REASONS
FOR JUDGMENT
Lyons J.
[1]
The appellant, Yisroel Kaplan, filed Canadian
Income Tax and Benefit Returns to make applications for the Canada Child Tax
Benefit (Benefit) under the Income Tax Act (Act). Mr. Kaplan received
the Benefit from the Government of Canada, in respect of five of his children, for
the 2007 to 2010 base taxation years (relevant period).[1] In 2011, the Minister of National Revenue re-determined his status and
determined that Mr. Kaplan was not entitled to the Benefit on the basis that he
was not resident in Canada while pursuing full-time, long-term studies in the
United States (U.S.) since 2002.
[2]
The only issue to be determined is whether Mr.
Kaplan was resident in Canada during the relevant period.[2]
I. Facts
[3]
Mr. Kaplan was the only witness to testify.
[4]
He was born, raised and educated in Toronto. He is a Canadian citizen and a naturalized U.S. citizen because his late father
was a U.S. citizen. Mr. Kaplan described himself as a factual resident of Canada until age 24 when he went to the U.S., in 2002, to embark on full-time, long-term advanced Talmudic
studies at the Kollel Knesses Yisroel seminary in Staten Island, New York, commencing May 2003. The studies are not available in Canada. The deadline to
complete his studies has been extended several times, but he will complete his studies
in January 2015.
[5]
His Canadian passport expired on October 17,
2002. He then obtained a U.S. passport, effective from July 21, 2003 to July
20, 2013,[3] and he
subsequently obtained a Canadian passport effective November 3, 2012.
[6]
In December 2001, he married his spouse, a U.S. citizen, in New York.[4] Mrs.
Kaplan has been a full-time special education teacher in New York since 1999. She
has approximately 25 family members residing in New York and New Jersey. The
youngest of six children, she grew up in New York and her parents and two
brothers and families reside in New York. Her two sisters and their families reside
in New Jersey and her other brother with his nine children reside in Seattle. Mr. Kaplan acknowledged his wife is not a Canadian citizen nor a resident.
[7]
In early 2002, the Kaplans had rented a friend’s
place in New Jersey and by mid-July 2002, they had rented an apartment while
waiting for campus housing. Since 2003, the Kaplan family have lived rent-free
in campus housing. Initially they resided in an apartment, however, in 2007,
because of their growing family, they moved to a house where they currently live.
Their possessions in the U.S. include clothing, furnishings, appliances and gadgets.
The seminary required students and their families to live on campus to create a
close-knit community.
[8]
Shortly
after they were married, the
Kaplans purchased and registered their first car in the U.S. and, for the past six years, they have had two cars at any given time under his wife’s
name. He never purchased a car in Canada. He held an Ontario driver’s licence during the
relevant period. The evidence was unclear if he had a U.S. driver’s licence prior to obtaining one from New York State in 2010.
[9]
Since their first child was born in September
2002, they have had seven additional children. Six were born in New York, two were born in New Jersey. All of the children are U.S. and Canadian citizens.
The children of school age attended school(s) in Brooklyn or a playgroup in Staten Island.
[10]
The primary family doctor is situated in New York and he attends to the children for sick visits/check ups, and the children are
vaccinated in the U.S. Mr. Kaplan maintained medical coverage with the
Ontario Health Insurance Plan (OHIP). He had a Canadian and U.S. doctor. His children were registered with the OHIP, but not as soon as they were born,
as they needed to be with him in Toronto when registered. According to the
evidence, one child (B) was registered four years after the child was born.
[11]
The Kaplan family took trips to Canada for the summer break. Three semester breaks coincide with the religious holidays,
summer breaks do not. He usually spends the religious holidays in the seminary,
and worships at the seminary three times a day. He claims he went to Canada, sometimes at the end of term and sometimes in between, estimating about ten trips
per year. Some trips were made with only some of his children and without Mrs.
Kaplan because of medical issues or issues related to her pregnancies.
