Citation: 2010 TCC 321
Date: 20100614
Docket: 2009-2937(IT)I
BETWEEN:
CLARK
JOHNSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Paris J.
[1] The Appellant is
appealing the partial disallowance of the medical expense tax credit he claimed
for the 2007 taxation year.
[2] In 2007, he
traveled from Thunder Bay to Chicago for medical treatment. He flew on a ticket he obtained by
redeeming Aeroplan frequent flyer points that he had accumulated, and by paying
$220 of taxes on the ticket.
[3] The Minister of
National Revenue (the “Minister”) allowed only the cash portion of the cost of
the ticket as a medical expense, holding that the Appellant had not paid any
amount in excess of $220 for the ticket.
[4] The Appellant says
that he paid an amount for the ticket by using his Aeroplan points, and that he
should be able to claim the value of those points as a medical expense.
[5] The medical expense
credit is provided for in subsection 118.2(1) of the Income Tax Act (the
“Act”). Expenses that qualify for the credit are set out in subsection
118.2(2) of the Act, and include amounts paid by an individual for
travel to a location not less than 40 kilometres from his or her home to obtain
medical treatment that is unavailable locally (paragraph 118.2(g)).
[6] The opening words
of subsection 118.2(2) state that an amount must be paid in order to give rise
to a medical expense. The portion of subsection 118.2(2) relevant to this
appeal reads as follows:
118.2(2) For
the purposes of subsection 118.2(1), a medical expense of an individual is an
amount paid
(a) …
(g) to a person engaged
in the business of providing transportation services, to the extent that the
payment is made for the transportation of
(i) the patient,
…
from the locality where the
patient dwells to a place, not less than 40 kilometers from that locality,
where medical services are normally provided, or from that place to that
locality, if
(iii) substantially
equivalent medical services are not available in that locality,
(iv) the
route traveled by the patient is, having regard to the circumstances, a
reasonably direct route, and
(v) the
patient travels to that place to obtain medical services for himself or herself
and it is reasonable, having regard to the circumstances, for the patient to
travel to that place to obtain those services;
(Emphasis
added)
[7] The first issue in
this appeal is whether the Aeroplan points given by the Appellant as
consideration for the air ticket constitute an amount paid for a ticket.
[8] At the hearing, the
Respondent also argued that the value of the points that were used to obtain
the ticket could not be determined and, therefore, that it could not be said
that an amount was paid by the Appellant for the ticket.
[9] The Appellant testified
that he redeemed 76,000 Aeroplan points in order to travel to Chicago and back. He booked the
tickets on relatively short notice, a few weeks before he travelled, once he
had made the appointments for the medical treatment.
[10] When he filed his
tax return, he checked on the Air Canada website, and found that an equivalent
fare for the trip was $2,280 at that time, but he was unable to find out what
the actual cost of his flights would have been if he had paid cash for them. He
also produced two printouts of airfares from the Air Canada website showing
that the full return airfare for a Thunder Bay to Chicago trip would have been $2,678.78 for
travel in September 2008 and $2,932.18 for travel in March 2009. The former was
for a “Latitude” fare type and the latter was for a “Tango Plus” fare type.
Both are apparently economy class fares. The evidence did not show what fare
type the Appellant travelled on, except that it was an economy fare.
[11] The Appellant also
stated that one could buy Aeroplan points at a cost of three cents per point
and provided a printout from the Aeroplan website to confirm this rate. The
Appellant also said that 76,000 points were enough to book five return trips
from Thunder Bay to Ottawa, Winnipeg, Toronto or Quebec
City.
[12] The Respondent takes
the position on the first issue that there was no amount paid by the Appellant within
the meaning of subsection 118.2(2) of the Act because
no money was paid by him for the ticket. Counsel for the Respondent said that a
transfer of “money’s worth” did not constitute an “amount paid” . I disagree.
[13] The word “paid” is
not defined in the Act. According to the Canadian Oxford Dictionary
(2nd Ed.) “pay” means:
1. Give (a person, etc.) what is due for
services done, goods received, debts incurred, etc.
The definition of “payment” in Black’s Law Dictionary (9th
Ed.) refers to:
performance of an obligation by the
delivery of money or some other valuable thing accepted in partial or full
discharge of the obligation.
[14] The word “amount” which precedes “paid” in subsection 118.2(2) is defined in subsection 248(1) of
the Act as follows:
248(1) In this Act,
“amount” means money, rights or things expressed in
terms of the amount of money or the value in terms of money of the right or
thing, …
[15] Therefore, the
phrase “amount paid” would include payments made by means of a transfer of a
right or thing where the value of the right or thing can be expressed in terms
of an amount owing, and is not limited to a transfer or delivery of money
alone.
[16] This position has been
accepted in Gibson v. The Queen.
In that case, the taxpayer owed maintenance to his ex-spouse, and these
arrears were offset against the taxpayer’s interest in the matrimonial property
by means of a consent judgment. The taxpayer sought to deduct the amounts of
maintenance covered by the setoff under paragraph 60(1)(b) or (c)
of the Act, both of which require that there be an “amount paid by the taxpayer”.
