Truemner v. The Queen, 89 DTC 5149, [1989] 1 CTC 356 (FCTD)

Martin, J.:—The plaintiffs appeal the Minister of National Revenue's reassessments of their 1979 and 1980 income tax returns in which the Minister added to their taxable incomes for those years payments received by them from their employer which they claimed were allowances in respect of expenses incurred for their board and lodging at remote locations and therefore exempt from taxation within the meaning of subparagraph 6(6)(a)(ii) which, in the taxation years under consideration, provided as follows:

Employment at Special Work Site or Remote Location

(6) Notwithstanding subsection (1), in computing the income of a taxpayer for a taxation year from an office or employment, there shall not be included any amount received or enjoyed by him in respect of, in the course of, or by virtue of his office or employment that is the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by him for,

(a) his board and lodging at

(ii) a location at which, by virtue of its remoteness from any established community, the taxpayer could not reasonably be expected to establish and maintain a self-contained domestic establishment,

in respect of a period while he was required by his duties to be away from his ordinary place of residence, or to be at the location, for a period of not less than 36 hours; or

The plaintiffs gave no evidence at the hearing before me but instead their counsel entered as an exhibit the documentation transmitted by the Registrar of the Tax Court of Canada to this Court pursuant to subsection 176(1) of the Income Tax Act.

During 1979 and 1980 the plaintiffs worked as derrick hands at various locations in Alberta all of which were admittedly within 25 miles of established communities having a population of at least 1000. While at the drill sites and actually drilling the plaintiffs received $35 per day which they understood would be non-taxable by reason of the remote location provisions of the Act to which reference has already been made.

Counsel for the plaintiffs accepts the fact that his clients do not come within the 50-mile remoteness test described in Revenue Canada's Interpretation Bulletin IT-91 R2 dated May 10, 1979 in the following terms:

Remoteness from an Established Community

14. When determining whether a work location is in fact remote from an established community as required in 3(b) above, the Department will consider factors such as the following:

(a) the availability of transportation,

(b) the distance from an established community, and

(c) the time required to travel that distance.

As a general rule, a work location will be considered to be remote if the nearest established community with a population of 1,000 or more is no closer than 80 kilometres (50 miles) by the most direct route normally travelled in the circumstances. Cases not meeting this general rule are not necessarily disqualified from the exemption under subsection 6(6) and will be considered on their merits.

He argues that the paragraph 14 test is not conclusive and that his clients can claim the exemption if community services and housing are such that it would not be reasonable to expect them to establish self-contained domestic establishments (apartments or houses) in the various communities near their work sites. This possibility is recognized in paragraph 15 of Interpretation Bulletin IT-91 R2:

15. The term "established community" is considered to mean a body of people who reside in the same locality and who are permanently settled in that location.

Where an established community is in an area which is not remote from a work location, the location will still meet the requirements of 3(b) above if community services and (available) housing are limited to the extent that workers could not reasonably be expected to establish and maintain at that community a self- contained domestic establishment. Where there is more than one established community located in an area which is not remote from a work location, the sum total of the services and housing available in all established communities should be considered.

I should mention in passing that this argument can have no application to four of the plaintiffs' work sites which were within commuting distance of Calgary where the plaintiffs had their ordinary place of residence and to which they commuted on a daily basis from those four sites.

The plaintiffs claim that it would not be reasonable to expect them to establish and maintain self-contained domestic establishments at communities near the remaining work sites, not because of the remoteness of the site from the established community, but because

(a) their average length of stay being only four to six weeks would make it impractical to rent an apartment;

(b) the cost of moving from one apartment to another, being about $1500 for each move, would be excessively onerous;

(c) it was a well-known fact that apartment space in the various communities under consideration was difficult if not impossible to secure.

The plaintiff's submissions in this respect were somewhat blunted by the unchallenged observation which counsel for the Minister made with respect to their evidence that the plaintiffs never made the slightest attempt to establish themselves in apartments in any of the communities near the work sites. As their work sites would change they would simply move out of a hotel or motel in one community and into another hotel or motel in the next community.

Because the plaintiffs made no attempt to establish themselves in apartments at any of the relevant communities it would only be speculation to assess the difficulty of finding suitable apartment accommodation and thus the reasonableness of expecting the plaintiffs to establish themselves in apartments.

The figure of $1500 given as the cost of each move was not substantiated in any way. I was left with the impression that it was simply plucked out of the air. Presumably, if the plaintiffs had in fact established themselves as short-term occupants of apartments they could, as well, have tailored their furnishings to the necessity of frequent moves or alternatively could have leased furnished premises.

