Reimbursement of travel expenses was camouflage for consulting fees relating to scouting services

Tax - Income Tax - Business and Property Income

Minister reassessed taxpayer under Income Tax Act for unreported income for taxation years 2007 and 2008, with respect to payments from event management firm T Inc.. Taxpayer appealed. Appeal allowed in part, to reduce amount for taxation year 2008 by $27,385. Taxpayer claimed that amounts were payments to him as agent for his real estate holding company or for his wife, relating to repairs, expenses or rent of properties owned by him or his wife or were reimbursement of his travel expenses for evaluation of potential site venues. Taxpayer did not establish that agencies existed or that payments related to reimbursement of expenses rather than being consulting payments. There was no evidence reflecting transfer of claimed rental payment from taxpayer as alleged agent to wife as principal and given T Inc.’s contemporaneous non-description of sum as rent, Minister’s assumption that this was income to taxpayer was not demolished. Taxpayer did not establish that T Inc. paid amount as reimbursement for waterfront reconstruction of his property when he was acting as agent for his company that managed property for him as owner, as claimed terms of verbal lease for winter access were unsupported and not credible . Taxpayer’s trips were personal in nature, and T Inc.’s reimbursement of travel expenses was camouflage for consulting fees relating to scouting services, given lack of evidence of agency, relevance of expenses to business costs incurred, and actual invoicing to T Inc. for services rendered. Repairs, furniture and travel costs supposedly paid by T Inc. for wife’s property took place after T Inc.’s verbal lease was effectively terminated and taxpayer’s supposedly related living expenses constituted entire credit card balances for five months. Taxpayer’s appeal would succeed on one item relating to costs incurred when T Inc. rented wife’s property and its employee damaged it, as repairs were supported by invoices and contemporaneous letter by T Inc.’s principal acknowledging damage and pre-approval to pay for damages. Evidentiary difference between this and taxpayer’s other “expenses” totalling some $145,000 was striking, as they were not supported by reliable evidence that they related to business or property income or were reimbursement received as agent, with items en bloc, vague and unjustified.

Peerenboom v. The Queen (2019), 2019 CarswellNat 799, 2019 TCC 61, Randall S. Bocock J. (T.C.C. [General Procedure]).

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