Ronald W. Douglas v. Her Majesty the Queen, [1990] 2 CTC 460

Cullen, J.:— This is an action appealing a decision of the Tax Court of Canada concerning the plaintiff's 1983 taxation year.

Facts

The plaintiff was employed by the United Steelworkers of America as a staff representative. This position required the plaintiff to occasionally be posted away from his home base. The plaintiff sometimes spent up to six months away from his home base, and at those times received a per diem allowance plus reimbursement for lodging costs. In 1982, the plaintiff was posted in Calgary on a temporary basis, and received a per diem allowance and lodging costs. In December 1982, he was told that the assignment in Calgary would be permanent. At this time, his out-of-town per diem and lodging expenses were discontinued. The plaintiff objected to this placement and filed a grievance. The plaintiff's wife, family, and home were located in North Delta, British Columbia and he was not willing to move. The plaintiff lost his grievance, and decided that he did not want to quit his employment until he had sufficient time earned to draw a full pension.

In the plaintiff's personal income tax return for 1983, he claimed a deduction in the amount of $4,666.80 for rent paid on his apartment in Calgary over the year. The Minister of National Revenue (the Minister) assessed the plaintiff and disallowed the rent deduction claimed on his personal residence. The taxpayer appealed to the Tax Court of Canada and that appeal was dismissed. The plaintiff then appealed to this Court.

Plaintiff's Position

The plaintiff states that his wife, family and home were located in North Delta, British Columbia. His wife could not leave her nursing position in B.C. due to pension considerations and he did not want to leave his position with the union until he could collect a full pension. As such, they decided to keep two residences: a house in Delta and an apartment in Calgary. The plaintiff then quit the union on August 5, 1984 (having established his pension) and moved back to British Columbia.

The plaintiff submits he was therefore on a temporary assignment with the union while in Calgary, and it would not have been reasonable to expect him to set up a home in Calgary when his wife and family were located in British Columbia. The plaintiff further submits that per diem allowances and lodging expenses while away from one's home base are acceptable business expense deductions under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72,

c. 63) (the "Act").

Finally, the plaintiff submits that section 8 of the Income Tax Act does not apply to his case.

The plaintiff therefore requests that his appeal be allowed, with costs.

Defendant's Position

The defendant denies that the plaintiff was on temporary assignment in 1983. In assessment of the plaintiff's 1983 taxation year, the Minister disallowed the deduction of $4,666.80 for amounts expended on rent, because it was a personal or living expense.

The defendant submits that there is no provision in the Act that would permit the plaintiff to deduct the rent expense of $4,666.80 from his 1983 employment income. The expense was a personal or living expense to the plaintiff, and therefore, the deduction was correctly disallowed by the Minister. The defendant relies upon sections 3, 5(1), 8(1), and 8(2) of the Income Tax Act.

The defendant requests that the reassessment of June 11, 1984 be confirmed, the appeal be dismissed, and the costs in the action be granted to the defendant.

Issue

The issue in this case is simply whether or not the plaintiff can deduct his rent in his personal income tax return for 1983.

Section 3 of the Act covers the basic rules for computation of personal income for taxation purposes. Subsection 5(1) of the Act states that a taxpayer's income for a taxation year is primarily the salary and/or wages received in a year. In this case, the most relevant section is section 8, which covers deductions allowed in computing the taxpayer's income from employment. Section 8 is clear that only deductions specifically enumerated in subsection 8(1) are allowable as deductions from employment income under the Act. Furthermore, subsection 8(2) states that the list in subsection 8(1) is exhaustive, therefore, if the plaintiff's situation is not among those enumerated in section 8, the rent expense he has claimed must be disallowed.

Paragraph 8(1)(h) is the most relevant to this taxpayer, as it covers frequent per diem travel. Paragraph 8(1)(h) states that the taxpayer can deduct travelling expenses expended in the course of one's employment where certain conditions are met. Paragraph 8(1)(h) reads:

(h) travelling expenses.—where the taxpayer, in the year,

(i) was ordinarily required to carry on the duties of his employment away from his employer's place of business or in different places,

(ii) under the contract of employment was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment, and

(iii) was not in receipt of an allowance for travelling expenses that was, by virtue of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing his income and did not claim any deduction for the year under paragraph (e),

(f) or (g)

amounts expended by him in the year for travelling in the course of his employment;

The problem here is that this taxpayer does not meet the requirements set out in this subsection. The plaintiff was permanently stationed in Calgary in 1983 and as such was not travelling nor carrying on his duties away from his employer's place of business.

In terms of case law, there is not much to support this taxpayer's claim. In Landeryou v. M.N.R. (1964), 35 Tax A.B.C. 174; 64 D.T.C 281, (T.A.B.), the taxpayer resided in one city and conducted his business in another. The Tax Appeal Board in that case noted that the fact the taxpayer's residence was elsewhere was his own choosing, and the expenses incurred were of a personal nature.

The plaintiff himself has maintained that section 8 does not apply to his case, and, unfortunately for him, I agree. It is unfortunate because section 8 is the only way he could claim the deduction he has attempted.

Having established that paragraph 8(1)(h) does not apply in this case, what is to be made of the rent deduction the taxpayer has claimed? The rent cannot be deducted as a business expense, unless the taxpayer can show it was incurred for the purpose of producing income from property or a business. There is no evidence to suggest that this taxpayer had a business operating out of his apartment. Instead, it seems the taxpayer's rent was simply a personal living expense. No deductions are permitted for personal and living expenses of a taxpayer under the Act.

Comments

This case revolves around its facts and their application to income tax law. Here the rent the taxpayer paid in Calgary was clearly a personal living expense. The evidence is clear that the plaintiff's posting in Calgary was made permanent inDecember 1982. When the plaintiff's status changed to permanent in December 1982, the living allowances provided by the union were discontinued. The very fact that the employer stopped providing this allowance is conclusive proof that the posting was no longer temporary. At this point Calgary became the permanent residence of the plaintiff. The fact that he and his wife chose to maintain two separate residences was a personal decision, and the taxpayer alone must bear the cost of that decision. There is no provision in the Act to deduct rental payments from one's employment income, and for a judge to allow otherwise would clearly contravene the spirit and terms of the Act.

Every taxpayer has to cover certain personal costs of living. The plaintiff and his wife made the decision to maintain two residences. While I realize this must have been a financial strain, it does not permit a deduction under the Act. I do note, however, that the plaintiff did receive an Alberta Renter Assistance Credit on his income taxes, in the amount of $110.17, based on the rent he paid in Calgary.

The plaintiff suggests, "Holes in the floor picked me up" and argued the Canadian Bill of Rights, R.S.C. 1970, App. III and the Canadian Charter of Rights and Freedoms (Constitution Act, 1982 Part I) protection was available to him. Unfortunately, no pleading, no argument nor any evidence was forthcoming that provided any basis for his contentions vis-à-vis the Bill of Rights or the Charter. He cited the preamble to the Bill of Rights which refers to “family” and counsel for the Crown pointed to the fact that neither that reference nor subsection 15(1) of the Charter had been contravened. No specifics were really presented.

For the reasons stated above the reassessment of June 11, 1984 is confirmed, and the plaintiff's appeal is dismissed with costs to the defendant if sought.

Appeal dismissed.