Trainor v. The Queen, docket 98-1729-IT-I (Informal Procedure)

Date: 19991007

Docket: 98-1729-IT-I

BETWEEN:

KENNETH R. TRAINOR,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

O'Connor, J.T.C.C.

[1] This appeal was heard at Moncton, New Brunswick on September 22, 1999.

Facts

[2] The principal facts are as follows. The Appellant, an R.C.M.P. officer, was transferred in 1994 from Ottawa, Ontario to Sussex, New Brunswick. He was reimbursed his moving expenses by his employer, including the expenses of meals and lodging for a period of 23 days. His home in Sussex was not immediately available to him with the result that he was required to pay (and was not reimbursed) for further meal and lodging expenses of $1,626.01, covering a period of 11 days following the 23 days mentioned above. He claimed these expenses as a deduction in his 1994 income tax return and the deduction was disallowed by the Minister of National Revenue ("Minister") as a result of which he was required to pay an additional amount of income tax of $709.02 which he paid under protest and subject to his appeal rights.

[4] The Appellant submits that notwithstanding he was reimbursed by his employer for meals and lodging for a period of 23 days, he was not so reimbursed for the meals and lodging for 11 days and that he qualifies for the deduction contemplated in subparagraph 62(3)(c) of the Income Tax Act. The Respondent's position is that he is not entitled to the additional expenses claimed of $1,626.01 because his total meals and lodging, including the amounts reimbursed and the amounts not reimbursed exceeded a period of 15 days as contemplated in subparagraph 62(3)(c). Respondent submits that the 15 day period commences when a taxpayer moves out of his old residence and runs consecutively thereafter.

Analysis and Decision

[5] Section 62, so far as material reads:

(1) Where a taxpayer has, at any time, commenced

(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as "the new work location"), or

...

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") to a residence in Canada at which, after the move, the taxpayer ordinarily resided (in this section referred to as "the new residence"), ... in computing the taxpayer's income for the taxation year in which the taxpayer moved from the old residence to the new residence or for the immediately following taxation year, there may be deducted amounts paid by the taxpayer as or on account of moving expenses incurred in the course of moving from the old residence to the new residence, to the extent that

(c) they were not paid on the taxpayer's behalf by the taxpayer's employer,

(d) they were not deductible by virtue of this section in computing the taxpayer's income for the preceding taxation year,

(e) they would not, but for this section, be deductible in computing the taxpayer's income,

(f) the total of those amounts does not exceed

...

(g) any reimbursement or allowance received by the taxpayer in respect of those expenses is included in computing the taxpayer's income.

...

(3) In subsection (1), "moving expenses" includes any expense incurred as or on account of

(a) travel costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of the taxpayer's household from the old residence to the new residence,

...

(c) the cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer's household for a period not exceeding 15 days,

...

Under subparagraph 62(1)(d) all reimbursements and allowances received by the taxpayer in respect of moving expenses are to be included in the taxpayer's income. The amount reimbursed to the Appellant by his employer was not apparently declared by the taxpayer in his 1994 return. In other words, he did not claim the deduction for the reimbursed expenses and did not include the same amount in income as a reimbursement or allowance. The result is the same whether the reimbursed expenses are deducted and included in income. There is a nil increase in income.. The only amount the taxpayer is claiming as a deduction is the cost that he was out of pocket for, namely $1,626.01.

[6] Although the Appellant was reimbursed for certain meals and lodging, there was an actual cost to the Appellant with respect to meals and lodging which was not reimbursed. Consequently, that would appear to qualify as the cost to the taxpayer of meals and lodging (for 11 days) i.e., it was a cost to him, it related to a period of less than 15 days and I see nothing in subparagraph 62(3)(c) that would lead to the conclusion that he cannot qualify because he has been reimbursed by his employer for a period other than the 11 days in question. I also see nothing that necessarily leads to the conclusion that it is only the first 15 days that are considered. If that were the case it would lead to the curious result that if a taxpayer personally bears the costs for the first 11 days, he gets the deduction but if the costs are for a period after the first 15 days, he does not.

[7] Section 62, in my opinion, should be given a liberal interpretation. As a matter of policy it allows a person to deduct certain expenses which would otherwise be personal and/or living expenses. This policy was to encourage mobility in our workforce and since in my view the section is not entirely clear on the issue at hand, a liberal interpretation following the teleological approach should be adopted.

[8] Moreover, since section 62 is not precisely clear on the issue, if there were any doubt on its interpretation, the taxpayer should be entitled to the residual presumption in his favour. As was stated by the Supreme Court in the case of Corporation Notre-Dame de Bon-Secours v. Communaute Urbaine de Quebec et al, 95 DTC 5017 at page 5023:

The rules formulated in the preceding pages ... may be summarized as follows:

The interpretation of tax legislation should follow the ordinary rules of interpretation;

A legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and the legislative intent: this is the teleological approach;

The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions;

Substance should be given precedence over form to the extent that this is consistent with the wording and objective of the statute;

Only a reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer.

[9] For all of the above reasons, the appeal is allowed and the matter is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to the deduction claimed of $1,626.01 in the 1994 taxation year.

Signed at Ottawa, Canada this 7th day of October 19999

"T.P. O'Connor"

J.T.C.C.