Citation: 2004TCC166
|
Date: 20040220
|
Docket: 2002-2414(IT)I
|
BETWEEN:
|
RICHARD COLLINS,
|
Appellant,
|
and
|
|
HER MAJESTY THE QUEEN,
|
Respondent.
|
Docket: 2002-2416(IT)I
|
BETWEEN:
|
EMILIA COLLINS,
|
Appellant,
|
and
|
|
HER MAJESTY THE QUEEN,
|
Respondent.
|
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Lamarre J.
[1] The Appellants, a husband and
wife, are appealing the assessments made by the Minister of
National Revenue (the "Minister") in which they were deemed
non-residents in Canada within the meaning of the Income
Tax Act (the "Act") for the 1997 and 1998 taxation years in
the case of Richard Collins, and for the 1998 taxation year in
the case of Emilia Collins. The Minister disallowed both
Appellants' claim for the Goods and Services Tax Credit (the "GST
credit") pursuant to section 122.5 of the Act, which requires an
individual to be resident in Canada in order to be eligible for
this credit. Further, Emilia Collins, who earned $11,476 in
net rental income in Canada in 1998, was not allowed any
deductions in computing her tax payable (more specifically, no
personal tax credits within the meaning of section 118 of the
Act) pursuant to section 216 of the Act.
[2] During the years at issue, the
relevant legislative provisions read as follows:
SECTION 122.5: Definitions [for the GST
credit].
(1) The following
definitions apply in this section.
"eligible individual" Individual, except a trust, who,
as at December 31 of a taxation year, is resident in Canada and
is married or in a common-law relationship, is a father or mother
of a child or has attained the age of 19 years.
SECTION 216: Alternatives re rents and timber
royalties.
(1) Where an amount has
been paid during a taxation year to a non-resident person or to a
partnership of which that person was a member as, on account of,
in lieu of payment of or in satisfaction of, rent on real
property in Canada or a timber royalty, that person may, within 2
years after the end of the year, file a return of income under
Part I in the form prescribed for a person resident in Canada for
that year and the non-resident person shall, without affecting
the liability of the non-resident person for tax otherwise
payable under Part I, thereupon be liable, in lieu of paying tax
under this Part on that amount, to pay tax under Part I for the
year as though
(a) the non-resident person were a person resident in Canada
and not exempt from tax under section 149;
(b) the non-resident person's income from the non-resident
person's interest in real property in Canada, timber resource
properties and timber limits in Canada and the non-resident
person's share of the income of a partnership of which the
non-resident person was a member from its interest in real
property in Canada, timber resource properties and timber limits
in Canada were the non-resident person's only income;
(c) the non-resident person were entitled to no deductions
from income for the purpose of computing the non-resident
person's taxable income; and
(d) the non-resident person were entitled to no deductions
under sections 118 to 118.9 in computing the non-resident
person's tax payable under Part I for the year.
Issue under appeal
[3] The parties agreed that the only
issue under appeal was whether the Appellants were residents in
Canada during the 1997 and 1998 taxation years. The
Respondent maintains that the Appellants were not resident in
Canada during those years because they were not ordinarily
resident in Canada at that time and cites in this regard
subsection 250(3) of the Act which reads as follows:
4250(3)3
(3)
Ordinarily resident. In this Act, a reference to a
person resident in Canada includes a person who was at the
relevant time ordinarily resident in Canada.
Facts
[4] Under an agreement between
the parties ratified by an order of this Court (March 17, 2003
order), these appeals were heard on written evidence because,
when these appeals were supposed to be heard, the Appellants were
living in the state of Pennsylvania in the United States and no
longer had the means to travel to Canada for the hearing of their
appeals. The Appellants answered a written questionnaire
prepared by the Respondent and a joint book of documents was
filed with the Court. Each party filed its own written
submissions.
[5] Based on the written
evidence, the Appellants are both university professors who moved
from Canada to the United States in September 1994 when
Richard Collins obtained a work contract expected to last
nine months. According to Richard Collins, he was supposed to
conduct a technical advisory mission under a fixed-term contract
(see Question 2 on the written questionnaire entered as Tab 16 in
the book of documents).
