Mallett v. The Queen, 92 DTC 6537, [1992] 2 CTC 229 (FCTD)

McGillis, J.:—The appellant Jocelyn Ghent Mallett appeals from a decision of the Tax Court of Canada dismissing her appeal concerning the deductibility of moving expenses claimed by her in the 1985 taxation year.

Facts

The appeal proceeded on the basis of an agreed statement of facts.

At all material times, Mrs. Mallett was an employee of the government of Canada. From 1982 to November 30, 1985, Mrs. Mallett was on secondment from the Ministry of State for Science and Technology to External Affairs as the counsellor for European Space Affairs. She worked weekdays at the offices of the Canadian Embassy in Paris, France and, until August 28, 1985, had an apartment in that city. During this period, she was ordinarily resident in her Paris apartment on ordinary working days.

In the spring of 1985, Mrs. Mallett was informed that she was to be appointed to a position in Ottawa, Ontario. In July 1985, she entered into an agreement to purchase a home in Ottawa. In the month of August 1985, Mrs. Mallett married a man who maintained a home in England. Beginning in August, 1985, she commuted regularly, but not always, to the house in England. She gave up her apartment in Paris on August 28, 1985 and her household goods and personal effects were removed from that apartment, shipped to Canada and placed in storage. On October 18, 1985, her household goods and personal effects were moved into her new home in Ottawa. Mrs. Mallett was fully reimbursed by her employer for the cost of moving her household goods and personal effects from Paris to Ottawa.

From September to November 30, 1985, Mrs. Mallett remained an employee of External Affairs in Paris, either working in the Embassy or outside Paris on temporary duty or taking annual and foreign service leave in the United Kingdom. When she was working in Paris during this period, she lived in noncommercial temporary accommodation and was ordinarily resident there on ordinary working days. She spent most of the month of November 1985 on leave at the house in England maintained by her husband. Mrs. Mallett never had the intention to live on a permanent basis in England. Immediately prior to her move to Ottawa, some of the personal effects of Mrs. Mallett were divided between Paris and London.

In December, 1985, Mrs. Mallett began working at her new position in Ottawa with the Ministry of State for Science and Technology.

In her income tax return for the 1985 taxation year, Mrs. Mallett sought to deduct from her total income the sum of $20,024.62 as moving expenses. These expenses represented the cost of moving the personal effects of Mrs. Mallett and her husband from the house in England to Ottawa. Included in this amount was the sum of $4,332.69 for the cost of moving two antique automobiles owned by the husband of Mrs. Mallett. The income of Mrs. Mallett for the 1985 taxation year from her employment at her new position in Ottawa was $5,116.50. By notice of assessment dated June 27, 1986, the Minister of National Revenue disallowed the deduction of $20,024.62 claimed for moving expenses. Mrs. Mallett objected to the assessment, but the Minister of National Revenue confirmed the assessment by notification of confirmation dated December 16, 1986. Mrs. Mallett unsuccessfully appealed the disallowance of the deductions to the Tax Court of Canada.

Issue

The sole issue to be determined is whether Mrs. Mallett is entitled under section 62 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") to claim as a deduction from income the expenses incurred for the move from the home in England to Ottawa.

Position of plaintiff Mallett

Mrs. Mallett submits that she was ordinarily resident in both Paris and London before moving to Canada and, as such, is entitled to claim expenses for the move from the house in England as a deduction under section 62 of the Income Tax Act. Alternatively, if the costs incurred in moving the effects from the house in England may be construed as being amounts on account of moving within the meaning of section 62 of the Income Tax Act, the expenses may properly be claimed as a deduction.

Position of defendant Her Majesty The Queen

Counsel for the Attorney General of Canada submits that Mrs. Mallett neither established a residence nor was ordinarily resident in England before her move to Canada in the fall of 1985. As such, she is not entitled under section 62 of the Income Tax Act to claim the moving expenses as a deduction from income. Alternatively, if Mrs. Mallett is entitled to claim the moving expenses as a deduction, that deduction must be limited to the portion of her income earned in the 1985 taxation year at her new work location and any remaining amount carried forward to the next taxation year.

