Federal Appeal


Tax

Income tax

Losses

Taxpayer’s losses were denied in their entirety

Taxpayer L-M deducted against his employment income of $70,000 to $80,000 aggregate business and rental losses of $52,748 for 2006, $61,625 for 2007, and $67,768 for 2008. L-M claimed significant losses from arrangement with P Ltd.. Taxpayer L reported small amount of business income and deducted business losses from purported business carried on in common with L-M, being $3,846 in 2006, $336 in 2007, and $11,188 in 2008. Taxpayers reported losses as 80/20 partners in partnership that was distributor for MA business. Minister reassessed taxpayers to deny losses in their entirety. Tax Court judge dismissed taxpayers’ appeals. Judge found that losses claimed with respect to P Ltd. were not substantiated. L-M appealed. Appeal dismissed. Judge did not misunderstand issue that was before her. Net effect of judge’s decision would be same regardless of whether it was determined that L-M did not have source of business or property income in relation to P Ltd. or MA activity or that expenses in dispute were not incurred by him for purpose of gaining income from business or property, with result that revenue for each activity would be equal to expenses allowed for each activity. Judge did not make any error by focusing on issue of whether L-M had substantiated amounts claimed as losses. Judge did not err in finding that L-M had not substantiated that he had incurred amounts as expenses for purpose of gaining income from business or property. Judge did not err in determining that L-M’s testimony was so vague and conflicting as to be unreliable except to extent it was supported by other evidence.

Lubega-Matovu v. R. (2016), 2016 CarswellNat 7427, 2016 FCA 315, Eleanor R. Dawson J.A., Wyman W. Webb J.A., and Richard Boivin J.A. (F.C.A.); affirmed (2015), 2015 CarswellNat 2214, 2015 TCC 147, Judith M. Woods J. (T.C.C. [Informal Procedure]).

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