[12]
During trips to Canada, the Kaplan family stayed
at his mother’s Toronto home, rent free, in the garage attached to her house,
which he had sealed up at the front to create two rooms where they stored
clothing, toys, books and a freezer.
[13]
His late father has six siblings residing in New York, with their families residing in New York or New Jersey. Other than three cousins,
he claims that he is seldom in contact with his extended family. He has one
estranged aunt, from his mother’s side, residing in New York.
[14]
Mr. Kaplan always intended to teach at the Yeshivas
Nachalas Zvi private high school (school), in Toronto, that his late father had
established in 1987. Before his passing, he had told Mr. Kaplan that he
intended to hire him as a full‑time teacher. Mr. Kaplan’s older brother,
Yitzchok Kaplan, assumed his late father’s position as Dean shortly after his
father had passed in March 2009.
[15]
Encountering turmoil, budgetary problems and staff
challenges, his brother was pushing Mr. Kaplan to accept a teaching position. He
declined in April 2009 because, according to him, his brother expected more of
him beyond a teaching role; he wanted to wait for the dust to settle; and he lacked
confidence in his ability to educate children. In the spring of 2009, he
returned to Toronto five times to provide moral support to his brother and to
help stabilize the school. In 2011, he gave a speech at the school but could
not recall the topic.
[16]
Before marrying his wife, he told her and her
parents that upon completion of his studies his intention was to return to Canada. He explained that she was the youngest of six children, who resided with, and had a
very strong attachment to, her parents and they might have objected to the
marriage.
[17]
Mr. Kaplan stepped in a lot to help the rabbi at
the synagogue. He claims to have refused a position offered to him by a
prominent synagogue in 2007 because of his intention to return to teach at the
school upon completion of his studies.
[18]
The following sources of funds were referred to during
the hearing:
a) Employment
income of $50,000 (net) from Mrs. Kaplan’s teaching position (less in the
earlier years) and $800 per year to oversee a child.
b) Exemptions
and deductions for their children from filing with the U.S. IRS a joint tax
return with his wife.
d) IRA’s for each of
the Kaplans.
e) Stipend
of $5,500 earned by Mr. Kaplan reported in the U.S. tax return.
f) Self-employment
commissions of $12,500 in each of 2011 and 2012 earned by Mr. Kaplan (to help
his brother establish an alumni association relating to the school; he produced
the T4A to show it was consistent with his intent in 2007).
g) Free
campus housing and accommodation in his mother’s garage.
h) Purchases
for their children by each of the Kaplans’ parents.
[19]
They had U.S. bank accounts, including a
chequing account for bill payments, and two U.S. credit cards for daily
purchases. Mr. Kaplan opened a new Canadian account in 2009 and a credit card
in September 2008.
[20]
He did not join organizations in the U.S. as his stay was strictly study‑related. He acknowledged in cross-examination
that he was responsible for tending to his growing family while his spouse
worked and said that this left little time available.
[21]
Mr. Kaplan stated that, in 2007, he became
involved in unpaid fund-raising activities for the school. In cross-examination,
he admitted that some of those activities were conducted from the U.S.
[22]
As U.S. citizens, the Kaplans filed a joint U.S. tax return each year with the IRS. In response to questions put by counsel for the
respondent, Mr. Kaplan agreed that his U.S. accountant had stated that all of the
income on the 2011 U.S. tax return was earned by Mrs. Kaplan because Mr. Kaplan
has not and does not earn income.[5]
However, he earned income in 2011 and 2012 from Canada and a $5,500 stipend
from the U.S. He claimed his accountant told him that, since he was a student,
any Canadian income was to be reported in his Canadian returns. Only the first
page of his Canadian Income Tax and Benefit Returns, relating to 2011 and 2012,
were produced showing his wife’s earnings. The evidence was unclear as to what,
if anything, was reported in either the Canadian or U.S. returns.
[23]
In 2006, the Minister determined Mr.