[6] Both Appellants say that
when they moved to the United States in September 1994, they did
not plan on making it their permanent home. In fact, they
rented out their principal residence in Halifax, Nova Scotia,
Canada, and left behind personal belongings, such as clothing,
furniture and various equipment. The Appellants were unable
to find the actual rental contract, but said that their residence
had been rented on an annual basis, with a renewal option, unless
they returned to Halifax (see Question 11 on the written
questionnaire in Tabs 16 and 17 of the book of documents). For
their part, they rented a small house in the United States on a
monthly basis (see Question 10(e) on the questionnaire entitled
Determination of Residency Status (Leaving Canada), the
Appellants filled out on July 21, 1996, in Tab 1 of the book of
documents). It would appear they were always on temporary
location in the United States because, in 1997 and 1998, they
stated that they were neither tenants nor owned any residence in
the United States (see Questions 15 and 17 on the written
questionnaire the Appellants filled out on April 7, 2003, in
Tabs 16 and 17 of the book of documents).
[7] When Richard Collins'
contract in the United States expired, the Appellants stayed and
looked for work in the United States and Canada. Since
their residence in Canada was rented to third parties and they
were earning rental income, they stayed in the United
States. They made frequent visits to Canada because all of
Richard Collins' family lives in Canada. Emilia Collins'
family lives in Bulgaria and Germany. The Appellants have
only one daughter, who, during the years at issue, was a minor
who lived with them in the United States. However, they
invested in an education savings plan in Canada so that she could
go to university in Canada. Although the Appellants each
had a U.S. passport, they also had Canadian passports. They
had two Visa accounts and a bank account at the Scotiabank in
Canada. The rental income flowed through these bank
accounts. They also had a Visa account in the United
States. The Appellants say they also belonged to various
professional associations in Canada. They also allegedly had Nova
Scotia Medical Services Insurance coverage during the years at
issue. This insurance was allegedly then replaced by U.S.
health insurance coverage (see Question 21 on the written
questionnaire in Tabs 16 and 17 of the book of documents).
The Appellants also took out house insurance coverage with a
Canadian insurance agent on their residence in Halifax.
According to the Appellants, this insurance agent dealt with a
U.S. insurance company. The insurance agent made this
choice without the Appellants' involvement (see the Appellants'
response to the Respondent's arguments in Paragraph 8 on Page
4).
[8] The Appellants said that
they never intended to leave Canada permanently. They
always hoped to find employment in Canada. I understand
from the evidence that they did not find employment in the United
States or Canada. They lived off their savings and rental income
until June 1999, when they were forced to sell their residence in
Canada because they had spent virtually all of their family
savings (see Paragraph 4 on Page 2 of the Appellants' response to
the Respondent's arguments). At that point, the Appellants
informed the Canadian authorities that their situation had
changed and that they understood that they would lose their
Canadian resident status.
[9] The Appellants had already
filled out a questionnaire in July 1996 at the request of the
Canadian authorities (Tab 1 in the book of documents). Based on
the information provided, the Canada Customs and Revenue Agency
(the "CCRA") informed the Appellants in a letter dated August 26,
1996, that they were "factual residents" in Canada for tax
purposes (see Tab 2 of the book of documents). After the
Appellants had informed the Canadian authorities that they had
sold their principal residence in Canada in June 1999, the CCRA
wrote to the Appellants again on July 10, 2000 (Tab 7 of the book
of documents) to say that if their situation had changed since
1996, their resident status may perhaps have as well. Based
on this letter, it would seem that the Appellants were being
asked to fill out a new Determination of Residency Status
questionnaire. The Appellants allegedly replied that they
had no changes to report for the years from 1996 to 1998 and that
their situation had not changed since 1996.
[10] The Appellants' fact situation in
1996 was virtually the same as that in 1997 and 1998. In
the questionnaire filled out in July 1996, the Appellants
indicated, however, that they would renew their Canadian drivers'
licences when they expired. In the written questionnaire
filled out on April 7, 2003, the Appellants did not indicate
whether they held Canadian or U.S. drivers' or vehicle
licence. They indicated that they had not kept those
documents; they said the same thing about insurance, for which
they were unable to provide documents certifying they still had
insurance in Canada.
Parties' arguments
[11] The Respondent submitted that the
Appellants did not show that they had sufficient residential ties
in Canada to conclude that they were ordinarily resident in
Canada within the meaning of the Act during the years at
issue. The Respondent maintains that the Appellants, who
had been living in the United States with their daughter since
1994, returned to Canada only to visit and were unable to move
into their residence in Canada because it was rented. Thus,
over the years, they had centralized their ordinary mode of
living in the United States, not Canada. Based on the
formulas used by the courts to determine an individual's
residence, which are mainly based on the Supreme Court of Canada
decision in Thomson v. M.N.R., 2 DTC 812, the Respondent
concluded that the Appellants had "in mind and fact" settled in
the United States, not Canada, during the 1997 and 1998 taxation
years. According to the Respondent, the Appellants were not
ordinarily resident in Canada during those years.
