September 12, 2009 by Dan White.

Tax Court Report for McLeans versus the Queen.

This is ok to report as it is now public knowledge by way of we were in tax court on the matter, so there is no violation of privacy.

Case was heard. Judgment is pending the 3 cases ahead of us for Justice Webb to rule on.

There was one major issue of national interest in that we were arguing that the product purchases should be 100% deductable. CRA’s long standing position is that they are personal consumption, not for the purpose of earning income and were not deductible as business expenses.
The significance of the case is large because if we win,  the word will spread out through the MLM community very quickly, starting first with Mannatech and then into other MLM’s affecting a 60 Billion dollar a year industry.
If we lose, at we lose while having put up the best possible fight that anyone could have done. I am satisfied that we put up a recognizable well done job in presenting our case. We had both good witnesses and a good argument.
The clients were highly credible in court.
The clients were well prepared. (Except for the issue that I never told them to not refer to the glyco nutrients as “food.”)
The issues were;
1.    Are Mannatech Distributor product purchases deductible or not, when not for resale.
2.    Are personal consumptions a business expense?
3.    Are costs on friends and family tax deductible?
4.    Were the courses taken tax deductible?
5.    Were the travel expenses personal or business?

On # 1. CRA audit disallowed all purchases as personal.
Our arguments were.
A.    It is required to purchase product to maximize bonuses and therefore maximise total income.
B.    You have no credibility in selling the product if you don’t consume it.
C.    They had to purchase product for their down lines to round up leg product consumption.
D.    We argued that if the tax payers were not in the business they would not consume nearly the purchased amount of product.
E.    We argued that the dollar amounts of purchases were not reasonable to assume as personal use.

On # 2. CRA argued that all product purchased were for personal consumption
A.    We argued as per ABC above.
On # 3. CRA Argued that money spent on friends and family are personal expenses.
A.    We argued that MLM is primarily marketed to friends and family. Therefore if the money spent for the purpose of generating income was deductible regardless of the fact that it was friends and family.
B.    We argued that Mannatech was a billion dollar business built on the principle of selling to friends and family.
C.    We argued that you have to look at the “primary purpose” as the overriding issue.
On # 3. CRA argued that the courses were personal interest and not business related.
A.    We argued that the courses were employment expenses and were not lasting in nature, therefore were fully expansible.

On #5. CRA argued that there was no proof of attendance. They argued that if in fact that they both did attend the conference and that the two extra days they stayed were personal. They argued that the Calgary trip was to a wedding and friends and visits.
A.    We submitted evidence of attendance.
B.    We argued that the extra days were to allow for marketing and business activities related to business.
C.    We argued that the taxpayers would not have gone to the nephew’s wedding if they were not going to make it a business trip.
D.    We argued that it was an ideal opportunity to be with lots of friends and family to market to.

The day was long… started about 10AM and went to 5:30

As the Appellant I had to be the one to carry the argument and prove our case.

I think we did an admirable job, the cleints were credible and honest under testimony.

now we will see if the judge agrees. I know he took our arguments seriously.

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September 12, 2009 by Dan White.

Here is a good article about the Home Renovation Tax Credit HRTC.

The funny thing and something that the government obviously missed. The refund equals the same amount as what the GST and PST amount to. So it will be very easy for the underground economy to just say…. “Hey pay me cash and you won’t have to do the paperwork and wait for your tax savings. It is instantly 13% in your pocket. I think the government should have made it financially better to avoid the underground economy.

I guess a good point to remember is there will be an election this fall, as we continue to be vitums of politics and huge amounts of tax payer money paying for elections;  the point being… HRTC is not law… there is only a probability that it will come into law. While the odds are good it will happen, it would not be the sort of thing I would gamble on.

Dan White

How to get ready for the Home Reno Tax Credit

Jamie Golombek, Tax Expert, Financial Post  Published: Friday, September 11, 2009
More On This Story

Parliament may not have passed the law that sets it up, but Jamie Golombek says you should get your papers ready to benefit from the Home Renovation Tax Credit Bruce Stotesbury/Victoria Times Colonist Parliament may not have passed the law that sets it up, but Jamie Golombek says you should get your papers ready to benefit from the Home Renovation Tax Credit

Canadians’ love affair with the “proposed” Home Renovation Tax Credit (HRTC) continues unabated, despite the fact that legislation to make the HRTC law has not yet been drafted.

The legislation officially enacting the popular credit is expected to be introduced shortly after Parliament resumes sitting on Monday. Even if the current government is defeated under a confidence motion this fall, the HRTC is so ingrained in the Canadian taxpayer psyche that any future government will most certainly reintroduce it. That has been confirmed publicly by Liberal Leader Michael Ignatieff and Bloc Québécois Leader Gilles Duceppe.

The HRTC is a 15% non-refundable tax credit for eligible renovation expenditures made to your home or vacation property. The credit applies to any amounts spent over $1,000, up to a maximum of $10,000, producing a maximum credit of $1,350.

The Canada Revenue Agency has indicated that a new schedule will be included in your 2009 income tax return that will allow you to list your eligible renovation expenses and calculate the amount eligible for the credit. The CRA has even introduced a nifty yellow HRTC envelope in which to save your receipts. Envelopes are available at various retail stores including Home Depot and Canadian Tire.

In the seven months or so since the credit was first introduced, the CRA has released numerous technical interpretations over exactly which types of renovation expenses qualify for the HRTC. Here’s a quick summary of some of the more recent qualifying expenditures:

* Air conditioners and heat pumps that are permanently installed.

* Common areas of condos that are paid for either from the condo’s reserve fund or a special fund.

* Dock: The materials and installation costs for a dock are eligible provided the dock is attached to land that forms part of the eligible dwelling.

* Driveways.

* Sanding and refinishing of hardwood floors.

* Permanently wired or installed home security systems qualify, but ongoing alarm monitoring costs do not.

* Landscaping.

* Sauna: The costs of installing a wood-fired, 10 x 10-foot, outdoor sauna building on the land that forms part of an eligible dwelling qualifies.

* Solar panels on your home or on adjacent land qualify unless the cost is part of the purchase price of the home. You can still claim the full HRTC on the costs of the installation if you’ve received another government tax credit or grant for installing the solar panels.

* Tree removal if the removal relates to a renovation project that is of an “enduring nature and integral to the home.”

* Wireless broadband tower: The costs of building such a tower, even if unattached to your home but anchored to the ground qualifies, provided it’s installed on the adjoining one half-hectare of land that is considered an eligible dwelling

Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax and estate planning with CIBC Private Wealth Management in Toronto.

Jamie.Golombek@cibc.com

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