Citation: 2009 TCC 435
Date: 20090909
Docket: 2008-1278(IT)G
BETWEEN:
RONALD H. LINGLE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Campbell J.
[1] In computing income
for the 2004 and 2005 taxation years, the Appellant filed his income tax
returns as a non-resident of Canada, reporting self‑employment business
income which he earned doing consulting work for Ontario Power Generation Inc.
(“OPGI”). The Appellant filed returns in both Canada and the United States for
these taxation years but in his Canadian returns he claimed equivalent amounts
as treaty deductions pursuant to the Canada‑United States Income Tax
Convention (1980), as amended (the “Treaty”).
[2] The Minister of
National Revenue (the “Minister”) assessed the Appellant for the entire 2004
taxation year and for the period January 1, 2005 to September 14,
2005 (the “period”) on the basis that he was a resident of Canada because his
habitual abode was in Canada during this period and not the United States.
The Appellant was therefore required to pay income tax on his business income
which he earned in these taxation years.
[3] The facts are not
materially in dispute. The parties filed a Statement of Agreed Facts and Issue,
which I have attached to my Reasons as Schedule “A”. The Appellant was born in
the United
States and
was a citizen of that country during the relevant period. He worked as a lead
planner in a supervisory capacity for OPGI at its nuclear plant in Pickering, Ontario beginning in
2000. Initially he was employed as an employee but during the relevant period
under appeal he was hired as an independent contractor. Throughout this period,
the Appellant had a United States residence (the “Ransom House”) in Illinois and a Canadian residence (the
“Ajax House”) in Ontario. The Appellant’s spouse and children resided at the Ransom House. The
Appellant returned to the Ransom House approximately one weekend per month. The
Appellant and his spouse separated in 2004 and the house was sold in 2006. Calendars
attached to the Statement of Agreed Facts and Issue detail the number of days
during the relevant period which the Appellant spent in Canada (321 days in
2004 and 233 days during the period January 1, 2005 to September 14, 2005)
and in the United States (45 days in 2004 and 24 days during the period
January 1, 2005 to September 14, 2005).
[4] The parties have
agreed that, at all times during this period, the Appellant was “liable to tax”
in both the United States and Canada within the meaning of
Article IV(1) of the Treaty. The relevant portion of that Article
provides:
1. For the purposes of this Convention,
the term "resident" of a Contracting State means any person that,
under the laws of that State, is liable to tax therein by reason of that person's
domicile, residence, citizenship, place of management, place of incorporation
or any other criterion of a similar nature, …
The Appellant is
“liable to tax” in the United States because of his citizenship in that country
but he is also “liable to tax” in Canada because of his
residence here under Canada’s domestic definition
of residency. In these circumstances the Appellant was a dual treaty resident.
[5] Pursuant to
subsection 250(5) of the Income Tax Act (the “Act”), where a
taxpayer is a dual treaty resident, if he is “tie-broken” into the other
country under the Treaty, then the taxpayer is deemed not to be a
resident of Canada, during the period. Subsection 250(5) states:
250(5) Notwithstanding any other provision of this Act (other
than paragraph 126(1.1)(a)), a person is deemed not to be resident
in Canada at a time if, at that time, the person would, but for this subsection
and any tax treaty, be resident in Canada for the purposes of this Act but is,
under a tax treaty with another country, resident in the other country and not
resident in Canada.
[6] The issue therefore
is whether the Appellant was a resident in Canada during this period for the
purposes of the Act and his residence will be determined according to
the “tie-breaker” rules found in Article IV(2) of the Treaty.
[7] The tie-breaker
rules state:
2. Where by reason of the provisions of paragraph 1
an individual is a resident of both Contracting States, then
his status shall be determined as follows:
(a) he shall be deemed to be a resident of the
Contracting State in which he has a permanent home available to him; if he has
a permanent home available to him in both States or in neither State, he shall
be deemed to be a resident of the Contracting State with which his personal and
economic relations are closer (centre of vital interests);
(b) if the Contracting State in
which he has his centre of vital interests cannot be determined, he shall be
deemed to be a resident of the Contracting State in which he has an
habitual abode;
(c) if he has an habitual abode in both States or in
neither State, he shall be deemed to be a resident of the Contracting State of which he is a citizen; and
(d) if he is a citizen of both States or of neither
of them, the competent authorities of the Contracting States shall settle the
question by mutual agreement.
[8] With respect to
these “tie-breaker” rules, the parties agreed that the Appellant had a
“permanent home” in both Canada and the United States during this period; that
it was not possible to determine in which country the Appellant had his “centre
of vital interests”; and that he had an “habitual abode” in Canada.
