Citation : 2012TCC430
Date: 20121204
Docket: 2012-536(IT)I
BETWEEN:
FIONA J. EDWARDS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The Appellant has been
assessed a penalty of $2500 for each of her 2005, 2006 and 2007 taxation years
for failure to file form T1135 within the time prescribed by the Income Tax
Act (the “Act”). Form T1135 is the foreign income verification
statement.
[2]
The Appellant filed her
income tax returns and form T1135 for 2005, 2006 and 2007 on September 22,
2009. Her filing due dates for her returns and form T1135 were April 30, 2006
for 2005, April 30, 2007 for 2006 and April 30, 2008 for 2007. As the T1135
forms were filed more than 100 days late, a maximum penalty of $2,500 was
assessed for each year pursuant to subsection 162(7) of the Act.
[3]
The Appellant indicated
in the T1135 forms that she owned real property outside Canada which cost more than $100,000 but less than $300,000. She also reported rental
income from this property.
[4]
At the hearing, the Appellant
was represented by R.J. Agar, an accountant. He argued first, that the
Appellant was not a resident of Canada in 2005, 2006 and 2007; and in the
alternative, if she was a resident, then she exercised due diligence during the
relevant period in failing to file form T1135 within the prescribed time
period.
Residence
(a) Facts
[5]
The Respondent filed
the affidavit of Brent Aylesworth, Litigation Officer in the Appeals Division
of the Edmonton Tax Services Office of the Canada Revenue Agency (“CRA”). The
exhibits attached to the affidavit included a Determination of Residence Status
form (the “DRS form”) dated February 24, 2009 which had been completed and
signed by the Appellant and a letter dated July 10, 2009 from the CRA which
notified the Appellant that she was considered to be a resident of Canada as of March 3, 2003.
[6]
At the hearing, her
agent stated that the Appellant’s statements in the DRS form pertained to the
facts as they existed in 2003 and not as they existed in 2005, 2006 and 2007.
The Appellant explained that she was not sure how to complete the DRS form and
she asked an officer at the CRA for assistance. It was her evidence that she
was advised to complete the form with the facts as they existed in 2003.
[7]
The Appellant related
the following events that led up to her request for a determination of her
residence status.
[8]
She has been a flight
attendant with United Airlines since 1992 and she has always worked out of the UK.
[9]
In May 2000 the
Appellant married a Canadian citizen. After the birth of their daughter in
2002, the Appellant and her spouse decided to move to Canada. In March 2003, she moved from the UK to Edmonton, Alberta. She became a permanent resident
of Canada on March 15, 2005.
[10]
The Appellant was on
leave from the United Airlines from 2002 until August 2005 when she was
recalled to work. She separated from her spouse in November 2005 and filed for
divorce in January 2006.
[11]
Initially, on occasion,
the Appellant was allowed to take her daughter with her when she travelled to
the UK. However, due to a custody assessment, it was decided that her daughter
would stay in Edmonton. The Appellant then “tried to spend as much time in Edmonton” as possible to have access to her daughter. According to her evidence, she spent
50 percent of her time in Canada and 50 percent of her time in the UK.
[12]
When she was in Canada, the Appellant lived in the matrimonial home with her former spouse until 2007. She
then rented an apartment and later purchased a home in Edmonton. Her divorce
was granted in October 2008.
[13]
The Appellant stated
that at the divorce proceeding she wanted the judge to focus on the custody
issue. In satisfaction of the matrimonial property issue, she accepted a lump
sum payment from her former spouse.
[14]
According to her
evidence, her former spouse instructed his lawyer to withhold 25 percent of the
lump sum because it was his opinion that the Appellant was not a resident of Canada.
[15]
The Appellant testified
that it was only because of her former spouse’s actions that she sought to have
her Canadian residency determined.
(b) Analysis
[16]
The question of
residency is a factual finding. The seminal decision on residence of an
individual is the decision of the Supreme Court of Canada in Thomson v.
Minister of National Revenue (1945), [1946] CTC 51 (SCC) and the most
quoted portions of that decision are the following observations of Rand J.:
47 The gradation of degrees of time, object, intention, continuity
and other relevant circumstances, shows, I think, that in common parlance
“residing” is not a term of invariable elements, all of which must be satisfied
in each instance. It is quite impossible to give it a precise and inclusive
definition. It is highly flexible, and its many shades of meaning vary not only
in the contexts of different matters, but also in different aspects of the same
matter. In one case it is satisfied by certain elements, in another by others,
some common, some new.
48 The expression “ordinarily resident” carries a restricted
signification, and although the first impression seems to be that of
preponderance in time, the decisions on the English Act reject that view. It is
held to mean 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 general mode of life is, therefore, relevant to a question of
its application.
49 For the purposes of income tax legislation, it must be assumed
that every person has at all times a residence. It is not necessary to this
that he should have a home or a particular place of abode or even a shelter. He
may sleep in the open. It is important only to ascertain the spatial bounds
within which he spends his life or to which his ordered or customary living is
related. Ordinary residence can best be appreciated by considering its
antithesis, occasional or casual or deviatory residence. The latter would seem
clearly to be not only temporary in time and exceptional in circumstance, but
also accompanied by a sense of transitoriness and of return.
