Citation: 2009TCC163
Date: 20090409
Docket: 2008-3470(IT)I
BETWEEN:
SCOTT PHILLIPS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] In 2006, the Appellant, Scott Phillips, moved from
Ontario to Airdrie, Alberta to take up new employment. At
issue are certain deductions disallowed by
the Minister of National Revenue on the basis that they were not “moving expenses”
within the meaning of subsections 62(1) and (3) of the Income Tax Act:
1. $ 5,000 for a commission related to the
purchase of the new residence;
2. $ 290.55 for car rental from May 6 to 10,
2006; and
3. $ 29.57 for materials used to
construct a ramp to unload a recreational aircraft from the moving van.
The
Real Estate Commission
[2] When the
Appellant moved to Alberta in 2006, that province was experiencing an
unprecedented real estate boom. The Appellant found himself in a seller’s
market. The vendor of the property he purchased in Airdrie had not listed the
property with an agent; as a result, the Appellant ended up paying, out of his
own pocket, fees to his real estate agent for services that would normally have
been borne by a vendor as part of his commission to the selling agent.
[3] The Appellant
argues that in the unusual circumstances of his situation, subsection 62(3) of
the Act ought to be interpreted broadly to permit the deduction of the fees
he paid to his real estate agent. The applicable provision is paragraph 62(3)(f):
(3) Definition
of “moving expenses” – In subsection (1), “moving expenses” includes any
expense incurred as or on account of
…
(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, and
…
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.
[4] Subsection 62(1)
provides generally for the deduction of “amounts paid by the taxpayer as or on
account of moving expenses”. The term “moving expenses” is defined in
subsection 62(3) as including the items listed in that provision; the use of
the word “includes” means that the list is not exhaustive.
However, the concluding portion of subsection 62(3) expressly excludes from the
definition of “moving expenses”, “… costs (other than costs referred to in
paragraph (f)) incurred by the taxpayer in respect of the acquisition of
the new residence.”
[5] As the $5,000
fee the Appellant paid to his realtor cannot be characterized as “legal
services” or “any tax, fee or duty … imposed on the transfer or registration of
title to the new residence” as contemplated by paragraph (f), it was a
cost incurred “in respect of the acquisition of the new residence”. As such, it
falls squarely within the exclusionary provision of subsection 62(3) and was
properly disallowed by the Minister.
The Car Rental Expense
[6] The Appellant owned a car in Ontario prior to his move in 2006. He considered driving or shipping
it to Alberta. Upon learning that shipping would cost in the area
of $1,500[2], he decided it would make more sense to sell it and
purchase a new one in Alberta. Upon his arrival, he rented a car at the Calgary airport
and drove to Airdrie to start his new job. He immediately began the search for
a car to replace the one he had sold in Ontario; within five days, he had acquired and registered a 1994
Saturn for which he paid $1,200. The cost of the rental car used in the interim was $
290.55.
[7] The
Minister disallowed the car rental deduction. The Appellant’s argument is that
but for the move to Alberta, he would not have incurred this expense. Had he
driven or shipped that vehicle to Alberta, he could have deducted the costs of doing so, either
of which would have been significantly more costly than the rental cost of
$290.55. Instead, he chose the more fiscally prudent option and upon his
arrival at the Calgary airport, proceeded forthwith to acquire a replacement
vehicle.
[8] Counsel for the Respondent submitted that such an
expense is not a “moving expense” since there is no specific provision for car
rental costs in subsection 62(3); nor does such an expense fall within the
ordinary meaning of “moving expenses”.
[9] To
determine whether the cost claimed by the taxpayer is within the ordinary
meaning of “moving expenses”, the test is whether that cost is “… a direct
consequence of the change in residence imposed by the change in employment”. But for his move from
Ontario to work in Alberta, the Appellant would not have needed to move his car
to Alberta; in lieu of the more costly options of shipping or driving his
existing vehicle to Alberta, the Appellant quite sensibly decided to replace it.
He could not reasonably be expected to acquire a replacement vehicle in Airdrie,
some 31 kilometers north of Calgary, without interim transportation. Immediately upon his
arrival in Alberta he set about replacing his former vehicle and within
five days, had done so. In these circumstances, the car rental expense of $290.55
was a direct and reasonable cost of the move and is therefore deductible.
The
Ramp Expense
[10] The Appellant
owns a two-passenger hobby aircraft small enough, he testified, to have been constructed
in his living room. Its wings can be removed for transportation or storage.