[9] The Appellant’s
position is that he also had an habitual abode in the United States as well as Canada and
as a result of the tie-breaker rules he will be deemed to be a resident of the United States because he is a citizen
of that country and not of Canada. The Respondent’s position is that the Appellant did not
have an habitual abode in the United States and because his habitual abode is
in Canada, he will be deemed to
be a resident of Canada, making his business income taxable in Canada during this period.
[10] The narrow issue
therefore in this appeal is whether the Appellant under the tie-breaker rules
also had an habitual abode in the United States as well as one in Canada. If the Ransom House is
the Appellant’s habitual abode in the United States during this period, then he
will be tie-broken into that country pursuant to Article IV(2)(c) of the Treaty
because of his U.S. citizenship. However, if Ransom House is not an habitual
abode, then he will be deemed to be a resident of Canada pursuant to Article IV(2)(b).
[11] A definition of “habitual
abode” has not been provided in the Treaty so a review of the caselaw in
this area must first be addressed. The leading case concerning the proper
approach to the interpretation of an international tax convention is the
Supreme Court of Canada decision in Crown Forest Industries Ltd. v. Canada,
[1995] 2 S.C.R. 802. At paragraph 22, Iacobucci J. stated:
22 In interpreting a treaty, the
paramount goal is to find the meaning of the words in question. This process
involves looking to the language used and the intentions of the parties. …
Therefore, in determining the meaning to
be given to the expression “habitual abode”, it is necessary to examine both
the meaning of the words as well as the intention of the parties drafting the
treaty. Iacobucci J. at paragraphs 43-44 and 54‑55 went on to explain:
43 Reviewing the intentions of the
drafters of a taxation convention is a very important element in delineating
the scope of the application of that treaty. As noted by Addy J. in J. N.
Gladden Estate v. The Queen, [1985] 1 C.T.C. 163 (F.C.T.D.), at pp. 166-67:
Contrary to an ordinary
taxing statute a tax treaty or convention must be given a liberal
interpretation with a view to implementing the true intentions of the
parties. A literal or legalistic interpretation must be avoided when the
basic object of the treaty might be defeated or frustrated in so far as the
particular item under consideration is concerned. [Emphasis added.]
[…]
44 Clearly, the purpose of the Convention has significant
relevance to how its provisions are to be interpreted. I agree with the
intervener Government of the United States' submission that, in ascertaining
these goals and intentions, a court may refer to extrinsic materials which form
part of the legal context (these include accepted model conventions and
official commentaries thereon) without the need first to find an ambiguity
before turning to such materials.
[…]
54 I now turn to another set of extrinsic materials, other
international taxation conventions and general models thereof, in order to help
illustrate and illuminate the intentions of the parties to the Canada-United
States Income Tax Convention (1980). Articles 31 and 32 of the Vienna
Convention on the Law of Treaties (Can. T.S. 1980 No. 37) indicate that
reference may be made to these types of extrinsic materials when interpreting
international documents such as taxation conventions; see also Hunter
Douglas Ltd. v. The Queen, 79 D.T.C. 5340, (F.C.T.D.), at pp. 5344-45, and Thiel
v. Federal Commissioner of Taxation, 90 A.T.C. 4717 (H.C. Aust.), at
p. 4722.
55 Of high persuasive value in terms of defining the
parameters of the Canada-United States Income Tax Convention (1980) is
the OECD Model Double Taxation Convention on Income and on Capital
(1963, re-enacted in 1977): Arnold and Edgar, eds., Materials on Canadian
Income Tax (9th ed. 1990), at p. 208. As noted by the Court of Appeal, it
served as the basis for the Canada-United States Income Tax Convention
(1980) and also has world-wide recognition as a basic document of reference
in the negotiation, application and interpretation of multilateral or bilateral
tax conventions. …
These remarks make it clear that reference
may be made to extrinsic materials when a court is called upon to interpret
provisions of a treaty. Clearly both the OECD Model Tax Convention on Income
and on Capital (the “OECD Model”) and the pertinent Commentaries are relevant
to the interpretation of the Treaty.
[12] In the recent
decision of the Federal Court of Appeal in Prévost Car Inc. v. The Queen,
2009 FCA 57, 2009 D.T.C. 5053, Décary J. at paragraph 10 also confirmed that
the Commentaries on the provisions of the OECD Model are relevant to treaty
interpretation:
[10] The worldwide recognition of the provisions of the Model
Convention and their incorporation into a majority of bilateral conventions
have made the Commentaries on the provisions of the OECD Model a
widely-accepted guide to the interpretation and application of the provisions
of existing bilateral conventions (see Crown Forest Industries Ltd. v.
