REASONS
FOR JUDGMENT
Woods J.
[1]
In 2004, Calvin Lyn Kew left Pickering, which is
near Toronto, and spent the next seven years living on a sailboat. This appeal
concerns a deduction claimed by Mr. Lyn Kew for expenses incurred in 2011 in
sailing for 52 days from West Palm Beach, Florida to Pickering and in transporting
the sailboat from Pickering to a storage area. Mr. Lyn Kew submits that the
expenses are deductible as work-related moving expenses pursuant to section 62
of the Income Tax Act.
[2]
The reassessment at issue disallowed the
deduction in its entirety on the basis that the trip did not qualify as an “eligible relocation”
as required by section 62.
Amount at issue
[3]
The amount at issue relates to expenses incurred
in 2011 that the appellant carried forward to his 2012 income tax return
because he did not have sufficient income to use the deduction in 2011. The
amount carried forward was $7,325.
[4]
The appellant acknowledges in the notice of
appeal that there is an error in the amount claimed. The amount that should
have been carried forward is $5,936.67.
[5]
The appellant also deducted $225 for expenses
incurred in 2012. I accept the submission of the respondent that this deduction
was allowed by the Minister. Accordingly, this amount should not be allowed again
in this appeal.
[6]
At the commencement of the hearing, the
appellant informed the Court that he also wished to claim an additional $290
that he neglected to claim in the income tax return. The respondent did not
object to putting this amount at issue.
[7]
After the evidence had been completed, the
appellant informed the Court that he wished to put a further amount in issue
for meals while he lived temporarily on the sailboat in Pickering upon his
return from Florida. The respondent submitted that it would be prejudiced if this
amount were put at issue at this late stage. I agreed with this submission and
did not allow the issue to be raised.
[8]
Accordingly, the total amount at issue is the
amount carried forward to the income tax return in 2012, which is $7,325 (part
of which is conceded), plus $290.
The issues
[9]
At the commencement of the hearing, there was a lengthy
discussion about the issues to be decided. The appellant said that he was
confused by the lack of clarity as to the reasons for the reassessment
communicated to him by the Canada Revenue Agency. I also had concerns about the
issues stemming from lack of clarity in the Reply.
[10]
Following this discussion, I concluded that the
issues that are properly engaged in this appeal are as set out below. I am
satisfied that the appellant had adequate notice of these issues.
(a)
Was the “old
residence” in West Palm Beach, Florida?
(b)
Was the relocation undertaken to start a
business or employment at a location in Canada?
(c)
In the alternative, did expenses incurred in
hauling the sailboat out of the water and transporting it to a storage area qualify
as moving expenses for purposes of section 62?
[11]
I would also mention for clarity that the
respondent acknowledged at the commencement of the hearing that one of the
Minister’s assumptions is incorrect. The assumption had been made that the
appellant had previously lived at the “new
residence.” The respondent now concedes that
this is incorrect, and accordingly concedes the issue stated in paragraph 14 of
the Reply.
Background facts
The Voyager
[12]
The appellant has Canadian and Jamaican
citizenship and he has lived in Canada for many years.
[13]
Prior to his sailing venture, the appellant was
a long-time employee of Scotiabank. When this position was terminated, the
appellant refitted an old trawler so that it was suitable for solo sailing. For
seven years, from May 14, 2004 to August 27, 2011, the appellant made his home
on the sailboat, which was named the Voyager. The appellant set out from Pickering
in May 2004 and finally returned to Pickering with the Voyager in August 2011.
[14]
It is useful to briefly set out where the appellant
went over his seven years on the Voyager. The appellant was able to recreate
this from a detailed ship’s log, from which he summarized his travels (Exhibit
A-3).
(a)
The appellant first travelled to St. John’s,
Newfoundland and Labrador where he stayed for four years while enrolled at Memorial
University.
(b)
The appellant then traveled from St. John’s to
West Palm Beach, Florida, where he stayed for four months.
(c)
The appellant then set out from West Palm Beach
and went briefly to Miami and then on to The Bahamas. He stayed in The Bahamas
for approximately eight months (from June 2009 to February 2010).
(d)
The appellant then traveled from The Bahamas to
West Palm Beach where the Voyager was anchored in one location for a year near
the appellant’s brother.
(e)
The appellant then set out on a cruise around
the Caribbean area for four months. This trip was required to keep the
appellant’s U.S. cruising permit.