Kaplan’s residency status and notified him that he was a factual resident of Canada while living outside of Canada and was entitled to the Benefit, but the determination was
subject to a possible future review. The sixth child was born and he sent the
documentation to the Canada Revenue Agency (CRA) to add the child to the Canada
Child Tax Benefit account. In 2011, the Minister advised Mr. Kaplan that he was
no longer considered a resident.
II. Law
[24]
To qualify for the Benefit, a taxpayer must be
resident in Canada during the applicable base taxation year in order to be an “eligible individual” as defined in paragraph 122.6(c) of
the Act.[6]
[25]
The term “resident”, which includes those who
are “ordinarily resident”, and the concept “ordinarily resident”, are not
defined in the Act.
[26]
In explaining the difference between residence
and sojourning, Rand J. in Thomson v Minister of National Revenue,
[1946] S.C.R. 209, at page 223, said that the term “residence” embodies the degree
to which a person in mind and fact settles in or maintains or centralizes his
ordinary mode of living.[7]
[27]
In determining whether a person is resident in
Canada for the purpose of the Benefit, the legal test was recently reiterated by
the Federal Court of Appeal in Goldstein v The Queen, 2014 FCA 27, 2014
DTC 5027, which described the correct test as:
[2] […] a person is
resident in the country where he or she, in the settled routine of life,
regularly, normally or customarily lives, as opposed to the place where the
person unusually, casually or intermittently stays. (The Queen v Laurin,
2008 FCA 58, 2008 DTC 6175 (FCA), at paragraph 2)[8]
[28]
Justice Sharlow also stated in Laurin
that “[t]he legal test of residence has a substantial factual component.” While
facts from cases can be identified as more or less important or distinguished
from the case under appeal, the jurisprudence recognizes that determining the
place of residence turns on the facts of the particular taxpayers under appeal:
Cartwright J. in Beament
v Minister of National Revenue, [1952] 2 S.C.R. 486, and
quoted by Bowman C.J. in Laurin v The Queen, 2006 TCC 634,
2007 DTC 236 (affirmed by the Federal Court of Appeal).
III. Analysis
[29]
Since the Minister relied on residence at the
re-determination stage, Mr. Kaplan bears the usual burden of proof to
establish a prima facie case to show that the Minister’s re-determination
is incorrect. In my view, he has failed to discharge his onus and has not convinced
me that he was resident in Canada during the relevant period.
[30]
Mr. Kaplan made extensive submissions and
compared the facts of many cases. His primary argument is that his residency
status in Canada remains unchanged because he never severed his Canadian ties
when, and since, departing for the U.S. in 2002 to pursue full-time studies,
and he intends to return to Canada to teach at the school on completion of his
studies.[9]
[31]
The difficulty with his submission is his
lengthy presence in the U.S. combined with the exceptionally strong ties that he
has developed in the U.S. These factors have culminated in Mr. Kaplan, his wife
and their eight children - all U.S. citizens – having settled into a daily
routine of their lives in New York since July 2002 while he pursued and
continues to pursue long-term, full-time studies.
[32]
Recognizing that the jurisprudence establishes that
no specific amount of time can be used to determine residency, and a lengthy
absence can not be the determinative factor, the length of time is,
nevertheless, a factor to be considered with other relevant factors.
[33]
By the time of the hearing, Mr. Kaplan had spent
13 years pursuing his study program in advanced Talmudic studies. The lengthy
presence in the U.S. and corresponding absence from Canada poses some
difficulty for Mr. Kaplan.
[34]
In addition to acceptance at the seminary, other
significant factors in July 2002 include: his wife continuing to maintain her
employment; his wife’s first pregnancy; they had rented their second
accommodation while waiting for campus housing; and they purchased and
registered their first car in the U.S. These are material changes. I am not
convinced that his presence in the U.S. had the sense of transitoriness, as described
in Thomson, or was casual or intermittent, as described in Goldstein
v The Queen, 2013 TCC 165, [2013] TCJ No. 131. The settled routine of
his life, and that of his family, since July 2002 has been in the U.S., not in Canada.
