Docket: 2023-1800(IT)I
BETWEEN:
JUSTIN MILLER,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Docket: 2023-1803(IT)I
AND BETWEEN:
HEATHER A. MURRAY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
Appeal heard on May 28, 2025, at Halifax, Nova Scotia
Before: The Honourable Justice Bruce S. Russell
Appearances:
Counsel for the Appellant:
Edward Sawa
Counsel for the Respondent:
Sean Karmali
JUDGMENT
The appeal of the reassessments of Mr. Miller’s 2017, 2018 and 2019 taxation years, raised March 1, 2022 under the federal Income Tax Act is allowed, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment as addressed in the Reasons for Judgment associated herewith; the whole without costs.
The appeal of the reassessments of Ms. Murray’s 2017, 2018, 2019, and 2020 taxation years, raised March 1, 2022 under the federal Income Tax Act is allowed, the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment as addressed in the Reasons for Judgment associated herewith; the whole without costs.
Signed this 31st day of July 2026.
“B. Russell”
Russell J.
Citation: 2026 TCC 144
Date: 20260731
Docket: 2023-1800(IT)I
BETWEEN:
JUSTIN MILLER,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Docket: 2023-1803(IT)I
AND BETWEEN:
HEATHER A. MURRAY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
REASONS FOR JUDGMENT
Russell J.
I. Background and Issue:
[1] The appellants, Heather A. Murray and her adult son Justin Miller, have brought these two informal procedure appeals. These appeals raise the same issue and were heard together.
[2] Ms. Murray seeks that March 1, 2022 reassessments of her 2017, 2018, 2019 and 2020 taxation years, per the federal Income Tax Act (Act), be vacated and those years further reassessed to allow her claimed $50,922 terminal loss for her 2017 taxation year and related loss carry forwards for her 2018, 2019 and 2020 taxation years.
[3] Likewise, Mr. Miller seeks that March 1, 2022 reassessments of his 2017, 2018 and 2019 taxation years, under the Act, be vacated and those years further reassessed to allow his claimed $50,922 terminal loss for his 2017 year and related loss carry forwards for his 2018 and 2019 taxation years.
[4] The appeals are in relation to a pizza restaurant business in which each of the two appellants held a 50% interest. In 2013 and 2014 the appellants prepared premises for operation of the pizza restaurant business. The business commenced operation in December 2014 under the name “Piez Bistro”
and continued operating until the appellants closed it in July 2017, due to its failure to generate profit.
[5] The respondent Crown’s position, as reflected in the appealed reassessments, is that the appellants’ books and records do not justify the claimed “other expenses”
of $101,843. These are as reported in each appellant’s filed 2017 taxation year Statement of Business or Professional Activities (Ex. A-4), being the basis of each appellant’s claimed $50,922 terminal loss ($50,922 x 2 = $101,843).1
[6] In the Amended Reply for each appeal is pleaded as an assumption of fact of the Minister of National Revenue (Minister) that, “the appellant has not incurred the total amount of $50,922 as other expenses with respect to the business for the 2017 taxation year”
.2
[7] That is the issue in both of these matters - did the two equal interest partners, Ms. Murray and Mr. Miller, together incur “other expenses”
totaling $101,843 - half of which amount each of the two appellants claimed in 2017 as a terminal loss.
[8] I note the well-known proviso that a pleaded ministerial assumption of fact is deemed correct, unless on a balance of probabilities proven otherwise.
[9] The claimed expenses in question relate to “build-out”
expenses purportedly incurred by the appellants in 2013 and 2014 on leased premises to physically establish their planned pizza restaurant business, including for example, installation of a pizza oven and air conditioning and kitchen facilities, and also a furnished seating area for customers, equipped with dining implements.
[10] The issue raised by Canada Revenue Agency (CRA) is that appellants have not provided actual invoices and receipts for much of these build-out expenses, incurred in 2013 and 2014. Ms. Murray testified that she had kept this documentation in a box in her premises, but these contents of the box were “mashed”
by a flood in her premises. She does not recall exactly in what year this occurred, noting that such documentation would be at least twelve years old by the time of the hearing of these two appeals.
