Date: 20020513
Docket:
2002-150-IT-I
BETWEEN:
THOMAS
DOSWELL,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Little, J.
[1]
The Appellant is appealing a Notice of Assessment issued by the
Minister of National Revenue (the "Minister") for the
2000 taxation year.
[2]
The Appellant received dividends from taxable Canadian
Corporations of $2,915.77 in the 2000 taxation year.
[3]
In the year 2000, the Appellant also received a payment in the
amount of $5,079.00 under the Old Age Security
Act.
[4]
In computing his income for the 2000 taxation year, the Appellant
determined that he was required to include in his income the
amount of $2,359.38 based on the inclusion of the actual
dividends received by him of $2,915.77.
[5]
By Notice of Assessment dated June 21, 2001 the Minister
determined that in computing his income the Appellant should have
used the taxable amount of the dividends of $3,644.70 rather than
the actual amount of the dividends of $2,915.77.
[6]
The issue is whether the Appellant is required to report the
actual amount of dividends received by him of $2,915.77 or the
"grossed up" amount of the dividends ($2,915.77 x .25 =
$3,644.70) in the computation of the tax applicable to the
amounts received under the Old Age Security
Act.
Analysis
[7]
Section 180.2 of Part I.2 of the Income Tax
Act (the "Act") imposes a tax with respect
to federal Old Age Security Benefits included in the income of a
taxpayer. To the extent that the taxpayer's net income
including Old Age Security Benefits exceeds a threshold of
$50,000.00, or such amount after indexation, section 180.2
imposes a 15% tax on the benefits. This is sometimes referred to
as a "social benefit repayment" or a
"clawback".
[8]
In order to determine the amount of Part I.2
tax payable, it is necessary to:
(1)
Total the amounts of pension, supplement or spouse's or
common law partner's allowance under the Old Age Security
Act included as benefits in computing the individual's
Part I income for the year under
paragraph 56(1)(a);
(2)
Determine the "adjusted income" received by the
individual for the year, and then subtract the indexed threshold
amount and multiply the remainder by 15%.
The lesser of the two
amounts determined under (1) and (2) will equal the Part I.2 tax
payable by the individual for the taxation year.
[9]
In the case of the Appellant, the amount
determined under (2) using "adjusted income" was the
lesser of the two and was, therefore, the amount determined to be
the Appellant's Part I.2 tax payable (social benefits
repayment) for the 2000 taxation year.
[10]
For the purposes of the Part I.2 tax,
"adjusted income" is defined in subsection 180.2(1) of
the Act as follows:
"adjusted income" of an individual
for a taxation year means the amount that would be the
individual's income under Part I for the year if no amount
were deductible under paragraph 60(w) nor included in
respect of a gain from a disposition of property to which section
79 applies.
and is calculated under the general rules of Part I of
the Act (specifically section 3). "Adjusted
income" therefore, is a taxpayer's net income and not
his taxable income. As Judge Lamarre Proulx T.C.J. explained in
Poulin v. R., at
paragraph 12:
According to that paragraph, the
individual's income which is taken into account is his
"income", not his "taxable
income". Under the Act, income and taxable
income are different concepts and are governed by specific
legislative provisions. "Income" is computed under
Division B of Part I of the Act, while "taxable
income" is computed under Division C of the
Act...
[11]
However, as noted above, adjusted income is
calculated under section 180.2 as if no amount were deductible
under paragraph 60(w) (which provides for the
deduction of the social benefits repayment itself) or included in
respect of a gain from the disposition of property to which
section 79 applies (capital gains realized on mortgage
foreclosures).
[12]
Subsection 82(1) located in Division B of Part
I of the Act, requires that in computing the income of a
taxpayer for a taxation year there shall be included in income
Canadian-source dividend income received in the year, plus 1/4 of
the amount of the dividend. Therefore, where Canadian-source
dividend income was received in the year, it is the
"grossed-up" amount that must be included in the
determination of "adjusted income" used to calculate
the tax applicable to the amount received under the Old Age
Security Act.
[13]
The appeal is dismissed.
Signed at Vancouver, British Columbia, this
13th day of May 2002.
"L.M. Little"
J.T.C.C.
COURT FILE
NO.:
2002-150(IT)I
STYLE OF
CAUSE:
Thomas Doswell and
Her Majesty the Queen
PLACE OF
HEARING:
Ottawa, Ontario
DATE OF
HEARING:
April 25, 2002
REASONS FOR JUDGMENT
BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
May 13, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Justine Malone
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-150(IT)I
BETWEEN:
THOMAS DOSWELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on April 25, 2002 at Ottawa,
Ontario, by
the Honourable Judge L.M. Little
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Justine Malone
JUDGMENT
The appeal from the assessments made under the
Income Tax Act for the 2000 taxation year is dismissed in
accordance with the attached Reasons for Judgment.
Signed at Vancouver,
British Columbia, this 13th day of May 2002.
J.T.C.C.
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