[35]
Since September 2002, when their first child was
born, the Kaplans have had eight children who were all born, raised, educated (those
of school age), and vaccinated in New York. They received day-to-day medical
treatment, as did Mrs. Kaplan, from their family doctor in New York. Mrs.
Kaplan grew up in Brooklyn and the Kaplans each have a significant family
network in and around New York including Mrs. Kaplan’s very strong
attachment to her parents. As well, they were part of the close-knit community
at the seminary with Mr. Kaplan worshipping at the seminary. Clearly,
these are exceptionally strong ties for Mr. Kaplan and his family demonstrating
they have settled into an ordinary mode of living developed over a lengthy
period of time while he was in pursuit of full-time, long-term studies.
[36]
Of some import as to the strength of his ties connecting
him to the U.S. is the fact that when his Canadian passport expired on October
17, 2002, Mr. Kaplan chose to obtain a U.S. passport, effective July 21,
2003, utilizing it on his trips to and from Canada spanning a ten year period until
it expired in 2013.
[37]
Other connecting ties to the U.S. are also
evidenced by the purchase and registration of their first vehicle, and all
subsequent vehicles, in the U.S; filing U.S. tax returns as U.S. citizens;
obtaining IRA’s; and their usage of their U.S. bank accounts and credit cards
on a daily basis. The U.S. passport and the other factors are strongly
indicative of having settled into a daily routine of their lives in New York over a long period of time.
[38]
I do not accept Mr. Kaplan’s evidence of his stated
intention to return to Canada upon completion of his studies to pursue his
dream of teaching at the school. His rejection in 2007 of the offer by the
synagogue is consistent with his stated intention, but two years later his
rejection of the offer to teach at the school is contrary to his stated
intention.[10]
Five years after the offer in 2009, he continues to study at the seminary. In
cross-examination, Mr. Kaplan acknowledged that there had been extensions to
his study program at the seminary, but his evidence failed to reveal why the
extensions were obtained. In the absence of evidence relating to the
extensions, I infer from this and some of the following points immediately
below that he did not lack the qualification or ability as he intimated, but
made a personal choice to extend his time at the seminary.
[39]
In completing the 2012 form for the residency
determination from the CRA, Mr. Kaplan stated that he expected to return
to “Canada full-time anywhere between eight months and two-and-a-half years
from now, depending on the research opportunities that become available.
However, nothing is “etched in stone” as of yet.”[11] Yet he later testified that
he does not have any immediate plans to return to Canada, even though he
admitted in cross-examination that in January 2015 his study program will end. His
evidence is inconsistent, and his stated intent is not borne out by the
evidence which leads me to conclude that he had no such intention.
[40]
Even if I were to accept such intention, that
would not suffice to make him a resident in Canada in light of his lengthy
presence in the U.S. It was argued in Goldstein that she and her family intended
to return to Canada in 2014 and therefore was resident in Canada. Woods J. rejected that and found that her stated intent was not a significant
factor in light of the 14 years that she spent in the U.S. Goldstein is
strikingly similar to Mr. Kaplan’s situation on this aspect as well as many of
the other facts. Based on the evidence, I am not satisfied he is resident in Canada.
[41]
While Mr. Kaplan has a number of ties to Canada
that were maintained over the years, those ties do not amount to a settled
routine in Canada and are not substantial enough to establish residence.
[42]
Some ties that Mr. Kaplan referred to in his
testimony include:
a) His
family initially included his father, his mother, many siblings, and nephews
and nieces that were within a three block radius in Toronto. Of the five unmarried
siblings, one sister lived with his mother full-time and the remaining siblings
only part-time as most of them studied overseas for six to eight months of the
year. Of the seven married siblings, he only referred to his older brother in
relation to issues with the school and otherwise the evidence was vague with
respect to this group of siblings.
b) The
garage owned by his mother where he stays with his family when in Toronto and stores books, clothing and toys.
c) Canadian
citizenship held by him and his children and his Canadian passport.
d) Religious
affiliations in Toronto.
e) Job
offer in March 2009 and work for the school in 2011 and 2012 to help his
brother establish an alumni association and provide a speech at the school.
f) OHIP coverage
for himself and his children.
g) Two
Canadian joint bank accounts held by the Kaplans, one opened in 2001 and the
other in 2009. He obtained a Canadian credit card in 2008.
h) Ontario driver’s
licence.