(f)
The appellant then went back to West Palm Beach
where he stayed briefly and then sailed back to Pickering. He arrived there in
August 2011.
(g)
After two months on the Voyager while it was
anchored in Pickering, the appellant moved into his mother’s home, which is
located at 624 Cognac Ave., Pickering. The appellant continues to reside at
this address.
Business and
employment
[15]
The appellant has a technical background in
computers.
[16]
From 1988 to 2003 the appellant was employed by
Scotiabank at 40 King Street West in Toronto. He was terminated when his
position became redundant. The appellant’s last position during that time was
Senior Technical Analyst, Decision Support Services – Chief Accountants
Department.
[17]
Beginning March 1, 2012, the appellant commenced
a six month arrangement to provide computer-related services as an independent
contractor for Scotiabank. These services were provided at 20 Richmond Street
East in Toronto.
[18]
The appellant then became a full-time employee
of Scotiabank at the Richmond Street location and is still in this employment.
His current title is Manager, Strategic Information Systems & MIS, Global
Transaction Banking.
Relevant
legislative provisions
[19]
The main applicable legislative provisions are
set out below.
62.(1) Moving
expenses - There may be deducted in computing a
taxpayer's income for a taxation year amounts paid by the taxpayer as or on
account of moving expenses incurred in respect of an eligible relocation, to
the extent that […]
[…]
62.(3) Definition
of “moving expenses” - In subsection 62(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,
(b) the cost to the taxpayer of transporting or storing household
effects in the course of moving 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,
(d) the cost to the taxpayer of cancelling the lease by virtue of
which the taxpayer was the lessee of the old residence,
(e)
the taxpayer's selling costs in respect of the sale of the old residence,
(f) where the old residence is sold by the taxpayer or the
taxpayer's spouse or common-law partner as a result of the move, the cost to
the taxpayer of legal services in respect of the purchase of the new residence
and of any tax, fee or duty (other than any goods and services tax or
value-added tax) imposed on the transfer or registration of title to the new
residence,
(g) interest, property taxes, insurance premiums and the cost of
heating and utilities in respect of the old residence, to the extent of the
lesser of $5,000 and the total of such expenses of the taxpayer for the period
(i) throughout which the
old residence is neither ordinarily occupied by the taxpayer or by any other
person who ordinarily resided with the taxpayer at the old residence
immediately before the move nor rented by the taxpayer to any other person, and
(ii) in which reasonable
efforts are made to sell the old residence, and
(h) the cost of revising legal documents to reflect the address of
the taxpayer's new residence, of replacing drivers' licenses and non-commercial
vehicle permits (excluding any cost for vehicle insurance) and of connecting or
disconnecting utilities,
but, for greater certainty, does not include costs (other than costs
referred to in paragraph 62(3)(f) incurred by the taxpayer in respect of the
acquisition of the new residence.
[…]
248.(1) Definitions - In this Act,
[…]
“eligible
relocation” means a relocation of a taxpayer in
respect of which the following apply:
(a) the
relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a location (in
section 62 and this definition referred to as “the new work location”) that is,
except if the taxpayer is absent from but resident in Canada, in Canada, or
(ii) to be a student in full-time attendance enrolled in a program
at a post-secondary level at a location of a university, college or other
educational institution (in section 62 and this definition referred to as “the
new work location”),
(b) the taxpayer ordinarily resided before the relocation at a
residence (in section 62 and this definition referred to as “the old
residence”) and ordinarily resided after the relocation at a residence (in
section 62 and this definition referred to as “the new residence”),
(c) except if the taxpayer is absent from but resident in Canada,
both the old residence and the new residence are in Canada, and
(d) the
distance between the old residence and the new work location is not less than
40 kilometres greater than the distance between the new residence and the new
work location;
Discussion
[20]
The deduction that is sought by the appellant
requires, among other things, that there be an “eligible
relocation,” as that term is defined in
subsection 248(1) of the Act. The appellant’s position is that his
relocation from West Palm Beach to Pickering satisfies each of the requirements
of this provision, as described below.
[21]
With respect to paragraph (a) of the definition
of “eligible relocation,”
the appellant submits that the purpose of the relocation was to, among other
things, carry on a business at his mother’s residence.