Canada, [1995] 2 S.C.R. 802; Klaus Vogel, "Klaus
Vogel on Double Taxation Conventions" 3rd ed. (The Hague: Kluwer
Law International, 1997) at 43. …
[13] I was referred to
four cases which dealt with the meaning of “habitual abode”. In Allchin v.
The Queen, 2005 TCC 476, 2005 D.T.C. 603, Bell J. dealt with the issue of whether
a taxpayer, under the “tie-breaking” rules in the same Treaty as in the
present appeal, was a resident of the United States or Canada. He concluded
that the taxpayer had a permanent residence in “both or neither” of Canada and
the United
States and
that she had a centre of vital interests in both countries. In deciding that
these tests were not conclusive, he moved on to a consideration of “habitual
abode”. In deciding that the taxpayer had an habitual abode in the United States, he ignored the OECD
Commentary discussion to the Model Convention concerning habitual abode. He
determined that the Commentary was not useful to his analysis because of the
slight difference in ordering between the tie-breaker rules contained in the Treaty
and those in the Model Convention concerning the circumstances where an
individual does not have a permanent home in either State. If an individual has
a permanent home in both or neither of the countries, the Treaty tie-breaker
rules next rely on the “centre of vital interests” test while under the Model
Convention, if an individual has a permanent home in neither country, then the
tie-breaker rules skip the “centre of vital interests” test and go directly to
the use of the “habitual abode” test. Because of this distinction, Bell J.
instead utilized the dictionary definition of the words “habitual” and “abode”
and concluded at paragraph 54 of the decision that:
[54] The combination of evidence
describing the nature of the Appellant’s lifestyle and activities in the U.S. and the information contained in the foregoing
chart make it clear that during the years in question her habitual abode was in
the U.S. …
It is apparent from his conclusion
concerning habitual abode that he not only considered the number of days spent
in each country but also the taxpayer’s “lifestyle and activities”. However,
the decision does not provide clarification as to the precise factors, beyond
the number of days spent in each country, that were considered relevant to the
analysis of habitual abode. Nevertheless, what can be gleaned from Allchin
is that consistently spending each weekend with one’s family in the same rented
premises over the course of a year – approximately 100 days – is
insufficient to establish an habitual abode.
[14] In the second
Canadian decision referred to me of Yoon v. The Queen, 2005 TCC
366, 2005 D.T.C. 1109, O’Connor J. found that the taxpayer was not a resident
in Canada under the common law.
Although the tie-breaker provisions in the Canada-Korean Tax Convention were
considered, this part of his analysis is obiter. Since there was no
distinction between the OECD Model and the Treaty at issue in Yoon,
O’Connor J. distinguished Allchin on that basis and found the Commentary
to be relevant. At paragraphs 39 to 41 he determined the issue of habitual
residence on the basis of where the Appellant stayed more frequently:
[39] Paragraph 17 of the OECD Commentary to Article IV states:
17. In the first situation, the case
where the individual has a permanent home available to him in both States, the
fact of having an habitual abode in one State rather than in the other appears
therefore as the circumstance which, in case of doubt as to where the
individual has his centre of vital interests, tips the balance towards the
State where he stays more frequently. For this purpose regard must be
had to stays made by the individual not only at the permanent home in the State
in question but also at any other place in the same State.
[Emphasis Added]
[40] Aside from Allchin, supra, there are no
Canadian cases that consider the meaning of habitual abode. However, in the
American case of Podd v. Commissioner, (1998) Tax Ct. Memo LEXIS 414,
Wells, J. of the United States Tax Court confirms the meaning of habitual abode
enunciated in the OECD Commentary.
Accordingly, where doubt exists as to
an individual's "center of vital interests”, the balance is tipped in
favour of the country where the individual stays more frequently.
[41] The evidence shows that Mrs. Yoon spent more time in Korea
than in Canada in 2001. Therefore, her habitual abode
was in Korea and not Canada.
…
Since the Appellant spent 224 days in
Korea and 135 days in Canada,
O’Connor J. would have found that she had an habitual abode in Korea and not in
Canada.
[15] In the United States
Tax Court decision in Stephen D. Podd, et al. v. Commissioner, 76 T.C.M.
