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Businesses . . . Taxes . . . Office in the home . . .Recent court casesHemond v H.M.Q (2002) (French Tax Court of Canada) Telephone constitutes an office – The taxpayer was a doctor who met most of his patients at the Clinic or at the Nursing Homes. He had one or two appointments per week at his house. The Court noted that meeting with patients may occur by telephone. His patients and staff called him regularly at his home office. CRA argued that he was not connected to the Clinic computer network. The Judge disregarded this and said that Doctor Hemond could conduct the necessary business required.
Andreone v H.M.Q. (2004) (Tax Court of Canada) Exterior work a no go – The taxpayer deducted costs with respect to exterior painting of the home, brickwork repairs, snow removal and lawn care. CRA disallowed these expenses as being personal. In Tax Court noted that if a need exist (ex. Lawn care), in the absence of business activity, then the expense would be viewed as personal in nature.
Molckovsky v H.M.Q. (2003) (Tax Court of Canada) One call per day not enough – A physician deducted home office space of 140 square feet and another 160 square feet for storage space. CRA disallowed the expenses. The Tax Court said, although there was obviously a home office, one call per day did not warrant the space as used “exclusively” for the purpose of earning income nor used on a “regular and continuous basis for meeting patients”.
Jenkins v H.M.Q (2004) (Tax Court of Canada) Where business aspects take place – The taxpayers claimed office in the home expenses related to their fishing business. CRA said the home office was neither their “principal place of business” or “used exclusively for the purposes of earning income from a business. They argued the ocean, boat or docks was where they sold the fish. The court noted that “principal place of business” is where the “business aspects take place” such as telephoning customers and suppliers, filling in invoices, doing payroll, maintaining books and records, contacting authorities for licenses, chasing down receivables, etc.
Rudiak v H.M.Q. (2002) (Tax Court of Canada) The taxpayers operated a bed and breakfast. They declared their expenses without reference to the S. 18(12) "home business" limitations. CRA disallowed their expenses to the limit (see restrictions). CRA argued that the taxpayers were operating a business in their home. The taxpayers argued that this was a business more in the nature of a motel where they occupied only a small part of the space in the large home. The Court found for the taxpayers and determined that they were not operating a business in their home. The court commented that in certain cases a bed and breakfast is considered running a business in their home. What will distinguish between a business that is a home business and one that is not is the amount of separation there is between the taxpayer's living quarters and the business quarters.
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