AROUND THE COURTS
Losses from part-time law practice disallowed
In the recent Renaud case, the taxpayer was a lawyer who was employed full-time at a Federal government agency. She also had a part-time law practice of 10 hours a week, from which she ended up losing money every year for many years. She attempted to claim the non-capital losses for tax purposes against her other sources of income. Apparently, her practice consisted of helping clients with low incomes who could not pay her enough for her to make a profit.
The Tax Court of Canada found that Ms. Renaud's practice was not sufficiently commercial, but rather had a significant personal element, and as a result it did not constitute a “source” of income. Her losses were therefore denied.
Ms. Renaud appealed that decision to the Federal Court of Appeal. The Court of Appeal agreed with the Tax Court judge, holding that Ms. Renaud's practice was not clearly commercial in nature and that it was not carried on with a view of making a profit. Thus, her losses were denied.