[12] For their part, the Appellants
maintain that the CCRA agreed on two occasions, on August 26,
1996 (Tab 2 in the book of documents) and on February 18,
1997 (this latter letter was not submitted as evidence), to
consider them to be residents in Canada and that it is difficult
for them to prove at this point in time with documents dating
back to the period at issue (such as drivers' licences, car
registrations, bank statements or membership cards for
professional or other associations) their ties to Canada.
They maintain that they were unemployed during the years at issue
and did not consider their move to the United States to be a
permanent one while they looked for work to enable them to move
back to Canada. If such had not been the case, they would
not have kept their residence in Canada "[TRANSLATION] despite
the clear monetary losses this meant at the time". They
kept this residence with a view to moving back into it (see the
Appellants' responses to the Respondent's arguments in Paragraph
3 on Page 2). Further, the Appellants maintain that they have no
family or work colleagues in the United States since they both
are unemployed. They say that they have family and social
ties to Canada. The Appellants conclude that their respective
situations have not changed since the CCRA accepted their
"factual" Canadian resident status through the decisions it
rendered in 1996 and in 1997. They feel that subsection 250(3) of
the Act does not apply here in determining their "factual
resident" status.
Analysis
[13] Provision is made in subsection
250(3) of the Act that a person resident in Canada includes a
person who was ordinarily resident in Canada. As indicated in
Paragraph 10 of Interpretation Bulletin IT-221R3, where an
individual has not severed all of his or her residential ties
with Canada, but is physically absent from Canada for a
considerable period of time, the Courts have generally focused on
the term "ordinarily resident" in determining the
individual's residence status while abroad. Also, reference
is made in Paragraph 3 of IT-221R3 to a "factual resident" in the
specific case of an individual who ordinarily is resident in
Canada within the meaning of subsection 250(3) of the Act.
This is not the presumption of residence in Canada provided for
in subsection 250(1) of the Act that can apply to individuals who
are not factual residents of Canada (as the Appellants seemed to
understand). Subsection 250(3) is a separate subsection and
must be analyzed in light of the facts of the case at hand to
determine whether an individual is ordinarily resident in Canada
at a particular time for the purposes of the Act. Thus, if
I conclude that in 1997 and 1998 the Appellants were ordinarily
resident in Canada, they will then be Canadian residents for the
purposes of the Act.
[14] The Supreme Court of Canada
justices analyzed the concept of "ordinarily resident" in
Thomson, supra. At page 813, Justice Estey
wrote:
A reference to the dictionary and judicial comments upon the
meaning of these terms indicates that one is 'ordinarily
resident' in the place where in the settled routine of his
life he regularly, normally or customarily lives. One
'sojourns' at a place where he unusually, casually or
intermittently visits or stays. In the former the element of
permanence; in the latter that of the temporary predominates. The
difference cannot be stated in precise and definite terms, but
each case must be determined after all of the relevant factors
are taken into consideration, but the foregoing indicates in a
general way the essential difference. It is not the length of the
visit or stay that determines the question. [...]
The words of Viscount Sumner in Inland Revenue Commissioners
v. Lysaght (1928) A.C. 234, at p. 243, are indicative:
|
'I think the converse to
'ordinarily' is 'extraordinarily' and that
part of the regular order of a man's life, adopted
voluntarily and for settled purposes, is not
extraordinary.
|
|
Lord Buckmaster, with whom Lord Atkinson concurred, in the
same case, at 248:
|
. . . if residence be once established ordinarily
resident means in my opinion no more titan that the
residence is not casual and uncertain but that the person
held to reside does so in the ordinary course of his
life.'
|
It is well established that a person may have more than one
residence, and therefore the fact of his residence in Pinehurst
or Belleair does not assist or in any way affect the
determination of this issue.
[15] Justice Rand wrote the following
at pages 815 and 816:
The graduation of degrees of time, object, intention,
continuity and other relevant circumstances, shows, I think, that
in common parlance 'residing' is not a term of invariable
elements, all of which must be satisfied in each instance. It is
quite impossible to give it a precise and inclusive definition.
It is highly flexible, and its many shades of meaning vary not
only in the contexts of different matters, but also in different
aspects of the same matter. In one case it is satisfied by
certain elements, in another by others, some common, some
new.
The expression 'ordinarily resident' carries a
restricted signification, and although the first impression seems
to be that of preponderance in time, the decisions on the English
Act reject that view. It is held to mean residence in the course
of the customary mode of life of the person concerned, and it is
contrasted with special or occasional or casual residence. The
general mode of life is, therefore, relevant to a question of its
application.