[43]
This evidence does not establish that Mr. Kaplan
had a customary mode of living in Canada during the relevant period. In my
view, he severed significant ties to Canada in July 2002 when a number of
material changes occurred. All of which signify his altered status in Canada by his family’s settled routine and customary mode of living in New York.
[44]
I accept Mr. Kaplan’s testimony that he assisted
his brother about five times in 2009 when there was turmoil at the school and
then gave a speech at the school in 2011. His family, religious and citizenship
ties establish that Mr. Kaplan has strong connections in Canada, but these do not translate to a daily settled routine of life and customary mode of living
in Canada.
[45]
Given his family ties in Canada, I accept that Mr. Kaplan and his family came to Canada during his summer breaks. Some trips
were only with some of his children and without his spouse because of medical
issues or issues related to the pregnancies. I do not accept his visits were as
regular as he claims. Since three of the religious holidays coincide with three
of the semester breaks, and he stated that he usually spends his time at the
seminary, I find he did not return to Canada on those occasions. With the
exception of 2009 when his father passed and he assisted his brother, I do not
accept that his visits to Canada averaged ten times a year as he had testified.
This is inconsistent with the information on the Answers to questionnaire that
he had provided to the CRA.[12]
Other than the reference to the trips to provide moral support to his brother
in 2009, in my view the trips are in the nature of holidays, and have the
quality of casual or intermittent stays rather than a settled routine of life
where they customarily live.
[46]
The difficulty I have had throughout is that
some of his testimony and some of the information that he had provided to the
CRA was not reliable nor credible. Testimony should be clear, straightforward,
and detailed for it to be reliable. Some examples will be identified below in
which he was asked in cross‑examination about his prior testimony or about
the information previously provided:
a) He
testified that his intention to return to Canada “is actually in a prenuptial
agreement with my wife.” When asked in cross‑examination if he had
brought the prenuptial agreement with him to the hearing, he denied the
existence of any written prenuptial agreement.[13]
b) When
he was asked whether he had acquired the title Rabbi,[14] Mr. Kaplan indicated it
is just a title of honour they give and he does not know of a legal way to
acquire the title.
c) On
the 2006 NR73 form, he answered that he expected to live outside Canada for “Three months”. At the hearing he said, “Generally we
leave for six to twelve weeks. …”, which is equal to three months.[15] This is at a point where Mr.
Kaplan had lived outside Canada since 2002. When asked about the date of
departure, Mr. Kaplan left it blank. When asked the same questions on the 2012
NR73 form, dated July 27, 2012, he indicated “Since I am constantly traveling,
there is no one specific date of departure.” He then provided the specific
dates that he had taken his trips.[16]
[47]
Another example where his testimony was not
reliable is the information that he had initially provided to the CRA in 2006
in which he had given the impression that he owned and maintained a home in Toronto. He also said that it was not sublet nor shared. He acknowledged in cross‑examination
that he was referring to his mother’s garage, available to him and the Kaplan
family, free of charge. It was also available to his siblings during his
absence.[17]
His evidence on this was not credible and misleading. The evidence did not
reveal much in terms of personal property stored in Canada. Using his mother’s
property during their summer breaks and other occasional visits and storing
some possessions, are not significant factors in determining Canadian residence.
[48]
Although he and his children were Canadian
citizens, they were also U.S. citizens and he travelled on a U.S. passport which expired in July 2013. As to the Canadian passport, it was not obtained until
November 2012, therefore beyond the relevant period, and was likely obtained by
Mr. Kaplan in anticipation of the review of residency status by the CRA, as he
was fully aware of the importance of establishing connections to Canada for the Benefit.
