Date: 20021223
Docket: 2002-894-IT-I
BETWEEN:
VICTORIA GALLO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Little, J.
A. FACTS
[1] Jovic Plastifacture Inc. ("Jovic") was incorporated under the laws of the Province of British Columbia on the 25th day of March 1988.
[2] Jovic was incorporated for the purpose of developing and marketing a bicycle stop light sensor powered by a computer device.
[3] Funds were raised by Jovic to develop and market the stoplight.
[4] On the 6th day of March 1990 the shares of Jovic were owned as follows:
Joseph Gallo, Jr. 233,890
Joseph Gallo, Sr. 219,280
Victoria Gallo (the Appellant) 32,000
[5] Jovic was unable to obtain any further funds and it has been inactive since 1994.
[6] When the Appellant filed her income tax return for the 1998 taxation year she deducted carrying charges in the amount of $3,977.00.
[7] When the Appellant filed her income tax return for the 1999 taxation year the Appellant claimed an allowable business investment loss ("ABIL") of $8,812.50 calculated on the following basis:
32,000 shares at $0.25 = $ 8,000.00
375,000 shares at $0.01 = $ 3,750.00
$11,750.00
75% thereof $ 8,812.50
[8] By Notices of Reassessment issued on the 14th day of June 2001 the Minister reassessed the Appellant's 1998 and 1999 taxation years. In the Reassessment issued for the Appellant's 1998 taxation year the Minister disallowed carrying charges in the amount of $3,977.00. In the Reassessment issued for the Appellant's 1999 taxation year the Minister disallowed the ABIL of $8,812.50 that was claimed by the Appellant.
[9] The Appellant filed a Notice of Appeal to the Court. In the Notice of Appeal dated March 4, 2002 the Appellant maintained that she was entitled to deduct carrying charges of $3,977.00 for the 1998 taxation year. The Appellant also stated that the ABIL that was claimed by her in the 1999 taxation year should have been calculated as follows:
32,000 shares at $0.25 = $ 8,000.00
Un-repaid loans
October 8, 1991 $2,400.00
May 6, 1992 $2,390.00
March 8, 1994 $3,000.00
$7,790.00
50% my portion $ 3,895.00
$11,896.00
75% thereof . $ 8,922.00
B. ISSUE
[10] (1) Is the Appellant entitled to deduct carrying charges of $3,977.00 in determining her income for the 1998 taxation year?
(2) Is the Appellant entitled to deduct an ABIL in the amount of $8,922.00 in determining her income for the 1999 taxation year?
C. ANALYSIS
[11] Mr. Robert Jamieson C.A. testified as a witness for the Appellant. Mr. Jamieson said that he acted as the accountant for Jovic and for the Appellant for a number of years. Mr. Jamieson said that he was unable to provide satisfactory or acceptable evidence to establish that the Appellant was entitled to deduct carrying charges of $3,977.00 in determining her income for the 1998 taxation year. The appeal in respect of this issue will be dismissed.
[12] Mr. Jamieson testified that with respect to the ABIL he could only establish from reviewing the records of Jovic that the Appellant paid $8,000.00 for 32,000 shares of Jovic at $0.25 per share. Mr. Jamieson said that he could not establish that the Appellant purchased 375,000 shares of Jovic at $.01 per share. However, Mr. Jamieson said that from a review of his working papers and other records he has determined that the Appellant personally made loans totalling $7,790.00 to Jovic.
[13] From the evidence presented by Mr. Jamieson and from an analysis of the Exhibits that were filed I have concluded as follows:
a) Jovic was insolvent in 1994;
b) Jovic did not carry on an active business after 1994;
c) Subsequent to 1994 the fair market value of the shares of Jovic was "NIL".
d) Jovic was likely to be dissolved after 1994 and was dissolved in June 2001.
[14] In determining her income for the 1999 taxation year the Appellant is entitled to claim an ABIL in connection with the shares of Jovic that she purchased and the unpaid loans that she made to Jovic. The ABIL should be calculated as follows:
32,000 shares at $0.25 = $ 8,000.00
Un-repaid loans
October 8, 1991 $2,400.00
May 6, 1991 $2,390.00
March 8, 1994 $3,000.00
$7,790.00 $ 7,790.00
$15,790.00
75% $11,842.50
[15] The Minister is instructed to allow the Appellant to claim an ABIL in the amount of $11,842.50 in determining her income for the 1999 taxation year.
Signed at Vancouver, British Columbia, this 23rd day of December 2002.
|
"L.M. Little" |
J.T.C.C.
COURT FILE NO.: 2002-894(IT)I
STYLE OF CAUSE: Victoria Gallo and
Her Majesty the Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: December 16, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little
DATE OF JUDGMENT: December 23, 2002
APPEARANCES:
For the Appellant: The Appellant herself
Counsel for the Respondent: Nadine Taylor-Pickering
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-894(IT)I
BETWEEN:
VICTORIA GALLO,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on December 16, 2002, at Vancouver, British Columbia, by
the Honourable Judge L.M. Little
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: Nadine Taylor-Pickering
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1998 taxation year is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 23rd day of December 2002.
|
"L.M. Little" |
J.T.C.C.