Citation: 2010TCC332
Date: 20100617
Docket: 2009-3094(OAS)
BETWEEN:
GEORGE GAISFORD,
Appellant,
and
THE MINISTER OF HUMAN RESOURCES
AND SKILLS DEVELOPMENT,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1]
The Appellant is
appealing the computation of his income for the purposes of determining the
guaranteed income supplement for the purposes of the Old Age Security Act
(the “OAS”). The Appellant’s position is that his income as determined
for the purposes of the OAS should not include amounts that he received
from his Registered Retirement Income Fund (“RRIF”) and should not include the
gross-up amount for dividends. It is his position that only the actual amount
of the dividends that he received should have been included in his income for
the purposes of the OAS and not the amount that reflects the additional
amount to be added pursuant to section 82 of the Income Tax Act.
[2]
Section 2 of the OAS
provides that:
“income” of a person for a calendar year means the person's income
for the year, computed in accordance with the Income Tax Act, except
that
…
(d) there shall be deducted from the person's income for the year
three times the amount, if any, by which
(i) the total of any amounts that may be deducted under section 121
of the Income Tax Act in computing the person's tax payable for the year
exceeds
(ii) the person's “tax for the year otherwise payable under this
Part” (within the meaning assigned by subsection 126(7) of the Income Tax Act
for the purposes of paragraph 126(1)(b) of that Act) for the year; and
[3]
The Appellant was not
alleging that the Respondent had failed to take into account any deduction that
should have been taken into account under paragraph (d) of the definition of income
in section 2 of the OAS. His argument was that “income” for the purposes
of the OAS should be determined based on the actual amount of the
dividends that he received.
[4]
The Appellant received
a T5 slip and a T3 slip for 2007 from RBC Direct Investing Inc. These slips
indicated the following in relation to the dividends that were paid to the
Appellant in 2007:
|
|
Actual amount of eligible dividends
|
Taxable amount of eligible dividends
|
Dividend tax credit for eligible
dividends
|
|
T5
|
$2,675.19
|
$3,879.03
|
$735.68
|
|
T3
|
$241.34
|
$349.92
|
$66.32
|
|
Total:
|
$2,916.53
|
$4,228.95
|
$802.00
|
[5]
The Appellant also
received the amount of $4,699.21 from his RRIF. It is his position that no part
of the amount received from his RRIF should have been included in his income
for the purposes of the OAS and that only $2,917 (and not $4,229) should
have been included in his income for the purposes of the OAS in relation
to the dividends that he had received.
[6]
The income of a person
for a calendar year for the purposes of the OAS is “the person’s income
for the year, computed in accordance with the Income Tax Act”. Subsection
56(1) of the Income Tax Act provides, in part, that:
56. (1) Without restricting the generality of section 3, there
shall be included in computing the income of a taxpayer for a taxation year,
…
(t) amounts in respect of a registered retirement income fund
required by section 146.3 to be included in computing the taxpayer's income for
the year;
[7]
Subsection 146.3(5) of
the Income Tax Act provides that:
(5) There shall be included in computing the income of a taxpayer
for a taxation year all amounts received by the taxpayer in the year out of or
under a registered retirement income fund other than the portion thereof that
can reasonably be regarded as
(a) part of the amount included in computing the income of another
taxpayer by virtue of subsections (6) and (6.2); or
(b) an amount received in respect of the income of the trust under
the fund for a taxation year for which the trust was not exempt from tax by
virtue of subsection (3.1).
(c) an amount that relates to interest, or to another amount
included in computing income otherwise than because of this section, and that
would, if the fund were a registered retirement savings plan, be a tax-paid
amount (within the meaning assigned by paragraph (b) of the definition
“tax-paid amount” in subsection 146(1)).
[8]
There was no suggestion
in this case that any of paragraphs (a), (b) or (c) are applicable. The
Appellant’s only argument was that the amount in the RRIF was his money and
that it should not be included in his income when it is paid to him. However,
the amount that he received from his RRIF represents an amount that has not
been taxed – either because he would have received a deduction in computing his
income when he made a contribution to his registered retirement savings plan or
the amount is paid from income earned while the amount was held by the RRSP or
RRIF (which would not have been taxed when earned).
[9]
It is clear that the
amounts received by the Appellant from his RRIF were to be included in
computing his income in accordance with the provisions of the Income Tax Act and
therefore are also to be included in determining his income for the purposes of
the OAS. Justice Little reached the same conclusion in Tabios v. The
Minister of Human Resources Development Canada, 2005 TCC 465.
[10]
Subsection 12(1) of the Income Tax Act provides, in
part, that:
12. (1) There shall be included in computing the income of a
taxpayer for a taxation year as income from a business or property such of the
following amounts as are applicable:
…
(j) any amount required by subdivision h to be included in computing
the taxpayer's income for the year in respect of a dividend paid by a
corporation resident in Canada on a share of its capital stock;
[11]
Section 82 of the Income
Tax Act is in subdivision h. This subsection, in 2007, provided, in part
that:
82. (1) In computing the income of a taxpayer for a taxation year,
there shall be included the total of the following amounts:
…
(a.1) the amount, if any, by which
(i) the total of all amounts, …, received by the taxpayer in the
taxation year from corporations resident in Canada as, on account of, in lieu
of payment of or in satisfaction of, eligible dividends,
…
(b) if the
taxpayer is an individual, …, the total of
…
(ii) 45% of the amount determined under paragraph (a.1) in respect
of the taxpayer for the taxation year,
…
[12]
It is clear that in
computing income in accordance with the Income Tax Act that the gross-up
prescribed by subsection 82(1) of the Income Tax Act is to be included.
In this case, the Appellant’s income as determined in accordance with the Income
Tax Act would have included the amount of $4,229 in relation to the
dividends that he received and therefore the same amount is to be included in
determining his income for the purposes of the OAS. It must be
remembered that dividend income is not taxed in the same manner as interest
income. While dividends are grossed-up so that a greater amount is included in
income than was actually received, the individual is also entitled to claim a
dividend tax credit. As a result, the amount of income tax that would be paid
in relation to an actual dividend of $2,917 will be less than the amount of
income tax that will be paid in relation to interest income of $2,917.
[13]
As a result the
Appellant’s appeal from the decision of the Respondent in relation to the
calculation of his entitlement to the Guaranteed Income Supplement under the OAS
for the period from July 2008 to June 2009 is dismissed, without costs.
Signed at Ottawa, Canada, this 17th day of June, 2010.
“Wyman W. Webb”
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