Templeton v. R., 97 DTC 5216, [1998] 3 CTC 207 (FCTD)

Campbell J.:

Mr. Charles B. Templeton possesses unique creative skills and very effectively put them to work to great benefit during a long and productive career as a broadcaster and inventor. In the process of adapting his life circumstances to make the most effective use of his skills, in the 1984 tax year Mr. Templeton claimed a moving expense deduction, and he and the Minister of National Revenue (the Minister) disagree about his ability to do so. This appeal from a reassessment disallowing the deduction has been conducted in a respectful and cooperative way with the principle aim of testing the correctness of the case law, which, as it stands, does not work to Mr. Templeton’s benefit. For the reasons which follow, I think it should.

Both Mr. Templeton and the Minister have agreed that this appeal should be decided on the following facts:

1. Prior to February 28, 1984, the Plaintiff’s principal residence was at R.R. #1, Penetanguishene, Ontario.

2. During the period of his residency in Penetanguishene the Plaintiff was frequently required to travel to Toronto in connection with his activity as broadcaster-commentator for radio station CKEY.

3. As a result of these trips, the Plaintiff retained a rented residence at 75 Douglas Crescent in Toronto, which he occupied for approximately 105 days of the year as a matter of convenience.

4. In 1982, the radio station notified the Plaintiff that his contract with the radio station, expiring in June 1983, would not be renewed.

5. In order to compensate for this loss of revenue, the Plaintiff decided to devote a greater percentage of his time to his previously commenced activity as an inventor of games and gadgets as well as continuing his activity as a writer of novels.

6. During the entire period of his residence in Penetanguishene the Plaintiff’s residence also served as his official work location for his activities as an author and inventor. His broadcasting activities were conducted at the radio station CKEY in Toronto.

7. As a result of the Plaintiffs decision to devote more of his time to inventing as a source of revenue, the Plaintiff sold his residence in Penetanguishene, terminated his lease at 75 Douglas Crescent in Toronto and on March 30, 1984, and [sic] moved to a leased apartment located at 701 Don Mills Road in Don Mills, Ontario.

8. The Plaintiff incurred moving expenses in the course of the above-noted move in the amount of $19,474.50, of which the Plaintiff claimed $17,166.00 to the extent of net income earned at the new work location during the remainder of the Plaintiffs 1984 taxation year.

9. The Plaintiffs new residence at 701 Don Mills Road contained the office used by the Plaintiff in carrying out his business as an author and inventor and included an adjacent workroom that was used for designing and making models for inventions.

Mrs. Templeton’s careful and detailed evidence established that the distance between Penetanguishene and 701 Don Mills Road is 97 miles or 155.2 kilometres.

Concerning Mr. Templeton’s claim for a moving expense deduction, the governing provision of the Income Tax Act is s.62(1), the pertinent parts of which are as follows:

s.62(l) Where a taxpayer has, at any time, commenced

(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as his “new work location”)...

and by reason thereof has moved from the residence in Canada at which, before the move, he ordinarily resided (in this section referred to as his “old residence”) to a residence in Canada at which, after the move, he ordinarily resided (in this section referred to as his “new residence”), so that the distance between his old residence and his new work location is not less than 40 kilometres greater than the distance between his new residence and his new work location, in computing his income for the taxation year in which he moved from his old residence to his new residence or for the immediately following taxation year, there may be deducted amounts paid by him as or on account of moving expenses incurred in the course of moving from his old residence to his new residence...

At the beginning of the appeal, Mr. Michael D. Templeton, able counsel for Mr. Templeton, stated that the reason that this appeal was brought in the Federal Court (Trial Division) rather than the Tax Court, which was an option when this action began, is to effectively reverse the Tax Court decision of Bracken v. Minister of National Revenue, (1984) 84 D.T.C. 1813 (T.C.C.), which is unfavourable to Mr. Templeton’s position, and, in his submission, is wrong in law. In advancing the Minister’s objection to the deduction, counsel Mr. R. Leclaire very fairly agreed on the facts maintained by Mr. Templeton and limited the issue to the correctness of Bracken upon which the Minister relies and considers binding.

