[1] This is an application for judicial review of a decision of the Tax Court under the informal procedure, reported as Johnston v. Canada, [2002] 2 C.T.C. 2586 (T.C.C.). The issue is whether interest expenses of $3,675.00 incurred by the applicant in 1999 come within the definition of "moving expenses" in subsection 62(3) of the Income Tax Act, R.S.C. 1985, c. 1 (5^th supp.).

[2] In August, 1999, the applicant moved from Toronto to Winnipeg, where he earned income from employment. At that time he owned a mortgage free home in Toronto. He bought a new home in Winnipeg in September, 1999, using the proceeds of two bank loans secured by the Toronto home. The Toronto home was sold in November, 1999 and the proceeds of sale were used to repay the two bank loans. The interest expense that is the subject of this application accrued between September and November, 1999.

[3] The relevant parts of the definition of "moving expenses" read as follows in 1999 (emphasis added):

62(3) In subsection 62(1), "moving expenses" includes any expense incurred as or on account of ...

62(3) Pour l'application du paragraphe (1), sont comprises dans les frais de déménagement toutes dépenses engagées au titre: ...

(f) where the old residence is sold by the taxpayer or the taxpayer's spouse as a result of the move, the cost to the taxpayer of legal services in respect of the purchase of the new residence and of any tax, fee or duty (other than any goods and services tax or value-added tax) imposed on the transfer or registration of title to the new residence,

f) lorsque le contribuable ou son époux vend l'ancienne résidence par suite du déménagement, des frais, pour le contribuable, à l'égard des services juridiques relatifs à l'achat de la nouvelle résidence et des impôts, frais, droits et taxes (sauf toute taxe sur les produits et services ou taxe à la valeur ajoutée) applicables au transfert ou à l'enregistrement du droit de propriété de cette résidence;

(g) interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence, to the extent of the lesser of $5,000 and the total of such expenses of the taxpayer for the period

g) des intérêts, impôts fonciers, primes d'assurance et coûts du chauffage et des services publics relativement à l'ancienne résidence, jusqu'à concurrence de 5 000 $ ou, s'il est moins élevé, du total des dépenses de cette nature engagées par le contribuable pour la période, à la fois:

(i) throughout which the old residence is neither ordinarily occupied by the taxpayer or by any other person who ordinarily resided with the taxpayer at the old residence immediately before the move nor rented by the taxpayer to any other person, and

(i) tout au long de laquelle l'ancienne résidence n'est ni ordinairement occupée par le contribuable ou par une autre personne qui y résidait habituellement avec lui immédiatement avant le déménagement, ni louée par le contribuable à une autre personne,

(ii) in which reasonable efforts are made to sell the old residence, ...

(ii) au cours de laquelle des efforts sérieux sont faits en vue de vendre l'ancienne résidence; ...

but, for greater certainty, does not include costs (other than costs referred to in paragraph 62(3)(f)) incurred by the taxpayer in respect of the acquisition of the new residence.

il est toutefois entendu que le terme ne vise pas les frais (autres que les frais visés à l'alinéa f)) engagés par le contribuable pour l'acquisition de sa nouvelle résidence.

[4] The applicant argues that the interest comes within paragraph 62(3)(g) of the definition of "moving expenses" because it is "in respect of" his Toronto home. By this he means that the loans represent the equity in his Toronto home that he accessed to finance his purchase of the Winnipeg home.

[5] The Crown argued in the Tax Court that the interest was incurred in respect of the acquisition of the applicant's Winnipeg home, and for that reason it is excluded from the definition of "moving expenses" by the closing words of subsection 62(3). The Tax Court Judge adopted the Crown's interpretation, and in our view he was correct to do so.

[6] The definition of "moving expenses", read in its entirety, indicates that interest on money borrowed to purchase a home in the new work location is not within the definition, even if the loan is secured by a mortgage on a home in the former work location. There was ample evidence before the Tax Court Judge to support his conclusion that the applicant used the borrowed money to purchase a home in Winnipeg. That precludes the applicant from claiming interest on the borrowed money as a moving expense.

[7] This application for judicial review will be dismissed.

"Karen R. Sharlow"

Judge

FEDERAL COURT OF CANADA

APPEAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

DOCKET: A-218-02

STYLE OF CAUSE: Murray G. Johnston v. Queen (AGC)

PLACE OF HEARING: Winnipeg, Manitoba

DATE OF HEARING: April 8, 2003

REASONS FOR JUDGMENT OF

THE HONOURABLE MADAM JUSTICE SHARLOW

DATED APRIL 8, 2003

APPEARANCES:

Mr. Murray G. Johnston on his own behalf

Ms. Angela Evans for the Respondent

Department of Justice

301 - 310 Broadway

Winnipeg, MB R3C 0S6

SOLICITORS OF RECORD:

Mr. Murray G. Johnston on his own behalf

Morris Rosenberg

Deputy Attorney General of Canada for the Respondent

Summaries

Summary Under

Tax Topics - Income Tax Act - Section 62 - Subsection 62(3)

When the taxpayer moved to Winnipeg, he received two mortgage loans on his Toronto home to finance the acquisition of a Winnipeg home, and then...

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Johnston v. Canada, 2003 DTC 5295, 2003 FCA 185

Citations2003 DTC 5295, 2003 FCA 185

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Citations
2003 DTC 5295, 2003 FCA 185