(CCH) 906, Wells J. dismissed a motion by the taxpayer to reconsider a finding
that he was a United States resident on the basis that no Canadian law had been
introduced on the residency issue. Consequently, the subsequent consideration by
Wells J. of the tie-breaker rules contained in the Treaty constituted obiter
just as it had in Yoon. Although it is obiter, Wells J. stated
the following at page 910:
Accordingly, where doubt exists as to an
individual’s “[centre] of vital interest”, the commentary tips the balance
in favour of the country where the individual stays most frequently. During
1990, petitioner spent only 120 days in Montreal; he
spent the remainder of the year in the United States, including 160 days in Florida and 50 days in South
Carolina. Because petitioner
spent more time in the United States than in Canada during 1990, it appears
that petitioner had a habitual abode in the United States. On the basis of
the analysis above, we think that, even if we had applied the Canada Convention
in the instant case, petitioners would not have established that petitioner was
a Canadian, as opposed to a U.S., resident for tax purposes during 1990.
(Emphasis added.)
[16] The final case, Dr.
Rajnikant R. Bhatt vs. Commissioner Of Income-Tax, [1996] 222 ITR 562, is
of little assistance as no analysis was undertaken respecting the meaning of
“habitual abode”, although the applicant’s residence turned on where he had an
habitual abode. It is not clear from the decision what other factors, besides
number of days spent in each State, were considered in reaching a decision on
this issue.
[17] With the exception
of Allchin, these decisions support the general relevance of the
Commentaries to treaty interpretation. Although Bell J. in Allchin concluded
that the relevance of the Commentaries to the interpretation of habitual abode was
not useful given the differences between the Treaty provisions and the OECD
Model provisions, the recent Federal Court of Appeal decision in Prévost Car
in unequivocal language gives support to the use of Commentaries on the
provisions of the OECD Model as useful guidelines in interpreting and applying
the provisions of existing bilateral conventions.
[18] Since the early
1960s, the Organization for Economic Cooperation and Development (the “OECD”)
has published “Model” income tax treaties which may be used by countries as a
basis to draft their actual treaties. Commentaries are also published
pertaining to the OECD Models, which are meant to assist in explaining the
terms of each Model income tax treaty. The 1980 Treaty in the present
appeal is similar to the 1977 OECD Model Treaty. The OECD Commentary contains
statements pertinent to the interpretation of habitual abode in Article
IV(2)(b) of the Treaty. However, due to the slight difference in wording
between the Treaty and the Model, the Appellant and Respondent have
adopted opposing positions on the relevancy of the Commentary in interpreting
Article IV(2)(c) of the Treaty.
[19] The Appellant argues
that even if the conclusion of Bell J. respecting the Commentary in Allchin
is wrong and the Commentary is relevant, it contains nothing that would define
an habitual abode as the place where the taxpayer “stays more frequently”. The
Commentary on Article IV(2) does not contain a test requiring a comparison
between the frequency of stays in Canada and the United States.
[20] The relevant
paragraphs, 16 to 20 from the Commentary on Article IV(2) of the OECD
Model, provide:
16. Subparagraph b) establishes a
secondary criterion for two quite distinct and different situations:
a)
the case where the
individual has a permanent home available to him in both Contracting States and
it is not possible to determine in which one he has his centre of vital
interests;
b)
the case where the
individual has a permanent home available to him in neither Contracting State.
Preference is given to the Contracting State where the individual has an habitual abode.
17. In the first situation, the case where
the individual has a permanent home available to him in both States, the fact
of having an habitual abode in one State rather than in the other appears
therefore as the circumstance which, in case of doubt as to where the
individual has his centre of vital interests, tips the balance towards the
State where he stays more frequently. For this purpose regard must be had to
stays made by the individual not only at the permanent home in the State in
question but also at any other place in the same State.
18. The second situation is the case of an
individual who has a permanent home available to him in neither Contracting State, as for
example, a person going from one hotel to another. In this case also all stays
made in a State must be considered without it being necessary to ascertain the
reasons for them.
19. In stipulating that in the two
situations which it contemplates preference is given to the Contracting State where the individual has an habitual abode, subparagraph b)
does not specify over what length of time the comparison must be made. The
comparison must cover a sufficient length of time for it to be possible to
determine whether the residence in each of the two States is habitual and to
determine also the intervals at which the stays take place.
20. Where, in the two situations referred
to in subparagraph b) the individual has an habitual abode in both
Contracting States or in neither, preference is given to the State of which he
is a national. If, in these cases still, the individual is a national of both
Contracting States or of neither of them, subparagraph d) assigns to the
competent authorities the duty of resolving the difficulty by mutual agreement
according to the procedure established in Article 25.
