-16) but very successful Canadian actor. The disputed amounts were expenses alleged to have been incurred by the corporation to further the taxpayer’s career. By the time the matter made it to the Tax Court most of the outstanding issues had been resolved and there was only roughly $23,000 in dispute over the period from 2009-2011. The Tax Court allowed roughly 10% of the disputed amounts. Thus the appeals of both the corporation and the individual shareholder were allowed in part. There was no order as to costs since this was an informal procedure appeal.
Shenanigans Media v. R. – TCC: Taxpayer allowed small portion (roughly 10%) of disallowed expensesREAD MORE »

Geick v. R. - TCC: Policeman could not deduct legal fees defending criminal charges laid against him

Jul 11, 2017 By Bill Innes

Précis: The taxpayer was a police officer. In 2006, as a result of several charges under the Criminal Code relating to incidents in 2004, he was suspended with pay. He incurred $115,996.00 in legal fees between 2007 and 2011. In 2012 he claimed to deduct those expenses against his employment income and CRA disallowed the deduction. He then appealed to the Tax Court. He argued, variously, that the legal fees protected his salary income, his potential pension income and income from certain properties in which he had an ownership interest. The Tax Court rejected his arguments, holding that the payments were personal in character and therefore not deductible. His appeal was accordingly dismissed with costs in accordance with the tariff.
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Danilov v. R. - TCC: No deduction for legal fees incurred in fight with in-laws over money

Jul 10, 2017 By Bill Innes

Précis: Mr. Danilov and his wife were involved in protracted litigation (commenced in 2012 and still ongoing at the date of the Tax Court hearing in 2017) about funds they had received from his wife’s parents. He sought to deduct legal fees of $74,566 in computing his business income for the 2014 taxation year. The Court held that the fees were not incurred for the purposes of earning or producing income but rather were personal expenditures. The Court also rejected Mr. Danilov’s argument that his appeal should be allowed because the Crown had filed its Reply a few days late. As a result the appeal was dismissed. There was no order as to costs since this was an informal procedure appeal.
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