Bowman T.C.J.:
1 This appeal is from an assessment for the appellant's 1992 taxation year. It concerns a claim by him to deduct moving expenses under section 62 of the Income Tax Act.
2 In his return of income for 1992 the appellant claimed $2,570.70 as moving expenses. This amount was made up of $42.00 for the cost of meals, removal costs of $409.20, legal fees of $696.50 and property transfer tax of $1,423.00 in respect of the purchase of real property. These amounts were initially allowed as deductions by the Minister but by a subsequent reassessment they were disallowed. Moreover, the appellant's request for a further deduction under section 62 of $8,341.95 was denied. This latter amount represented legal fees and real estate commissions relating to his sale of his former residence.
3 All of these amounts are in issue in this appeal. It is not disputed that the amounts were spent by the appellant.
4 The facts are as follows. The appellant and his family until September 1992 lived at 1156 Maple Bay Road, Duncan, British Columbia which he and his wife had purchased in 1985. He was employed by Mr. Grocer in the meat department. In June of 1988, Thrifty Foods hired him as a part time meat cutter in Nanaimo and Victoria but be continued to live in Duncan.
5 In April 1992 a new Thrifty Foods store opened in Parksville, north of Nanaimo. The store was owned by three partners, Dave Habewood, Brian Roberts and Clayton Baker, the last two being managers.
6 The appellant was hired as meat manager, subject to certain conditions:7 He was aware that Mr. Roberts had a reputation for being hard to work for.
8 He searched for a rental home in Qualicum Beach near Parksville but ultimately bought a house. He used an inheritance he had received as part of the down payment. The balance of the purchase price was financed by a loan from the Canadian Imperial Bank of Commerce who agreed to lend him the money provided that he keep the house in Duncan, rent it and use the rentals to help pay the mortgage. The purchase of the house in Qualicum Beach closed on August 1, 1992.
9 He found tenants to live in the house in Duncan. The lease was for one year with a renewal option but subject to his right to terminate the tenancy on 90 days notice if he chose to move back. This provision evidently reflected his concern that things might not work out at the store in Parksville, partly, I presume because of his concerns about Mr. Roberts.
10 On July 19, 1992, the store at Parksville opened. Up until July 2, 1992 he worked in Nanaimo following which he started to work in Parksville.
11 By September of 1992 it was obvious that the business in the store in Parksville was doing badly and Mr. Roberts started to wreak havoc with the managers, particularly the produce manager, the bakery manager and the deli manager. The appellant somehow survived — in fact he is still there — but he was well aware that his position was precarious.
12 In November 1992, the meat supervisor for the entire Thrifty Foods chain came to Parksville and told the owners that they should try to make the meat department more profitable. At Christmas of 1992, the appellant told his employers that if things did not work out at Parksville he would ask for a demotion within the chain and go back to Duncan.
13 In September of 1992, Mr. Roberts was diagnosed with leukemia and Mr. Baker took over and profitability increased. In June of 1993 it was announced that Mr. Roberts was coming back. However in September of 1993 the board of directors of Thrifty Foods told Mr. Roberts that he should stay out of management. About this time as well the tenants at the appellant's house in Duncan informed him that they wanted to renew the lease and the appellant renewed it until August 31, 1994.
14 The appellant decided to sell the house in Duncan at the termination of the lease on August 31, 1994 and in fact it was sold.
15 The costs claimed by the appellant fall broadly into two categories:(a) those associated with his move to Parksville in 1992, including the cost of acquiring his new house there; and
(b) those associated with the sale of the former residence in Duncan in 1994.
16 In 1992 he claimed in respect of the Duncan property a rental loss of $2,700, in 1993, a profit of $730 and in 1994 a rental loss of $4,166.
