Tax Court Awards Additional Business Expenses in Four-Year Appeal

OUTCOME: Allowed

Docket: 2019-4453(IT)I BETWEEN: [RESPONDENT] and HIS [NAME] THE [NAME], Respondent . Appeal heard on: April 3, 2024 at Hamilton, Ontario, June 17, 2025 at Oakville, Ontario, and April 12, 2026 at Burlington, Ontario. Before: The Honourable Justice Randall S. Bocock Appearances : For the Appellant: [redacted] Counsel for the Respondent: [redacted] NOW THEREFORE THIS COURT ORDERS THAT:

1. The appeal concerning the 2014 and 2015 taxation years is allowed on the basis that, for the 2014 and 2015 taxation years, the Appellant is entitled to the additional business expenses of $58,899 and $20,477, respectively, specified by expense category as follows: Expense Category Additional Amount 2014 Additional Amount 2015 Subcontractor expenses $30,112 Not in dispute Meals and entertainment $1,221 $738 Insurance $5,473 $3,744 Interest Nil Nil Office expenses $1,831 $595 Supplies $9,757 $2,987 Maintenance and repairs $6,570 $10,696 Telephone and utilities $3,935 $1,687 Total Additional Expenses in each taxation year $58,899 $20,447 2. The matter is referred back to the Minister of National Revenue for reconsideration and reassessment; and, 3. There shall be no costs. Signed at Ottawa, Ontario, this 19 th day of June 2026. “[NAME].S. Bocock” [RESPONDENT] J. Docket: 2022-1345(IT)I BETWEEN: [RESPONDENT], and HIS [NAME] THE [NAME], Respondent. Appeal heard on: April 3, 2024 at Hamilton, Ontario, June 17, 2025 and April 12, 2026 at Oakville, Ontario Before: The Honourable Justice Randall S. Bocock Appearances : For the Appellant: [redacted] Counsel for the Respondent: [redacted] NOW THEREFORE THIS COURT ORDERS THAT:

1. The appeal concerning the 2017 and 2018 taxation years is allowed on the basis that, for the 2017 and 2018 taxation years, the Appellant is entitled to the following additional business expenses of $30,525 and $28,873, respectively, specified by expense category as follows: Expense Category Additional Amount 2017 Additional Amount 2018 Meals and entertainment $1,006 $768 Insurance $3,496 $3,876 Interest and bank charges $2,265 $2,132 Office expenses $452 $170 Supplies $5,042 Maintenance and repairs $14,886 $20,685 Travel Nil Not claimed Telephone and utilities $1,411 $828 Total Additional Expenses in each taxation year $30,525 $28,873 2. The matter is referred back to the Minister of National Revenue for reconsideration and reassessment; and, There shall be no costs. Signed at Ottawa, Ontario, this 19 th day of June 2026. “[NAME].[NAME]. [NAME]” [NAME] J Citation: 2026 [NAME] 114 Date: 20260619 Dockets: 2019-4453(IT)I 2022-1345(IT)I BETWEEN: [RESPONDENT], Appellant, and HIS [NAME] THE [NAME], Respondent. COMMON

REASONS FOR [RESPONDENT] J.

