Citation: 2011 TCC 174
Date: 20110321
Docket: 2010-2487(IT)I
BETWEEN:
WILLIAM M. VOLLMER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Little J.
A. FACTS
[1]
The Appellant, William
M. Vollmer, Patricia Lynn Vollmer (hereinafter referred to as “Patricia”),
Angelina Jones, Erin Jones and Benjamin Vollmer, currently reside together in
Edmonton, Alberta (the above individuals are referred to as the “Family”).
[2]
Dylan and Devon Vollmer
reside with their mother in London,
Ontario.
[3]
Angelina Jones and Erin
Jones are the Appellant’s step-daughters (hereinafter referred to as “Angelina”
and “Erin”).
[4]
Prior to July 2008, the
Family was living in London, Ontario.
[5]
The Family moved from
London, Ontario to Edmonton, Alberta in 2008.
[6]
The Appellant began his
new employment with Telus Communications, in Edmonton, Alberta on June 30,
2008.
[7]
Patricia’s former
husband, Michael Jones (“Michael”) filed a Notice of Motion in the Superior
Court of Ontario. Patricia’s former husband was seeking to restrain Patricia
and the Family from moving their two daughters, Angelina and Erin, to Edmonton, Alberta.
[8]
Patricia filed a Defence
to dispute the Notice of Motion.
[9]
The Defence filed in
Court by Patricia was successful. However, Patricia and the Appellant incurred
legal fees of $25,641.
[10]
The Appellant
determined that the legal fees of $25,641 constituted moving expenses (“Moving
Expenses”) and he deducted the Moving Expenses when he filed his income tax
return for the 2008 taxation year.
B. ISSUE
[11]
The issue to be decided
is whether the Appellant is entitled to treat the legal fees of $25,641 as
Moving Expenses and deduct this amount in determining his income for the 2008
taxation year.
C. ANALYSIS
[12]
The relevant legislation
is found in section 62 of the Income Tax Act (the “Act”).
[13]
Section 62 of the Act reads
as follows:
62(1)
Moving expenses. There may be deducted in computing a taxpayer’s income for
a taxation year amounts paid by the taxpayer as or on account of moving
expenses incurred in respect of an eligible relocation, to the extent that
(a) there were not paid on the taxpayer’s behalf in respect of,
in the course of or because of, the taxpayer’s office or employment;
(b) they were not deductible because of this section in
computing the taxpayer’s income for the preceding taxation year;
(c) the total of those amounts does not exceed
(i) in any case described in subparagraph (a)(i) of the
definition “eligible relocation” in subsection 248(1), the taxpayer’s income
for the year from the taxpayer’s employment at a new work location or from carrying
on the business at the new work location, as the case may be, and
(ii) in any case described in subparagraph (a)(ii) of the
definition “eligible relocation” in subsection 248(1), the total of amounts
included in computing the taxpayer’s income for the year because of paragraphs
56(1)(n) and (o); and
(d) all reimbursements and allowances received by the taxpayer
in respect of those expenses are included in computing the taxpayer’s income.
(2) Moving
expenses of students. There may be deducted in computing a taxpayer’s
income for a taxation year the amount, if any, that the taxpayer would be
entitled to deduct under subsection (1) if the definition “eligible relocation”
in subsection 248(1) were read without reference to subparagraph (a)(i)
of that definition and if the word “both” in paragraph (b) of that
definition were read as “either or both”.
(3)
Definition of “moving expenses”. In subsection (1), “moving expenses”
includes any expense incurred as or on account of
(a) travel costs (including a reasonable amount expended for
meals and lodging), in the course of moving the taxpayer and members of the
taxpayer’s household from the old residence to the new residence,
(b) the cost to the taxpayer of transporting or storing
household effects in the course of moving from the old residence to the new
residence,
(c) the cost to the taxpayer of meals and lodging near the old
residence or the new residence for the taxpayer and members of the taxpayer’s
household for a period not exceeding 15 days,
(d) the cost to the taxpayer of cancelling the lease by virtue
of which the taxpayer was the lessee of the old residence,
(e) the
taxpayer’s selling costs in respect of the sale of the old residence,
(f) where the old residence is sold by the taxpayer or the
taxpayer’s spouse or common-law partner 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, and
(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
(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
(ii) in
which reasonable efforts are made to sell the old residence, and
(h) the cost of revising legal documents to reflect the
address of the taxpayer’s new residence, of replacing drivers’ licenses and
non-commercial vehicle permits (excluding any cost for vehicle insurance) and
of connecting or disconnecting utilities,
but, for
greater certainty, does not include costs (other than costs referred to in
paragraph (f)) incurred by the taxpayer in respect of the acquisition of
the new residence.
[14]
The definition of
“eligible relocation” is found in subsection 248(1) of the Act:
“eligible relocation” means a
relocation of a taxpayer where
(a) the relocation
occurs to enable the taxpayer
(i) to carry on a
business or to be employed at a location in Canada (in section 62 and this
subsection referred to as “the new work location”), or
(ii) to be a
student in full-time attendance enrolled in a proram at a post-secondary level
at a location of a university, college or other educational institution (in
section 62 and this subsection referred to as “the new work location”),
(b) both the
residence at which the taxpayer ordinarily resided before the relocation (in
section 62 and this subsection referred to as “the old residence”) and the
residence at which the taxpayer ordinarily resided after the relocation (in
section 62 and this subsection referred to as “the new residence”) are in
Canada, and
(c) the
distance between the old residence and the new work location is not less than 40
kilometres greater than the distance between the new residence and the new work
location
except that, in applying
subsections 6(19) to (23) and section 62 in respect of a relocation of a
taxpayer who is absent from but resident in Canada, this definition shall be read
without reference to the words “in Canada” in subparagraph (a)(i), and without
reference to paragraph (b);
[15]
There are several Court decisions
which deal with expenses other than those which are listed in subsection 62(3)
of the Act.
