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Docket: 2003-4485(IT)G
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BETWEEN:
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DON G. BURLEIGH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Motion heard on common evidence with the motion of
Douglas A. Burleigh (2003-4487(IT)G) on
March 2, 2004 at Toronto, Ontario.
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Before: The Honourable D.G.H. Bowman, Associate Chief
Justice
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Appearances:
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Counsel for the Appellant:
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Jacques Bernier
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Counsel for the Respondent:
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Shatru Ghan
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____________________________________________________________________
AMENDED ORDER
Upon motion made by counsel for the respondent for an order
dismissing the appeal pursuant to paragraph 58(1)(b)
of the Tax Court of Canada Rules (General Procedure);
And upon hearing what was alleged by the parties;
The motion is dismissed with costs payable to the appellant in
any event of the cause;
.../2
The respondent is granted an extension of 30 days from the
date of this amended order in which to serve and file a Reply to
the Notice of Appeal.
Signed at Toronto, Ontario, this 9th day of March
2004.
Bowman, A.C.J.
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Docket: 2003-4487(IT)G
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BETWEEN:
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DOUGLAS A. BURLEIGH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Motion heard on common evidence with the motion of
Don G. Burleigh (2003-4485(IT)G)
on March 2, 2004 at Toronto, Ontario.
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Before: The Honourable D.G.H. Bowman, Associate Chief
Justice
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Appearances:
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Counsel for the Appellant:
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Jacques Bernier
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Counsel for the Respondent:
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Shatru Ghan
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____________________________________________________________________
AMENDED ORDER
Upon motion made by counsel for the respondent for an order
dismissing the appeal pursuant to paragraph 58(1)(b)
of the Tax Court of Canada Rules (General Procedure);
And upon hearing what was alleged by the parties;
The motion is dismissed with costs payable to the appellant in
any event of the cause;
.../2
The respondent is granted an extension of 30 days from the
date of this amended order in which to serve and file a Reply to
the Notice of Appeal.
Signed at Toronto, Ontario, this 9th day of March
2004.
Bowman, A.C.J.
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Citation: 2004TCC197
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Date: 20040309
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Docket: 2003-4485(IT)G
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BETWEEN:
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DON G. BURLEIGH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent,
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AND
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Docket: 2003-4487(IT)G
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BETWEEN:
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DOUGLAS A. BURLEIGH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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AMENDED REASONS FOR ORDER
Bowman, A.C.J.
[1] These motions were heard together.
The respondent seeks an order striking out the appeals on the
grounds that the Notices of Appeal disclose no reasonable grounds
for the appeal (paragraph 58(1)(b)) of the Tax Court of
Canada Rules (General Procedure) or that they are scandalous,
frivolous or vexatious (paragraph 53(b)). There is
certainly nothing scandalous, frivolous or vexatious about the
Notices of Appeal. They involve nothing more than a claim to
carry forward a net capital loss from 2001 to 2002. The point
under paragraph 53(b) of the Rules was not
pressed and I say nothing more about it.
[2] On a motion to strike out a
pleading on the ground that it discloses no reasonable grounds of
appeal within the meaning of paragraph 58(1)(b), one must
look solely at the pleading without recourse to other evidence.
Moreover, in accordance with a long line of authority in the
Supreme Court of Canada, which has frequently been followed in
this court, it must be "plain and obvious" that the action cannot
succeed.
[3] The paragraph in the two Notices
of Appeal, which the respondent alleges support her claim that
the notices of appeal disclose no reasonable grounds of appeal
are:
(Douglas Burleigh)
4. On or about
November 18, 2003, the Appellant filed an amended 2001
tax return and reported a capital loss of $3,441,945.87 which
gave rise to a net capital loss of $1,720,972.94 available to be
claimed in other years.
5. On or about
April 30, 2003, the Appellant filed his 2002 tax
return.
6. In his 2002
tax return, the Appellant applied $487,888.42 of the net capital
losses (as defined in subsection 111(8) of the Income Tax Act
(Canada) (the "Act")) arising in 2001 against his 2002
taxable capital gains.
(Don Burleigh)
4.
On or about November 18, 2003, the Appellant filed his 2001
tax return and reported a capital loss of $2,893,256.19 which
gave rise to a net capital loss of $1,446,628.10 available to be
claimed in other years.
5.
On or about April 30, 2003, the Appellant filed his
2002 tax return.
6.
In his 2002 tax return, the Appellant applied $488,696.50 of the
net capital losses (as defined in subsection 111(8) of the
Income Tax Act (Canada) (the "Act")) arising in 2001
against his 2002 taxable capital gains.
