REASONS
FOR JUDGMENT
Hogan J.
I. Introduction
[1] This is an appeal by Henry Dueck (the “Appellant”) from a
reassessment for the 2011 taxation year. The Appellant, in calculating his
income for the 2011 taxation year, deducted moving expenses in the amount of
$21,861 pursuant to subsection 62(1) of the Income Tax Act (the “Act”).
The Minister disallowed the Appellant’s deductions on the basis that the
Appellant’s move was not an eligible relocation because (i) the Appellant did
not change work locations and (ii) the distance between his old residence and
his work location was not at least 40 kilometres greater than the
distance between his new residence and his work location (the “Distance
Requirement”).
II. Factual Background
[2] The Appellant worked as a concrete estimator for Jerry’s Concrete
Works Ltd. (“JEWL”). The Appellant was employed with the same employer from
2005 through the 2011 taxation year. He worked both in and out of the office,
but reported to the same work site routinely.
[3] In October 2011, the Appellant moved to Burke Bay, Winnipeg, Manitoba (the “New Residence”). Prior to that, the Appellant had resided on Road 2 East, Sanford, Manitoba (the “Old Residence”). Throughout this time the Appellant continued to
work for JEWL.
[4] The Appellant testified that while he was living at his Old
Residence his health began to deteriorate. He had a heart attack and suffered
from exhaustion. The Appellant claims that his medical condition prevented him
from continuing to work while at the same time maintaining his property. The
Appellant testified that his Old Residence was located in a rural area, on a
very large lot. He therefore decided to downsize and relocate on a smaller
property closer to his work.
[5] The Appellant was very cautious in his explanation as to why he
chose to sell his property. His responses to the questions concerning the
reasons for his move appeared to be scripted. He was circumspect in describing his family’s
situation. For example, he did not explain what he did with the proceeds of the
sale of the Old Residence. Did he reinvest all the proceeds in his new home?
Did he downsize in order to extract capital, which would then be used to
generate funds to supplement his income as part of his retirement plan? It
appears that the Appellant may have been approaching retirement. Was his Old
Residence simply too big? Did he move to get closer to the city and his health
care providers? Because the Appellant was less than forthright in his
explanation of the circumstances surrounding the move, I have difficulty giving
any weight to his declaration of his subjective intent as having been to move
in order to continue working.
III. Issues
[6] This appeal raises two issues. The first is whether or not, for the
purposes of subsection 62(1) of the Act, the Appellant meets the
requirements of the definition of “eligible relocation” found in
subsection 248(1) of the Act. The second issue is whether the route taken
by the Appellant is the shortest normal route for the purpose of
meeting the Distance Requirement.
IV. Analysis
[7]
The relevant provisions are reproduced below:
62(1) 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
incurred in respect of an eligible relocation, to the extent that
(a) they were not paid on
the taxpayer’s behalf in respect of, in the course of or because of, the
taxpayer’s office or employment;
(b) they were not deductible
because of this section in computing the taxpayer’s income for the preceding taxation
year;
(c) the total of those
amounts does not exceed
(i)
in any case described in subparagraph (a)(i) of the definition “eligible
relocation” in subsection 248(1), the total of all amounts, each of which is an
amount included in computing the taxpayer’s income for the taxation year from
the taxpayer’s employment at a new work location or from carrying on the
business at the new work location, or because of subparagraph 56(1)(r)(v)
in respect of the taxpayer’s employment at the new work location, and
(ii)
in any case described in subparagraph (a)(ii) of the definition
“eligible relocation” in subsection 248(1), the total of amounts included in
computing the taxpayer’s income for the year because of paragraphs 56(1)(n)
and (o); and
(d) all reimbursements and
allowances received by the taxpayer in respect of those expenses are included
in computing the taxpayer’s income.
