Khan v. The Queen

Khan v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2003-02-20
Neutral citation
2003 TCC 72
File numbers
2002-1086(IT)I
Judges and Taxing Officers
Leslie M. Little
Subjects
Income Tax Act
Decision Content
Docket: 2002-1086(IT)I
BETWEEN:
AHSAN M. KHAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on December 17, 2002 at Vancouver, British Columbia
Before: The Honourable Judge L.M. Little
Appearances:
For the Appellant:
The Appellant himself
Agent for the Respondent:
Bruce Senkpiel
Student-at-law
____________________________________________________________________
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1998 and 1999 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 24th day of February 2003.
"L.M. Little"
J.T.C.C.
Citation: 2003TCC72
Date: 20030220
Docket: 2002-1086(IT)I
BETWEEN:
AHSAN M. KHAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The Appellant, the Appellant's spouse (Rafat Khan) and the Appellant's daughter (Mehre Yousuff Khan) (the spouse and the daughter are hereinafter referred to as the "Joint Owners") were the registered owners of a house located at 10271 Odlin Road, Richmond, British Columbia (the "Property").
[2] In March 1995 the Appellant and the Joint Owners borrowed $369,166.00 from Bawa Singh Bains and Gurmej Kaur Bains. To secure the loan a mortgage was registered against the Property.
[3] During the 1998 and 1999 taxation years the Property was the principal residence of the Appellant and the Joint Owners.
[4] The Appellant claimed that he suffered rental losses in connection with the Property. The Minister of National Revenue (the "Minister") denied the rental losses.
[5] In the Reply counsel for the Respondent alleged that during the 1998 and 1999 taxation years no portion of the Property was rented to tenants.
B. ISSUES
[6](a) Did the Appellant rent any portion of the Property to tenants in the 1998 and 1999 taxation years?
(b) Did the Appellant incur any expenses in connection with the Property?
(c) Is the Appellant entitled to deduct all or a portion of the rental losses that were claimed in determining his income for the 1998 and 1999 taxation years?
C. ANALYSIS
[7] It is clear from the evidence that was presented to the Court that the Appellant did rent a portion of the Property to tenants in the 1998 taxation year and for the months of January to April in the 1999 taxation year. The Appellant presented evidence which established that the following rental payments had been received:
1998
1999
$8,400.00
$2,100.00
(See Exhibit A-6.)
[8] During the hearing of the appeal the Appellant maintained that he paid interest on the mortgage of $18,404.00 in 1998 and $18,102.24 in 1999.
[9] Based on the evidence that was presented to the Court, I have concluded that the interest expense in 1998 and 1999 should be determined as follows:
1998 - $18,404.00 ÷ 2 = $9,202.00
(Note - one-half of the interest expense is business and one-half is personal.)
1999 - $18,102.24 ÷ 2 = $9,051.12
(Note - I have concluded that interest should only be recognized for the months of January, February, March and April 1999.)
$9,051.00 ÷ 3 = $3,017.00
[10] The interest expense of $18,404.00 for 1998 should be allocated as follows:
The Appellant
$3,067.33
Rafat Khan
$3,067.33
Mehre Yousuff Khan
$3,067.33
[11] The interest expense of $3,017.00 in 1999 should be allocated as follows:
The Appellant
$1,005.66
Rafat Khan
$1,005.66
Mehre Yousuff Khan
$1,005.66
[12] Based on the evidence that was presented to the Court (Exhibit A-9) the Appellant and the Joint Owners should include the following rent in their income:
1998
1999
The Appellant
$2,800.00
$700.00
Rafat Khan
$2,800.00
$700.00
Mehre Yousuff Khan
$2,800.00
$700.00
[13] The evidence that was presented to the Court did not convince me that the Appellant paid property taxes, utilities and water and sewage expenses in the 1998 and 1999 years. (Note: In a Petition to the Supreme Court of British Columbia filed by Bawa Singh Bains and Gurmej Kaur Bains dated May 6, 1999 (Exhibit A-3) it is stated that the Appellant and the Joint Owners failed to pay to the City of Richmond all property taxes for the 1997 and 1998 years.)
[14] The appeal is allowed to permit the Appellant to claim interest expenses as follows:
1998
1999
$3,067.33
$1,005.66
[15] The Appellant would also be required to include the following rent in his income:
1998
1999
$2,800.00
$700.00
[16] I am not prepared to accept the authorizations of the Appellant's spouse and the Appellant's daughter authorizing the Court to allocate all of the rental losses from the Property to the Appellant. However, to be fair and consistent the Minister should reassess the Appellant's spouse and the Appellant's daughter on the following basis:
Spouse
1998
1999
Rental Income
$2,800.00
$700.00
Interest Deduction
$3,067.33
$1,005.66
Daughter
1998
1999
Rental Income
$2,800.00
$700.00
Interest Deduction
$3,067.33
$1,005.66
[17] The appeals from the assessments made under the Income Tax Act for the 1998 and 1999 taxation years are allowed, without costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment.
Signed at Vancouver, British Columbia, this 24th day of February 2003.
"L.M. Little"
J.T.C.C.
CITATION:
2003TCC72
COURT FILE NO.:
2002-1086(IT)I
STYLE OF CAUSE:
Ahsan M. Khan
PLACE OF HEARING:
Vancouver, British Columbia
DATE OF HEARING:
December 17, 2002
REASONS FOR JUDGMENT BY:
The Honourable Judge L.M. Little
DATE OF JUDGMENT:
February 24, 2003
APPEARANCES:
For the Appellant:
The Appellant himself
Agent for the Respondent:
Bruce Senkpiel, Student-at-law
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada