“The hardest thing in the world to understand is the income tax.”
- Albert Einstein
As the Income Tax Act (ITA) has grown to more than 2,000 pages today, the tax department is still struggling to deal with practical problems that always seem to pop up, and the apparent uncertainty in many areas of tax law. The complexity presents a daunting challenge even to those familiar with Canada’s tax system. It is not uncommon that, in some cases, even the taxman cannot interpret the law properly. Take a look of these court cases.
Home Office Expenses
You are allowed to claim home office expenses only if your home is your principal place of business, or where you use a specific area of your home exclusively for earning income from your business and you meet clients or customers there on a regular basis. This is what the ITA says.
In the case of Thomas Vanka v. The Queen, Mr. Vanka was a physician treating elderly and psychologically unstable patients. Mr. Vanka worked in his downtown office, but he also maintained a room in his home to be used specially for his practice. He provided consultation service by phone in this home office in the evening and handled administrative matters relating to these consultations through computer connections to his downtown office.
His claim for home office expense was denied because the taxman held the position that he did not physically meet his patients regularly in his home office. However, the court allowed his deduction because the phone consultations were considered to be “meeting with patients”.
Moving Expenses
In the case of Gary Adamson v. The Queen, Mr. Adamson was required by his employer to work out of his home. He moved to a new home to provide greater needed office space. The taxman denied his claim for moving expenses taking the position that he was not starting a new employment. But the court allowed his deduction.
Know Your Right
From these cases, you can see that taxpayers, the taxman, and the court might have different understanding of the same rules. When there is discrepancy between the assessment from the taxman and what you report, do not automatically assume that you make an error and the taxman is correct. You must know your right.