The essential findings of fact and law made by Christie, C.J.T.C. in Bracken are at 1819 and are as follows:

Reverting to subsection 62(1) of the Income Tax Act, what is relevant to this appeal in [sic] the subsection provides that a taxpayer who moves her place of residence may, in computing the income for the taxation year in which the move took place, deduct amounts paid by her on account of moving expenses under these conditions. The taxpayer ceases to carry on business at a location in Canada at which she ordinarily carried on business and by reason thereof moves from her old residence to a new residence and the distance between her old residence and her new work location is not less than 40 kilometres greater than the distance between her new residence and her new work location.

The appellant is a self-employed auditor who, in 1981, moved from her residence at 3609 Queenston Drive, Mississauga, Ontario, to a new residence at 130 Harlandale Avenue, Willowdale, At all times relevant to this appeal she carried on her business activities at her residence. The distance between 3609 Queenston Drive and 130 Harlandale Avenue by road is about 47.52 kilometres but it is less than 40 kilometres if the distance is measured in a straight line.

My reading of subsection 62(1) is that it contemplates the existence of four separate elements: old work location, new work location, old residence and new residence, and the comparison of two distances, i.e. the distance from the old residence to the new work location with the distance from the new residence to the new work location the former of which must exceed the latter by 40 or more kilometres in order for the moving expenses to be deductible. In this case two of the four elements are each combined with one of the other two resulting in two components. That is to say the old work location was joined with the old residence and the new work location is joined with the new residence thereby leaving only the distance between the two components capable of any conceivably meaningful measurement. In my opinion the subsection is not properly application to these circumstances.

Let us assume however, for the purpose of this appeal, that it is permissible to measure the distance between the fused elements and to conclude that if that distance is not less than 40 kilometres the appellant is entitled to the deductions claimed. The appeal must still fail because that distance is less than 40 kilometres if measured in a straight line.

This case turns on the proper interpretation to be placed on s.62( 1 ). For the proper interpretation, I do not feel that I need to look further than the Federal Court of Appeal decision of Giannakopoulos v. R, (1995) 95 D.T.C. 5477 (Fed. C.A.). Giannakopoulos dealt with the correct interpretation to be placed on the “distance” aspect of the phrase in s.62(l) “so the distance between his old residence and his new work location is not less than 40 kilometres greater than the distance between his new residence and his new work location”. But in so doing, some important guidance was provided on how to interpret the “residence” and “work location” aspect as well.

The guidance provided by Giannakopoulos by Marceau J.A. can be seen by comparing the facts and analysis of each aspect of Ms. Giannakopoulos’s situation and that of Mr. Templeton. In Giannakopoulos at 5478 he states:

The applicant was employed as a research interviewer with the University of Alberta when, in 1991, she accepted a new position as an administrative assistant with her employer, which required her to work at a different location. In order to be closer to her new workplace, she moved from Stony Plain to Edmonton, where the University administration offices are located.

In this case, Mr. Templeton’s official old work location as an author and inventor was Penetanguishene, when, in 1984, he decided to devote more of his time to inventing, which required him to work in Toronto. In order to be closer to his new workplace in Toronto, he moved to his new residence at 701 Don Mills Road, Don Mills, where his new work location was also situated.

In Giannakopoulos at 5478 Marceau J.A. also states:

Using the odometer in her car, the applicant calculated that her new residence was 44 kilometres closer to the University administration centre than her prior one.

In this case, Mr. Templeton’s new residence was 155.2 kilometres closer to his new work location in Toronto, being 701 Don Mills Road, than his prior one in Penetanguishene.

