Barbour v. R. – TCC: Tenured professor denied claim for business expenses while on sabbatical

Barbour v. R. – TCC:  Tenured professor denied claim for business expenses while on sabbatical

Barbour v. The Queen (April 20, 2018 – 2018 TCC 77, Russell J.).

Précis:   The taxpayer was a tenured professor at Ontario College of Art and Design University (OCADU) in Toronto.  She claimed deductions for business expenses and losses in 2012 and 2013.  During that period she was on sabbatical from July 2012 to June 2013.  The Court found that the taxpayer was not carrying on any business during the years in question.  While some of the disputed expenses might have qualified as expenses from employment, that was not pleaded or proven and there was no form T2200 from OCADU verifying that such expenses were conditions of employment.  As a result the appeal was dismissed, without costs.

Decision:   The Court concluded that the expenses in question all arose out of the taxpayer’s employment at OCADU and not from business activity:

[33]  I find that similar circumstances exist here, for each of the 2012 and 2013 taxation years. During her sabbatical the Appellant was incurring expenses for various art related viewings, including numerous attendances at New York art institutions such as museums, libraries and theatres to observe current artistic expressions in various forms, while also to some degree working on the polygamy video. These activities in my view are basically all in the context of her complying with her contracted OCADU employment responsibilities to stay engaged in and maintain current knowledge of the visual arts sector and be involved in artistic creation. She was being paid a salary by OCADU, including while she was on sabbatical, to do these very things, in accordance with her duties of employment as a tenured art professor at that institution. These therefore would not be business expenses. As stated by Bowman, J. in Scheinberg, para. 10 thereof:

..[t]o the extent that the expenses were not personal or living expenses, they related not to any business that [the professor] carried on but to [the professor’s] employment with the university.

[34]  I concluded above that the Appellant was not engaged in a business undertaking and did not have any source of business income. In accordance with Stewart, there was little if any identifiable conduct of a commercial nature. Also, per Scheinberg the work in respect of which expenses were claimed as being deductible business expenses essentially was work that the Appellant had contracted to carry out as part of her duties of employment with OCADU. Thus, even if there had been a business undertaking, the expenses claimed as deductible business expenses nevertheless pertained to her contractual commitments with her employer OCADU. This does not render these expenses deductible, noting as well the absence of a completed form T2200, “Declaration of Conditions of Employment”, signed by OCADU.

Similarly the Tax Court found that a grant the taxpayer had received in 2013 from the Canada Council for the Arts (“CCA”) was not business income:

[44]  The 2013 taxation year involves also the matter of the CCA grant approval of $55,000, of which $50,000 was paid to the Appellant early in that year for the purpose of researching, producing and developing the polygamy video. It appears that the Appellant reported that instalment of $50,000 as being business income and sought to deduct expenses as if they were business expenses. But that is not the way paragraph 56(1)(o) works.

[45]  Paragraph 56(1)(o) of the Act provides as follows:

Amounts to be included in income for year

56 (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year…

Research grants

(o) the amount, if any, by which any grant received by the taxpayer in the year to enable the taxpayer to carry on research or any similar work exceeds the total of expenses incurred by the taxpayer in the year for the purpose of carrying on the work, other than

(i) personal or living expenses of the taxpayer except travel expenses (including the entire amount expended for meals and lodging) incurred by the taxpayer while away from home in the course of carrying on the work,

(ii) expenses in respect of which the taxpayer has been reimbursed, or

(iii) expenses that are otherwise deductible in computing the taxpayer’s income for the year;

[46]  In Scheinberg, Bowman, J. spoke of paragraph 56(1)(o) in relation to a grant of $4,000 the taxpayer had received from his home university on account of his sabbatical. That grant had been paid pursuant to a clause in the professor’s employment agreement with his university employer, stating that such grants were, “to promote intensive scholarly and professional activity through sustained periods of concentrated research and study”. Bowman, J. found (para. 7) that that $4,000 grant was a paragraph 56(1)(o) grant, on the following bases:

Paragraph 56(1)(o) is not a provision that allows a deduction. It requires the inclusion in income of the amount of a research grant to the extent that it exceeds the expenses relating to the research. Where the expenses exceed the grant it does not authorize the deduction of the excess. If those expenses are to be deducted the authority, if it exists at all, must be found elsewhere. Second, Dr. Scheinberg contended that the $4,000 was not a research grant but rather a “leave of absence grant”. I do not see the distinction, or, if one exists, its significance.

While some of the expenses claimed might have qualified as expenses from employment that was not pleaded or argued and no form T2200 from OCADU had been filed:

[49]  It is possible that certain claimed expenses (apart from those such as personal expenses which as such would have been denied), might have been deductible as employment expenses. This was not pleaded or focused upon by the Appellant. I noted above that no form T2200 signed by OCADU was filed indicating “Declaration of Conditions of Employment” so as to support deduction of any specified employment expenses.

Thus the taxpayer’s appeal was dismissed.  There was no order as to costs since this was an informal procedure appeal.