Canada ( Attorney General ) v. Poulin
A-68-94
Marceau J.A.
15/7/96
8 pp.
Appeal of Tax Court of Canada decision vacating reassessments made against respondent for five taxation years from 1984 to 1988-Issue whether respondent entitled to deduct $385,802 (damages, interest, costs and legal fees) as business loss in computing his income for 1987 taxation year, and then carry over loss not deducted in 1987 to other years in issue-In 1976, respondent started real estate brokerage on own-As result of fraud and false representations, ordered to pay damages, interest and costs-Did not satisfy judgment until 1987, after judgment of Court of Appeal-Act declares all income taxable but allows deduction only of expenses incurred for purpose of gaining income-Respondent cannot be considered to have ceased activities as broker as long as engaged in completing things done in carrying on business even though at that point no longer carrying on business and could no longer act on behalf of clients-To meet requirement of Income Tax Act, in s. 18(1)(a), necessary payment be directly related to act necessary in order to carry on trade or profession and potentially considered to have been performed improperly-Tort herein committed while carrying on trade or profession but completely foreign to it-Payment in satisfaction of award of damages for tort, intentional unlawful act, deliberate act committed with aim of causing damage-Payment of award of damages and interest does not meet condition in Act, s. 18(1)(a) in order for respondent to be able to deduct it as expense associated with carrying on profession as real estate broker-Appeal allowed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 18(1)(a).