In interpreting the “distance” aspect of s.62(l), Marceau J.A. at 5478 states:

Subsection 62(1) permits a taxpayer to deduct moving expenses when he moves closer to a new workplace. An employee must live within a reasonable distance of his work. When he accepts a new position, the employee may have to move in order to remain within a practical commuting distance of his job. Subsection 62(1) recognizes that relocation is a legitimate work-related expense. In order to prevent the provision from being invoked when a taxpayer simply desires a change in residence, the provision requires that the move bring the taxpayer at least forty kilometres closer to work. Usually, a taxpayer travels to work using ordinary route of public travel, i.e. roads, highways, railways. In determining whether the taxpayer has really moved forty kilometres closer to work, it only makes sense to measure the distance he has moved using real routes of travel. A realistic measurement of travelling distance is necessary in order to give effect to the purpose of the provision. The straight line method bears no relation to how an employee travels to work. It is illogical to apply this technique to a provision which exists to recognize work related relocation expanses. It leads to absurd results where the old residence and the new workplace are separated by a body of water. A taxpayer who moves across a river to be closer to his workplace may have only moved a few miles “as the crow flies” but may actually be several dozen miles closer to work.

...Thus, the shortest normal route would be a preferable test to the straight line method, for it is both realistic and precise. It also furthers the purpose of the provision.

[Emphasis added]

Thus, for Marceau J.A., the proper interpretative approach to s.62(l) was a “realistic” and “logical” approach in order to “give effect to the purpose of the provision”. He also decided that the “context” of the practical situation is important in deciding upon the interpretation of the words of the section. This point is well made at 5479 as follows:

In common parlance, the word itself, or its equivalent in French, has to be interpreted in relation to the context in which it is used. The “distance” between two steeples in a city or between Ottawa and Paris could not be understood as meaning the same thing as the “distance” between two runners in a marathon.

As a result, Marceau J.A. decided in the judicial review application under consideration that:

...the Tax Court of Canada has interpreted the word [distance] without regard to the context and, in so doing, has committed an error of law which must be reversed.

In Mr. Templeton’s case, interpreting the “residence” and “work location” aspects of s.62(l) must also be accomplished according to a realistic, logical and contextual approach in order to give effect to the purpose of the provision. As Marceau J.A. in Giannakopoulos emphasized, the purpose of the provision is to recognize that relocation is a legitimate work-related expense. This purpose is stated in the following quotation from Revenue Canada Taxation’s Interpretation Bulletin (No. IT - 178R3, May 28, 1993) which was tendered without objection by Mr. Templeton as an aid to interpretation:

Section 62 provides that eligible moving expenses are deductible only when the reason for the residential move is to begin employment or business at the new location or to begin full-time attendance at an educational institution. It is always a question of fact whether or not a move has been made for such reasons. However, eligible moving expenses may be claimed provided that the taxpayer begins one of these activities either before or after the move. In addition, if an employee is transferred to another location of an employer’s business or if a self-employed individual relocates a business to another location in Canada. Eligible moving expenses that are otherwise allowable may be deducted by the taxpayer. [Paragraph 15, p.6]

It is realistic, logical and in context with the reality of Canadian life to understand that a person’s residence might very well be the same as his or her work location. To make the deduction, s.62(l) covers a range or allowable possibilities, with the distance between a person’s new residence and new work location being thousands of kilometres at one end of the range, to zero kilometres at the other. Mr. Templeton’s situation of 50 feet falls nearer the lower end of the scale.

Therefore, I find that the interpretation applied by Christie C.J.T.C. in Bracken requiring “four separate elements: old work location, new work location, old residence, and new residence” is unrealistic, illogical and non- contextual, and, therefore, is wrong in law. Accordingly, Mr. Templeton is entitled to his 1984 moving expenses deduction for following his creative spirit and, thus, this appeal is allowed.

Although I do not find the Minister at fault for relying upon Bracken in reassessing Mr. Templeton and denying his deduction, I find that the uncommon patience which Mr. Templeton endured in rectifying the manifest error that case pronounced is a special reason to award him costs. Accordingly, Mr. Templeton is awarded the costs of this appeal in Column III of Tariff B of the Federal Court Rules.

Appeal allowed.