[21] The Respondent
contends that the Commentary, particularly paragraph 17, makes it clear
that an individual will have an habitual abode in the State where one “stays
more frequently”. By applying this test set out in the Commentary and considering
the total of the Appellant’s stays in Canada and the United States, the Appellant’s habitual
abode, according to the Respondent, is in Canada because that is where the
Appellant “stays more frequently”.
[22] However, a careful
review of the relevant paragraphs of the Commentary does not support the
Respondent’s narrow interpretation of these provisions. Paragraph 16 of
the Commentary explains that habitual abode is the secondary criterion that
will determine a taxpayer’s residence where the initial analysis respecting
permanent home and centre of vital interests remains inconclusive. Paragraph 17
explains that habitual abode will determine one’s residence where an individual
has permanent homes available in both States but has an habitual abode in one
State but not in the other. Where this occurs, the individual will stay more
frequently in the place where he has his sole habitual abode. This paragraph
clarifies that frequency of stay is relevant to the determination of whether an
individual has an habitual abode in a given State. However, it is clear that
this paragraph does not go so far as to suggest that frequency of stay or
counting the number of stays in each State is the determining or sole factor to
be considered.
[23] Paragraph 19 of
the Commentary, in my view, is more relevant in interpreting the meaning of
“habitual abode”. This provision specifies that “The comparison must cover a
sufficient length of time for it to be possible to determine whether the residence
in each of the two States is habitual”. [Emphasis added].
[24] The analysis
respecting habitual abode, offered by John F. Avery Jones et al.,
in the article entitled “Dual Residence of Individuals: The Meaning of the Expressions in the OECD
Model Convention”, [1981] British Tax Review 15, supports the foregoing approach. At page 113
of this article, it states:
Turning now to the third test of the
State in which the taxpayer has an habitual abode, there are two relevant
meanings of the noun “abode” in English, either a place such as a house, or a
more abstract concept of residing, an example of the latter being:
“May never glorious sun
reflex his beams
Upon the country where you
make abode”.
Neither usage is common although the Oxford
English Dictionary does not describe either as obsolete. The use of the
adjective “habitual” shows clearly that the latter use is intended because it
is meaningless to refer to an habitual house. The French official text is much clearer: où elle séjourne de façon
habituelle, literally meaning where one habitually stays. …
This article is particularly instructive where at page 116 it
states:
According to the OECD Model, the correct way of applying
the test is to ask of each State whether the taxpayer has an habitual abode
there, just as one asks whether he has a permanent home. The commentary on the
other hand suggests that it is a test more in the nature of the State with
which his personal and economic relations are closer, that is to say it is a
comparative test: in which State is his abode more habitual? This is probably
an unintended result of the commentary which goes on to say: “The comparison
must cover a sufficient length of time for it to be possible to determine whether
the residence in each of the two states is habitual… The passage to which
we have added italics is, it is submitted, the correct test to be applied under
paragraph (b), and the reference to it being a comparison is misleading.
This interpretation is also supported by the fact that the OECD Model goes on
to deal with the position of the taxpayer having an habitual abode in both
States; if the test merely involved a comparison of the time spent in each State
this could occur only when the time spent in each was identical or nearly so,
which does not seem likely to have been the intention. It seems that by
using the expression “habitual,” what is meant is whether living in each
State is normal. …
(Emphasis added.)
[25] Where there are two official versions of a treaty in
two languages, the Vienna Convention on the Law of Treaties (Can. T.S. 1980 No.
37), Art. 33(4), allows a comparison of the texts in order to adopt “…the
meaning which best reconciles the texts having regard to the object and purpose
of the treaty…”. In the French version of the Treaty, Article IV(2)(b)
provides:
(b) Si l'État contractant où cette
personne a le centre de ses intérêts
vitaux ne peut pas être déterminé, elle est considérée comme un résident de
l'État contractant où elle séjourne de façon habituelle;
(Emphasis added.)
[26] The French version when translated literally means
“where one stays in an habitual way”. This version largely removes any
ambiguity that may be present in the English version.
[27] The word “habitual” is described in the Canadian Oxford
Dictionary (2nd ed. 2004) as “done constantly or as a habit” or “regular,
continual, usual”. Black’s Law Dictionary (5th ed. 1979) defines “habitual” as
“customary, usual, of the nature of a habit”. The Appellant argues that any
interpretation to be given to the term “habitual” should not require an element
of frequency. At paragraph 5.9 of the Appellant’s written Argument, he
stated:
The concept of “habitual” does not have any sort of
“frequency test” attached to it. Depending on the circumstances, a taxpayer may
stay at an abode “habitually” if he stays there once a week, once a month or
once a year.
