Citation: 2004TCC227
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Date: 20040322
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Docket: 2001-3162(IT)G
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BETWEEN:
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JOSEPH CALVANO,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Ron D.F. Wilhelm
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Vancouver, British Columbia, on December 9,
2003)
Miller J.
[1] The Appellant, Joseph Calvano,
appeals the assessment from the Minister of National Revenue of
his 1996 taxation year in which the Minister denied
Mr. Calvano a deduction for moving expenses of
$24,806.74.
[2] Mr. Calvano claimed the expenses
were incurred for his move from his Brampton, Ontario home to a
residence in Port Moody, British Columbia, as a result of a new
job at Army and Navy Department Stores in Vancouver,
British Columbia. Mr. Calvano spent 19 months in rented
premises in Coquitlam, British Columbia before acquiring a Port
Moody home. The primary issue is whether Mr. Calvano
ordinarily resided in the rental premises in Coquitlam, for if he
did, it is only the costs of the move from Brampton to Coquitlam
which are properly deductible. None of the $24,806 relates to the
move to Coquitlam. I find Mr. Calvano did ordinarily reside in
the Coquitlam property and, therefore, the moving expenses he
claimed in 1996 are not deductible.
[3] Mr. Calvano had an extensive
background in the retail industry. In 1994, he was headhunted for
the position of president of Army and Navy. Army and Navy
intended to move their head office from Regina to Vancouver, so
it was Vancouver where the new president was to be located. Mr.
Calvano was offered and accepted the position of president in
late 1994. He attended a three-week orientation in Regina in
January 1995 and moved to Vancouver immediately thereafter. He
was put up by Army and Navy at the Landis Hotel in Vancouver. He
worked out of the Army and Navy retail store in Vancouver as the
head office had not yet moved, though he was assured by the CEO,
Mr. Garth Kennedy, that the head office would move in the spring.
He was provided with a $75,000 loan from Army and Navy so he
could retire his debts other than his mortgage.
[4] Mr. Calvano's wife joined him
in Vancouver for a week early in 1995 and together they found the
rental property in Coquitlam which they took possession of in
March. Mr. Calvano's teenaged son moved to Vancouver in
February and joined Mr. Calvano at the Landis Hotel. In March,
Mr. Calvano's wife also moved to Vancouver and the three
family members moved into the Coquitlam rental property. They
chose this property as it was big enough to afford Mr.
Calvano's son some privacy.
[5] All their belongings were moved
from Brampton into the Coquitlam home. They incurred some minor
moving expenses of approximately $1,600, some meals, for example,
which Mr. Calvano successfully claimed as moving expenses in
1995. Army and Navy paid for the rest of the moving expenses from
Brampton to Coquitlam.
[6] Mr. Calvano indicated it was a
family decision to accept the job and move to British Columbia
and that it was indeed a difficult decision. Mr. Calvano's
son was 18 and in his last year or two of high school. He was
very involved in hockey in Ontario. Both Mr. and Mrs.
Calvano's family were in Ontario. They were close and they
saw their family frequently. It was clear that the Calvanos loved
their home in Ontario and, until this job, had every expectation
to remain there for a long time. However, Mr. Calvano's
consulting in 1994 was clearly not as fruitful as he might have
liked and the offer of a $125,000 a year steady job ultimately
held sway.
[7] Mr. Calvano decided to rent out
the Brampton home. He said he made this decision as he felt the
future was not secure in British Columbia in that he had no firm
contract in early 1995. The head office of Army and Navy had not
yet moved from Regina and he simply wanted to be sure it would
work out for everyone in British Columbia.
[8] I am not completely convinced by
Mr. Calvano's testimony in this regard, for it was clear that
Mr. Kennedy and Army and Navy's legal executive,
Mr. MacKenzie, had made it clear to Mr. Calvano that he did
have a long-term future with the company. Mr. Calvano's own
evidence would suggest that it was not until June that he started
having concerns about not having a written contract. In March,
when he decided to rent the Brampton property, the lack of a
written contract with Army and Navy was simply not a
consideration.
[9] Mr. Calvano was able to find a
tenant, Mr. Thorvardson, for the Brampton property. Mr.
