Citation: 2007TCC95
Date: 20070216
Docket: 2006-120(IT)I
BETWEEN:
ROALD K. ABRAHAMSEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Mogan D.J.
[1] Section 62 of the Income Tax Act (the "Act") permits a taxpayer to deduct in computing income amounts paid as "moving expenses" within particular circumstances. The Appellant and his wife resided in Nova Scotia from 1994 to 2000. In September 2000, they moved to Ontario but he did not find fulltime employment in Ontariountil January 2002. When filing his income tax return for 2002, the Appellant deducted various amounts which he regarded as moving expenses connected with his move from Nova Scotiato Ontario.
[2] By Notice of Reassessment dated October 21, 2003, the Minister of National Revenue (the "Minister") disallowed as deductions about 80% of the amounts claimed by the Appellant as moving expenses. The Appellant has appealed from that reassessment and has elected the informal procedure. The only issue is which, if any, of the amounts disallowed as deductions by the Minister may be deducted under section 62 of the Act.
[3] From 1994 to 2000, the Appellant had only sporadic employment in Nova Scotia. In 1997, he came to Ontarioto take a three-month job at a hunting camp. On August 10, 1997, the Appellant and his wife listed for sale their home in Nova Scotia. See Exhibit R-1, Tab 1. The home was not sold until September 1, 2000. See Exhibit R-1, Tab 2. After the sale of their home, the Appellant and his wife put their furniture in storage in Nova Scotia and stayed briefly with friends at Bridgewater. They then drove to Toronto, Ontariowhere they intended to establish a permanent residence.
[4] From the end of September 2000 until April 30, 2001, the Appellant and his wife were vacationing in Florida, USA in rental accommodation. They returned to Ontario and from May 15 to December 15, 2001, they resided in a house on Oriole Road, Toronto. The house had been owned by the parent of a friend and, following the parent's death, they lived in the house rent-free while it was being shown for sale. After the house was sold in mid-December 2001, the Appellant and his wife lived briefly with a friend and then moved into a rental apartment at Avenue Road and St. Clair Avenue, Toronto for three months (January to March) paying $1,500 per month rent.
[5] When the Appellant returned to Toronto from Florida in May 2001, he began to look for fulltime employment. On June 9, 2001, he and his wife signed an agreement to purchase a new house to be built at 949 Best Circle, Newmarketabout 30 miles north of Toronto. When the new house was completed at the end of March 2002 (See Exhibit R-1, Tabs 3 and 4), the Appellant and his wife moved in and caused their furniture to be taken out of storage in Nova Scotia and shipped to their new house in Ontario.
[6] Although the Appellant was looking for fulltime employment in the last six months of 2001, he was not desperate because he had a pension. In the fall of 2001, he was offered a job starting in January 2002 as part of the World Youth Day organization. He accepted the offer and started to work fulltime for World Youth Day in January 2002. I am satisfied that the Appellant did not have any employment in Ontariowhen he and his wife moved in September 2000 from Nova Scotia to Ontario.
[7] There was a significant amendment to section 62 of the Act which took effect after 1997. The pre-1998 legislation and cases decided thereunder may not apply to the appeal herein with respect to the taxation year 2002. It is helpful, however, to contrast the pre-1998 legislation with the current Act.
Pre-1998
62(1) Where a taxpayer has, at any time, commenced
(a) to carry on business or to be employed at a location in Canada (in this subsection referred to as "the new work location"), or
(b) ...
and by reason thereof has moved from the residence in Canada at which, before the move, the taxpayer ordinarily resided (in this section referred to as "the old residence") ...
A number of decided cases have construed the words "and by reason thereof has moved" to mean that the taxpayer must have employment at the new location before making the move to the new location. In Pelchat v. M.N.R., 84 DTC 1865, Tremblay J. stated in paragraph 25:
However, the Court considers that the interpretation to be given is that, when the taxpayer in fact moves, he must have already found employment in the new location in order to benefit from the deduction provided for by section 62.
Pelchat was followed by Beaubier J. in Ball v. The Queen, [1996] 3 C.T.C. 2178 and by Hamlyn J. in Hippola v. The Queen, [2002] 1 C.T.C. 2156.
[8] The wording of the current section 62 is quite different from the prior legislation:
Post-1997
62(1) There may be deducted in computing a taxpayer's income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation ...
(a) ...