In support of their contention that apartment vacancies were rare and that it was thus difficult if not impossible to find apartment space they tendered the results of Alberta Housing’s 'Apartment Vacancy & Rental Cost Survey" for 1979 and 1980 for the following communities: Lethbridge, Claresholm, Didsbury, Fort Macleod, High River, Nanton, Olds and Rocky Mountain House.

I have reviewed these surveys and, while the dates of the surveys do not match exactly the dates when the plaintiffs were working at the sites near them, the closest dates show that in all cases there were vacant apartments available. Whether or not the owners would have rented the apartments to the plaintiffs on short-term leases, or, if the apartments would have been suitable for occupation by the plaintiffs, will have to remain unknown because the plaintiffs made no attempt to rent them. Having made no attempt to establish themselves in apartments in the several communities adjacent to the various work sites it is impossible to find that it would be unreasonable to expect them to do so.

In their statements of claim the plaintiffs each name ten work sites which they have claimed as remote locations. I will refer to them as sites number 1 to 10 and indicate briefly why the plaintiffs cannot claim the benefit of subparagraph 6(6)(a)(ii) of the Act.

Site no. 1: About 25 miles southeast of Calgary. The plaintiffs commuted

between Calgary and this site and thus were not requried to be away from their ordinary place of residence within the meaning of subparagraph 6(6)(a)(ii).

Site no. 2: The same reasons apply to this site as apply to site no. 1.

Site no. 3: About 11 miles southwest of Vulcan and 25 miles northeast of

Claresholm both of which communities have populations of over 1000. The plaintiffs submitted no data on the availability of apartment space at Vulcan. The Alberta Housing survey indicated six vacant apartments in Claresholm on June 11, 1979 and 21 vacancies on May 16, 1980. There is no evidence that the plaintiffs attempted to establish themselves in an apartment in either of these communities.

Site no. 4: The same reasons apply to this site as apply to site no. 1.

Site no. 5: About 25 miles west of Rocky Mountain House, a community

with a population of over 1000. The Alberta Housing study indicated 38 vacant apartments on June 25, 1979. There is no evidence that the plaintiffs attempted to establish themselves in an apartment in this community.

Site no. 6: About 25 miles southwest of Vulcan and 20 miles north of

Claresholm. The same reasons apply to this site as apply to site no. 3.

Site no. 7: About 15 miles east of Fort Macleod and 15 miles west of

Lethbridge both of which communities have populations of over 1000. Although there were no vacant apartments in Fort Macleod on June 7,1979 there were ten on May 12, 1980 and many vacancies in Lethbridge on June 6, 1979 and May 22, 1980. There is no evidence that the plaintiffs attempted to establish themselves in an apartment in either of these communities.

Site no. 8: The same reasons apply to this site as apply to site no. 1.

Site no. 9: To the extent that the plaintiffs commuted from this site to

their ordinary place of residence in Calgary the same reasons apply to this site as apply to site no. 1. To the extent that the plaintiffs did not commute to Calgary this site is about 15 miles west of Didsbury and 25 miles from Olds and Carstairs all of which are communities of over 1000. The plaintiffs submitted no data on the availability of apartment space at Carstairs. The Alberta Housing survey indicated a few vacancies on June 15,1979 and June 24, 1980 in Didsbury and many vacancies in Olds on June 15,1979 and July 28, 1980. There is no evidence that the plaintiffs attempted to establish themselves in an apartment in any of these three communities.

Site no. 10: About 12 miles east of St. Albert and seven miles southwest of

Fort Saskatchewan both of which communities have populations of over 1000. The plaintiffs submitted no data on the availability of apartment space at either of these communities and there is no evidence that they attempted to establish themselves in an apartment in either of them.

In the result I find that the plaintiffs have failed to discharge the onus of proving that the circumstances of their claims bring them within the exempting provisions of subparagraph 6(6)(a)(ii) of the Income Tax Act in respect of any of the ten sites at which they worked during 1979 and 1980. It follows that their appeals against the Minister's reassessments must be dismissed.

Neither the plaintiffs nor their employer treated the allowances paid as income in the hands of the plaintiffs for the simple reason that a Mr. J.B. Fawcett, Chief, Source Deductions, Revenue Canada, had notified the Canadian Association of Oilwell Drilling Contractors that in the circumstances of the plaintiffs’ claims the allowances paid to them would not be taxable. While Mr. Fawcett's letter cannot change the provisions of the Income Tax Act under which both I and the Tax Court of Canada Judge have found them to be taxable it does, in my view, constitute grounds for making no order as to costs. Accordingly there will be no order as to costs.

Appeals dismissed.