Court Cases

There have been many court cases in trying to determine if the space is eligible.  Remember, to be deductible, the space must be:

• used exclusively to earn business income and on a regular and continuous basis for the purposes of meeting clients of the business, or
• the principal place of business

Some of the court cases go like this:

Telephone constitutes an office

Hemond v H.M.Q. (2002) (French Tax Court of Canada)

The taxpayer was a doctor who met most of his patients in the clinic or nursing homes.  He had one or two appointments per week at his house.  His patients and staff called him regularly at his home office.  The court noted that meeting with patients may occur by telephone.  The judge determined that Dr. Hemond could conduct the necessary business required from his home office.

Exterior work a no go

Andreone v H.M.Q. (2004) (Tax Court of Canada)

The taxpayer deducted costs with respect to exterior painting of the home, brickwork repairs, snow removal and lawn care.  In tax court, it was stated that if a need exist (ex. lawn care), in the absence of business activity, then the expense would be viewed as personal in nature.

One call per day not enough

Mockovsky v H.M.Q. (2003) (Tax Court of Canada)

A physician deducted home office space of 140 square feet for office space and another 160 square feet storage.  The tax court agreed there was a home office.  However, 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".

Where business aspects take place

Jenkins v H.M.Q. (2004) (Tax Court of Canada)

The taxpayer claimed office in the home expenses for his fishing business.

CRA said the home was neither the "principal place of business" or "used exclusively for the purposes of earning income" from a business.  They argued the ocean, boat and docks was where they sold the fish.

The court noted that "principal place of business" is where the "business aspects" take place.  This includes telephoning customers and suppliers, filling in invoices, doing payroll, maintaining books and records, contacting authorities for licences, chasing down receivables, etc.