248(1) In this Act,
"eligible relocation" means a relocation of a taxpayer where
(a) The relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a location in Canada (in section 62 and this subsection referred to as "the new work location"), or
(ii) ...
(b) both the residence at which the taxpayer ordinarily resided before the relocation (in section 62 and this subsection referred to as "the old residence") and the residence at which the taxpayer ordinarily resided after the relocation (in section 62 and this subsection referred to as "the new residence") are in Canada, and
(c) the distance between the old residence and the new work location is not less than 40 kilometers greater than the distance between the new residence and the new work location
...
[9] In the definition of "eligible relocation", I would not construe the words in paragraph (a) "to enable the taxpayer ... to be employed ..." as a requirement that the taxpayer have employment at the new location before making a move to the new location. In my view, the current legislation gives more latitude to the taxpayer than the pre-1998 legislation.
[10] Under the pre-1998 legislation, moving expenses were deductible only in the taxation year when the taxpayer moved or "the immediately following taxation year". Under the current (post-1997) legislation, moving expenses are deductible to the extent that they were not deductible "because of this section ... for the preceding taxation year". Also, under paragraph 62(1)(c), moving expenses may be deducted only from the taxpayer's employment income at a new work location. In this appeal, if the Appellant did not have any employment income in Ontario in 2001 or in the last four months of 2000, then the 2002 taxation year would be the first taxation year in which his moving expenses would be deductible.
[11] The Appellant appeared without counsel and represented himself. He did not state that he needed employment income to sustain his lifestyle but I conclude that he did need such income because (i) between 1994 and 2000, he had come to Ontario more than once looking for fulltime employment; (ii) commencing in June 2001, after the Appellant and his wife had returned to Toronto following a winter in Florida, he started to look for fulltime employment; (iii) when he and his wife closed the purchase of the new house in Newmarket in March 2002, there was a substantial first mortgage on that house (Exhibit R-1, Tab 4); and (iv) when he testified at the hearing of this appeal, he described himself as employed.
[12] I also conclude that the Appellant found employment in Ontariowithin a reasonable time after the September 2000 move when he started to work for World Youth Day in January 2002. Therefore, as I view the current (post-1997) words in section 62, the Appellant is permitted to deduct in computing his income for 2002 his "moving expenses" within the limits of section 62.
[13] For 2002, the Appellant deducted moving expenses in the aggregate amount of $25,075.36 comprising the following eight items:
|
1. Transport and Storage for Household Effects
(Nova Scotia)
|
$4,400.00
|
|
Travel Expenses from old to new residence:
|
|
|
2. Travel Costs other than accommodation and meals
|
350.00
|
|
3. Accommodation
|
96.00
|
|
4. Meals
|
50.00
|
|
Costs of Selling Old Residence:
|
|
|
5. Real Estate Commissions
|
16,200.00
|
|
6. Legal or notarial fees
|
750.00
|
|
Costs of Purchasing New Residence:
|
|
|
7. Legal or notarial fees
|
695.00
|
|
8 Taxes paid for Registration of Transfer of Land
|
2,534.36
|
|
Total
|
$25,075.36
|
[14] In the reassessment under appeal, the Appellant was permitted to deduct the following three amounts corresponding to the numbered items in paragraph 13 above:
|
1. Storage and transportation of household effects
|
$3,500.00
|
|
2. Travel Costs
|
350.00
|
|
4. Meals
|
50.00
|
Because the Appellant did not produce any receipts at the hearing of his appeal, I will not increase the amounts allowed by the Minister under items 1, 2 and 4. Using the definition of "moving expenses" in subsection 62(3) of the Act, I will permit the Appellant to deduct the following additional amounts:
|
3. Accommodation - 62(3)(a)
|
96.00
|
|
5. Real Estate Commissions - 62(3)(e)
|
16,200.00
|
|
6. Legal Services (NS) - 62(3)(e) Exhibit R-1, Tab 2
|
451.40
|
|
7. Legal Services (ON) - 62(3)(f) Exhibit R-1, Tab 4
|
1,275.82
|
|
8 Land Transfer Tax (ON) - 62(3)(f) Exhibit R-1, Tab 4
|
2,534.36
|
|
Total
|
$20,557.58
|
[15] The appeal is allowed in part and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that in computing income, the Appellant is permitted to deduct additional moving expenses of $20,557.58 as listed in paragraph 14.
Signed at Ottawa, Canada, this 16th day of February, 2007.
"M.A. Mogan"
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