National Hockey league goalies are the best in the game. Their job is to prevent their opponents from scoring by keeping pucks out of the net.
Canada Revenue Agency employees also see themselves as the best in their field. They frequently think their job is to prevent taxpayers from scoring deductions or to stop claims from getting through.
Ultimately, Canada’s tax collection agency sees itself as protecting the government tax revenue stream and for this reason it tends to take a narrow view of what should be allowed as deductible business expenses.
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It is not a surprise, then, when the agency automatically rejects aggressive or far-out deductions. However, it doesn’t always have the last laugh.
The Tax Court of Canada has recently handed down surprising and humorous decisions that permitted inventive business expense claims and allowed farmers to score on the revenue agency.
In one case, a taxpayer claimed as a farm expense his Edmonton Oilers season tickets, home renovations, car repairs for his son and the purchase of steel-toed boots. CRA denied all these amounts. The court, on the other hand, allowed 50 percent of the claim for the hockey tickets because the taxpayer was able to convince the court they were used to entertain customers.
The home repairs related to the installation of new kitchen cabinets and shelving. Once again, the court accepted the taxpayer’s argument that the new cabinets and shelving were used to store supplies that were needed for use on the farm. It allowed the full claim.
The car repairs, along with the cost of automobiles and driving lessons for the taxpayer’s children, were considered payment to the children in exchange for their work on the farm. Even though the taxpayer did not pay his children actual wages, the deduction stood as wages in kind.
The court agreed with the farmer that steel-toed boots were an allowable business expense in a farming environment.
All in all, this taxpayer had a good day in court.
In another case before the court, a blueberry producer claimed food and veterinary expenses for a dog and a cat. The revenue agency dismissed the taxpayer’s claim that the animals were used to frighten away wild animals such as deer, rats and mice that regularly foraged on his blueberry crop.
In court, the agency went so far as to suggest the mice and rats should have been sufficient food for the dog and cat and they didn’t need pet food. The court agreed with the taxpayer that the use of the pets to frighten pests away to preserve his blueberry crop was a legitimate business expense for the berry producer and the costs of keeping the animals could be fully deducted.
Unfortunately, not every decision goes in favour of taxpayers. Apart from having good representation and clever, well-made arguments, positive court rulings frequently depend on the luck of the draw, the credibility of the appellant and being assigned a sympathetic judge.
Larry Roche is a tax analyst with farm taxation and planning specialists Farm Business Consultants Inc. He can be contacted at fbc@fbc.ca or call 800-860-7011.