The Respondent argued that it was necessary to have a transfer of cash or
cheques in order for there to have been an “amount paid”. The Court rejected
this position, holding that the setoff resulted in an amount being paid by the
taxpayer. At paragraph 11 of the decision, O’Connor J. said:
The Court finds the effect of the consent
judgment and the transfer effected pursuant thereto was that the Appellant was
released with respect to all arrears of his alimony payments except for a sum
of $5,100. Surely therefore the transfer must be considered as a form of
payment. The Court therefore concludes that for paragraph 60(b) or (c)
to operate there need not necessarily be payment in cash or by cheque. Payment
in kind, provided there has been an agreement or a binding determination of the
value in money of the object given, will suffice.
[17] O’Connor J.’s
comments regarding the existence of a binding agreement as to the value in
money of the object given seem unduly restrictive. I believe that objective
evidence of the value of the right or thing transferred would be sufficient to
quantify the amount paid.
[18] I also note that in Gibson,
the Court declined to follow the decision in Blais v. The Queen, where Garon J. (as he then was) held
that in the context of paragraph 60(b) of the Act the verb “to
pay” meant “a transfer of money, a handing over of funds”. I would also decline
to follow Blais, given that the Court did not refer to any definition or
other authority or provide any analysis to support its conclusion.
[19] In Hallet v. The
Queen, the
issue was whether a payment in kind was an amount received by the taxpayer. In
that case, the taxpayer’s ex-spouse transferred his interest in a mobile home to
the taxpayer in satisfaction of arrears of maintenance. The Minister included
the value of the interest in the taxpayer’s income as maintenance under
paragraph 56(1)(c) of the Act. In finding that the transfer
resulted in the taxpayer receiving an amount Bowie J. said at paragraph 4:
If the value of payments in
kind were not payments for the purposes of the Act the profits derived
from a great many business transactions would be immune from taxation; it is
for that reason that Parliament defined “amount” the way it did.
[20] The two cases cited
by counsel for the Respondent, William Coutts Co., o/a Hallmark Cards v. The
Queen
and Joshi v. The Queen
do not support the proposition that a payment of an amount requires a transfer
or giving of money.
[21] In Coutts,
the taxpayer sold greeting cards and invoiced its customers for the cost of the
cards and the applicable GST. The taxpayer gave its customers a 2% discount on
the invoiced amount for early payment. The taxpayer argued that, by giving the
discount, it was paying a rebate to its customers, and that it was eligible for
certain ITCs, pursuant to section 181.1 of the Excise Tax Act.
[22] The Court held that
by giving the discount, the taxpayer had paid a rebate. The Court found that
payment by the customers of 98% of the full price shown on the taxpayer’s
invoice amounted to collapsing two separate notional payments, one by the
customer of the full invoice price and one by the taxpayer of a 2% rebate ‑
into one. This case would not appear to support the Respondent’s position,
since the Court found that there did not need to be a payment of money by the
taxpayer in order for it to have “paid” a rebate to its customers.
[23] Joshi was an
appeal from a disallowance of moving expenses. The taxpayer claimed amounts for
labour provided by his spouse and by members of his spouse’s family who
assisted with the move. The taxpayer admitted that he did not pay them anything
and that the claim was based on the value of labour they supplied. The claim was
rejected by the Court on the grounds that no amount had been paid, as required
by subsection 62(1) of the Act.
[24] Counsel in
this appeal relied on the statement of O’Connor J. in Joshi that:
[s]ection 62(1) does not recognize an
imputed value as a deductible expense; it requires an amount to be paid before
a deduction may be taken. In the present appeal, no money was spent, so no
deduction may be taken.
[25] However, the reason
the Court rejected the claim was because no consideration of any kind was given
by the taxpayer for the labour. This appears from paragraph 18 of the decision:
18. The Appellant provided neither
his spouse nor the other family members that helped him move any consideration
in exchange for their help. Subsection 62(1) states that “There may be deducted
in computing a taxpayer’s income for a taxation year amounts paid by the
taxpayer as or on account of moving expenses. …” [Emphasis added]. “Amount” is
defined in subsection 248(1) as money, rights or things expressed in terms of
money or the value in terms of money of the right or thing …” In the present
case, the Appellant did not pay to his spouse or family money, rights or things
expressed in terms of money. (emphasis
added.)
[26]In this case, I find
that the points given up by the Appellant for the ticket were a right, since
they were exchangeable for air transportation services at his request, and that
they had a value that could be expressed in money since the services for which
they could be exchanged was offered for sale to arm’s length parties at a fixed
price. Also, the points could be purchased for three cents apiece. By redeeming
his points, the Appellant gave what was due for the services and therefore
“paid” for them within the ordinary meaning of that word. It follows that the
amount paid by the Appellant included 76,000 Aeroplan points.
[27] The second issue, regarding
the value of the Aeroplan points, was raised by the Respondent at the hearing.
The Reply to the Notice of Appeal does not set out that the value of the
frequent flyer points used by the Appellant was in dispute, and therefore, the
onus was on the Respondent to show that the value of the points was less than
the amount claimed by the Appellant. The Respondent led no evidence of value,
nor did counsel challenge the Appellant’s evidence. As a result, the Respondent
cannot succeed on this point.
[28] For these reasons, the
appeal is allowed, and the Appellant is entitled to additional medical expenses
of $2,060 in computing his medical expense credit for his 2007 taxation year.
Signed at Ottawa, Canada, this 14th
day of June, 2010.
“Brent Paris”
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