Siwik v. The Queen, 96 DTC 1678, [1996] 2 CTC 2417 (TCC) (Informal Procedure)

Taylor J.T.C.C.: — These appeals heard in Toronto, Ontario on February 14, 1996, were against assessments under the Income Tax Act (the “Act”) in which the Respondent included in income amounts of $9,197.00, $10,877.54 and $4,265.55 for the years 1990, 1991 and 1992 respectively as “benefits — from a debt incurred by virtue of your employment”, as described in the Notice of Confirmation by the Minister. That Notice continued as follows:

These deemed benefits have been calculated in accordance with subsection 80.4(4) of the Act and are included in your employment income under subsection 6(9) of the Act.

The basis of the dispute arose from the circumstances as seen and described by the Respondent in the Reply to Notice of Appeal:

- the Appellant was at all relevant times employed by Noranda Inc. (the “Employer”);

- in 1989, the Appellant was transferred by his Employer from the Employer’s Montreal office location, where the Appellant had up until that time reported for work, to the Employer’s Toronto offices;

— upon accepting the transfer to Toronto, the Appellant sold his home in Montreal, Quebec and purchased a house in Burlington, Ontario;

- as part of the Employer’s housing loan program, the Employer advanced the amount of $100,000.00 to the Appellant as an interest-free home relocation loan with a 10 year repayment term for which the Appellant signed a promissory note and an assignment of group life insurance benefits;

— the Appellant agreed to repay the principal amount of the loan over a period of 10 years with the Appellant increasing his monthly repayments to the Employer during that term at his own option;

— a debtor-creditor relationship was created between the Employer and the Appellant as a result of the interest-free loan;

— the amount of $100,000.00 received by the Appellant from the Employer was money received pursuant to a loan agreement to facilitate the Appellant’s relocation and was not a reimbursement for actual losses incurred as a result of the Appellant’s move to the Toronto area.

I wish to also note for the record the following three paragraphs from the Reply to Notice of Appeal, but I do not see that they impinge on the decision to be made in this matter:

In computing income for the 1990, 1991 and 1992 taxation years, the Appellant included taxable benefits in the amounts of $12,447.50, 13,561.79 and $6,111.29, respectively, (as per T4 supplementaries) in respect of an interest-free loan provided to him by his employer and deducted the amounts of $12,447.50, $13,561.79 and $1,845.74 in the 1990, 1991 and 1992 taxation years, respectively, on the basis that the taxable benefits related to an employee home relocation loan.

In assessing the Appellant for the 1990, 1991, and 1992 taxation years, by Notices of Assessment mailed on May 22, 1991, August 10, 1992 and April 28, 1993, respectively, the Minister of National Revenue (the “Minister”) assessed the Appellant’s 1990 return of income as filed, allowed a reduced home relocation loan deduction of $2,684.25 in the 1991 taxation year and allowed the $1,845.74 deduction in respect of the home relocation loan as filed in the 1992 taxation year.

In reassessing the Appellant for the 1990 taxation year, by Notice of Reassessment mailed on June 9, 1993, the Minister allowed a reduced home relocation loan deduction of $3,250.

I do not wish the brevity of these reasons to reflect in any way on the conduct of the case by the parties. It is simply that the issue came down to one point — which will be noted later. The case in fact — testimony, evidence and argument were well prepared and presented. There were many sub-facets brought out and discussed, and the case law which might have a bearing was reviewed expertly and in detail. In the pleadings the Respondent had indicated reliance on subsections 6(9), 80.4(1), 80.4(4), 80.4(7), 248(1) and paragraphs 6(l)(a) and 110(l)(j) of the Act as amended for the 1990, 1991 and 1992 taxation years. Concentration however largely was on the impact, or inter-relationship of subsections 80.4 and 6(1 )(a), with reference also being made to subsection 5(1) of the Act. All the major case law dealing with the general point of issue was reviewed, culminating on both sides with the recent case of Hoefele v. R. (sub nom. Canada (Attorney General) v. Hoefele) (sub nom. Krull v. Canada (Attorney General)), [1995] 1 C.T.C. 131, 95 D.T.C. 5602.

At the conclusion of his part of the argument, Counsel for the Respondent was asked by the Court:

...may I narrow down the Minister’s argument, or the Minister’s main argument, to the point you made in opening, that this loan is direct from Noranda as opposed to a somewhat more indirect routing for all of the five cases covered in the Hoefele (case), even including the Krull case...the circumstances were all similar, they made their own private loans and then there were arrangements made for some form of, and I’ll call it, a mortgage subsidy. Is that the Minister’s main contention in this matter?

MR. HAYWARD: That’s correct, Your Honour.

HIS HONOUR: Then really that’s the only point on which I need Mr. Campbell’s comments. Mr. Campbell?

Counsel for the Appellant responded that in his reading of the above cases, the involvement of the employer was still there. But for counsel the main point remained, under subsection 80.4 of the Act — not who made the loan, but why the loan was received.

Conclusion

I leave aside all the other perspectives that might be addressed in this matter - and I readily agree there are several which were raised and which I have not attempted to answer. The simple fact is that in my view there is nothing in the Hoefele, supra judgement which would support the kind of distinction the Respondent wishes to make here. It is not evident to me that there is a substantive difference between the employer Noranda, foregoing the interest on the loan, and Noranda making a payment to the employee as reimbursement, or to a separate financial institution directly for the interest involved. The Hoefele, supra judgment of the Federal Court of Appeal level has set out the guidelines for the taxability of such relocation payments and I am not convinced that they should be segregated or separated to the minute extent contended by the Respondent here. My own views on this subject as expressed in the Krull case of the Tax Court level (Krull v. R. (sub nom. Krull v. Canada), [1995] 2 C.T.C. 2204, 95 D.T.C. 206) are not relevant at this time, and I adopt those expressed by the Federal Court of Appeal (above).

The appeals are allowed with costs.

Appeals allowed.