Thorvardson wanted to rent for a couple of years or longer, if
possible. The lease was settled at one year, four months, March
1995 to June 1996, so that Mr. Thorvardson's children's
school would not be interrupted. Mr. Calvano charged $1,800
a month, exactly the same rent as he agreed to pay for the
Coquitlam property.
[10] With respect to the Brampton property,
Mr. Calvano declared losses from that property in both 1995 and
1996 of $11,800 and $6,200, respectively. While Mr. Calvano
maintained he never told his tenant, Mr. Thorvardson, that the
lease would be any longer than one year, four months, this
evidence was contradicted by a letter from Mr. Thorvardson sent
to Mr. Calvano after learning the lease would not be extended.
Mr. Thorvardson indicated in that letter that it had been his
understanding that if Mr. Calvano stayed in British Columbia, the
Brampton lease would automatically be extended. Mr. Calvano's
own accountant, Laurie Starkman, appears to have confirmed
this view in correspondence with Canada Customs and Revenue
Agency, and then she went on to state that it was Mr.
Calvano's hope to pay down the mortgage on the Brampton
property and rent it for a profit in the future.
[11] On balance, I find Mr. Calvano had led
his tenant to believe the Brampton lease would continue if the
Calvanos did not return to Ontario.
[12] During the summer of 1995, Mr. Calvano
believed his efforts with Army and Navy were starting to bear
fruit. He also believed the company was waiting to see the
results before finalizing his contract. It was primarily the
bonus provisions of his arrangement which had not been finalized.
Also during the summer of 1995, Mr. and Mrs. Calvano explored the
Vancouver area looking for properties.
[13] Over the first few months of 1995, Mr.
Calvano established a bank account in British Columbia, changed
to a British Columbia driver's licence and acquired B.C.
health care. He sold his car to Army and Navy but retained the
use of it on the basis of the company's policy of providing
their executives with a company car.
[14] In December 1995, Mr. Calvano got his
written contract. Apart from the bonus provisions, it confirmed
the verbal arrangement under which he had been operating for many
months. By September, the head office had also moved to
Vancouver.
[15] In December 1995, Mr. Calvano also saw
his Ontario real estate agent and he proceeded to list his
Brampton property in January 1996, causing the tenant, Mr.
Thorvardson, to send the letter of disappointment alluded to
earlier. The Brampton property sold in May 1996 after having had
the price reduced a couple of times.
[16] In August 1996, the Calvanos put in an
offer on a property under construction in Port Moody, British
Columbia. Although they moved into this property at the end of
October 1996, it was not until January 1997 that title
transferred.
[17] The issue in this case is whether Mr.
Calvano is entitled to moving expenses that consist of costs of
$18,376 covering realtor's commission, legal fees and a
mortgage repayment in connection with the sale of the Brampton
property in May 1996, and costs of $6,340 covering legal
fees and taxes in connection with the purchase of the Port Moody
property.
[18] The relevant provisions are subsections
62(1) and 62(3) and I will just read the pertinent parts of
subsection 62(1) for now:
62(1) Where a taxpayer has, at any time,
commenced
(a) ... to be
employed at a location in Canada, ...
and by reason thereof has moved from the residence in Canada
at which, before the move, the taxpayer ordinarily resided, ...
to a residence in Canada at which, after the move, the taxpayer
ordinarily resided, ... so that the distance between the old
residence and the new work location is not less than 40
kilometres greater than ...
I do not need to read the rest.
[19] So, first, did Mr. Calvano commence to
be employed at a new work location? Yes, he did, clearly. Second,
did he move from Brampton because of the new job? Again, yes, he
did. Third, did he move to a residence in Canada at which, after
the move, he ordinarily resided? The answer to this question is
also, yes, he did.
[20] The Appellant maintains that the first
new residence where he ordinarily resided after the move was Port
Moody in late October 1996, while the Respondent says the new
residence where Mr. Calvano ordinarily resided after the move was
Coquitlam, in March 1995. As stated at the outset, this case
comes down to where Mr. Calvano first ordinarily resided after
the move.