[16]
In Fardeau v The Queen, Associate Chief Justice Bowman
(as he then was) held that moving expenses had to be actually incurred, and
that the category did not include damage to or loss of personal property as a
result of the move.
[17]
Similarly, in Rath v The Queen,
Chief Justice Thurlow of the Federal Court of Appeal held that the
losses occasioned by a fire at the storage facility where the appellant’s
belongings were stored during his move were “simply not moving expenses within
the ordinary meaning of that expression.”
[18]
In Séguin v The Queen, which was decided before
the addition of paragraph 62(3)(g) of the Act, dealt with an attempt by
Mr. Séguin to deduct mortgage interest paid on the old residence as a moving
expense. In the decision at first instance, Deputy Judge Somers of
the Tax Court allowed the deduction. Deputy Judge Somers adopted a
purposive reading of section 62 (the purpose being to encourage labour
mobility), and held that the cost of cancelling a lease was deductible under
paragraph 62(3)(d). The Federal Court of Appeal disagreed with this approach,
and said that, although the list in subsection 62(3) is not exhaustive and the
purpose of the provision is to encourage labour mobility, not all moving
expenses are deductible.
The Court also rejected any analogy between the cost of breaking a lease and
mortgage interest on an old residence that wasn’t sold. Deductible moving
expenses must be directly related to the physical change of residence. At pages 16 to 17, Madame Justice
Desjardins speaking for the Court said:
According to the ordinary meaning of the word used, the provision
(i.e. section 62) includes those expenses incurred for physically moving,
changing one’s residence and certain other expenses directly related to the
actual move and resettlement and not some amount intended to compensate for
accessory damages that are unrelated to the actual move to and resettlement in
the new residence.
[19]
Justice Collier of the Federal
Court, Trial Division, in Storrow made a similar statement:
Only outlays incurred to effect the physical
transfer of the taxpayer, his household, and their belongings to the new
residence are deductible…
[20]
In Christian v The Queen, Justice Favreau held that
“writ interest” was not deductible as a moving expense. The Appellant’s spouse
owed a tax debt to the Canada Revenue Agency (the “CRA”), which resulted in a
writ and a lien was filed on the old residence. The Appellant had paid the writ
interest, and urged the Court to accept this as a moving expense because it had
to be paid in order for the old residence to be sold. Justice Favreau
followed Séguin,
and held that the writ interest was a personal liability and not directly
related to the move.
[21]
The Respondent does not dispute
that the Appellant had an eligible relocation in the year in question, and that
he incurred the legal expenses in question. The only question in this appeal is
whether the legal expenses incurred by the Appellant are “Moving Expenses”
within the meaning of that term in section 62. In deciding this question, the
authorities have generally referred to the ordinary meaning of the term, and
have required that the expenses incurred be directly related to the physical
moving of the taxpayer’s household and belongings.
[22]
In this case, the direct cause of
the legal expenses was the Appellant’s and Patricia’s personal situation and
not the move from London, Ontario to Edmonton, Alberta. It appears that the legal proceedings
between Patricia and Michael were precipitated by the proposed move; however,
at the core, the proceedings were about the custodial arrangement of the
Appellant’s two step-daughters.
[23]
The Courts have repeatedly
emphasized that not all expenses related to a move are deductible. In
determining whether an expense which is not listed in subsection 62(3) is
deductible, a Court should consider whether the expense is of the same type as
those which are listed. In this case, the legal expenses incurred to defend the
Appellant’s right to move his Family are not the same kind of expenses as
travel costs, transportation and storage costs, meals and lodging during the
move, or the legal expenses associated with buying and selling residential
property.
[24]
The decision of the Federal Court
of Appeal in Séguin
appears to rebuff the kind of broad and purposive interpretation of section 62
that the Appellant is seeking. In the Séguin decision at first
instance, Deputy Judge Somers canvassed the authorities on statutory
interpretation before concluding that allowing the deduction was consistent
with interpreting the Act as a whole in light of its purpose. However, the
Federal Court of Appeal rejected this reading of the provision.
[25]
It is certainly unfortunate that
the Appellant was forced to incur this expense to defend his right to move the
Family, and it is unfortunate that the cost award made in the proceeding turned
out to be impossible to recover. However, in our society, we are all vulnerable
to having legal proceedings commenced against us. The costs of defending our
position in court will sometimes be unrecoverable, and often they will not be
deductible for tax purposes. It is unfortunate, but that is the situation in
which the Appellant finds himself.
[26]
Although it is not exhaustive, the
effect of subsection 62(3) of the Act is to limit the type of Moving Expenses
that are deductible, and the legal fees in question here are not of that type.
[27]
I am sympathetic with the
Appellant’s claim and tempted by the arguments based on a purposive
interpretation and the policy underlying section 62, however, I believe that I
am bound by the decision of the Federal Court of Appeal in Séguin.
[28]
Accordingly, I have concluded that
the legal expenses paid by the Appellant are not deductible.
[29]
The appeal is dismissed, without
costs.
Signed at Vancouver, British Columbia, this 21st day of March 2011.
“L.M. Little”
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