In a June 8, 2016 Federal Court of Appeal case (Peach vs. H.M.Q., A-406-14), at issue was whether the Tax Court was correct in denying the taxpayer’s rental and business losses for the 2009 and 2010 taxation years.

Taxpayer wins, in part
The Federal Court found that the Tax Court erred in globally denying the expenses of the business under Section 67. The Court should have considered each particular expense and the explanation for them. Unreasonable expenses can be eliminated or reduced to make them reasonable.

support and examination for each particular expense

The Federal Court found that the Tax Court did not determine whether each actual expense in the case was unreasonable and what reduction in the taxpayer’s claim might be necessary to make it reasonable. The Federal Court, therefore, returned the case to the Tax Court to address the reasonableness of each of the expenses.

On the other hand, the Federal Court found that the Tax Court did not err in denying the taxpayer’s losses in relation to rental properties as there was no source of income.