[28] I agree that the interpretation of habitual abode
embodies more than simply a determination of which State an individual “stayed
more frequently”. However, I do not agree that “frequency” is irrelevant to an
interpretation of habitual abode. Paragraphs 9 and 10 of the Commentary to
Article IV(2) illustrate the context in which the tie-breaker rules are to be
considered:
9. This paragraph relates to the case where, under
the provisions of paragraph 1, an individual is a resident of both
Contracting States.
10. To solve this conflict special rules must be
established which give the attachment to one State a preference over the
attachment to the other State. As far as possible, the preference criterion
must be of such a nature that there can be no question but that the person
concerned will satisfy it in one State only, and at the same time it must
reflect such an attachment that it is felt to be natural that the right to tax
devolves upon that particular State. …
(Emphasis added.)
This Commentary is equally applicable to the tie-breaker rules in
Article IV(2) of the Treaty. It follows logically that if an individual
stays in one State consistently and repeatedly one day every year, although in
one sense those stays are in the nature of a habit or of a customary nature, those
stays would not reflect such an attachment to that State that it would be
natural for the right to tax to devolve upon that particular State, where the tests
for permanent home and centre of vital interests were inconclusive. This
approach would align closely with the objects and purposes of the provisions in
the Treaty which in part are meant to resolve cases of potential double
taxation.
[29] Article 31(1) of the Vienna Convention on the Law of
Treaties provides the following approach to be used when interpreting a treaty:
1. A treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be
given to the terms of the treaty in their context and in the light of its
object and purpose. [Emphasis added.]
This accords with the decision of the Supreme Court of Canada in Crown Forest
which emphasized the necessity of looking at the language used in the provision
together with the parties’ intention in drafting those provisions.
[30] It follows that the proper approach to determining
whether the Appellant had an habitual abode in the United States is to enquire
whether he resided there habitually, in the sense that he regularly,
customarily or usually lived in the United States. Paragraphs 27 to 32 of the Agreed Statement of Facts and
Issue contain pertinent statements which assist in the determination of whether
the Appellant “normally lived” in the United States. It was agreed between the parties that the Appellant
“consistently and repeatedly returned to his home in Canada for the majority of the days in
this period.” In the settled routine of his life “he regularly, normally and
customarily lived in Canada.” He
“did not have any other contracts clients or business in the USA.” In addition, he spent only 69 days out of
623 days in the relevant period at his home in the United States. It is interesting that these
agreed statements explicitly state that the Appellant “normally … lived in Canada” – which answers the definition
that the Avery Jones article suggested for the expression “habitual”. The
Appellant’s stays at the Ransom House were in the nature of periodic visits
with his “normal” place of residence being in Canada throughout the period. He did not
have an habitual abode in the United States
for the purposes of the Treaty because he did not regularly, customarily
or normally live in the United States.
Considering all the facts before me, his connections with the United States
were weak when compared to his settled routine in Canada. Accordingly, the Appellant was a
resident in Canada during this period and as such he
is taxable on his business income earned as a consultant.
[31] The appeals are therefore dismissed with costs.
Signed at Summerside, Prince Edward Island this 9th day
of September 2009.
“Diane Campbell”
Schedule “A”
2008-1278(IT)G
TAX
COURT OF CANADA
IN
RE: THE INCOME TAX ACT
BETWEEN:
RONALD
H. LINGLE
APPELLANT
AND:
HER
MAJESTY THE QUEEN
RESPONDENT
STATEMENT
OF AGREED FACTS AND ISSUE
The
parties hereby agree that for purposes only of this Appeal and any Appeal
therefrom or any other proceeding taken in this matter, the facts set out
herein are true. The parties also agree that the documents attached hereto in
the Tabs referred to below are true copies of the documents they represent,
were signed by the persons who purported to have signed them, and were signed
on the dates they were purportedly signed. Either party may adduce other
evidence or documents not inconsistent with this Statement of Agreed Facts. All
statutory references are to the Income Tax Act, RSC 1985 (5th
Supp.), c. 1 (the “Act”) as it read for the Appellant’s 2004 and 2005 taxation
years.
I. FACTS
(a)
Background
1. The
Appellant was born on January 25, 1950.
