Date: 19990217
Docket: 97-3328-IT-I
BETWEEN:
ANDRÉ GÉLINAS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Tardif, J.T.C.C.
[1] This is an appeal for the 1990, 1991 and 1992 taxation years. The issue is whether a $25,000 repayment and $1,636 in professional fees—for a total of $26,636—must be considered in calculating the undepreciated capital cost of the property in question or whether they are instead personal or living expenses.
[2] The respondent assumed the following facts as justification for the reassessments disallowing the carryback of a non-capital loss for the 1990, 1991 and 1992 taxation years:
[TRANSLATION]
(a) in filing his tax return for the 1993 taxation year, the appellant:
(i) claimed a net rental loss on the property of $58,365.25, including a terminal loss of $58,254.25 [sic], the latter being calculated as follows:
Undepreciated capital cost $130,254.25
Minus: Proceeds of disposition considered
at 100% rental use $74,000.00
Terminal loss on the property $56,254.25
(ii) and requested a carryback of the non-capital loss of $27,395.22 as follows: $8,697.61 for each of the 1990 and 1991 taxation years and $10,000 for the 1992 taxation year;
(b) in response to information obtained from the objections division of the Quebec Department of Revenue, the Minister revised the terminal loss down to $28,511 based on the following calculation:
Undepreciated capital cost $130,254.25
Minus: Disallowed expenses
- Insurance repayment $25,000
- Professional fees $1,636 $26,636.00
Revised undepreciated capital cost $103,618.25
Business portion: 60% of this amount $62,171.00
Plus: Change in use in 1992
Total FMV $93,800
Land FMV $4,700 $89,100 x 40% $35,640.00
Revised capital cost - business $97,811.00
Minus: Proceeds of disposition $74,000
Minus: Land $4,700 $69,300.00
Revised terminal loss $28,511.00
(c) the $25,000 the appellant had to repay the insurance company is an amount he was obliged to lay out because he was found to be partly liable in respect of the fire at his first home in 1987;
(d) the professional fees of $1,636 are lawyer’s fees relating to the appellant’s defence against the claim by the insurance company referred to in the preceding paragraph;
(e) the insurance repayment and the professional fees totalling $26,636 should not be considered in calculating the undepreciated capital cost of the property for the 1993 taxation year, since they are actually personal or living expenses of the appellant;
(f) the net rental loss on the property for the 1993 taxation year was correctly revised down to $28,622;
(g) that net rental loss has now been completely absorbed in the 1993 taxation year;
(h) accordingly, the non-capital loss was revised down to nil for the 1993 taxation year and the loss carrybacks to the 1990, 1991 and 1992 taxation years were correctly disallowed.
[3] Before the hearing began, the Court explained clearly to the appellant that he bore the burden of proving the soundness of his claims.
[4] The appellant thereupon briefly explained that the home of which he was renting a part to his daughter had been completely destroyed by a fire.
[5] The appellant was compensated for the losses he incurred, and he rebuilt after acquiring his daughter’s title to the land. After he had rebuilt, it was proved that his daughter had caused the fire.
[6] As a result of that finding, the insurance company that had compensated the appellant brought legal proceedings seeking repayment of part of the compensation paid. The appellant retained a lawyer to represent him in those proceedings, and a settlement was reached pursuant to which he was required to pay an amount of $25,000 plus $1,636 for professional fees.
[7] Relying on interpretation bulletins IT-467R (February 19, 1992), IT-99R4 (August 2, 1991), IT-487 (April 26, 1982), IT-143R2 (August 10, 1983) and IT-143R2 (Special Release) (October 30, 1992), he submitted:
[TRANSLATION]
In our tax returns, we claimed the $25,000 in compensation and the legal expenses associated therewith.
The appellant argued as well that the amounts referred to above could be claimed against his rental income. Without elaborating any further, he simply asked that his appeal be allowed.
[8] On the evidence submitted by the appellant it is not possible to allow his appeal, since he has not at all discharged the burden of proof that lay upon him.
[9] Moreover, it was absolutely essential that he prove on the balance of evidence that the amounts in question were not personal or living expenses exclusively attributable to him.
[10] For these reasons, the appeal must be dismissed.
Signed at Ottawa, Canada, this 17th day of February 1999.
“Alain Tardif”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of October 1999.
Erich Klein, Revisor