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Docket: 2002-3661(IT)I
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BETWEEN:
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RICK M. MARUSYK,
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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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____________________________________________________________________
Appeals heard on June 24, 2003 at Vancouver,
British Columbia
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Before: The Honourable Mr. Justice L.M. Little
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Appearances:
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For the Appellant:
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The Appellant himself
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Counsel for the Respondent:
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Raj Grewal
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____________________________________________________________________
JUDGMENT
The
appeals from the assessments made under the Income Tax Act
for the 1994, 1995, 1996 taxation years are allowed, without
costs, and the assessments are referred back to the Minister of
National Revenue for reconsideration and reassessment in
accordance with the terms of the attached Reasons for
Judgment.
The
appeal from the assessment made under the Income Tax Act
for the 1998 taxation year is allowed, without costs, to
permit the Appellant to claim an equivalent-to-spouse claim in
the amount of $5,380.00. In all other respects the appeal filed
for the 1998 taxation year is dismissed.
The
appeal from the assessment made under the Income Tax Act
for the 1999 taxation year is dismissed.
Signed at Vancouver, Canada, this 5th day of August 2003.
Little, J.
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Citation: 2003TCC453
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Date: 20030805
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Docket: 2002-3661(IT)I
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BETWEEN:
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RICK M. MARUSYK,
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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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REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The Appellant was married to
Cynthia Maureen Murphy ("Cynthia"). A daughter,
Tess Olivia Murphy Marusyk ("Tess"), was
born on the 12th day of February 1994.
[2] In late 1994 the Appellant and
Cynthia separated. A lengthy and bitter legal dispute occurred
between the Appellant and Cynthia. The legal dispute involved
custody of Tess, division of property and the ownership of the
family home.
[3] The Appellant said that after the
separation he was obliged to leave the family home.
[4] The Appellant maintains that he
was unable to obtain the records and documents that he required
to prepare his income tax returns for the 1994, 1995, 1996 and
1998 taxation years because the records and documents were either
in files at the family home or were in the computer that was
located in the family home.
[5] The Appellant testified that he
made numerous requests to Cynthia to obtain the records and
documents that he required to prepare his income tax returns and
that she refused his numerous requests.
[6] The Appellant said that as a
result of the refusal by Cynthia to provide him access to his
records and documents and access to his computer he was unable to
prepare and file his income tax returns within the time limits
specified in the Income Tax Act (the
"Act") for the 1994, 1995, 1996 and 1998
taxation years.
[7] The Appellant said that in the
1993, 1994, 1995 and 1996 taxation years he was operating several
businesses and that he had a number of clients. The Appellant
said that from 1997 to 1999 he was the Mayor of the Municipality
of Port Moody and from 1997 to 1999 he spent the majority of his
time serving as the Mayor and he did not continue to have an
active consulting practice during this period.
[8] The Appellant stated that after
repeated requests made by him to Cynthia personally and requests
made to Cynthia by his lawyer for records and documents he
finally obtained some of his records and documents from Cynthia
in September 2000. The Appellant stated that he prepared and
filed his income tax returns for the 1994, 1995 and 1996 taxation
years on September 21, 2000.
[9] The Appellant said that after many
requests for the records and documents made to Cynthia, both by
him personally and by his lawyer, he finally obtained the
relevant documents for the 1998 and 1999 taxation years in
February-March 2000.
[10] The Appellant said that he filed his
income tax return for the 1998 taxation year on March 10, 2000
and that he filed his income tax return for the
1999 taxation year within the time specified in the
Act.
[11] The Minister of National Revenue
("the Minister") imposed late filing penalties and
arrears interest for the 1994, 1995, 1996 and 1998 taxation
years.
B. ISSUES
[12] The issues before the Court are:
(a) Is the Appellant entitled to
claim equivalent-to-spouse credits in the 1998 and 1999 taxation
years?
During
the hearing the parties agreed that the Appellant was allowed to
an equivalent-to-spouse claim in the amount of $5,380.00 in
determining his income for the 1998 taxation year.