[11] She testified also that during the covid years (2020-2022) she sought to address this matter with CRA, but no one at CRA was available to speak with her.
[12] The respondent Crown’s position is that in the absence of documentation of the claimed expenses, CRA does not accept that the appellants incurred these build-out expenses, as claimed.
[13] In this regard the respondent Crown cites certain provisions of the Act including paragraph 18(1)(a) and subsections 230(1) and 230(4) as follow:
Paragraph 18(1):
(1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
(a) an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
Subsections 230(1) and (4):
(1) Every person carrying on business and every person who is required, by or pursuant to this Act, to pay or collect taxes or other amounts shall keep records and books of account (including an annual inventory kept in prescribed manner) at the person's place of business or residence in Canada or at such other place as may be designated by the Minister, in such form and containing such information as will enable the taxes payable under this Act or the taxes or other amounts that should have been deducted, withheld or collected to be determined.
(4) Every person required by this section to keep records and books of account shall retain:
(a) the records and books of accounts referred to in this section in respect of which a period is prescribed, together with every account and voucher necessary to verify the information contained therein, for such as is prescribed; and
(b) all other records and books of account refer to in the section, together with every account and voucher necessary to verify the information contained therein, until the expiration of six years from the end of the last taxation year to which the records and books of account relate.
[14] The respondent also cites Brand v. The King, 2022 TCC 92, wherein my colleague Justice Wong wrote, at para. 27:
Generally speaking, an expense is deductible from business income if it is made for the purpose of gaining or producing income from that business. Personal or living expenses are not deductible from business income other than travel expenses incurred in the course of carrying on the taxpayer’s business. Equally importantly, every person who carries on business must keep books and records which are sufficient to enable the Minister to determine the taxes payable.
[15] In response the appellants submit that oral evidence should be accepted based on the reasoning of Madam Justice L’Heureux-Dubé in Hickman Motor Limited v. The Queen, [1977] 2 S.C.R. 336 at paras. 87-88 as follow:
- My colleague Iacobucci J., at para. 143 of his reasons, repeats the Court of Appeal’s opinion that because the revenue was not shown in the financial statements, there is no evidence of revenue. I cannot agree with that statement. For example, see Docherty v. M.N.R., 91 D.T.C. 537 (TCC), at p. 539, where, in the absence of entries in the appellant's financial statements reflecting a transaction, the court accepted the working papers and the testimony of the corporation's accountant as evidence that the transaction had occurred. The law is well established that accounting documents or accounting entries serve only to reflect transactions and that it is the reality of the facts that determines the true nature and substance of transactions... Furthermore, where the ITA does not require supporting documentation, credible oral evidence from a taxpayer is sufficient notwithstanding the absence of records: Weinberger v. M.N.R., 64 D.T.C. 5060 (Ex. Ct.); Naka v. The Queen, 95 D.T.C. (T.C.C.); Page v. The Queen, 95 D.T.C. 373 (T.C.C.)
- In the case at bar, the ITA does not require that the revenue be shown in the financial statements and, accordingly, since no issue of credibility was raised, the evidence adduced by the appellant is clearly sufficient.
II. Evidence and Analysis:
[16] The court heard testimony from the appellants’ long-standing accountant, Ms. Kristy Lipton, CPA.
[17] Ms. Lipton testified at some length. I found her entirely credible.
[18] Ms. Lipton produced a document she had prepared for the appellants in or about late 2014 or 2015 entitled “Piez Bistro - Transactions by Account Report 12/01/2013 to 11/30/2014”
, admitted in evidence as Ex. A-1. It is a list of capital expenses incurred by the appellants in 2013-2014 that led to the opening of their pizza shop business.
[19] They are expenses incurred in the “build-out”
of the restaurant, to have it ready for opening. Of particular significance is that Ms. Lipton prepared this document based on original documentation held by appellant Ms. Murray, including invoices and receipts that confirmed these expenses. Ms. Lipton had reviewed to obtain the name of the entity providing the asset or service, and the amount paid or payable for each such work item.