[22]
With reference to paragraph (b), the appellant
submits that: (1) before the relocation he was an ordinary resident of West
Palm Beach, specifically at the location where the Voyager was anchored, and
(2) after the relocation he was an ordinary resident at his mother’s home in
Pickering.
[23]
With reference to paragraph (c), the appellant
submits that the old residence does not need to be in Canada because he was
absent from but resident in Canada.
[24]
As for paragraph (d), the appellant submits that
the new residence is more than 40 kilometres closer to his new work location
than his old residence.
[25]
The difficulty that I have with the appellant’s
position is that I am not satisfied that the relocation occurred to enable the
appellant to carry on a business at his mother’s residence.
[26]
I would first comment on the approach that
should be taken in determining the appellant’s purpose for the relocation.
Although a taxpayer’s statement of purpose is relevant, this statement is
self-serving and not determinative. Objective factors are also important.
[27]
I note the following comment of Iacobucci J. in Symes
v. The Queen, 94 DTC 6001 (S.C.C.), at p. 6014:
As in
other areas of law where purpose or intention behind actions is to be
ascertained, it must not be supposed that in responding to this question,
courts will be guided only by a taxpayer’s statements, ex post facto or
otherwise, as to the subjective purpose of a particular expenditure. Courts
will, instead, look for objective manifestations of purpose, and purpose is
ultimately a question of fact to be decided with due regard for all of the
circumstances. […]
[28]
In this case, I find that, prior to the
relocation, the appellant had a general plan to look for work in the Toronto/Pickering
area. The plan included contacting Scotiabank, which was his former employer,
as well as looking for other business opportunities.
[29]
The appellant ended up accepting a contract with
Scotiabank and he commenced work about six months after his return to Canada.
The evidence does not reveal how this contract transpired, but the contract was
entered into before the appellant pursued other potential work opportunities.
[30]
According to the appellant’s testimony, which I
accept, the appellant always planned to come back to Canada at some point, and
he did not have the necessary visa to work in the United States.
[31]
I also accept the appellant’s testimony that his
return to Canada was hastened by a renewed relationship with his children and
that living at his mother’s residence made economic sense since he had limited
funds.
[32]
The evidence as a whole does not satisfy me that
the appellant’s relocation to Pickering occurred to enable him to start a
business at his mother’s residence.
[33]
Before the relocation, the appellant had only
had a general plan to look for work in the Toronto/Pickering area. It only
makes sense that the appellant would be open to the best work opportunity that
came his way. I find that the appellant did not have a specific intent to
commence a business at his mother’s residence.
[34]
This conclusion is supported by an excerpt from
an email titled “What’s Up?” sent by the appellant to an acquaintance on July
4, 2011 (Ex. A-1, Tab 10). At the time, the appellant was enroute from Florida
to Pickering.
I want a job too,
so I can make some money to help my kids, even though they are grown up and can
help themselves much. But I am fifty five and I don’t know who will hire me at
my age. Do you have any ideas how I can earn money? Is it too late for me to
start a business of my own, do you think? I’ve never been in business for myself
before but I think I would do well if I find a good business to get into. Any
ideas?
[35]
This email demonstrates that the appellant wanted
to find work but that he had not formulated a specific work plan at the time he
left Florida.
[36]
I conclude that the relocation did not occur to
enable the appellant to commence a business at his mother’s residence and that
the expenses were not incurred in respect of an “eligible
relocation.”
[37]
In light of this conclusion it is not necessary
that I consider the other issues in this appeal and I decline to do so.
Conclusion and costs
[38]
The appeal will be dismissed.
[39]
As for costs, the appellant seeks an award of
costs for the inordinate amount of time that he spent preparing for this appeal
due to Canada Revenue Agency’s poor communication in describing the reasons for
the reassessment.
[40]
In an appeal in this Court, there must be
exceptional circumstances to justify an award of costs to the losing party. This
is not such a case.
[41]
The problem with the appellant’s position is
that the prior communications by the Canada Revenue Agency are not relevant in
determining the issues in the appeal. The issues for purposes of the appeal,
from the respondent’s perspective, are set out in the Reply. It is the function
of the Reply to inform the taxpayer of the case that he has to meet in Court.
[42]
It is unfortunate if the prior communications
were not clear, but it is not appropriate to deviate from the usual rule as to
costs.
[43]
Accordingly, each party shall bear their own
costs.
Signed
at Ottawa, Ontario this 29th day of July 2015.
“J.M. Woods”
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