The
Appellant advised the Court that he was withdrawing his claim for
an equivalent-to-spouse claim of $5,718.00 in determining his
income for the 1999 taxation year.
(b) Is the Appellant entitled to
deduct any amount in respect of support payments in determining
his income for the 1998 and 1999 taxation years?
During
the hearing the Appellant withdrew his claim to deduct support
payments in determining his income for the 1998 and 1999 taxation
years.
(c) Is the Appellant liable for the
late filing penalties and the revised late filing penalty and
arrears interest as calculated by the Minister for the relevant
years?
C. ANALYSIS
[13] From an analysis of the relevant facts
and the testimony of the Appellant, I have concluded that the
Appellant was unable to prepare and file his income tax returns
for the 1994, 1995 and 1996 taxation years because he was
involved in a bitter and acrimonious custody and divorce action
with Cynthia. The Appellant testified under oath that he made
many requests to Cynthia to obtain the relevant records and
documents required to complete his tax returns but Cynthia
refused to give him access to the records and documents or access
the computer data. I accept the Appellant's sworn
testimony.
[14] The Tax Court has frequently been asked
to determine if a penalty should be imposed under section 162 of
the Act.
[15] In Bennett v. The Queen, 96 DTC
1630 Madam Justice Lamarre Proulx said at paragraph 25:
[25] In my view, the wording of
subsection 162(2) of the Act does not have the clarity necessary
to make it an absolute liability provision.
Accordingly a defence of due diligence exists and Madam
Justice Lamarre Proulx mentioned at paragraph 27:
[27] I am of the view however
that, in order for this Act to accomplish its public purpose, the
taxpayer should be expected to comply with the requirements of
the Act with a high degree of diligence.
[16] I have concluded that in these very
difficult, unusual and emotional circumstances, where the
Appellant was unable to obtain access to the records and
documents, the Appellant should not be subject to the late filing
penalties and the revised late filing penalty that were imposed
for the 1994, 1995 and 1996 taxation years.
[17] In the 1998 taxation year the Appellant
was Mayor of Port Moody and most of his income (with the
exception of $600.00) was paid to him by the Municipality of Port
Moody. I am therefore not satisfied that the Appellant was
precluded from filing his income tax return for the 1998 taxation
year. The late filing penalty for the 1998 taxation year should
not be deleted.
[18] Information Circular IC-92-2 was
published by Canada Customs and Revenue Agency on March 18, 1992
(see Tab 12 of exhibit A-1). Paragraph 5 reads as follows:
5. Penalties
and interest may be waived or cancelled in whole or in part where
they result in circumstances beyond a taxpayer's or
employer's control. For example, one of the following
extraordinary circumstances may have prevented a taxpayer, a
taxpayer's agent, the executor of an estate, or an employer
from making a payment when due, or otherwise complying with the
Income Tax Act:
(a) natural or
human-made disasters such as, flood or fire;
...
[19] From the evidence that was presented I
have concluded that the Appellant was prevented from complying
with the Act in the 1994, 1995 and 1996 taxation years
because of the extraordinary circumstances "beyond his
control". I make this comment with respect to the late
filing penalties that were imposed for the 1994, 1995 and 1996
taxation years.
[20] I do not have the authority to waive
the interest that has been imposed. However, because of the
extraordinary circumstances as outlined above it would appear to
me that the Minister should exercise the discretion imposed on
him in the Fairness Legislation in the Act and waive the
arrears interest that has been imposed for the 1994, 1995 and
1996 taxation years up to September 21, 2000 (i.e. the date
that the income tax returns were filed by the Appellant).
[21] The appeals are to be allowed to
eliminate the late filing penalties that were imposed for the
1994, 1995 and 1996 taxation years. The appeal filed for the 1998
taxation year is allowed to permit the Appellant to claim an
equivalent-to-spouse claim in the amount of $5,380.00. The appeal
filed for the 1999 taxation year is dismissed.
Signed at Vancouver, Canada, this 5th day of August 2003.
Little, J.
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