Citation: 2011TCC552
Date: 20111202
Docket: 2011-787(IT)I
BETWEEN:
HUGH VINCENT LUNN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The Appellant was
released from the military in 1995. Prior to 2008, he was receiving a pension
from the Canadian Forces and a long term disability benefit from the Service
Income Security Insurance Plan (“SISIP”) which was administered by Manulife
Financial. On June 3, 2008 the Appellant’s application for benefits under the
Canada Pension Plan was approved, retroactive to March 2007. This resulted
in a lump sum payment of $12,487.70 to the Appellant. Since he had now received
benefits under the Canada Pension Plan for the same period of time during which
he had received pension payments from the Canadian Forces and benefit payments
from the SISIP, the result was that he had received more in payments under the
Canadian Forces pension and under SISIP than he should have received. The
amount of the overpayment under the Canadian Forces pension was $6,446.58 and the
amount of the overpayment under the SISIP was $8,521.02. The Appellant claimed
a deduction in the amount of $14,519.87 in computing his income for 2008 on the
basis that he was obligated to repay these overpayments. The Canada
Revenue Agency reduced the amount allowed as a deduction to $108. The issue is
whether the Appellant is entitled to a deduction in an amount greater than
$108.
[2]
The Appellant expressed
concern that the lump sum payment amount that he had received in 2008 under the
Canada Pension Plan was $12,487.70 but the overpayment amounts totalled
$14,967.60. Although it is not entirely clear, it seems to me that this discrepancy
perhaps arises as a result of the timing of the determination under the Canada
Pension Plan of his entitlement to benefits and the receipt of payments from
the other sources. The Appellant’s application under the Canada Pension Plan
was approved on June 3, 2008, retroactive to March 2007. The lump sum payment
of $12,487 was for 10 months in 2007 and 5 months in 2008. Therefore the lump
sum payment covered the period from March to December of 2007 and January to
May of 2008.
[3]
However, for the month
of June 2008 he received a gross payment under the Canada Pension Plan of
$843.54 and a gross payment under the SISIP of $1,530.24 as it was not until
July of 2008 that the gross payments under the SISIP were reduced to $991.07 to
reflect the monthly payments that the Appellant was now receiving under the
Canada Pension Plan. As a result, in addition to the overpayment of $12,487 for
the period from March 2007 to May 2008, there would also have been an
overpayment of $539.17 ($1,530.24 - $991.07) from the SISIP for the month of
June 2008. This presumably would account for another $539.17 of the total
overpayment ($12,487.70 + $539.17 = $13,026.87).
[4]
The monthly payments
under the Canadian Forces pension were not disclosed during the hearing but
since the letter indicating the overpayment under this pension was dated in
October 2008, presumably monthly payments for June, July, August and September
(and possibly October) continued at the rate that did not reflect the monthly Canada
Pension Plan benefit that the Appellant was receiving. It seems to me that this
could explain why there was a difference between the lump sum payment amount
received under the Canada Pension Plan and the total overpayment amounts.
[5]
The Appellant was
repaying the overpayment amounts by deductions from the payments he was
receiving from the Canadian Forces pension and the SISIP. The monthly amount
that he was repaying under the Canadian Forces pension was $54.34 and two of
these payments (for the months of November and December) were made in 2008. The
Appellant was allowed a deduction of $108 for these two payments.
[6]
The total gross
benefits paid under the SISIP in 2008 were $15,127.86. The amount that he
repaid under the SISIP in 2008 was $1,934.63 and the difference between these
two amounts is $13,193.23, which is the amount shown in his T4A slip as other
income under the SISIP and which was the amount of income that he reported on
his tax return for 2008 from the SISIP. No adjustment to this amount of income
was made by the Canada Revenue Agency. Therefore the Appellant has received a
deduction for the amounts that he repaid under the SISIP in 2008.
[7]
The Appellant claimed a
deduction of $14,519.87 in computing his income for 2008 based on the amount
that he was obligated to repay, which as counsel for the Respondent correctly
noted, would mean that the Appellant would, if successful, be entitled to two
deductions for the amounts actually repaid to SISIP – once in determining the
net amount reported on the Appellant’s T4A slip and again as part of the
deduction of $14,519.87 that the Appellant claimed in computing his income.
Although the amount that he claimed ($14,519.87) was less than the total amount
repayable ($14,967.60), the difference ($447.73) is less than the amount repaid
to SISIP ($1,934.63) and therefore is less than the amount for which he already
received the benefit of a deduction. Therefore there would still be the amount
of $1,486.90 ($1,934.63 - $447.73) for which the Appellant would be receiving
the benefit of two deductions. Even if the Appellant were allowed to claim a
deduction for the amount that was repayable, he cannot have the benefit of the
same amount twice.
[8]
In any event the issue
is whether the Appellant is entitled to claim any deduction for the amounts that
were repayable or whether his deduction is limited to only the amounts that he
actually repaid in 2008.