Analysis

At the outset of the proceedings, counsel for the Attorney General of Canada conceded that the learned judge from the Tax Court of Canada erred in dismissing the appeal of Mrs. Mallett on the basis that she was not moving from one location to another within Canada and therefore did not meet the requirements of section 62 of the Act. In so ruling, the learned judge neglected to apply the provisions of sections 250 and 63.1 of the Act which, when read together, would permit a public servant serving overseas to claim moving expenses in certain prescribed circumstances. I agree with the submission made by counsel that the learned judge from the Tax Court of Canada mis- directed himself on the interpretation of section 62 of the Act and failed to apply sections 63.1 and 250 of the Act.

An appeal from the Tax Court of Canada to the Federal Court of Canada is a trial de novo in which the assessment under consideration is presumed to be valid until the taxpayer establishes otherwise. (See M.N.R. v. Lehndorff Realty Devs. Ltd., [1987] 1 C.T.C. 42, 86 D.T.C. 6610 (F.C.T.D.) (sub. nom. R. v. Lehndorff Realty Devs. Ltd.); Midwest Oil Prod. Ltd. v. The Queen, [1982] C.T.C. 107, 82 D.T.C. 6092 (F.C.T.D.).) In order to determine whether Mrs. Mallett has discharged the burden of establishing that the assessment is invalid, the relevant statutory provisions must be considered.

Subsection 62(1) of the Act permits a taxpayer in prescribed circumstances to deduct from income amounts paid as or on account of moving expenses incurred while moving from the residence where he ordinarily resided in Canada to his new ordinary residence in Canada. Moving expenses are defined in paragraph 62(3)(b) of the Act as including any expense incurred as or on account of the cost of transporting or storing household effects in the course of moving from the residence where he ordinarily resided to his new ordinary residence.

Although subsection 62(1) of the Act would not appear on its face to apply to Mrs. Mallett as she was not moving from one residence to another in Canada, subsection 250(1) provides an extended meaning of resident and deems a servant of Canada who was resident in Canada immediately prior to appointment abroad to have been resident in Canada throughout a taxation year. Section 63.1 of the Act states that, where a taxpayer is deemed by section 250 to be resident in Canada throughout or for part of a taxation year, subsection 62(1) shall be read without reference to the words "in Canada". Accordingly, since Mrs. Mallett is deemed by subsection 250(1) of the Act to be resident in Canada throughout the taxation year, section 63.1 of the Act operates so as to eliminate the requirement in subsection 62(1) that her move occur from one residence to another in Canada. Mrs. Mallett may therefore claim as a deduction amounts paid on or account of moving expenses if she meets the requirements in subsection 62(1) of the Act.

In the circumstances of Mrs. Mallett, the only question to be determined in assessing whether she meets the requirements of subsection 62(1) of the Act is whether she was ordinarily resident in England before moving to Canada.

In the decision Thomson v. M.N.R., [1946] S.C.R. 209, [1946] C.T.C. 51, 2 D.T.C. 812, the concept of ordinary residence was discussed. It appears from a reading of the several judgments in this case that, although a person may have more than one residence, the term“ ordinary residence” has a more restricted meaning at law. As stated by Rand, J. at page 224 (C.T.C. 64; D.T.C. 816) of the judgment, ordinary residence means ”. . . residence in the course of the customary mode of life of the person concerned, and it is contrasted with special or occasional or casual residence.” The concept inherent in this statement is echoed, albeit in different words, in the other concurring judgments in the case. Recent jurisprudence has concluded, based on the analysis in Thomson v. M.N.R., supra, that a person cannot have two ordinary residences at the same time. (See Rennie v. M.N.R., [1990] 1 C.T.C. 2141, 90 D.T.C. 1050 (T.C.C.).)

The facts of this case establish unequivocally that Mrs. Mallett was not ordinarily resident in England prior to her move to Ottawa. To the extent that she spent time at the home in England, she only resided there casually until her move to her new home in Ottawa. Accordingly, even assuming that a taxpayer may have two ordinary residences at the same time (a proposition with which I do not agree), Mrs. Mallett has not convinced me that she was ordinarily resident in both Paris and England prior to her move to Ottawa. Since she was not ordinarily resident in England prior to moving to Ottawa, her alternative argument that the costs incurred in moving the effects from the house in England may be construed as being amounts“ on account of" moving fails on a plain reading of subsections 62(1) and (3) of the Act.

Mrs. Mallett has failed to discharge the burden of establishing that the assessment is invalid and is therefore not entitled to claim as a deduction the $20,024.62 in expenses incurred for the move from the home in England maintained by her husband to their new home in Ottawa. The appeal is dismissed with costs.

Appeal dismissed.