Citation: 2010 TCC 458
Date: 20100914
Docket: 2008-2227(IT)G
BETWEEN:
RENÉE CHRISTIAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Favreau J.
[1]
This is an appeal of a
reassessment dated July 28, 2008, made under the Income Tax Act,
R.S.C. 1985 (5th Supp.), c. 1 , as amended (the “Act”),
for the 2006 taxation year, in which the appellant claimed moving expenses in
the amount of $56,148.
[2]
The Minister of
National Revenue (the "Minister") initially assessed the Appellant's
tax liability for the 2006 taxation year by a notice of assessment dated August
27, 2007 disallowing all moving expenses claimed by the Appellant because they
were not supported by receipts or other acceptable documents.
[3]
By notice of
reassessment dated April 10, 2008, the Minister reassessed the Appellant’s tax
liability for the 2006 taxation year and allowed a $19,364 deduction for
moving expenses.
[4]
By another notice of
reassessment, dated July 28, 2008, the Minister again reassessed the
Appellant’s tax liability for the 2006 taxation year and allowed an additional
$10,000 deduction for moving expenses. At that time, the following moving
expenses were allowed:
|
-
Commission paid on
sale of old residence
-
Legal fees
-
Atlas (transportation
of household effects)
-
Meals and
accommodation (8 days)
Total
|
$17,842
$ 589
$ 9,084
$ 1,847
$29,364
|
[5]
At the opening of the
hearing, the Respondent conceded the following moving expenses:
|
- One month's storage
- Travel costs (other than accommodation and
meals)
- Meals and accommodation while travelling
- Temporary living expenses (accommodation)
- Temporary living expenses (meals)
- Paid to UPS in the course of selling the
old residence
Total
|
$ 144.45
$ 706.00
$ 447.00
$2,298.88
$ 811.96
$ 206.52
$4,614.81
|
[6]
During the hearing, the
Respondent also conceded an amount of $566.46 paid for the geodetic survey
carried out with respect to the sale of the old residence.
[7]
As a result of all the
concessions and adjustments described above, the amounts still at issue before
the Court are the following:
|
- For transportation and storage of
household effects
- For meals and accommodation while
travelling
- Temporary living expenses (accommodation)
- For selling costs in respect of old
residence
- For costs for purchase of new residence
Total
|
$ 1,036.90
$ 1,999.50
$ 4,550.88
$9,152.54
$8,476.40
$25,216.22
|
[8]
Another issue raised by
the Appellant was whether or not the Minister properly credited a payment of
$13,989.62 made by the Appellant on the filing of her 2006 income tax return.
The question of the jurisdiction of the Court to make that determination was
raised by the Respondent.
[9]
There is no dispute
that the Appellant, a self-employed taxpayer carrying on the business of
selling cosmetics for Mary Kay, relocated and was allowed to deduct moving
expenses incurred in 2006 in respect of that relocation, since it was admitted
that the relocation was an "eligible relocation" as defined in section 248
of the Act.
[10]
The definition of
" moving expenses" is found in subsection 62(3) of the Act;
the relevant portions of that definition are the following:
(3) Definition of "moving expenses" ─ In subsection (1),
"moving expenses" includes any expense
incurred as or on account of
(a) travel costs (including a reasonable amount expended for
meals and lodging), in the course of moving the taxpayer and members of the
taxpayer’s household from the old residence to the new residence,
(b) the cost to the taxpayer of transporting or storing
household effects in the course of moving from the old residence to the new
residence,
(c) the cost to the taxpayer of meals and lodging near the
old residence or the new residence for the taxpayer and members of the
taxpayer’s household for a period not exceeding 15 days,
(d) . . .
(e) the taxpayer’s selling costs in respect of the sale of
the old residence,
(f) where the old residence is sold by the taxpayer or the
taxpayer's spouse or common-law partner as a result of the move, the cost to
the taxpayer of legal services in respect of the purchase of the new residence
and of any tax, fee or duty (other than any goods and services tax or
value-added tax) imposed on the transfer or registration of title to the new
residence,
(g) . . .
(h) . . .
but, for greater certainty, does not include costs (other than costs
referred to in paragraph (f)) incurred by the taxpayer in respect of the
acquisition of the new residence.
[11]
The use of the word
"includes" in subsection 62(3) of the Act means that the list
is not exhaustive. It has also been recognized that the words "moving
expenses" must be construed in their ordinary and natural sense in their
context in the particular statute (Storrow v. R., 1978 CarswellNat 253, 78 DTC 6551
(F.C.T.D.)). Furthermore, the amount deductible under section 62 of the Act
must be reasonable in the circumstances, as required by section 67 of the Act.