[4] The only difference between the
Notices of Appeal of Douglas Burleigh and Don Burleigh,
apart from the numbers, is that Don Burleigh reported the
capital loss in his original return for 2001 whereas
Douglas Burleigh reported the capital loss in an amended
return for 2001.
[5] If I understand the argument of
counsel for the respondent, the appellants have no right to claim
a net capital loss carryforward from 2001 to 2002 because when
they filed their returns for 2002 on or about
April 30, 2003, they had not yet filed returns for 2001
in which the capital loss had been reported. Counsel argued that
a right to claim a net capital loss carryforward under
paragraph 111(1)(b) of the Income Tax Act
exists only if the loss has been reported in the return for the
year in which it was incurred.
[6] Indeed, counsel goes further and
says that not only must the loss be so reported but the return
must have been "processed" by the Canada Customs and Revenue
Agency ("CCRA") and the loss accepted by the Minister of National
Revenue. If the taxpayer's calculation of the loss is not
accepted by the Minister, counsel contends, the taxpayer must
appeal.
[7] It seems there are a number of
misconceptions here. The first is that one can appeal from the
Minister's calculation of a loss even though the assessment is
nil. One cannot appeal from a nil assessment. What is possible is
to request a determination of loss under subsection 152(1.1).
Such a determination is binding, subject to the taxpayer's rights
of objection and appeal.
[8] If counsel's argument implies that
the only way in which one can challenge the Minister's
calculation of a loss which the taxpayer wishes to carry forward
or carry back to another year under section 111 is to seek a loss
determination and then to appeal it if the Minister disagrees
with the taxpayer's calculations, it is, with respect, wrong.
[9] It is clear that no loss
determination under section 152(1.1) is necessary. The taxpayer
may simply apply a loss carryforward to a year in which there is
income. If the Minister disagrees with the taxpayer's
calculations and assesses to disallow part or all of the loss
carryforward, the taxpayer can object and appeal. This is the
practice that has been followed for as long as I can remember. It
is in my view both correct in law and practical. Why seek a loss
determination if you are not sure that you will be able to use
it? It makes far more sense to claim the loss incurred in a prior
or subsequent year in the year when you have income and in which
it makes a difference. Nothing in the Income Tax Act
supports the respondent's position that a taxpayer can challenge
the Minister's calculation of a loss carryforward only through a
loss determination. If Parliament intended this result it knows
how to say so. I thought this notion had been laid to rest in
Aallcann Wood Suppliers Inc. v. The Queen, 94 DTC
1475.
[10] The next misconception is the idea that
not only must the loss upon which the loss carryforward is based
have been reported in a return of income for the year in which it
is incurred, but also that the return must have been "processed"
and the loss accepted by the Minister. This idea is wrong on two
counts. First, it is wrong to say that the loss must have been
reported in a return of income for the year in which it was
incurred. Section 111 imposes no such restriction. It permits a
taxpayer to carry various types of losses forward or back. It
says nothing about requiring the losses to have been reported in
an income tax return. The definitions in subsection 111(8) of the
various types of losses to which section 111 applies do not
include a requirement that they be reported in a return of income
for the year in which they were incurred. There are obviously
practical reasons why it is desirable to report the loss in the
return of income for the year in which it is incurred but this is
not a requirement of the law.
[11] An individual, unlike a corporation,
need not file a return of income if he or she is not taxable,
unless the Minister demands one. If an individual had a loss in a
particular year resulting in nil taxable income, the Crown's
argument would deny that individual the right to carry the loss
forward to a year when there was taxable income to which the loss
could be applied unless a return was filed for the year. Nothing
in the Income Tax Act imposes such a restriction.
[12] Finally, the idea that the return of
income must have been processed by the CCRA has no basis on the
statute or in common sense.
[13] Losses that are available for
carryforward - and I am talking about any kind of loss to which
subsection 111(1) applies - like income, have an existence that
is independent of their being reported in a return of income.
They are susceptible of objective determination. The taxpayer's
right to utilize such losses is not subject to the restrictions
which the Crown would impose on them. I am not prepared to read
into the Income Tax Act words that are not there.
[14] The motions are dismissed. The
appellants are entitled to their costs, payable in any event of
the cause.
[15] The respondent is granted an extension
of 30 days from the date of this amended order in which to serve
and file a Reply to the Notice of Appeal.
Signed at Toronto, Ontario, this 9th day of
March 2004.
Bowman, A.C.J.
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