2. The
Appellant was born in the United States of America (“USA”).
3. The
Appellant was a citizen of the USA throughout his 2004 taxation year and from January 1 – September
14, 2005 (collectively, the “Period”).
4. The
Appellant was not a citizen of Canada at any time in the Period.
(b) The Appellant’s Work at
the Plant
5. At all relevant times the
Appellant had expertise as a “planner”, that is, in taking engineering
documents and using them to create a procedure on how to install, test and
operate the equipment described in the documents.
6. At all relevant times Ontario
Power Generation Inc. (“OPGI”) was an Ontario corporation whose principal
business was the generation and sale of electricity in Ontario. It had a nuclear plant (the “Plant”) at Pickering,
Ontario.
7. At all relevant times Stone
& Webster was a USA
engineering company (which may have changed its name to Field Services Inc.).
8. At all relevant times Framatome
Blakey Staffing Solutions Inc. (“Framatome”) was an Ontario company in the business of supplying workers to various projects.
9. In 2000 the Appellant was
contacted by Stone & Webster to act as a supervisor for a planning
department to be set up to refurbish part of the Plant.
10. The Appellant worked as a lead
planner in a supervisory capacity at the Plant from 2000 to June 2002. That
work was done as an employee.
11. From June 2002 to May 2003 the
Appellant did not work at the Plant.
12. In 2003 Framatome contacted the
Appellant to return to the Plant as a planner. He worked there from June 2003
to September 14, 2005 as a planner but not in a supervisory capacity. That work
was done as an independent contractor. The contracts with Framatome were
addressed to the Appellant at 2961 North 13th
Road, Ransom, Illinois, USA (the “Ransom Home”).
13. On June 6, 2003 the Appellant was
issued a work permit by Canada
which permitted him to work at the Plant until June 6, 2004 and which
restricted the nature of his work and the location of his work as stated on the
permit. In 2004 the Appellant was issued a second work permit which expired in
2005 and which contained the same restrictions as the first. Both work permits
were addressed to the Appellant at 41 Tragunna Lane, Ajax, Ontario (the
“Ajax Home”).
14. The Appellant ceased providing
services at the Plant on or about September 14, 2005 and left Canada at that time.
15. From 2000 through 2005, when the
Appellant was working in Canada,
he worked full-time at OPGI, eight to ten hours per day, never exceeding 60
hours per week.
(c) The Appellant’s Homes
During the Period
16. Throughout the Period the Ajax
Home was rented from its landlord by a female co-worker of the Appellant’s (the
“Girlfriend”), with whom he had a personal relationship. The Appellant had no
sublease or other formal lease agreement with his Girlfriend or the landlord.
17. Beginning in May 2003, through
2004, and until September 14, 2005, the Appellant was in a relationship with
his Girlfriend and they shared the same bedroom at the Ajax Home.
18. The Appellant married Ms. Linda
Sampson (the “Spouse”) on April 25, 1970 in the USA.
19. In March, 1991 the Appellant
purchased the Ransom Home, either by himself or jointly with his Spouse.
20. The Appellant and his Spouse have
six children: Brett, Eric, Marc, Julie, Amy and Ashley, born in 1972, 1977,
1978, 1980, 1986 and 1987, respectively.
21. During the Period, only two of
the Appellant’s six children, Amy and Ashley, lived with Linda. Brett, Eric,
Marc and Julie were either married, at school or on their own, in the USA.
22. In 2004 the Appellant’s Spouse
required hip surgery and moved out of the Ransom Home to an apartment in Morris, Illinois.
At that time Eric and his girlfriend moved back to the Ransom Home and stayed
there until the Ransom Home was sold in 2006.
23. The Appellant’s Spouse did not
return to the Ransom Home to reside there after her hip surgery was complete.
The Appellant and his Spouse separated in July 2004 and were divorced on
October 19, 2005.
24. The Appellant did not stay at the
Ransom Home after leaving Canada on September 14, 2005. He went to and stayed in Homestead, Florida.
(d) Invoices and Days Spent
in Canada and the
USA During the
Period
25. Throughout the Period, the
Appellant invoiced Framatome on a weekly basis (the “Invoices”) for the work
that he did for Framatome. The Invoices used the Ransom Home address.
26. The Appellant’s Invoices:
(a) covered all seven days for
each week of the Period;
(b)
stated that the per diem rates are $80/day in Canada and $55/day out of the country; and
(c)
the Appellant was paid according to his Invoices, in respect of the days each
week that the Appellant stated that he was present in Canada and the days that
he stated he was out of Canada.