I. Introduction, Facts and Issues [ 1 ] These two appeals concern disallowed business expenses covering four taxation years; 2014, 2015, 2017 and 2018 with each appeal covering two taxation years. It took over 24 months to conclude the hearing of evidence and argument for several notable reasons: the closure by the Tax Court of its Hamilton courthouse in September 2024, the Appellant’s desire, which is a usual right, to have the hearing close to the Halton region (where the Court now sits to replace the Hamilton location) and the dribbling introduction of the actual necessary evidence. The business: 4 years of records spanning 5 tax years [ 2 ] The Appellant, Ms. [RESPONDENT], owned and operated a [NAME]. This was not structured in a conventional manner. The sole purchaser of trucking services was a much larger trucking concern: the [COMPANY] (“[COMPANY]”) . Ms. [RESPONDENT]’s husband was the sole truck driver of a large diesel rig (the “Volvo Cab” ). The Volvo Cab was stored permanently, unless pulling a commissioned [COMPANY] trailer, at [COMPANY]’s yard some kilometres away from the [RESPONDENT] residence. To get to and from each day, Mr. [RESPONDENT] (the “driver” ) drove a dedicated business vehicle (the “Sienna” ). [NAME] advanced and later deducted expenses [ 3 ] Insurance, fuel and certain repair costs for the Volvo Rig were initially paid by [COMPANY] and later deducted from the [RESPONDENT] business’ earned trucking fees trucking fees paid to Ms. [RESPONDENT]. The balance of business expenses was directly incurred by the [RESPONDENT] business but were not borne and deducted by the [COMPANY]. These expenses ranged and varied over the four taxation years: Sienna vehicle expenses, home business expenses, employee travel expenses, wages, uniforms and supplies. Generously, the documentation reflecting these expenses was more muddled, ersatz and unorganized than the [COMPANY] statements. In many instances, such expense records were simply too faint and inscrutable to be deciphered. There was a business [ 4 ] Importantly, the Minister concedes there was a business. [ADDRESS] easily concludes there was a business. The remaining question is: to what extent could the expenses of the business be discerned and quantified? For the reasons stated at the outset, the process needed to determine that was, lengthy, circuitous and sputtering. An attempt to resolve by method a multi year experience case [ 5 ] When the appeals were first called for hearing the Court explored, through questions of Ms. [RESPONDENT], the nature of the [NAME] and the categories of expenses originally disallowed in the reassessments, with focus on the 2017 taxation year. It became apparent to the Court that an extended discussion between the parties and representatives may possibly provide a basis for resolution of this expense case without the need for multiple days of testimony. Without prejudice discussions occurred outside of Court between the parties but to no avail. The concept for resolution [ 6 ] The concept was to arrive at a percentage of allowable expenses across certain categories of business expenses in 2017: management and administration fees; meals and entertainment; insurance; interest and bank charges; office supplies; maintenance and repairs; and, telephone (the “expense categories” ). If the parties had agreed, the Court would have granted judgment in the appeals awarding additional business expenses to the Appellant by applying the agreed percentages for 2017 across the expense categories in dispute for the taxation years 2014, 2015 and 2018. Deductively, the Court would derive allowable deductible amounts for such taxation years. No resolution but more documents appear [ 7 ] The parties did not agree so the Court scheduled a new date for the continuance of the appeals. Upon re-calling the appeals for hearing on June 17, 2025, additional and voluminous materials (some 4 volumes, one for each year) were adduced by Ms. [RESPONDENT]. These required review by [NAME] and the Court before the conduct of further questioning. In addition, the Appellant was also directed to provide the [NAME] with copies of weekly summaries of reconciliation statements from the [COMPANY] for the first full week of January, April, July and October for the years 2014, 2015, 2017 and 2018 (the “[COMPANY]” ), to the extent same were available. A virtually bad session gives way to a better in-person one [ 8 ] After receipt and review of the new evidence, the Court reconvened by telephone on October 28, 2025, for the purposes of questioning of the Appellant by the Respondent and final argument. These goals faltered since the attempt to conduct the questioning concerning so many invoices remotely failed miserably. [ADDRESS] learnt its lesson and instead, although much further in the future than ideal, reconvened for one final session on April 12, 2026, in a face-to-face court setting in Burlington, Ontario.

II. The Law Generally [ 9 ] The two overarching statutory provisions relevant to this appeal are found in the Income tax Act (the “Act” ) as follows. [NAME] limitations 18 (1) In computing the income of a [NAME] from a [NAME] no deduction shall be made in respect of [NAME] limitations (a) an outlay or expense except to the extent that it was made or incurred by the [NAME] for the purpose of gaining or producing income from the [NAME]; Personal and living expenses (h) personal or living expenses of the [NAME], other than travel expenses incurred by the [NAME] while away from home in the course of carrying on the [NAME]’s business;

