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.