Citation: 2005TCC811
Date: 20051228
Docket: 2005-13(IT)I
BETWEEN:
MYRON ROZUMIAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal
pursuant to the Informal Procedure was heard at Vancouver, British Columbia on December 16, 2005. The Appellant
testified and called his former supervisor, Scott Galloway, his daughter, Tanya
Carter, and his wife, Dianne.
[2] The assessment
arises from the Appellant’s employment under a written contract with the
Vancouver Port Authority (“VPA”) commencing in 2002. The particulars in dispute
are set out in paragraphs 12-19 of the Reply to the Notice of Appeal. They
read:
12. In the Notice of
Objection the Appellant requested that he be entitled to a include medical
premiums, paid on Appellant’s behalf by VPA, of $9,585 to the 2002 taxation
year in the calculation of non-refundable tax credits.
13. In response to the Notice of Objection the
Minister reassessed the Appellant, and issued a Notice of Reassessment, on 12th
October 2004, allowing vehicle expenses of $3,165 and, including in the
calculation of gross non-refundable tax credits, $9,585 for the medical
premiums paid on the Appellant’s behalf by VPA..
14. In so reassessing the Appellant on 12th
October 2004, the Minister relied on the following assumptions:
a) in 2002 the Appellant received employment
income from Canadian National Railways of $288.00;
b) in 2002 the Appellant received other
employment income from Canadian National Railways of $288.00 on account of
medical insurance premiums;
c) in 2002 the Appellant received other
employment income from Canadian National Railways of $105.84 on account of life
insurance premiums;
d) on 1st November 2001 the
Appellant and VPA signed an agreement (the “Agreement”) which provided that the
Appellant would perform the duties of the Manager, Trade and Development (U.S.)
Midwest Office (“Chicago Office”) of VPA;
e) the Agreement was for the period from 12th
November 2001 to 11th November 2004;
f) the Appellant took up his duties in Chicago in April 2002;
g) under the terms of the Agreement, VPA expected
the Appellant to remain and reside in Chicago from April 2002 to November 2004;
h) the Appellant received $120,898.00 from
VPA in his 2002 taxation year;
Vehicle expenses:
i) in the 2002 taxation year the Appellant
received a vehicle allowance of $4,572;
j) in the 2002 taxation year the Appellant
was entitled to deduct the business portion of his total vehicle expenses in
the amount of $3,165.31;
Medical premiums
k) VPA paid medical insurance premiums of
$9,585 on the Appellant’s behalf for 2002 taxation year;
l) $9,585 is allowable in the calculation of
the Appellant’s non refundable tax credits for the 2002 taxation year;
Other amounts:
m) the rental expenses of $20,410.00 paid by
VPA on the Appellant’s behalf in 2002 were personal expenses of the Appellant;
and
n) the utilities, parking and telephone
expenses of $9,414 paid by VPA on the Appellant’s behalf in 2002 were personal
expenses of the Appellant.
B. ISSUES TO BE DECIDED
15. The issue are:
a) whether the Appellant is entitled to deduct
rental expenses of $24,100 under the provisions of 6(6) of the Income Tax
Act, R.S.C. 1985, c.1 (5th Supp.), as amended (the “Act”);
and
b) whether the Appellant is entitled to
utilities, parking and telephone expenses of $9,414 under the provisions of
6(6) of the Act.
C. STATUTORY PROVISONS RELIED ON
16. He relies on section 3, 5, 6, 8, 248, and
paragraphs 18(1)(h), of the Act.
D. GROUNDS RELIED ON AND RELIEF SOUGHT
17. He respectfully submits that the Appellant
is not entitled to deduct from his 2002 income from VPA rental expenses of
$24,100 or the rental, utilities, parking and telephone of $9,414 that were
paid on the Appellant’s behalf by VPA because the duties performed for VPA in
Chicago by the Appellant were not of a temporary nature pursuant to subsection
6(6) of the Act.
18. He further submits that the Minister
properly included the rental expenses of $24,100, and the $9,414, of utilities,
parking and telephone expenses, paid by VPA on the Appellant’s behalf, pursuant
to sections 3, 5 and 6, of the Act.
19. He further submits that the Minister
properly included the rental expenses of $24,100, and the $9,414, of utilities,
parking and telephone expenses, paid by VPA on the Appellant’s behalf, were
personal expenses of the Appellant and are not deductible under the provisions
of section 8 of the Act.