50
But in the different situation of so-called “permanent residence,” “temporary
residence,” “ordinary residence,” “principal residence” and the like, the
adjectives do not affect the fact that there is in all cases residence; and
that quality is chiefly a matter of the degree to which a person in mind and
fact settles into or maintains or centralizes his ordinary mode of living with
its accessories in social relations, interests and conveniences at or in the
place.
[17]
In R. v. Reeder,
[1975] CTC 256 (FCTD) Mahoney J. listed some of the factors which are material
in determining the question of residence as follows:
13 While the defendant here is far removed from the jet set,
including any possible imputation of a preconceived effort to avoid taxation,
the factors which have been found in those cases to be material in determining
the pure question of fact of fiscal residence are as valid in his case as in
theirs. While the list does not purport to be exhaustive, material factors
include:
(a)
past and present habits of life;
(b)
regularity and length of visits in the jurisdiction asserting residence;
(c)
ties within that jurisdiction;
(d)
ties elsewhere;
(e)
permanence or otherwise of purposes of stay abroad.
The
matter of ties within the jurisdiction asserting residence and elsewhere runs
the gamut of an individual's connections and commitments: property and
investment, employment, family, business, cultural and social are examples,
again not purporting to be exhaustive. Not all factors will necessarily be
material to every case. They must be considered in the light of the basic
premises that everyone must have a fiscal residence somewhere and that it is
quite possible for an individual to be simultaneously resident in more than one
place for tax purposes.
[18]
I understand the Appellant’s
confusion in completing the DRS form because many of the declarations are
phrased in the future tense. As an example, the Appellant declared that she
will own furniture or appliances in Canada; she will have an automobile and a
driver’s licence from a province; she will have a bank account in Canada.
[19]
However, in the DRS
form, the Appellant wrote that she became a permanent resident of Canada on March 15, 2005 and has maintained her permanent residency since that date. She
also wrote that she has a personal bank account and a mortgage at Scotiabank.
[20]
During the relevant
period, the Appellant always had a home available to her in Canada. She stated that when she was in Canada she resided with her former spouse until 2007. She
then rented an apartment and later bought a house. She did not give an exact
date for the rental of the apartment and the purchase of a house. In the UK, although she owned a two bedroom condominium, it was always rented out through an
agency so she stayed with her parents while there.
[21]
The Appellant may have
completed parts of the DRS form from a 2003 perspective; but, she did not state
that those same facts did not exist during 2005, 2006 and 2007.
[22]
During the period, the
Appellant’s ties with Canada were substantial. Her infant daughter lived in Canada and the Appellant spent as much time with her child as she could. By her own
evidence she spent at least 50 percent of her time in Canada.
[23]
It is my view that the
Appellant was a resident of Canada in 2005, 2006 and 2007. Her settled
routine was that she worked in the UK and she returned to Canada where she resided with her daughter.
[24]
It is also my view that
the Appellant knew she was a resident of Canada in 2005, 2006 and 2007. She
filed her Canadian income tax returns for 2003 and 2004 on November 22, 2005.
In these returns, she applied for the Goods and Services Tax Credit (“GSTC”).
In 2005, she also applied for retroactive payment of the Canada Child Tax
Benefit (“CCTB”). She was advised that she was not entitled to the GSTC for the
2003 taxation year as her spouse had applied for it on her behalf but she was
entitled to it for 2004. By letter dated December 23, 2005 she was advised that
she was eligible for the CCTB retroactive to March 2003 as requested.
Due Diligence
[25]
During the relevant
period, the Appellant filed income tax returns in the UK. After it was determined in 2009 that she had been a resident of Canada since March 9, 2003, the
Appellant was asked to file her Canadian income tax returns for 2005, 2006 and
2007. In each of the returns the Appellant claimed a federal foreign tax credit
and reported there was no federal taxes payable in Canada in 2006 and 2007. The
Appellant was required to pay additional federal taxes in Canada in 2005 but there was no evidence as to the amount.
[26]
Mr. Agar argued that
the Appellant had exercised due diligence in late filing form T1135 and he
relied on the decision in Douglas v. R., 2012 TCC 73.
[27]
In Douglas the
taxpayer late filed his 2008 income tax return and the T1135 form. For the 2008
taxation year, he reported no tax payable. Woods J. found that the evidence
revealed that Mr. Douglas had exercised due diligence in the circumstances and
she vacated the penalty.
[28]
Unlike Douglas, in the present appeal, the Appellant has not provided any evidence to show
that she exercised due diligence.
[29]
The Appellant knew that
she had to file an income tax return in Canada because she had filed returns
for 2003 and 2004. These returns were filed on November 22, 2005. The Appellant
was assessed as a resident of Canada for part of the 2003 taxation year and as
a resident of Canada for all of 2004.
[30]
She did not seek
professional tax advice in 2005, 2006 or 2007. She took no steps to report her
income in Canada in 2005, 2006 and 2007. It is my view that a reasonable person
in such circumstances and with the Appellant’s knowledge that she had filed her
2003 and 2004 Canadian income tax returns in November 2005 would, at the very
least, have consulted a tax advisor with respect to her income tax return for
2005. The Appellant has not established that she exercised due diligence.
[31]
For these reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 4th
day of December 2012.
“V.A. Miller”
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