When he moved from Ontario, he moved the aircraft by truck to Alberta. In
Ontario, he had friends who were able to help him lift the aircraft into the moving
truck; alone in Alberta, he had only himself to rely on. An ingenious fellow,
the Appellant went off to the local lumber yard and purchased $29.57 worth of
lumber to construct a ramp to effect the removal of the aircraft from the
moving truck into his garage. There it was stored (with its wings removed)
until he was able to make other arrangements at the Airdrie airport.
[11] The
Minister disallowed the deduction of the $29.57 on the basis that it did not
come within the meaning of subsection 62(3)(b):
62(3) Definition of “moving expenses”. In subsection (1), “moving expenses” includes any
expense incurred as or on account of
…
(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,
…
[12] The
Appellant argued that the cost of the ramp materials ought to be deductible, as
without the ramp he could not have completed the transport of the aircraft from
Ontario to Alberta. In support of his position, he referred the Court to
Interpretation Bulletin IT-178R3 which lists among the examples of allowable
moving expenses the costs of transporting such items as boats and trailers.
[13] The Respondent
argues that the $29.57 is not properly deductible as that cost was not incurred
for the “transporting or storing” of the aircraft and further, that the
Appellant’s aircraft does not come within the meaning of “household effects” in
paragraph 62(3)(b). Counsel for the Respondent referred to Yaeger v.
Minister of National Revenue[6] in which the question was whether the costs of
keeping and shipping a horse and trailer from England to Canada were properly
deductible under subsection 62(3). Concluding that a horse and trailer could
not reasonably be considered “household effects”, Couture, C.J. dismissed the
appeal. His decision was based, in part, on the French version of paragraph
62(3)(b) in which the word used for “household effects” is “meubles”
(which translates as “furniture”) and the adjectival clause modifying that term
“… qui doivent être transportés de son ancienne résidence dans sa nouvelle résidence”.
The Court concluded that “… no one in everyday usage would use the word
“furniture” when referring to animals”[7].
Further, Couture, C.J. translated “transportés de son ancienne résidence dans
sa nouvelle résidence”
as meaning “transported into the new residence”; on that translation, the
Court held that because a horse trailer could not be put “into” the new
residence, it was also excluded from the provision. [Emphasis added.]
[14] There being no
animals involved in the present matter, it remains only to consider whether the
Court’s conclusion with regard to the horse trailer is applicable to the
aircraft. In my view it is not. Notwithstanding the words used in the French
version of paragraph 62(3)(b), in English, the ordinary meaning of the
term “household effects” is broader than just “furniture”. Furthermore, in the
English version of paragraph 62(3)(b), the phrase is “transporting to
the new residence” which does not necessarily mean all household goods would be
put inside the new house.
[15] I accept the Appellant’s
description of the aircraft as a small hobby aircraft used for personal
recreation, designed to permit the removal of its wings to facilitate transportation
or storage. It is no different in kind from other recreational vehicles such as
a motor boat, a ski-doo or a bicycle, any of which would normally be considered
part of the household effects under subsection 62(3). This interpretation is
consistent with the example of the transport and storage of a boat and trailer
cited in IT-178R3. Furthermore, the “new residence” must be read broadly to
include the house and related areas like the garage or storage sheds.
[16] The next question
is whether the cost of the ramp to unload the aircraft was part of the
transportation and storage costs. Counsel for the Respondent argued that
because the Appellant was able to retain the ramp after he finished unloading
the aircraft, its costs could not reasonably be linked to the move. I prefer
however, the characterization advanced by the Appellant that the ramp is
analogous to the cardboard boxes used in a move. Their cost would certainly be
moving expenses; the fact that they might be reusable after the items were
unpacked would not diminish their deductibility under paragraph 62(3)(b).
Without the ramp, the Appellant would not have been able to complete its
transportation to the new residence i.e., to make the last leg of the journey
from the truck into the garage. The construction of the ramp was integral to
the act of transporting the aircraft and the $29.57, part of the total
transportation cost. Accordingly, the ramp cost is deductible.
[17] The Appellant is
also claiming relief from the interest charged in respect of the disallowed
amounts. As counsel for the Respondent correctly submitted, the Tax Court of
Canada has no jurisdiction to grant such relief.
[18] The appeal is
allowed and referred back to the Minister of National Revenue for
reconsideration and reassessment on the basis that the Appellant is entitled to
deduct $290.55 for car rental expenses and $29.57 for the ramp construction costs.
Signed at Ottawa,
Canada, this 9th day of April, 2009.
“G. A. Sheridan”
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