[9]
In order to claim a
deduction in computing income for the purposes of the Income Tax Act
(the “Act”), it is necessary to find a provision in the Act that
permits such a deduction. The Appellant did not refer to any of the provisions
of the Act. The Respondent referred to paragraphs 8(1)(n) and 60(j.04)
of the Act which provide as follows:
8. (1) In computing a taxpayer's income for a taxation year from an
office or employment, there may be deducted such of the following amounts as
are wholly applicable to that source or such part of the following amounts as
may reasonably be regarded as applicable thereto:
…
(n) an amount paid by or on behalf of the
taxpayer in the year pursuant to an arrangement (other than an
arrangement described in subparagraph (b)(ii) of the definition “top-up
disability payment” in subsection 6(17)) under which the taxpayer is required
to reimburse any amount paid to the taxpayer for a period throughout which the
taxpayer did not perform the duties of the office or employment, to the extent
that
(i) the amount so paid to the taxpayer for the period was included
in computing the taxpayer's income from an office or employment, and
(ii) the total of amounts so reimbursed does not exceed the total of
amounts received by the taxpayer for the period throughout which the taxpayer
did not perform the duties of the office or employment;
…
60. There may be deducted in computing a taxpayer's income for a
taxation year such of the following amounts as are applicable:
…
(j.04) the total of all amounts each of which is an amount
paid in the year by the taxpayer to a registered pension
plan as
(i) a repayment under a prescribed statutory provision of an amount
received from the plan that
(A) was included under subsection 56(1) in computing the taxpayer's
income for a taxation year ending after 1989, and
(B) can reasonably be considered not to have been designated by the
taxpayer for the purpose of paragraph (j.2), or
(ii) interest in respect of a repayment referred to in subparagraph
(i),
except to the extent that the total was deductible under paragraph
8(1)(m) in computing the taxpayer's income for the year;
(emphasis added)
[10]
In this appeal it is
not necessary to determine if all of the conditions for the application of
these paragraphs are satisfied as both provisions only apply to amounts paid
by the taxpayer. They do not apply to amounts that are payable (but not paid).
[11]
The Appellant is not
entitled to a deduction for the amounts payable in 2008 that were not paid in
2008. The Appellant indirectly received a deduction for the repayments he made
under the SISIP ($1,934.63) as the amount included in his income from the SISIP
($13,193.23) was net of the total amount he repaid under the SISIP. The
Appellant was allowed a deduction for the amounts ($108 in total) that he
repaid under the Canadian Forces pension. Therefore the Appellant has received
the benefit of a deduction for the amounts he repaid under the SISIP and under
the Canadian Forces pension in 2008. As a result, the Appellant is not entitled
to any further deduction in computing his income for 2008.
[12]
Presumably for the
amounts repaid under the SISIP after 2008, the amounts stated in his T4A slips
for each year reflect the net amount paid to him (taking into account the
amounts he repays during that year). Presumably he will also continue to be
allowed a deduction for each year for the amounts that he repays during that
year under the Canadian Forces pension.
[13]
The Appellant also
raised an issue in relation to a claim that he was making for a capital loss.
In 1993 the Appellant retained a contractor to build a house in Kingston, Nova Scotia. The Appellant stated that the house was
to be partially used for a business but did not indicate what portion of the
costs incurred would have been for this business or whether the Appellant had
commenced to carry on a business.
[14]
As a result of the
Appellant’s release from the Canadian Forces, the Appellant’s mortgage was not
approved and he was unable to pay the contractor. The contractor commenced an
action against the Appellant in the Supreme Court of Nova Scotia and was
awarded a lien in the amount of $50,217. In the decision of the Nova Scotia
Supreme Court the property is referred to either as the Appellant’s dwelling or
his house. There is no reference to the proposed use of a part of the structure
in carrying on a business. Included in the decision is a copy of a letter from
the lawyer for the Appellant to the lawyer for the contractor. In that letter,
the Appellant’s lawyer referred to the property as the Appellant’s house or
home. It also appears that the Appellant was living in this house for a period
of time.
[15]
It appears, based on the
testimony of the Appellant, that the property was subsequently seized and sold
and that the amount realized on the sale simply satisfied the outstanding lien.
[16]
In order to claim a
capital loss, the Appellant would have to establish the proceeds of disposition,
the adjusted cost base and that the property was not a personal use property. A
house in which the Appellant lived would be a personal use property. Even if
the taxpayer could establish all of these for a part of the property, any
resulting allowable capital loss could only be used as a deduction against taxable
capital gains, and the Appellant did not have any taxable capital gains in
2008. Therefore no adjustment will be made for the capital loss claimed by the
Appellant.
[17]
As a result the
Appellant’s appeal is dismissed, without costs.
Signed at Ottawa,
Canada, this 2nd day of December, 2011.
“Wyman W. Webb”
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