[20] When finished with this original documentation that Ms. Lipton had borrowed from Ms. Murray, Ms. Lipton returned same to her. However, this returned documentation subsequently was “mashed”
by a “flood”
in Ms. Murray’s premises.
[21] Ms. Lipton’s listing of the transactions under the heading “leasehold improvements”
gives date of invoice, name of selling entity and debits and credits yielding balance paid.
[22] That is the documentation that CRA lacks and would establish that the aforesaid amount of $101,843 was expended in 2013-2014 for build-out of the pizza shop premises.
[23] So, although the said documentation including invoices etc. no longer exists due to flood damage, Ms. Lipton’s extensive document, prepared by her through review of that subsequently lost documentation, lists and thereby confirms the transactions involved in the build-out which work makes up approximately all of the $50,922 x 2 = $101,843 that as stated above the Minister assumes was not incurred.
[24] I note also that both appellants testified, clarifying the actual work done in completing the build-out in late 2014, consistently with the work transactions identified in Ms. Lipton’s document.
[25] The said assets themselves were not retained by the appellants when they discontinued their unsuccessful business in December 2017. The landlord then seized all assets and leasehold improvements.
[26] As well, the build-out of the premises in 2013 and 2014 was carried out in large part by the appellant Mr. Miller who was an independent construction contractor. Also, Mr. Miller took numerous photos as the build-out proceeded (Ex. A-5). These photos are of course helpful to also confirming what work was done and when, in moving forward the build-out.
[27] Also, although some expenses of the build-out were paid by the landlord, Ms. Murray was adamant that she had repaid the landlord for all of same.
[28] Mr. Miller was asked by the respondent’s counsel if he had brought any invoices with him, given his work on the build-out. He had not. I think he was taken by surprise by this. Perhaps he should have been asked prior to the hearing to produce his invoices.
[29] Lastly, although many supporting documents were lost by flood, Ms. Murray was able to locate, from an old computer, copies of several invoices and related documentation that also was confirmation for the appellants’ respective terminal loss and loss carry forward claims. These are produced as Exhibits A-7 to A-16.
[30] Respondent’s counsel minimizes some of this documentation as follows - Ex. A-7 does not indicate a year, Ex. A-8 does not indicate that the Piez Bistro is the business being billed, Ex. A-9 seems to be a quote, and Ex. A-12 was billed to Blue Basin Investments (the landlord) - although as stated Ms. Murray was clear that in due course she had repaid the landlord for payments the landlord had made.
III. Conclusion:
[31] I conclude that the ministerial assumptions pleaded at paragraph 9(h) of each Reply that each appellant had not incurred the amount of $50,922 for 2017 as other expenses; and also as pleaded at paragraph 9(i), that neither appellant had incurred the claimed non-capital loss of $30,325 for 2017 expenses; were proven otherwise.
[32] Although the specific documentation was no longer available, lost to a flood, I consider that other evidence, including particularly Ms. Lipton’s Ex. A-1 document, established that the build-out work was done. Also, that work was paid for, ultimately if not immediately, by the two appellants (also utilizing Mr. Miller’s credit line) who were the actual owners of the pizza shop business itself.
[33] The two appeals will be allowed.
Signed this 31st day of July 2026.
“B. Russell”
Russell J.
2026 TCC 144
COURT FILE NO.:
2023-1800(IT)I
2023-1803(IT)I
STYLE OF CAUSE:
JUSTIN MILLER AND HIS MAJESTY THE KING
HEATHER A. MURRAY AND HIS MAJESTY THE KING
PLACE OF HEARING:
Halifax, Nova Scotia
DATE OF HEARING:
May 28, 2025
REASONS FOR JUDGMENT BY:
The Honourable Justice Bruce S. Russell
DATE OF JUDGMENT:
July 31, 2026
APPEARANCES:
Counsel for the Appellant:
Edward Sawa
Counsel for the Respondent:
Sean Karmali
COUNSEL OF RECORD:
For the Appellant:
Name:
Edward Sawa
Firm:
BOYNECLARK LLP
For the Respondent:
Marie-Josée Hogue Deputy Attorney General of Canada Ottawa, Canada