Costs for transportation and storage of household
effects
[12]
The disputed amount in
respect of the costs for the transportation and storage of household effects is
$1,036.90. The Minister has allowed the deduction of $9,228.45 and disallowed
the excess amount because the period of storage of the household effects was
too long.
[13]
During her testimony,
the Appellant explained that her household effects had to remain in storage
until such time as she could move into her new residence on December 19, 2007.
The construction of the new residence, located at 7794 Talbot Trail,
Blenheim, started in the fall of 2006 and was terminated at the end of 2007.
During the construction, she had to live in hotels, and that explains why her
household effects remained in storage for a long period of time. The amount
claimed as a deduction in this respect included only that portion of the expenses
that was incurred in 2006.
[14]
The Minister has
allowed all transportation costs for the household effects and has allowed one
month of storage. I consider that as being reasonable in the circumstances. The
decision to acquire a new residence which took more than a year to build was the
Appellant's personal choice and I do not see any reason why Canadian taxpayers
should bear the cost of that personal choice.
Meals and accommodation while travelling
[15]
The disputed amount in
respect of the claim for meals and accommodation while travelling is $1,999.50.
The Minister has allowed all travel costs (other than meals and accommodation),
namely $1,223 for accommodation and $1,071 for meals for a total of $2,294.
[16]
In her testimony, the
Appellant explained that it took her 10 days to drive 3,154 km (the
distance between Edmonton and Blenheim) with her two children, aged 10 and 7
years, and that it took her a few extra days because she had had health
problems. She provided some supporting medical receipts.
[17]
The Minister accepted
the claim for 7 nights, which represent 400 km per day and 4 hours of driving
per day. The excess amount claimed was refused because there was some leisure
time included in the claim (for example, 4 nights in Wisconsin and three days in a water park).
[18]
The amount that has
been accepted by the Minister for meals represents a flat rate of $17 a meal,
up to a maximum of $51 per day per person, without receipts. This was based on
meal and vehicle rates used by the Canada Revenue Agency ("CRA") to
calculate travel expenses for 2006.
[19]
Considering the
distance travelled, the fact that the Appellant was driving alone with her two
young children and that she had health problems, I find that 10 days for travel
was reasonable in the circumstances. Furthermore, the amount claimed for meals
($1,571.36) closely approximates the amount arrived at under the formula used
by the CRA.
Temporary living expenses (accommodation)
[20]
The disputed amount in
respect of the claim for temporary living expenses (accommodation) is
$4,550.88. The Minister has accepted an amount of $2,298, which represents 13
days and is within the 15-day maximum period allowed by paragraph 62(3)(c)
of the Act. This statutory requirement allows of no exceptions and must
be met. The Minister has accepted the claim for those expenses supported by receipts
that were incurred while the Appellant stayed in the London
area.
Selling costs for old residence – other selling costs
[21]
The disputed amount in
respect of the selling costs for the old residence (other selling costs) is
$9,719 of which $8,395.10 represents writ interest and $1,323.90 represents
freight/post, waste removal and closing costs and costs for repairs (floor
touch-up before the residence was listed for sale). The Minister disallowed the
latter expenses because no receipts were submitted by the Appellant.
[22]
Mr. Christos Daras, the
Appellant’s spouse, from whom the Appellant was separated, testified at the
hearing to explain what the writ interest was. The $24,627 writ was a lien on
the residence resulting from a tax debt owed by him to the CRA. The Appellant
became jointly and severally liable with him with respect to the above-mentioned
writ, pursuant to the subsection 160(1) of the Act, when he
transferred to her his share of the residence on December 20, 2001 for a
consideration that was less than fair market value.
[23]
The Appellant submits
that the Minister did not have the statutory authority to charge and collect
interest because paragraph 160(1)(e) sets a limit on liability. The
Appellant is only liable for any amount owing by the transferor of the property
up to and including December 20, 2001.
[24]
The Appellant further
submits that she had no choice but to pay the writ interest in order to be able
to sell her residence.
[25]
The respondent’s
counsel submits that the payment of the writ interest was not directly related
to the move and constituted a personal liability similar to mortgage interest.
[26]
The disputed outlays in
respect of the sale of the old residence, that is, the other selling costs,
were not, in my opinion, moving expenses in the natural and ordinary meaning of
that expression and were not directly and solely related to the move.
