Discussion Case: Benny Reitman, a retired chartered accountant and former partner of an international accounting firm, entered into an agreement with Woltner Associates, a regional office of a national accounting firm, to provide his talent and energy in locating new clients and promoting the firm's products to existing clients. As part of the agreement, Benny was responsible for contacting prospective and existing clients identified as targets by partners of Woltner to promote the firm's resources. Preliminary discussions and meetings with existing and prospective clients would take place in various places, including the offices of Woltner or the client and in restaurants. Benny was reimbursed for certain expenses related to these promotional activities. He paid for all other expenses. If Benny was able to gain some interest in Woltner's services from a new client or an existing client, he would arrange a marketing meeting between the client and a partner of the firm. He was involved in the preparation and would attend the meeting with the client. In preparing for the meeting, Benny would direct the work of his assistants in the development of promotional material, such as PowerPoint presentations, flyers, and handouts. He would be in charge of the preparation process with input from the Woltner partner and staff on the technical content and format of the meeting and/or presentation. Woltner would pay the cost of the presentation materials, and provide all equipment including hardware and software necessary to complete the job.
Most of the work was done at Woltner in whatever space was available, although Benny often worked from his office at home as well. Benny was responsible for hiring his own assistants.
Benny was paid $1,900 every two weeks, or $49,400 for a year, as a retainer or guarantee for his services. Under the agreement, he could not work for any other accounting firms. He was also paid an additional $5,000 for every successful marketing meeting resulting in a new client with billings of a minimum of $25,000 in a 12-month period from the date of the meeting or resulting in new work from an existing client with billings of a minimum of $35,000 in a 12-month period from the date of the meeting. He received nothing extra if a client meeting was unsuccessful or billings did not meet these targets. To be paid, he had to invoice the accounting firm. He reimbursed the accounting firm for its share of the premium for the medical plan in which he participated. He had no specific hours of work. He had no profit-sharing arrangement.
The Canada Revenue Agency disallowed some of Benny's expenses in providing these services on the basis that he was not self-employed.
Required:
As a judge of the Tax Court of Canada, discuss and evaluate the facts supporting the positions of Benny and the Canada Revenue Agency.