248(1) “eligible
relocation” means a relocation of a taxpayer in respect of which the
following apply:
(a) the relocation
occurs to enable the taxpayer
(i) to carry on a business or to be employed at a
location (in section 62 and this definition referred to as “the new work
location”) that is, except if the taxpayer is absent from but resident in Canada, in Canada, or
(ii) to be a student in full-time attendance enrolled
in a program at a post-secondary level at a location of a university, college
or other educational institution (in section 62 and this definition referred to
as “the new work location”),
(b) the taxpayer
ordinarily resided before the relocation at a residence (in section 62 and
this definition referred to as “the old residence”) and ordinarily resided
after the relocation at a residence (in section 62 and this definition referred
to as “the new residence”),
(c) except if the
taxpayer is absent from but resident in Canada, both the old residence and the
new residence are in Canada, and
(d) the distance between
the old residence and the new work location is not less than 40 kilometres
greater than the distance between the new residence and the new work location.
[8] With respect to the first issue, the Minister argues that the
provision requires a change in the circumstances of the taxpayer’s employment. Counsel
for the Respondent relies on Bracken v. Minister of National Revenue. In Bracken the judge
held that subsection 62(1) of the Act requires, inter alia, that there
be (i) an old work location, (ii) a new work location, (iii) an old residence,
and (iv) a new residence. Counsel for the Respondent acknowledges that the wording
of subsection 62(1) of the Act applicable to the instant case differs from the
wording of the version of the provision considered in Bracken.
Nonetheless, the Respondent argues that the requirements set out in Bracken are
applicable under the current version of the provision. In short, a taxpayer
must show that the move was caused by a change in the circumstances of his or
her employment.
[9] According to the Respondent, because there was no change in the
circumstances of the Appellant’s
employment, his moving expenses are not deductible. The evidence shows that the
Appellant continued to be employed by the same employer and reported to the
same work location. The Appellant does not dispute this fact. The Respondent
cites decisions of this Court that have followed Bracken
notwithstanding the change in the wording of the
provision.
[10] The
Appellant argues that an “eligible relocation” exists when the relocation of a taxpayer
enables the taxpayer to remain employed at his current work location. More
specifically, the taxpayer would meet the requirements of the definition of
“eligible relocation” as long as he needed to move closer to his work location in
order to continue working.
[11] The
Appellant cites the principles enunciated in Wunderlich v. The Queen as authority for the proposition
that a change in the circumstances of a taxpayer’s employment is not required in
order for the conditions of the definition provision to be met. In Wunderlich,
Justice Webb held that “new work location”, as defined in the definition of
“eligible relocation”, is simply a location in Canada where the taxpayer
is employed. The taxpayer does not have to show that the circumstances of his
employment have changed. Justice Webb held that the reference to a “new work
location” is simply a label which has no bearing on the meaning of the
provision.
[12] Contrary
to the Appellant’s submissions, the evidence shows that the Appellant sold his
home and bought a smaller one for personal reasons. At the very least, for the
reasons outlined below, the Appellant has failed to establish on a balance of
probabilities that he moved in order to continue working. Therefore, I do not
have to choose between the two interpretations described above to decide this
appeal, and will refrain from doing so.
[13] It
is common knowledge that homeowners move to a smaller home for a number of reasons.
For example, they may be empty nesters who no longer require a large home
and/or a large lot because their children have grown up. As people approach
retirement, they downsize because they want to reduce living expenses, extract
capital to supplement retirement income, or free up time for travel, etc. by
freeing themselves from home maintenance. All of these reasons are valid
personal choices.
[14] The
only explanation offered by the Appellant is that he had to move because he
could not maintain a large property and work at the same time. However, because
the Appellant was guarded in his explanation, he has failed to convince me that
this was the reason for his move. Had the Appellant described all of the
circumstances surrounding the move, I may have been persuaded to accept the
statement of his intent. For example, was capital extracted for reinvestment purposes?
Was the new home closer to the Appellant’s health care providers? How long did
the Appellant continue working after he moved?
[15] In
my opinion, it is not sufficient for a taxpayer to declare that he moved to get
closer to work and to continue working when there are no changes in his
employment conditions. He must provide evidence as to the circumstances
surrounding the move so as to enable the Court to decide whether the
declaration of his subjective intent is accurate. If this were not required it
would be easy for taxpayers to deduct moving expenses incurred for personal
reasons by moving shortly before retirement rather than doing so after retirement.
V. Conclusion
[16] For all of these reasons, the appeal is dismissed.
Signed at Montréal, Québec, this 4th day of June 2014.
“Robert
J. Hogan”
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