[27]
In Séguin v. R.,
1997 CarswellNat 2392, 97 DTC 5457, the Federal Court of Appeal, in
disallowing the deduction of mortgage interest expenses incurred by
Mr. Séguin on his former house until its sale, stated the following:
8 According to the ordinary meaning of the words used, the provision
includes those expenses incurred for physically moving, changing one’s
residence, and certain other expenses directly related to the actual move and
resettlement, and not some amount intended to compensate for accessory damages
that are unrelated to the actual move to and resettlement in the new residence.
Thus, it excludes the interest expenses on the old residence that do not
pertain directly to the physical move of the taxpayer and his family, but
instead pertain to the bank loan he took out on his old residence.
[28]
In my opinion, the writ
interest cost is comparable to interest expenses relating to the old residence.
The Appellant is not entitled to deduct as moving expenses a payment of
interest . As stated by Justice Collier in Storrow, supra, "Only
outlays incurred to effect the physical transfer of the taxpayer, his household,
and their belongings to the new residence are deductible" (par. 14
in fine).
[29]
In this appeal, this
Court only has to consider the deductibility of the writ interest cost as a moving
expense. No decision as to whether or not the Minister had the statutory
authority to charge the Appellant interest and collect that interest from her can
be made as that was not raised as an issue in this appeal and is not before me.
[30]
The other expenses claimed
with respect to the sale of the old residence are not deductible as moving
expenses either because they are not supported by receipts (e.g., freight/post)
or were incurred in preparation for the move (e.g., repair costs) rather than being
actual moving expenses as contemplated by subsection 62(3) of the Act.
Costs for purchase of new residence
[31]
The disputed amount in
respect of the claim for the costs related to purchasing a new residence is
$8,476.40, which represents the following expenses:
|
-
Damage deposit
-
Permit fee
-
Permit fee servicing
-
Public Utilities Commission
fee
-
Single fee, water
-
Permit fee (new
septic system)
Lower Thames
fee - conservation authority
|
$1,000.00
$4,919.40
$60.00
$ 140.00
$1,087.00
$1,120.00
$ 150.00
|
Those outlays are not deductible because they are
costs not referred to in paragraph 62(3)(f) of the Act. Subsection 62(3)
in fine provides, for greater certainty, that deductible moving expenses
do not include costs (other than costs referred in paragraph (f)) incurred
by the taxpayer in respect of the acquisition of the new residence.
[32]
Paragraph 62(3)(f)
provides that, where the old residence is sold by the taxpayer, the cost to the
taxpayer of legal services in respect of the purchase of the new residence and
of any tax, fee or duty (other than any goods and services tax or value‑added
tax) imposed on the transfer or registration of title to the new residence is
included in the definition of "moving expenses".
[33]
The outlays referred to
in paragraph 31 above were fees incurred in respect of the acquisition of
the new residence but were neither costs of legal services nor fees or duties
imposed on the transfer or registration of title to the new residence.
[34]
The last issue raised
by the Appellant concerns a payment of $13,989.62 made on the filing of her
2006 tax return, which payment, according to her, has not been credited to her.
The Respondent's counsel argued that the said amount was in fact credited to
her and that, in any event, this Court does not have jurisdiction to deal with
this accounting issue.
[35]
In Miller et al. v.
The Queen, 2007 DTC 680, Justice Margeson of this Court made it clear that ruling
on accounting issues regarding a debt owed is different from a determination of
the liability giving rise to the debt and that the determination of a debt owed
to the Crown falls within the jurisdiction of the Federal Court and not of this
Court. I share the view of Justice Margeson in that there is no right of appeal
from a statement of account, as a statement of account is not an assessment,
and in that the "balance unpaid", even if included in a notice of
assessment or reassessment, is not a matter that is subject to appeal under the
provisions of the Act, as it is the result of the assessment or
reassessment but not a component of the assessment of tax, interest and
penalties.
[36]
Consequently, the Court
is satisfied that it has no jurisdiction in respect of the accounting issue
raised by the Appellant.
[37]
For the reasons set out
above, the appeal of the reassessment for the 2006 taxation year is allowed in
part, without costs, and the matter is referred back to the Minister for
reconsideration and reassessment on the basis that the Appellant is entitled to
a moving expenses deduction of $1,999.50 for meal and accommodation costs
incurred while travelling.
Signed at Ottawa, Canada, this 14th day of September 2010.
"Réal Favreau"
Email this Content