Citation: 2011TCC66
Date: 20110204
Docket: 2010-2677(IT)I
BETWEEN:
LAURA T. WILLIAMS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The issue in this
Appeal is whether a member of the clergy, who satisfied the status requirement
as set out in subparagraph 8(1)(c)(i) of the Income Tax Act (the “Act”)
and the function requirement as set out in subparagraph 8(1)(c)(ii) of the Act
and who received a housing allowance in relation to a house that the person was
renting with her spouse (who was also eligible to claim a deduction under
paragraph 8(1)(c) of the Act), is able to choose whether to claim a
deduction under either subparagraph 8(1)(c)(iii) or (iv) of the Act.
[2]
There is no dispute in
this Appeal that the Appellant was a member of the clergy and that she
ministered to a congregation. The Appellant lived with her spouse who was also
a member of the clergy and who also ministered to a congregation. The Appellant
and her spouse received the following total amounts as housing allowances from
their respective employers in 2008:
|
|
Appellant
|
Appellant’s Spouse
|
|
Housing Allowance
|
$19,805
|
$19,999
|
[3]
The total amount paid
by the Appellant and her spouse for rent and utilities for their house in 2008
was $20,493.87. Neither party in this case indicated or suggested that the
amount paid for rent or utilities was not the fair market value thereof. The
total amount received by the Appellant and her spouse for housing allowances
for 2008 was $39,804 ($19,805 + $19,999) and this amount exceeded the amount paid
for rent and utilities for their house by $19,310 ($39,804 - $20,494).
[4]
Paragraph 8(1)(c) of
the Act provides as follows:
8. (1) In computing a taxpayer's income for a taxation year from an
office or employment, there may be deducted such of the following amounts as
are wholly applicable to that source or such part of the following amounts as
may reasonably be regarded as applicable thereto:
…
(c) where, in the year, the taxpayer
(i) is a member of the clergy or of a religious order or a regular
minister of a religious denomination, and
(ii) is
(A) in charge of a diocese, parish or congregation,
(B) ministering to a diocese, parish or congregation, or
(C) engaged exclusively in full-time administrative service by
appointment of a religious order or religious denomination,
the amount, not exceeding the taxpayer's remuneration for the year
from the office or employment, equal to
(iii) the total of all amounts including amounts in respect of
utilities, included in computing the taxpayer's income for the year under
section 6 in respect of the residence or other living accommodation occupied by
the taxpayer in the course of, or because of, the taxpayer's office or
employment as such a member or minister so in charge of or ministering to a
diocese, parish or congregation, or so engaged in such administrative service,
or
(iv) rent and utilities paid by the taxpayer for the taxpayer's
principal place of residence (or other principal living accommodation),
ordinarily occupied during the year by the taxpayer, or the fair rental value
of such a residence (or other living accommodation), including utilities, owned
by the taxpayer or the taxpayer's spouse or common-law partner, not exceeding
the lesser of
(A) the greater of
(I) $1,000 multiplied by the number of months (to a maximum of ten)
in the year, during which the taxpayer is a person described in subparagraphs
(i) and (ii), and
(II) one-third of the taxpayer's remuneration for the year from the
office or employment, and
(B) the amount, if any, by which
(I) the rent paid or the fair rental value of the residence or
living accommodation, including utilities
exceeds
(II) the total of all amounts each of which is an amount deducted,
in connection with the same accommodation or residence, in computing an
individual's income for the year from an office or employment or from a
business (other than an amount deducted under this paragraph by the taxpayer),
to the extent that the amount can reasonably be considered to relate to the
period, or a portion of the period, in respect of which an amount is claimed by
the taxpayer under this paragraph;
[5]
It is the position of
the Appellant that, in this case, she has the right to choose whether to claim
a deduction under subparagraph (iii) or subparagraph (iv) of paragraph 8(1)(c)
of the Act.
[6]
The amount deductible
under subparagraph (iv) (since the Appellant was renting the house) will be
limited to the rent and utilities paid by the taxpayer. The same limitation
would apply to the Appellant’s spouse under this subsection. The Appellant
would not be entitled to claim a deduction under subparagraph (iv) based on the
rent (and utilities) paid by her spouse and nor would her spouse be entitled to
a deduction under this subparagraph (iv) for rent and utilities paid by her.
Each would determine their own deduction based on what that person paid for
rent and utilities, as required by the opening words of subparagraph (iv).
Since the Appellant’s spouse was permitted to claim a deduction of $19,999
under paragraph 8(1)(c) of the Act, assuming that he deducted the
amount under subparagraph (iv), the Appellant’s spouse must have paid rent and
utilities of $19,999. If the Appellant would have paid the rent and utilities
then the Appellant’s spouse would not have been entitled to deduct $19,999
pursuant to subparagraph (iv) as the amount deductible under this
subparagraph is the amount “equal to … rent and utilities paid by the
taxpayer”, not exceeding the lesser of the amounts determined under clauses
(A) and (B). Since the Appellant was not disputing that her spouse was entitled
to deduct $19,999 in computing his income, if the applicable provision is
subparagraph (iv), then the Appellant’s spouse must have paid $19,999 in rent
and utilities. Assuming that the Appellant paid the balance of the rent and
utilities of $495 ($20,494 - $19,999) from her housing allowance, her claim
under subparagraph (iv) would be limited to $495. It seems to me that it is
more likely than not that she paid a portion of the rent and utilities and I
find that she did pay $495 for rent and utilities.