17 The moving expenses are claimed under subsection 62(1) which reads:
(1) Where a taxpayer has, at any time, commenced(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as his “new work location”), or
(b) to be a student in full-time attendance at an educational institution (in this subsection referred to as his “new work location”) that is a university, college or other educational institution providing courses at a post-secondary school level,
(c) they were not paid on his behalf by his employer,
(d) they were not deductible by virtue of this section in computing the taxpayer's income for the preceding taxation year,
(e) they would not, but for this section, be deductible in computing the taxpayer's income,
- (f) the aggregate of such amounts does not exceed
(i) in any case described in paragraph (a), the taxpayer's incomefor the year from his employment at his new work location or from carrying on the new business at his new work location, as the case may be, or
(ii) in any case described in paragraph (b), the aggregate of amounts required to be included in computing his income for the year by virtue of paragraphs 56(1)(n) and (o), and
(g) any reimbursement or allowance received by him in respect of such expenses is included in computing his income.
18 “Moving expenses” are defined inclusively in subsection 3:
(3) In subsection (1), “moving expenses” includes any expense incurred as or on account of(a) travelling costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of his household from his old residence to his new residence,
(b) the cost to him of transporting or storing household effects in the course of moving from his old residence or the new residence,
(c) the cost to him of meals and lodging near the old residence or the new residence for the taxpayer and members of his household for a period not exceeding 15 days,
(d) the cost to him of cancelling the lease, if any, by virtue of which he was the lessee of his old residence,
(e) the selling costs in respect of the sale of his old residence, and
(f) where his old residence is being or has been sold by the taxpayer or his spouse as a result of the move, the cost to him of legal services in respect of the purchase of his new residence and of any taxes imposed on the transfer or registration of title to his new residence,
19 I begin with the fairly obvious observation that the expenses claimed are, broadly speaking, the type of expenses contemplated by section 62 - moving expenses, land transfer taxes, legal expenses relating to the sale of the former residence and the purchase of the new residence, and real estate commissions. All of these costs fall within the ambit of section 62. Had the appellant's sale of his Duncan residence in 1992 and the purchase of his new residence in Qualicum Beach been roughly conterminous in 1992 there would have been no question of the deductibility of the expenses.
20 The Department of National Revenue in writing to Mr. Jaggers, explained the reason for refusing the deduction as follows:
We cannot allow the costs for selling your home in Duncan as you made no attempt to sell it until two years after your move. The fact that you were on probation for one year in your new job would account for not selling the house until you were assured of your job, however, the fact that you made no attempt to sell the house at that time precludes these costs being allowable as a moving expense. The only time the costs for selling a home can be claimed is when the home is sold directly because of the move to a new location. In addition, because the selling costs of your home in Duncan are not allowable, neither are the purchase costs for your new home in Qualicum Beach. In order for purchase costs to be allowed, there must be an allowable sale of a home at the old location.
21 The factor that differentiates this case from the more usual situation is that Mr. Jaggers bought the Qualicum Beach home in 1992 but kept the Duncan house until 1994. Does this make a difference for the purposes of section 62?
22 Counsel for the respondent, in a very thorough and fair presentation of the Crown's case, made essentially three submissions:(a) the appellant did not ordinarily reside at the old residence before it was sold;
(b) the expenses were not incurred “in the course of moving from his old residence to his new residence”;
(c) he does not meet the criterion in paragraph 62(3)(f) because the old residence was not being sold or had not been sold as a result of the move when the new house was bought.
23 In fact, he did ordinarily reside at the old residence before the move and the expenses were incurred in the course of moving from the old to the new residence.
24 It was not contended that the fact that the selling costs of the old house were incurred in 1994 should preclude their deduction in 1992. Subsection 62(1) permits the deduction in computing income “for the taxation year in which he moved from his old residence to his new residence or for the immediately following taxation year...”. The Act does not require that the moving costs be incurred in those years. Moreover, it is clear from the recent decision of the Federal Court of Appeal in Dale v. R. (Fed. C.A.)that subsequent events can affect the calculation of income in a preceding year.
25 The problem here, in a nutshell, is that when Mr. Jaggers moved to Qualicum Beach and bought his new house he was uncertain whether the job would work out, and he therefore kept his house in Duncan against the eventuality that he might move back. Also the bank insisted that he rent the Duncan house in order to defray some of the mortgage costs of the new one.