III. Methodology and Analysis The documentary record [ 10 ] Prior to the final hearing date, the Court was now armed with various exhibits submitted by Ms. [RESPONDENT] as evidence and for the critical questioning on both by [NAME]. These documents included: a) concerning expenses reflected in the [COMPANY] invoices: weekly summaries of reconciliation statements from the [COMPANY] for the first full week of January, April, July and October for the years 2014, 2015, 2017 and 2018; and, b) concerning the expenses of the business other than those paid and deducted from income by the [COMPANY]: annually grouped copies of purported invoices, vouches and receipts concerning various expense types for the years 2014, 2015, 2017 and 2018 (the “remaining invoices” ). Concessions of the Respondent [ 11 ] At the outset of the final day of hearing, [NAME] indicated there were multiple concessions the Minister would make concerning both the [COMPANY] and the remaining invoices. [ADDRESS] suggested, while acknowledging the effort put forth by counsel, that those preliminary concessions would be acknowledged, but the parties would conclude the hearing and submissions before attempting to quantify. This is necessary because approaching appeals solely relate to multiple disallowed expenses across various categories requires the Court to be mindful of three things: a) the quantum of the initially claimed expenses by the [NAME]; b) the precise expenses in (a) above disallowed by the Minister; and, c) perhaps, most importantly, the extent and specific amount to which such expenses, theoretically in dispute, were previously allowed, double counted or never claimed when filed. [ 12 ] To avoid these pitfalls, the Court requested, with the consent of both parties, that [NAME] summarize and submit in writing final concession calculations engaging the rubric outlined in (a), (b) and (c) above. The occurred with several weeks of the conclusion of the trial. [ADDRESS]’s review of the documentary evidence [ 13 ] Quite apart from the Respondent’s concessions, the Court reviewed the [COMPANY] invoices and the remaining invoices. In doing so, the Court concluded that it would deploy the following major rubrics for allowing expenses mindful of the Ministerial assumption and supporting Court finding there was a [NAME]: a) any essential element in an invoice must be legible; a number were not; b) the invoice must bear a date, and such date must fall within the taxation period claimed; c) for meals and clothing (uniforms), the expense must have been expended in a locality situate on normal trucking runs from Oakville to either Montreal or Dalton, Georgia, the 2 normal destinations; d) fuel and expenses for the Sienna required some identifiable factor, license/serial number or location between residence and yard; e) Canadian dollar conversions of US dollars were calculated at the average yearly rate of the currency exchange; and, f) no personal expenses falling outside of (c) above were allowed; and, expenses more likely than not associated with trucking or carrier services were allowed. [ 14 ] [ADDRESS] conducted this pre-concession review exercise before receiving the Respondent’s summary of final concession. This fit with the logical approach and methodology agreed to by the parties at the outset, had they been able to agree as too 2017 percentages. [ 15 ] [ADDRESS]’s request of the Respondent’s concessions in writing allowed the Court to know which specific invoice (legible or not) for a business expense was conceded by the Respondent both before and after the hearing of the appeal. With this knowledge the Court is presently able to determine whether the Court’s inclusion of expenses is included within these conceded amounts or in addition to it.