[7]
Since the opening words
of subparagraph (iv) refer to the “rent and utilities paid by the taxpayer”
and subclause (B)(I) refers to “the rent paid … including utilities” it is not
entirely clear whether this second reference to the rent paid is intended to
refer only to the rent paid by the Appellant or to the total rent paid for the
residence regardless of who has paid the rent. It seems to me that the
limitation in subclause 8(1)(c)(iv)(B)(I) of the Act should be
interpreted as providing a limitation based on the total amount paid as rent
and utilities by both the Appellant and her spouse and not just the amount paid
by the Appellant. A simple example will illustrate the problem that will arise
if only the rent (including utilities) paid by the Appellant is used in
determining the amount for (B)(I).
[8]
In this case, the
Appellant and her spouse received housing allowances of $19,805 and $19,999
respectively. The total amount paid for rent and utilities was $20,494. If it
is assumed that each paid one-half of the rent and utilities, then each would
have paid $10,247.
[9]
In determining the
amount that the Appellant’s spouse could claim under subparagraph (iv), the
opening words of this subparagraph would limit his deduction to the amount that
he paid for rent and utilities or $10,247 in this example. There are further
limitations in clauses (A) and (B) and his claim will be limited to the least
of $10,247, the amount determined under (A) and the amount determined under (B)
(since his claim is equal to the amount he paid not exceeding the lesser of (A)
and (B)). Assume that the amount for (A) is greater than $10,247.
[10]
In determining the
amount for (B) for the Appellant’s spouse it will not matter whether the amount
for (B)(I) is only the rent (including utilities) paid by the Appellant’s
spouse or whether it would be all of the rent (including utilities) paid in
relation to the residence, since, in this example, the amount that the
Appellant’s spouse may claim is being determined first. Whichever amount is
used his deduction will remain the same - $10,247.
[11]
However, when
determining, in this example, the amount that the Appellant could deduct it
will be relevant. If only the rent (including utilities) paid by the Appellant
is used in determining the amount for (B)(I), since the Appellant’s spouse has
claimed, in this example, a deduction of $10,247 for the same residence for the
same period of time, the following would be the amount determined under (B):
(I) Rent paid (including utilities): $10,247
Minus
(II) Amount deducted by the Appellant’s
spouse: $10,247
(B): 0
[12]
Since the amount that
the Appellant may claim is limited to the lesser of (A) and (B), the result of
only including the amount paid by the Appellant for rent and utilities in
(B)(I) is that the Appellant would not be entitled to any claim under
subparagraph (iv). If, instead, the amount included for (B)(I) is the total
amount paid for rent (including utilities) the following would be the amount
determined for (B):
(I) Rent paid (including utilities): $20,494
Minus
(II) Amount deducted by the Appellant’s
spouse: $10,247
(B): $10,247
[13]
It seems to me that
this would have been the intended result. It does not seem to me that it would
have been intended that if spouses are both ministers and each pay one-half of
the rent and utilities, that only one of these individuals would be entitled to
a deduction for only one-half of the rent and utilities paid in relation to the
residence.
[14]
Therefore it seems to
me that, in this case, the following would be the amount that would be
determined for (B) for the Appellant:
(I) Rent paid (including utilities): $20,494
Minus
(II) Amount deducted by the Appellant’s
spouse: $19,999
(B): $495
[15]
Since the deduction is
limited to the lesser of (A) and (B) and since her remuneration for the year
from her employment was more than $1,485, the Appellant’s deduction under
subparagraph (iv) would be limited to $495.
[16]
However the Appellant
submits that she has the right to choose to deduct $19,805 (the amount included
in her income pursuant to section 6) pursuant to subparagraph (iii). I am
unable to agree with the position of the Appellant. It seems to me that there
is a significant qualification under subparagraph (iii). The deduction
available under this subparagraph is only available in relation to “amounts …
included in … income … in respect of the residence … occupied by the taxpayer in
the course of, or because of, the taxpayer’s … employment”. Therefore
the issue is whether the Appellant was occupying this particular residence in
2008 in the course of or because of her employment.
[17]
In Workmen’s
Compensation Board v. Boissonneault, [1977] N.B.J. No. 182, 18
N.B.R. (2d) 621, Chief Justice Hughes, writing on behalf of the New Brunswick
Supreme Court, Appeal Division, stated as follows:
4 In Armstrong
v. Redford, [1920] A.C. 757 (H.L.), the phrase "in the course of
employment" was commented upon by Lord Parmoor, who said at p. 778:
"The
meaning of the words "in the course of employment" has been
determined in this House in the case of Davidson v. M'Robb,
[1918] A.C. 304. "'In the course of employment' does not mean during the
currency of the engagement, but means in the course of the work which the
workman is employed to do and what is incident to it." . . .