For the purpose of income tax legislation, it must be assumed
that every person has at all times a residence. It is not
necessary to this that he should have a home or a particular
place of abode or even a shelter. He may sleep in the open. It is
important only to ascertain the spatial bounds within which he
spends his life or to which his ordered or customary living is
related. Ordinary residence can best be appreciated by
considering its antithesis, occasional or casual or deviatory
residence. The latter would seem clearly to be not only temporary
in time and exceptional in circumstances, but also accompanied by
a sense of transitoriness and of return.
But in the different situations of so-called 'permanent
residence', 'temporary residence', 'ordinary
residence', 'principal residence' and the like, the
adjectives do not affect the fact that there is in all cases
residence; and that quality is chiefly a matter of the degree to
which a person in mind and fact settles into or maintains or
centralizes his ordinary mode of living, with its accessories in
social relations, interests and conveniences at or in the place
in question. It may be limited in time from the outset, or it may
be indefinite, or so far as it is thought of, unlimited. On the
lower level, the expressions involving residence should be
distinguished, as I think they are in ordinary speech, from the
field of 'stay or 'visit'.
[16] Justice Kerwin wrote the following at
pages 817 to 819:
|
|
|
There is no definition in the Act of 'resident'
or 'ordinarily resident' but they should receive
the meaning ascribed to them by common usage. When one is
considering a Revenue Act, it is true to state, I think, as
it is put in the Standard Dictionary that the words
'reside' and 'residence' are somewhat
stately and not to be used indiscriminately for
'live', 'house' or 'home'. The
Shorter Oxford English Dictionary gives the meaning of
'reside' as being 'To dwell permanently or for
a considerable time, to have one's settled or usual
abode, to live, in or at a particular place.' By the
same authority 'ordinarily' means: '1. In
conformity with rule; as a matter of regular occurrence, 2.
In most cases, usually, commonly. 3. To the usual extent.
4. As is normal or usual,' On the other hand the
meaning of the word 'sojourn Is given as 'to make a
temporary stay in a place; to remain or reside for a
time.'
|
|
[17] Justice Kellock wrote at page 819
that:
|
'Ordinarily' is defined as 'in conformity
with rule or established custom or practice,' 'as a
matter of regular practice or occurrence,' 'in the
ordinary or usual course of events,' 'usually,'
'commonly,' 'as is normal or usual.
|
|
[18] In Kadrie v. Canada, [2001]
T.C.J. No 601 (Q.L.), Justice Bowman from our court cited a
portion of Justice Mahoney's decision in The Queen v.
Reeder, 75 DTC 5160, at page 5163:
[...] the factors which have been found in those
cases to be material in determining the pure question of
fact of fiscal residence are as valid in his case as in
theirs. While the list does not purport to be exhaustive,
material factors include:
|
|
a.
|
|
past and present habits of life;
|
|
b.
|
|
regularity and length of visits in the jurisdiction
asserting residence;
|
|
c.
|
|
ties within that jurisdiction;
|
|
d.
|
|
ties elsewhere;
|
|
e.
|
|
permanence or otherwise of purposes of stay abroad.
|
|
|
The matter of ties within the jurisdiction asserting
residence and elsewhere runs the gamut of an
individual's connections and commitments: property and
investment, employment, family, business, cultural and
social are examples, again not purporting to be exhaustive.
Not all factors will necessarily be material to every case.
They must be considered in the light of the basic premises
that everyone must have a fiscal residence somewhere and
that it is quite possible for an individual to be
simultaneously resident in more than one place for tax
purposes.
|
[19] In Kadrie, supra,
Justice Bowman divided personal residence cases into three
categories in paragraph 24 of his decision:
While ultimately the tests that have been developed by
the courts follow a common pattern, it would seem that
individual residency cases fall into three broad
categories:
|
|
(a)
|
|
cases where a person who has theretofore been ordinarily
resident in Canada leaves, takes up residence elsewhere and
alleges that he or she has so severed the relationship with
Canada that he or she is no longer resident here;
|
|
(b)
|
|
cases where a person, ordinarily resident in another
country, acquires a residence and other ties in Canada.