[3] Assumptions 14 (a)
to (l) inclusive were not refuted. Assumptions 14 (m) and (n) are in dispute.
[4] The question is
whether the amounts described in assumptions 14 (m) and (n) are excluded from
the Appellant’s income pursuant to subsection 6(6) of the Income Tax Act (“Act”)
which reads:
(6) Notwithstanding
subsection 6(1), in computing the income of a taxpayer for a taxation year from
an office or employment, there shall not be included any amount received or
enjoyed by the taxpayer in respect of, in the course or by virtue of the office
or employment that is the value of, or an allowance (not in excess of a
reasonable amount) in respect of expenses the taxpayer has incurred for,
(a) the taxpayer's board and lodging for a period at
(i) a special work site, being a location at which the duties
performed by the taxpayer were of a temporary nature, if the taxpayer
maintained at another location a self-contained domestic establishment as the taxpayer's
principal place of residence
(A) that was, throughout the period, available for the taxpayer's
occupancy and not rented by the taxpayer to any other person, and
(B) to which, by reason of distance, the taxpayer could not
reasonably be expected to have returned daily from the special work site, or …
[5] Mr. Galloway testified
that the Appellant was hired and sent to Chicago by VPA because VPA wanted a
Canadian to open an office for VPA there who would devote all of his time to
inquiring into and soliciting business for VPA to bring it into the Port of
Vancouver, and ship by rail to or through Chicago a gateway to a major United
States market. It was an experiment to see what the landscape looked like, in
Mr. Galloway’s words. At his hiring, Mr. Rozumiak had 29 years experience
across Canada and in the Port Area of
Vancouver with goods transportation – primarily with C.N.R.
[6] The VPA obtained the
Appellant’s United States Visa which is issued in three-year increments. It
paid for his apartment rent and medical insurance, but not for his day-to-day
food or meals unless he was entertaining for business reasons.
[7] The Appellant kept his
home in Richmond and paid for its expenses. His
daughter and her child moved into part of it. His wife accompanied him to Chicago. He:
1. did not
change his Royal Bank account but had its mailing address changed to Chicago;
2. obtained
an Illinois driver’s licence;
3. took
his car and had it licensed and insured in the U.S.A.;
4. took
his wife to the United
States;
5. rented
an apartment at VPA’s expense – at first furnished and, when that was
cancelled, he and his wife moved to an unfurnished apartment again at VPA’s
expense, all in 2002;
6. took
out a non-resident membership in his B.C. golf club but did not join a golf
club or a club in the U.S.A.;
7. did not
do any other changes of address respecting his Canadian postal address or
telephone number;
8. and his
wife did not make any new friends in Chicago.
[8] In 2002 the Appellant
spent 203 days in the U.S.A. and 162 days in Canada.
[9] The question, in the words
of subsection 6(6), is whether in 2002 when in Chicago the Appellant received an amount for his board and
lodging at a special work site at which his duties were of a temporary nature.
Respondent’s counsel raised particular attention to the fact that the
Appellant’s day-to-day “board” was not paid for by VPA.
[10] The Appellant and VPA’s
contract was not for an indeterminate period of employment. Moreover, VPA and
Mr. Rozumiak both viewed Mr. Rozumiak and his duties as temporary – an
experiment to discover the lay of the land. Mr. Rozumiak had never signed
such a contract before and VPA had no office of its own in the United States. The contract was extended in
2004 for a further year to the end of Mr. Rozumiak’s Visa and the office was
closed as a failure at the end of that time; but neither party foresaw these
events in 2002.
[11] On this basis, the Court
finds that the Appellant’s duties were of a temporary nature when the original
contract was signed. His duties were to test the market. He was an older,
experienced man who had his roots in the Vancouver area who had the knowledge to test the market for VPA.
Their contract was terminable by either party in 3 months’ notice. Chicago was
not VPA’s regular place of business, nor was the office premises which the
Appellant rented for VPA – he was the only employee at that site and he
traveled from it outside of the Chicago area about one week each month. The firm the office
was rented from had similar office premises in other major American cities with
facilities Mr. Rozumiak could use when on the road.
[12] The Appellant fulfilled the
requirements of subsection 6(6) in 2002. The appeal is allowed. The Appellant
is awarded his taxable costs respecting the appeal.
Signed at Saskatoon, Saskatchewan, this 28th day of December 2005.
"D.W. Beaubier"
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