IV. Analysis and Calculation of [ADDRESS]’s findings with the Respondent’s received concessions [ 16 ] Using the Respondent’s concessions, the charts below yield the results across categories of expenses claimed presently identified by tax return year appealed. 2014 Taxation Year Amount Claimed by Ms. [RESPONDENT] at the Tax Court of Canada Amount Conceded by Respondent Remaining Disallowed Insurance $6,601.00 $6,601.00 $5,473.00 $1,128.00 Interest and Bank Charges $4.461.00 $4.461.00 $9,757.00 $4,461.00 Supplies $4,190.00 $4,190.00 $9,757.00 Nil Office Expenses $7,350.00 $5,424.00 $1,831.00 $3,593.00 Maintenance and repairs $2799.00 $2799.00 $6,570.00 Nil Telephone and utilities $4,210.00 $4,210.00 $3,935.00 $275.00 Meals and entertainment $727.00 $727.00 $1221.00 [NAME] fees $2,655.00 Nil Nil Nil Subcontracts $50,112.00 $30,112.00 $30,112.00 Nil Motor Vehicles $103,656.00 Nil Nil Nil Total: $186,761.00 $58,524.00 $68,656.00 $9,457.00 2015 Taxation Year Amount Claimed by Ms. [RESPONDENT] at the Tax Court of Canada Amount Conceded by Respondent Remaining Disallowed Advertising $52.00 Nil Nil Nil Insurance $6541.00 $6541.00 $3,744.00 $2,979.00 Interest and Bank Charges $4,206.00 $4,206.00 Nil $4,206.00 Supplies $2170.00 $2170.00 $2987.00 Nil Office Expenses $5767.00 $3,855.00 $595.00 $3,260.00 Maintenance and repairs $4,190.00 $4,190.00 $10,696.00 Nil Telephone and utilities $5331.00 $5,331.00 $1,687.00 $3,644.00 Meals and entertainment Not claimed Nil $738.00 [NAME] $2,655.00 Nil Nil Nil Subcontracts $30,589.00 Nil Nil Nil Motor Vehicle $80,007.00 Nil Nil Nil Total: $141,508.00 $26,293.00 $20,447.00 $13,907.00 2017 Taxation Year Amount Claimed by Ms. [RESPONDENT] at the Tax Court of Canada Amount Conceded by Respondent Remaining Disallowed Insurance $8,006.00 $7,674.00 $4,178.00 $3,496.00 Interest and Bank Charges $5,109.00 $5,109.00 $2844.00 $2,265.00 Business Tax, Fees, License Dues $1,952.00 Nil Nil Nil Supplies $4,610.00 $4,610.00 $5,042.00 Nil Office Expenses $443.00 $249.00 $194.00 $452.00 [NAME] $1,700.00 Nil Nil Nil Management and Administration $8,861.00 $8,861.00 Nil Nil Maintenance and repairs $678.00 $678.00 $14,886.00 Nil Travel $178.00 Nil Nil Nil Telephone and utilities $2,771.00 $2172.00 $1411.00 $761.00 Meals and entertainment $2718.00 $2718.00 $1712.00 $1006.00 Subcontractors $30,597.00 Nil Nil Nil Motor Vehicle $87,917.00 Nil Nil Nil Capital Cost Allowance $7,910.00 N/a N/a N/a Total: $163,450.00 $32,016.00 $30,525.00 $7,528.00 2018 Taxation Year Amount Claimed by Ms. [RESPONDENT] at the Tax Court of Canada Amount Conceded by Respondent Remaining Disallowed Insurance $3,256.00 $3,090.00 $3,876.00 N/A Interest and Bank Charges $4,839.00 $4,839.00 $2,132.00 $2707.00 Supplies $1,179.00 $1,179.00 $414.00 $765.00 [NAME] $1,380.00 Nil Nil Nil Office Expenses $463.00 $214.00 $170.00 $44.00 Management and Administration $23,146.00 $23,146.00 $20,685.00 $2461.00 Telephone and utilities $4,210.00 $3742.00 $828.00 $2914.00 Meals and entertainment $1654.00 $1,654.00 $768.00 $886.00 Subcontracts $21,673.00 Nil Nil Nil Motor Vehicle $51,117.00 Nil Nil Nil Capital Cost Allowance $5,536.00 Nil Nil Nil Total: $118,453.00 $37,874.00 $28,873.00 $9,777.00 Observations concerning concessions [ 17 ] Further important observations are made concerning the appeals and concessions offered by the Respondent; a) in all taxation years the Respondent allowed all expenses, where claimed, within the [COMPANY] invoices, the motor vehicle expenses and capital cost allowance where claimed. In fact, these 3 species of business expense deductions were allowed at audit where claimed, save for the 2014 year which is now fully conceded by the Respondent; b) in some instances, expenses claimed in one category were transferred to a more appropriate category and allowed by concession: notably telephone, office, maintenance and repairs; and, c) where bank changes and interest were disallowed, it is because no statements reflecting same were submitted. Similarly, where evidenced by bank statements, these changes were totalized and conceded by the Respondent. Respondent’s concessions versus the Court’s own findings [ 18 ] By a wide margin, the Respondent has generously conceded more than the Court could abide from its own analysis of remaining invoices. This is borne out when analyzing an invoice-by-invoice comparison. At the outset the amounts relating to all [COMPANY] invoices, motor vehicle expense and capital cost allowance have been conceded by the [NAME]. Beyond that in every other category the Respondent appears to have “deployed a benefit of the doubt test” rather than the Court standard of “more likely than not” . This works to Ms. [RESPONDENT]’s benefit and the Court will not upset it. Ms. [RESPONDENT]’s entitlement to these types of expenses should she come to the Tax Court in future will require more legible and discernable invoices rather certain inscrutable documents submitted in these appeals. [ 19 ] Additionally, lest Ms. [RESPONDENT] feel that the Court might have been more generous, she may take solace in the fact that the Court’s procedural leniency and bench-based questioning led to the revelation of the necessary records which anchored the Respondent’s patiently calculated ultimate concessions. Such documents were obscured initially by a language barrier, an untimely death of an accountant and a procedure that through hours of explanation, ultimately, yielded a generous outcome for Ms. [RESPONDENT]. [ 20 ] In conclusion, Ms. [RESPONDENT]’s appeal is allowed. She is entitled to the following additional business expenses concerning the described years: Taxation Year Additional Business Expenses Allowed 2014 $58,899 2015 $20,447 2016 $30,525 2017 $28,873 [ 21 ] There shall be no costs. Signed at Ottawa, Ontario, this 19 th day of June 2026. “[NAME].[NAME]. [NAME]” [NAME] J. CITATION: 2026 [NAME] 114 COURT FILE NO.: 2019-4453(IT)I 2022-1345(IT)I STYLE OF CAUSE: [RESPONDENT] AND HIS [NAME] THE [NAME] OF HEARING: Hamilton, ON et al loca DATES OF HEARING: April 3, 2024, at Hamilton, Ontario, June 17, 2025, at Oakville, Ontario, and April 12, 2026, at Burlington, Ontario.

REASONS FOR

JUDGMENT BY: The Honourable Justice Randall S. Bocock DATE OF

JUDGMENT: June 19, 2026 APPEARANCES: For the Appellant: [redacted] Counsel for the Respondent: [redacted] COUNSEL OF RECORD: For the Respondent: [redacted] [NAME] [NAME] [NAME] of Canada Ottawa, Canada