Docket: 2002-2414(IT)I

BETWEEN:

RICHARD COLLINS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

The Honourable Justice Lucie Lamarre

____________________________________________________________________

JUDGMENT

          The appeals from the assessments under the Income Tax Act for the 1997 and 1998 taxation years are allowed and the assessments referred to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant was resident in Canada within the meaning of the Act during the 1997 and 1998 taxation years.

Signed at Ottawa, Canada, this 20^th day of February, 2004.

"Lucie Lamarre"

Lamarre J.

Certified true translation
Colette Beaulne

Docket: 2002-2416(IT)I

BETWEEN:

EMILIA COLLINS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

The Honourable Justice Lucie Lamarre

____________________________________________________________________

JUDGMENT

          The appeal of the assessment under the Income Tax Act for the 1998 taxation year is allowed and the assessment referred to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant was resident in Canada within the meaning of the Act during the 1998 taxation year.

Signed at Ottawa, Canada, this 20^th day of February, 2004.

"Lucie Lamarre"

Lamarre J.

Certified true translation
Colette Beaulne

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:

Application of Term "Ordinarily Resident"

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 20^th day of February, 2004.

"Lucie Lamarre"

Lamarre, J.

Certified true translation
Colette Beaulne