[21] The starting point on any discussion of
"ordinarily resided" is the Supreme Court of Canada
case of Thomson v. M.N.R.[1] and particularly, Justice Estey's
following comment, which can be found at pages 231-2:
A reference to the dictionary and judicial comments upon the
meaning of these terms indicates that one is "ordinarily
resident" in the place where in the settled routine of his
life he regularly, normally or customarily lives. One
"sojourns" at a place where he unusually, casually or
intermittently visits or stays. In the former the element of
permanence; in the latter that of the temporary predominates. The
difference cannot be stated in precise and definite terms, but
each case must be determined after all of the relevant factors
are taken into consideration, but the foregoing indicates in a
general way the essential difference.
[22] It is clear from a review of the cases
that Justice Estey was absolutely right, that each case can only
be determined after a review of all the relevant factors. So for
example, in Ringham v. R.,[2] the relevant factors the Court considered were
that the couple sold their Ottawa home and that they moved into
an Ottawa apartment, expecting an imminent posting overseas by a
company of consulting engineers, Triple M. Many belongings were
put in storage. On an interim basis, Mr. Ringham worked for the
Toronto office of Triple M. The overseas posting never
materialized and Mr. Ringham moved to Toronto and sought moving
expenses, including expenses involved in the original sale of his
Ottawa home. Justice Bowman found it was not realistic to find
Mr. Ringham was ordinarily resident in the Ottawa
apartment.
[23] Mr. Calvano's situation is quite
different. Basically, he argues that his rental arrangement for
19 months in Coquitlam was only a temporary residence as opposed
to ordinary residence. I do not believe that is the test. Whether
a residence is intended to be temporary or permanent does not
determine whether the residence constitutes "ordinarily
resident." Simply because someone chooses to live somewhere
temporarily, it does not automatically follow that they cannot be
ordinarily resident there. Put in positive terms, one can be
ordinarily resident on a temporary basis. The concept of
"ordinarily resident" has more to do with the settled,
ordinary routine of life than the permanence of the
arrangement.
[24] I agree with Justice Bowie's
conclusion in the case of Cavalier v. Canada[3] where he stated at
paragraph 22:
I conclude from these cases that in order to be
"ordinarily resident" a taxpayer need not have formed
the intention to remain permanently, or for any particular length
of time, at the new place of residence. ...
Having said that, the length of stay in Coquitlam is one of a
number of factors to consider in determining whether Mr. Calvano
was ordinarily resident in Coquitlam.
[25] The other relevant factors I rely upon
in determining that he was ordinarily resident in Coquitlam are
as follows:
(i) First, both Mr. Calvano and
his wife and his son moved into this residence, leaving behind
significant attachments in Ontario, such as school and hockey for
the son, and close family ties for Mrs. Calvano.
(ii) All belongings were moved,
at Army and Navy's expense, to this new residence. Nothing of
significance was put in storage.
(iii) Driver's licence, health
care coverage and bank accounts were all moved to British
Columbia while in this residence.
(iv) There had clearly been a change
of use in the Brampton property from one of principal residence
to one of an income-producing property in March 1995 and it
operated as such, yielding deductible losses in 1995 and
1996.
(v) For 19 months, this is where Mr.
Calvano and his family ate, slept and lived, with only an
occasional trip to Ontario.
(vi) During these 19 months, the
Calvanos started and established a social life.
(vii) The property itself was chosen to
accommodate the family's specific needs.
These factors suggest to me this was considerably more than a
transitory lay-by. This was, for well over a year, the settled
routine of daily life for the Calvanos.
[26] Weighed against this is Mr.
Calvano's assertion that because of the lack of a written
contract until December 1995, for the period from March 1995 to
October 1996, he cannot be seen as being ordinarily resident
in Coquitlam, but only when the family bought the property in
Port Moody did they become ordinarily resident in B.C. That
diminishes the common-sense meaning of "ordinarily
resident" to the point of rendering it meaningless.
[27] I find Mr. Calvano and his family
decided to move to the Vancouver area in early 1995 and they
decided to take up ordinary residence, on a rental basis, in
Coquitlam at that time. A subsequent move 19 months later into a
home bought by the Calvanos does not make their time in those
first 19 months something other than ordinarily resident.
[28] It is unnecessary to consider any of
the Crown's alternative arguments. The appeal is dismissed.
No costs are awarded.
Signed at Ottawa, Canada, this 22nd day of March, 2004.
Miller J.