27. As detailed in the attached
calendars for 2004 and 2005 at Tab 1 hereto, the number of days on which the
Appellant was present only in Canada (based on the days billed for being in Canada on his Invoices less two days in August 2005) were as follows:
(a) 321 days in 2004;
(b) 233 days during the period
January 1 to September 14, 2005; and
(c) he was paid $80/day for
these days in Canada.
28. As detailed in Tab 1, the number
of days on which the Appellant was present only in the USA (based on the days
billed for being outside Canada
on his Invoices plus two days in August 2005) were as follows:
(a) 45 days in 2004;
(b) 24 days during the 257 day
period from January 1 to September 14, 2005; and
(c) he was paid $55/day for
these days outside Canada.
29. The Appellant consistently and
repeatedly returned to his home in Canada in the majority of days during the Period.
30. During the Period, in the settled
routine of the Appellant’s life, he regularly, normally and customarily lived
in Canada.
31. During the Period, the Appellant
did not have any other contracts, clients or business in the USA, but he was contacted by third parties
outside of Canada looking to
retain him.
32. During the Period, the Appellant
returned to the Ransom Home approximately one weekend a month, and specifically
on the days set out in the Invoices, with two additional days in August 2005,
as summarized on the calendars (Tab 1).
33. The distance from the Ajax Home
to the Ransom Home is approximately 600 miles and took about 10 hours to drive.
34. Throughout the 2000-2005 period,
while the Appellant was working at the Plant and specifically during the
Period, the Appellant had personal property at the Ransom Home including a boat
and a trailer, and he had personal property at the Ajax Home.
35. Throughout the Period the
Appellant was registered in Canada for Goods and Services Tax (“GST”). He charged Framatome GST on his
accounts and remitted GST to Canada.
36. The Appellant’s three GST returns
filed during the Period list the following addresses, respectively: his Ransom
Home; no address; and for the period January 1, 2005 to December 31, 2005, 23 Staci Lane, Webster, New York.
(e) The Treaty
37. At all times during the Period,
the Appellant was “liable to tax” in the USA by reason of his citizenship
there, within the meaning of Article IV(1) of the 1980 Canada-USA Income Tax
Convention (the “Treaty”).
38. At all times during the Period,
the Appellant was “liable to tax” in Canada by reason of his residence there, within the meaning of Article
IV(1) of the Treaty.
39. Throughout the Period the
Appellant had “permanent homes” (within the meaning of Article IV(2)(a) of the
Treaty) in both Canada and the USA, being the Ajax Home and the Ransom Home.
40. Throughout the Period the
Appellant had vital interests in both Canada and the USA and it
is not possible to determine in which country he had his “centre of vital
interests” (within the meaning of Articles IV(2)(a) and IV(2)(b) of the Treaty)
during the Period.
41. Throughout the Period the
Appellant’s Ajax Home was an “habitual abode” (within the meaning of Articles
IV(2)(b) and IV(2)(c) of the Treaty).
(f) The Reassessments
42. The Appellant filed both Canadian
and USA income tax returns for
his 2004 and 2005 taxation years. His 2004 Canadian return listed the USA address and his 2005 Canadian return
listed the Canadian address.
43. In computing his income for
Canadian purposes for the 2004 and 2005 taxation years, the Appellant filed as
a non-resident of Canada, reporting self-employed business income of $209,286
and $145,572, respectively, and claiming equivalent amounts as treaty
deductions pursuant to the Treaty.
44. By Notices of Assessment dated
March 13, 2006 and December 3, 2007 for the Appellant’s 2004 and 2005 taxation
years, respectively, the Minister of National Revenue (the “Minister”) assessed
the Appellant on the basis that he was a resident of Canada in those years.
45. The Appellant filed Notices of
Objection to the March 13, 2006 and December 3, 2007 assessments within 90 days
of those dates. The Minister confirmed the assessments by Notices of
Confirmation dated November 9, 2007 and March 20, 2008, respectively.
II. ISSUE
46. Was the Ransom Home an “habitual
abode” of the Appellant’s during the Period, so that the Appellant was
“tie-broken” into the USA under Article IV(2)(c) of the Treaty, and hence
tie-broken out of Canada for
the Period under subsection 250(5) of the Act?
Dated May 25th, 2009.
Her Majesty the Queen
Per: “Nadine Taylor
Pickering”_____
Nadine Taylor Pickering,
counsel
Ronald H. Lingle
Per: “Joel Nitikman” ___________
Joel Nitikman, counsel
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