Desrosiers v. R., 99 DTC 5279, [1999] 4 CTC 47 (FCA)

Noel J.A.:

This is an application for judicial review from a decision by Judge Bowman of the Tax Court of Canada confirming that the applicant had received a benefit from his employment and that as such he had to include the sums of $15,000 and $50,000 in his income for 1987 and 1988 taxation years respectively.

The facts mentioned by the applicant in support of his action are relatively straightforward. In September 1986 he successfully applied for the position of Clerk of the Legislative Assembly of the province of Ontario. Before taking this position he had been Principal Clerk responsible for management of parliamentary committees and private legislation at the House of Commons in Ottawa.

His new job gave him a significant salary increase [1] but also required him to move with his family to Toronto, where the real estate market was more costly. The applicant mentioned this concern after the position was offered to him but before he had accepted it. His employer told him at that time that he would be offered financial assistance, but gave no further details. [2]

Two weeks after he accepted his new position the employer told the applicant that he would be paid an amount calculated by reference to the difference between the selling price of his house in Aylmer and the purchase of an equivalent house in Toronto. [3] The taxpayer’s house was put up for sale but remained on the market for several months, such that the employer was forced to purchase it in order to facilitate the move. For this purpose the selling price was set at $104,570, in accordance with the fair market value as determined by independent appraisers. The applicant claimed that at the time the average value of equivalent houses in Toronto was about $250,000. [4]

The applicant said that as he was desirous of minimizing the money his employer had undertaken to pay on his behalf he in April 1987 purchased a house located in Oakville which he considered was clearly inferior to the one he had given up. In his submission, this house was inferior in that:

1. it was located 45 km. from his workplace, whereas the other was only 9 km. away;

2. it was a semi-detached house, whereas the other was detached;

3. it had a surface area of 1,700 sq. ft., while the other had a surface area of 2,400 sq. ft.;

4. it had three bedrooms, while the other had four.

The house in question was purchased for $171,000. [5] The applicant moved there with his wife and three children in April 1987. Consistent with the undertaking it had given, the employer paid the applicant the sums of $15,000 in 1987 and $50,000 in 1988, a total amount almost equal to the difference between the selling price of the old house and the cost of purchasing the new one.

In the summer of 1987 the applicant incurred expenses of some $22,000 in order to renovate his new house and create the living space needed to accommodate the members of his family. Despite these expenses the applicant was eventually forced to conclude that the house was still inadequate as it was too small. The decision was taken to dispose of it and at the end of 1988 the applicant and his family moved to a new house which we may assume was more spacious. [6]

In light of these facts Judge Bowman concluded that the sums of $15,000 and $50,000 received by the applicant in the 1987 and 1988 taxation years were a benefit resulting from his employment and that as such these amounts were taxable. The applicant, who represented himself, considered that he had not received a benefit, relying essentially on the fact that the house he had purchased in Oakville was in every respect inferior to the one he had given up when he accepted his new position. He claimed that, at the very least, the expenses incurred to renovate the house in Oakville should be deducted from the benefit he allegedly received. [7]

The only question that arises is as to whether, in paying the applicant the sum of $65,000 in order to enable him to acquire a residence in a more costly real estate market and so facilitate his coming to Toronto, the employer conferred a benefit on him within the meaning of s. 6(1) (a) of the Income Tax Act. [8] As I see it, the question answers itself.

When he accepted his new position the applicant knew he had to move to Toronto. The fact that he would not have accepted the position without the financial benefit he was promised does not help his case, [9] nor does his statement that the house purchased in Toronto was in his view clearly inferior to the one he chose to give up. [10] The Revenue Department is not concerned with the use, whether good or bad, that the applicant may have made of the financial assistance he received. What matters is the existence of a benefit which is quantifiable in monetary terms. In the case at bar the employer paid his employee the sum of $65,000 so the latter could purchase a personal asset. A benefit equal to the amount paid by the employer undoubtedly results from this transaction.

I also will not dwell at any length on the taxpayer’s argument that the property purchased with this benefit had a fluctuating value.!! [11] The trial judge put the question raised by the taxpayer as follows:

[TRANSLATION]

If he had sold it after residential prices fell in 1989, he would have sustained a non-deductible loss. Where is the benefit he was supposed to have enjoyed and in respect of which he was assessed? [12]

As I mentioned, the benefit resulted from the amount the applicant was paid in order to enable him to acquire a residence in a more costly real estate market. That benefit is measured at the time it was conferred. The fact that the residence acquired with this financial aid might subsequently increase or decrease in value is of no interest to the Revenue Department.

In his judgment the trial judge mentioned the legal uncertainty resulting from recent decisions by this Court in Phillips^ [13] and Hoefele [14] and added that in the circumstances it is easy to see why the applicant regarded the benefit which was being taxed in his hands as [TRANSLATION] “illusory” or “imaginary”. [15] Judge Bowman invited the applicant to appeal his judgment, suggesting that this Court use the opportunity to clarify the state of the law.

I do not feel there is any need here to say more than is necessary to dispose of the action at bar. Suffice it to say that on the facts on issue here, there is nothing illusory or imaginary in the benefit conferred on the applicant or the value of that benefit at the time it was conferred.

The application for judicial review should be dismissed. As the respondent did not claim any costs, no order should be made in this regard.

Application dismissed.