[49]
As for religious affiliations in Canada, while the evidence was vague, I am satisfied that he had at least one religious
affiliation as he had indicated on the 2006 NR73 form. He had established
strong ties of this nature in the U.S. in worshipping at the seminary and
helping out at the synagogue. This is not a factor that is strong enough to
establish residence in Canada.[18]
The 2012 NR73 form, however, expands the number of affiliations but I note that
was completed beyond the relevant period.
[50]
In addition to my previous comments relating to
the offer to teach in 2009, he further admitted that there is no written offer
of employment provided by his brother. As such, this factor is disregarded as a
tie.[19]
[51]
In terms of the Canadian bank accounts, there
was insufficient evidence provided as to how active these were. One of the bank
accounts and one of the credit cards were opened while he was receiving the
Benefit. The evidence, relating to the U.S. banking activities, shows that
these were used for their daily living. The Canadian banking information is a not
strong enough tie to establish residence.
[52]
Regarding the retention of the Ontario driver’s
licence and OHIP coverage, these factors are more of a benefit rather than
demonstrating a customary mode of living in Canada. Overall, an analysis of
personal and economic ties shows more connections to the U.S.
[53]
Mr. Kaplan places some reliance on the decision in
Perlman v The Queen, 2010 TCC 658, 2011 DTC 1045, in which Boyle J. decided
that Mr. Perlman continued to be a resident of Canada for the purposes of the Benefit
in circumstances where Mr. Perlman was absent for a significant period of time
while undertaking long-term religious studies overseas with a continuing
intention to return to Canada with prospects of a job offer. Boyle J. could
find no point in time in which there was a change of circumstances material
enough to constitute a change in residence. Mr. Kaplan aligns his
situation with that of Mr. Perlman and submits that the reasoning in Perlman
applies because there is no point in time at which he and his spouse severed
Canadian ties.
[54]
As I previously found, I am satisfied that Mr.
Kaplan’s residential ties to Canada had been sufficiently severed in July 2002
when a series of material changes resulted in Mr. Kaplan and his family having
settled into a daily routine of life in New York.
[55]
In terms of other distinguishing factors, as
between Mr. Perlman’s situation and that of Mr. Kaplan, it is significant that in
Perlman the burden of proof was on the Minister because of the late
introduction by the Minister of that position at trial.[20] In this case, it is Mr.
Kaplan who has that onus.
[56]
Other distinguishing factors in Perlman are
identified as follows. Mr. Perlman only held Canadian citizenship; he travelled
on a Canadian passport; he and his spouse were considered foreigners by Israel;
their children were not Israeli citizens; they did not have an extensive family
network in Israel; they had never filed Israeli tax returns; he had studied
three different programs (Talmudic studies, rabbinical studies and Jewish
Family Law); and he was to receive his rabbinical ordination in 2011. Except
for one Israeli bank account for their day-to-day living, his banking was
conducted through the Canadian banking system. That included a bank account, a
significant investment account managed by a Canadian brokerage firm, registered
education savings plans and Canadian credit cards. Boyle J. was also troubled that
if he found that Mr. Perlman was not a resident in Canada, he would be
implicitly finding that he became an Israeli resident. The decision in Perlman
is distinguishable and does not assist Mr. Kaplan.
[57]
Mr. Kaplan opposes the Minister’s 2011 re-determination
and says the factors that existed when the Minister made his earlier
determination, in deciding he was a factual resident, remain the same, thus his
residency status should not change and he should continue to receive the Benefit.
However, the Minister is not bound by his prior determination for prior years
and can come to a different conclusion.[21]
[58]
Based on the evidence, I am satisfied that his
ties to Canada are not sufficient to show he was a resident in Canada. Instead, his settled routine of life and customary mode of living was in the U.S. since July 2002 and his visits to Canada had a sense of transitoriness. I conclude that Mr.
Kaplan was not resident, and therefore not ordinarily resident, in Canada during the relevant period and thus not an eligible individual, as defined in
section 122.6 of the Act, for the purposes of the Benefit.
[59]
The appeal is dismissed.
Signed
at Ottawa, Canada, this 4th day of July 2014.
“K.
Lyons”
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