There the question is whether that person has become
"ordinarily resident" in Canada;
|
|
(c)
|
|
cases where a Canadian resident leaves Canada and severs
his or her connection with this country so that he or she
is not a Canadian resident, and then reacquires ties
here. The question there is whether that person
has resumed residence here.
|
|
|
The tests may ultimately be the same, but the type of
evidence necessary to establish the relinquishment of
Canadian residency would normally be somewhat different
from that necessary to establish that the taxpayer has or
has not acquired or resumed it.
|
[20] In my opinion, the Appellants did not
plan to sever their ties with Canada when they left Canada in
September 1994, until June 1999, when they sold their principal
residence in Canada. They rented an apartment on a month-to-month
basis in the United States, and based on their written evidence,
they were always on temporary location because they were
apparently neither tenants nor owners of any residence in the
United States in 1997 and 1998. They rented out their principal
residence in Halifax on a yearly basis and intended to move back
if they found employment in the Halifax area. They have
bank accounts and personal belongings in Canada. Their daughter
was the beneficiary of an education savings plan in Canada. All
of Richard Collins' family, particularly his mother, live in
Canada and the Appellants visited them often. They had Canadian
passports, and although they also had U.S. passports, they had
neither family nor work colleagues in the United States. It
did not seem that they had settled there.
[21] Based on the jurisprudence cited, the
meaning of "resident" is very flexible and its definition varies
depending on the context and the various aspects of a given
situation. An individual does not necessarily have to have
a house or a particular place where he or she lives in order to
be a resident. Justice Rand wrote in Thomson,
supra, that "ordinary residence can best be appreciated by
considering its antithesis, occasional or casual or deviatory
residence. The latter would seem clearly to be not only temporary
in time and exceptional in circumstances, but also accompanied by
a sense of transitoriness and of return." In the case at hand,
the Appellants kept their principal residence in Canada with a
view to moving back in when they found employment. In their
minds, they were living in the United Sates for a temporary and
uncertain length of time. They were both unemployed in 1997
and 1998. As Justice Estey wrote in Thomson,
supra, "It is not the length of the visit or stay that
determines the question." We cannot say that the
Appellants had settled in the United States. At any rate,
there was nothing permanent about their stay there.
Further, the only property they owned that was of any value was
their principal residence in Canada. Similarly, the CCRA's
criteria in Paragraph 10 of its Interpretation Bulletin IT-221R3
for determining ordinary residence seems to show that the
Appellants are correct, based on the facts before me.
Paragraph 10 of Interpretation Bulletin IT-221R3 reads as
follows:
10. Where an individual has not severed all of
his or her residential ties with Canada, but is physically absent
from Canada for a considerable period of time (that is, for a
period of time extending over several months or years), the
Courts have generally focused on the term "ordinarily
resident" in determining the individual's residence
status while abroad. The strong trend in decisions of the Courts
on this issue is to regard temporary absence from Canada, even on
an extended basis, as insufficient to avoid Canadian residence
for tax purposes. Accordingly, where an individual maintains
residential ties with Canada while abroad, the following factors
will be taken into account in evaluating the significance of
those ties:
(a) evidence of intention to permanently sever
residential ties with Canada,
(b) regularity and length of visits to Canada, and
(c) residential ties outside Canada.
For greater certainty, the CCRA does not consider that
intention to return to Canada, in and of itself and in the
absence of any residential ties, is a factor whose presence is
sufficient to lead to a determination that an individual is
resident in Canada while abroad.
[22] Further, although as the Respondent
maintains, the Appellants had settled "in mind and fact", or had
centralized their ordinary mode of living in the United States,
this does not prevent the Appellants from maintaining their
residence in Canada. It is well established that an individual
can have more than one residence (see Thomson,
supra, page 813 (Estey, J.)).
[23] The last point I would like to raise
involves the documents submitted as evidence. The
Appellants did not submit their drivers' licences, car
registrations, bank accounts, rental contract or evidence of
insurance coverage for the period at issue. I am
nonetheless ready to accept the Appellants' written testimony
without any supporting documentary evidence. The CCRA
informed the Appellants in 1996 (and in all likelihood in 1997 as
well) that they retained their Canadian resident status after
they moved in September 1994. The fact situation remained
the same until they sold their principal residence in June
1999. It is completely plausible that the Appellant did not
keep this documentary evidence dating back to 1997 and 1998 which
is now required, several years later, by the Respondent.
Since the Appellants' situation has not changed since 1995, they
could not anticipate the CCRA changing its mind about their
status and asking them years later for documents that an
individual would not necessarily keep several years in a row (I
am referring, among other things, to drivers' licences, car
registrations, membership cards to professional associations,
etc.).
[24] For these reasons, I allow the appeals
and refer the whole issue to the Minister of National Revenue for
reconsideration and reassessment on the basis that the Appellants
were residents in Canada within the meaning of the Act during the
1997 and 1998 taxation years.
Signed at Ottawa, Canada, this 20th day of
February, 2004.
Lamarre, J.
Certified true translation
Colette Beaulne