Citation: 2013TCC391
Date: 20131206
Docket: 2012-3500(IT)I
BETWEEN:
KEITH ABRAHAMS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this
appeal is whether the Appellant is entitled to claim a deduction for a clergy residence in his 2010
taxation year.
Preliminary Matter
[2]
In his amended notice
of appeal, the Appellant requested that if the Court allowed his appeal for his
2010 taxation year, the same result be applied to his 2009 and 2011 taxation
years.
[3]
The appeal for the 2009
and 2011 taxation years is not properly before this Court. According to the
affidavit of May Yu, an officer with the Canada Revenue Agency, the Appellant
did not file a notice of objection against the reassessment of his 2009
taxation year or the assessment of his 2011 taxation year. It is a condition
precedent that a taxpayer must file a notice of objection against an assessment
before he can file an appeal with this Court.
[4]
The appeal of the 2009
and 2011 taxation years is quashed.
History of Appeal
[5]
The Appellant is an
ordained pastor. In 2010, he ministered the congregation of Harvest Church
International (the “Church”) in Abbotsford, British Columbia. It was his
evidence that the Church had financial difficulties as a result of the
recession in 2008 and he proposed to the Directors of the Church that he would
be employed on contract with the Church.
[6]
When the Appellant
filed his tax return for 2010, he reported that he had earned business income
and he claimed a deduction for a clergy residence in the amount of $17,891 and
business expenses of $10,972.16. The Appellant filed his notice of appeal with
the Court claiming that whether he was employed by an “external employer or by
self, the qualifying function remains unchanged”.
[7]
The appeal was set for
hearing in March of 2013. At the hearing, the Appellant stated that he intended
to file an amended 2010 income tax return in which he would report that the
income he earned was employment income and not business income. It was
suggested that he file an amended notice of appeal instead of amending his
income tax return. The Appellant followed this suggestion and filed an amended
notice of appeal.
[8]
In the amended notice
of appeal, the Appellant stated:
(a)
His income in 2010
should have been reported as employment income;
(b)
There was a contract of
employment between him and the Church in 2010 and he was employed to minister
to the congregation of the Church;
(c)
He met both the
function and status tests set out in paragraph 8(1)(c) of the Income
Tax Act;
(d)
The Church had very
little money in 2010 and his remuneration was paid without deductions. It was
an error that his income was reported as having come from business rather than
employment;
(e)
He asks that his income
be treated as employment income;
(f)
He further asks that
the Court allow the CPP deduction which he claimed at line 222 in the amount of
$1,940.44;
(g)
He further asked that
his expenses in the amount of $10,972.16 be reported as employment expenses
rather than business expenses. He wrote that he enclosed a copy of form T2200
which was signed by the Director of the Church;
(h)
He requested that he be
allowed his original claim for the clergy residence deduction in the amount of
$17,891. He enclosed photocopies of cancelled cheques evidencing his income
from the Church.
The Appeal
[9]
Paragraph 8(1)(c)
of the Income Tax Act (“ITA”) reads:
(1) Deductions allowed -- In computing a taxpayer's income for a taxation year from an office or employment, there may be
deducted such of the following amounts as are wholly applicable to that source
or such part of the following amounts as may reasonably be regarded as
applicable thereto:
( c ) clergy residence -- where, in the
year, the taxpayer
(i) is a member of the clergy
or of a religious order or a regular minister of a religious denomination, and
(ii) is
(A) in charge of a diocese,
parish or congregation,
(B) ministering to a diocese,
parish or congregation, or
(C) engaged exclusively in
full-time administrative service by appointment of a religious order or
religious denomination,
the amount, not exceeding the taxpayer's remuneration for
the year from the office or employment, equal to
(iii) the total of all amounts
including amounts in respect of utilities, included in computing the taxpayer's income for the
year under section 6 in respect of the residence or other living accommodation
occupied by the taxpayer in the course of,
or because of, the taxpayer's office or employment as such a member
or minister so in charge of or ministering to a diocese, parish or
congregation, or so engaged in such administrative service, or
(iv) rent and utilities paid
by the taxpayer for the taxpayer's principal place
of residence (or other principal living accommodation), ordinarily occupied
during the year by the taxpayer, or the fair
rental value of such a residence (or other living accommodation), including
utilities, owned by the taxpayer or the taxpayer's spouse or common-law partner, not
exceeding the lesser of
(A) the greater of
(I) $1,000 multiplied by the
number of months (to a maximum of ten) in the year, during which the taxpayer is a person described in
subparagraphs (i) and (ii), and
(II) one-third of the taxpayer's remuneration for
the year from the office or employment, and
(B) the amount, if any, by which
(I) the rent paid or the fair
rental value of the residence or living accommodation, including utilities
exceeds
(II) the total of all amounts each of which is an amount deducted, in
connection with the same accommodation or residence, in computing an individual's income for the
year from an office or employment or from a business (other than an amount deducted under this
paragraph by the taxpayer), to the extent
that the amount can reasonably be
considered to relate to the period, or a portion of the period, in respect of
which an amount is claimed by the taxpayer under this
paragraph;
[10]
At the hearing, the
Appellant stated that he satisfied the conditions given in paragraph 8 (1)(c)
of the ITA. He was ordained as a pastor; he ministered to a congregation
and he occupied an office during 2010. Therefore he met all of the conditions
in paragraph 8(1)(c).
[11]
It is not disputed that
the Appellant met the status and function conditions of paragraph 8(1)(c).
The only issue in this appeal is whether the Appellant was self-employed in
2010 or whether he earned his income from an “office or employment” in 2010.
The Appellant is eligible to claim the deduction in paragraph 8(1)(c)
only if he was an employee of the Church in 2010.
[12]
The Appellant has
presented sufficient evidence to allow me to find that he met the conditions in
paragraph 8(1)(c) and he is entitled to the deduction for a clergy
residence in the amount of $17,891.
[13]
Although the Appellant
stated that he was no longer claiming the amount of $10,972.16 as an employment
expense, his witness, Gary Steeds, accountant, insisted that the Appellant was
entitled to both the employment expense and the clergy residence deduction.
[14]
The Appellant has not
submitted any documents to show that he incurred any employment expenses or
that he was required by his employer to pay expenses related to his employment.
I note that although he referred to a signed T2200 form in his amended notice
of appeal, the form was neither attached to his amended notice of appeal nor
was it submitted as an exhibit at the hearing. I find that the Appellant is not
entitled to deduct any expenses related to his employment beyond those related
to his residence.
[15]
In his amended notice
of appeal, the Appellant asked that the Court allow the CPP deduction in the
amount of $1,940.44. This matter was not raised at the hearing of the appeal.
[16]
The appeal is allowed
and the Appellant is entitled to claim the amount of $17,891 as a deduction for
a clergy residence.
Signed at Ottawa, Canada, this 6th
day of December 2013.
“V.A. Miller”
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