In the case of
Davidson v. M'Robb Lord Dunedin said, referring to course of
employment: "It connotes, to my mind, the idea that the workman or servant
is doing something which is part of his service to his employer or master. No
doubt it need not be actual work, but it must, I think, be work, or the natural
incidents connected with the class of work, e.g., in the workman's case the
taking of meals during the hours of labour.""
5 In St.
Helens Colliery Company Limited v. Hewitson, [1924] A.C. 59, Lord Atkinson
commented at p. 71: [*page626]
". . . a
workman is acting in the course of his employment . . . when he is doing
something in discharge of a duty to his employer, directly or indirectly,
imposed upon him by his contract of service. . . ."
[18]
It does not seem to me
that this house was occupied by her in the course of her employment as a
minister. It seems to me that to occupy the residence in the course of her
employment would require that she would occupy the house as part of her
employment or as a condition of her employment and not simply while she was
employed. In this case the house that was occupied by the Appellant was not
provided by her employer nor was it a house in which she was required to reside.
It appears that it was simply a house in which she and her spouse chose to
reside while she was employed. Therefore she did not occupy this residence in
the course of her employment as a minister in 2008.
[19]
Even though she did not
occupy this residence in the course of her employment as a minister in 2008, if
she occupied this residence because of her employment as a minister, then she
will satisfy the condition in subparagraph (iii) related to the occupancy of
the house. In Attorney General of Canada v. Hoefele, et al.,
95 DTC 5602, Justice Linden, writing on behalf of the majority of the Justices
of the Federal Court of Appeal, stated that:
…What must be
determined is whether those portions of the mortgage loans taken out by the
taxpayers in respect of the Toronto homes, and to which the interest subsidy
was directed, came about 'because of', 'as a consequence of' or 'by virtue of'
employment.
In resolving this question, one must first note that subsection
80.4(1), whether in its older or newly amended form, requires a close
connection between the loan or debt and employment, a connection much closer
than that required by paragraph 6(1)(a) as between benefit and employment. In
the latter, a benefit may arise if it is received merely 'in respect of'
employment. The phrase 'in respect of' connotes only the slightest relation
between two subjects and is intended to convey very wide scope. In Nowegijick
v. The Queen, the Supreme Court of Canada stated the following concerning
the words 'in respect of':
The words 'in respect of' are, in my opinion, words of the widest
possible scope. They import such meanings as 'in relations to', 'with reference
to' or 'in connection with'. The phrase 'in respect of' is probably the widest
of any expression intended to convey some connection between two related
subject matters. [ FOOTNOTE 19 : 1 S.C.R. 29 at 39 per Dickson, J. See also Linden,
J.A. in Blanchard. ]
On the other hand,
the phrases used in the amended subsection 80.4(1), 'because of',
or 'as a consequence of', as well as in the original version, 'by virtue of', require
a strong causal connection. I find little or no difference between the
meanings of the phrases 'because of', 'as a consequence of' and 'by virtue of'.
Each phrase implies a need for a strong causal relation between subject
matters, not merely a slight linkage between them.
(emphasis added)
[20]
It therefore seems to
me that the phrase “because of” as used in subparagraph 8(1)(c)(iii) of the Act
“implies a need for a strong causal
relation between” the occupation of the residence and the employment of the
Appellant. Merely residing in a house while being employed would not be
sufficient. There is no strong causal connection in this case between the
occupation of the house by the Appellant and her employment as a minister as
the house was not provided by her employer but was simply a house in which the
Appellant and her spouse chose to reside. It appears that she was simply living
in this house while she was employed as a minister and therefore she was not
occupying this house because of her employment as a minister.
[21]
The Appellant’s agent
had referred to an earlier version of form T1223 E (04) published by the Canada
Revenue Agency which, in the paragraph identified as (A) in Part C, implies
that a person who received a housing allowance may simply claim a deduction for
such an allowance. The calculations required in relation to the deduction that
may be claimed under subparagraph 8(1)(c)(iv) of the Act are set out in
the part following paragraph (B) of Part C of this form. It is unfortunate that
the form was not clearer but the form cannot change the requirements of the Act.
This form was changed in 2005 to delete the reference to the receipt of an
allowance in paragraph (A) in Part C.
[22]
It also seems to me
that having limited the amount that a person may claim pursuant to subparagraph
(iv) if that person owns or is renting a residence and his or her spouse is also
claiming a deduction in relation to the same residence, it would not have been
the intention of Parliament that such a person could then avoid the limitations
imposed by subparagraph (iv) by simply claiming an amount under subparagraph
(iii).
[23]
As a result the
deduction that the Appellant may claim is to be determined pursuant to
subparagraph 8(1)(c)(iv) of the Act and is limited to $495.
[24]
The appeal is allowed,
without costs, and the matter is referred back to the Minister of National
Revenue for reconsideration and reassessment on the basis that the Appellant is
entitled, in computing her income for 2008, to a deduction under paragraph
8(1)(c) of the Act in the amount of $495.
Signed at Halifax, Nova Scotia, this 4th day of February, 2011.
“Wyman W. Webb”
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