26 I think, with respect, that the Crown's position is unduly technical.
27 In Swantje v. R. (1994), 94 D.T.C. 6633 (Fed. C.A.), (aff'd Supreme Court of Canada(1996), 96 D.T.C. 6310 (S.C.C.)) made this observation at p. 6635:
The approach adopted by the learned judge was a purely mechanical one, focussed on the method, the means devised to achieve the goal. The proper approach must be a functional one, and the scheme must be considered as a whole, taking into account the intent of the legislation, its object and spirit and what it actually accomplishes.
28 I need not recite the numerous interpretive principles that have been developed over the years. That has been done before (Glaxo Wellcome Inc. v. R. (1996), 96 D.T.C. 1159 (T.C.C.)). The quotation from R., however seems particularly apposite. What section 62 is aimed at is the deduction of moving costs where a move is occasioned by a change of job. Its purpose would be defeated if an unduly narrow and technical approach were followed. We have here a taxpayer who moves to another city to take up new employment. He buys a home there but, sensibly, retains his old home until he is sure that the job will work out. He rents the old home as an interim measure. Because he does not evict the tenants as soon as he could - for reasons of commercial morality, it appears, rather than pure commerciality - he loses, in the view of the Department of National Revenue, the right to any deductions under section 62. I do not find this acceptable interpretation of section 62. These expenses are precisely the type contemplated by section 62.
29 Some point was made of the wording of paragraph 62(3)(f), and in particular the words “is being or has been sold....”. The use of the English construction “is being or has been sold” implies, it is argued, that the sale of the old house must either precede or be contemporaneous with the acquisition of the new home. This construction leads to the absurd result that if the sale of the old house is delayed for some reason until after the new house is bought the expenses of sale would be denied. (See Victoria (City) v. Bishop of Vancouver Island, [1921] 2 A.C. 384 (British Columbia P.C.)at p. 388). I note in passing that the French version (“vend ou a vendu”) carries no such implication.
30 I think that this conclusion is consistent with the judgment of Judge Taylor in Beyette v. Minister of National Revenue (1989), 89 D.T.C. 701 (T.C.C.)and that of Judge Watson in Simard c. R. (1996), 97 D.T.C. 216 (T.C.C.).
31 It was not suggested that the conditions set out by Christie C.J.T.C. in Bracken v. Minister of National Revenue (1984), 84 D.T.C. 1813 (T.C.C.)had not been met. In that case he said at p. 1819:
My reading of subsection 62(1) is that it contemplates the existence of four separate elements: old work location, new work location, old residence and new residence, and the comparison of two distances, i.e. the distance from the old residence to the new work location with the distance from the new residence to the new work location the former of which must exceed the latter by 40 or more kilometres in order for the moving expenses to be deductible.
32 It is quite true that the “straight line” or “as the crow flies” approach has been repudiated by the Federal Court of Appeal in Giannakopoulos v. R (1995), 95 D.T.C. 5477 (Fed. C.A.). However, the conclusion stated in Bracken that subsection 62(1), quoted above, contemplates the existence of four elements: old work location, new work location, old residence, new residence is clear from the Act itself. Certainly the Federal Court of Appeal in Giannakopoulos did not cast any doubt upon it.
33 Nonetheless in Templeton v. R. (Fed. T.D.)Campbell J., embarked on an unwarranted attack upon the principle stated by Christie C.J.T.C. as follows:
Therefore, I find that the interpretation applied by Christie C.J.T.C. in Bracken requiring “four separate elements: old work location, new work location, old residence, and new residence” is unrealistic, illogical and non-contextual, and, therefore, is wrong in law. Accordingly, Mr. Templeton is entitled to his 1984 moving expenses deduction for following his creative spirit and, thus, this appeal is allowed.
34 In the transcript of argument in Templeton counsel for Mr. Templeton in response to a question put to him by Campbell J. agreed with the interpretation expressed by Christie C.J.T.C.
35 Campbell J. seems to have misconstrued the judgment of Christie C.J.T.C., that of the Federal Court of Appeal and the Act itself.
36 The appeal is allowed and the assessment referred back to the Minister of National Revenue for reconsideration and reassessment to permit the deduction of the amounts of $2,570.70 and $8,341.95 in the computation of the appellant's income for 1992.
37 The appellant is entitled to his costs, if any.
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