Sarchuk,
T.C.J.
[Orally]:—The
appeal
of
Gerald
Pollard
is
from
an
assessment
of
tax
with
respect
to
his
1983
taxation
year.
The
facts
which
give
rise
to
this
appeal
are
not
particularly
in
dispute
and
can
be
briefly
summarized.
As
a
result
of
leaving
his
employment
in
Stratford,
Ontario,
and
taking
up
new
employment
in
Waterloo,
Ontario,
Mr.
Pollard
changed
his
residence
from
a
home
in
Stratford
to
a
new
home
in
Waterloo
in
the
taxation
year
1983.
The
Waterloo
residence
was
more
than
40
kilometres
closer
to
his
new
place
of
employment
than
was
his
former
Stratford
residence.
Mr.
Pollard
claimed
a
deduction
in
taxation
year
1983
for
moving
expenses.
The
respondent,
by
notice
of
reassessment,
allowed
the
sum
of
$5,526,
leaving
in
dispute
several
other
amounts.
The
appellant
claims
by
this
appeal
a
further
allowance
of
$6,115.
His
position
is
that
this
amount
represents
the
selling
cost
in
respect
of
his
Stratford
residence.
The
respondent's
position
is
that
the
amount
of
$6,115
claimed
as
a
moving
expense
is
a
cost
attributable
to
the
appellant
giving
a
mortgage
on
his
new
residence
at
a
rate
of
15
per
cent
rather
than
at
the
lowest
first
mortgage
rate
then
available
of
13
A
per
cent.
The
respondent
does
not
dispute
that
this
increase
in
the
rate
of
interest
was
negotiated
between
the
appellant
and
the
mortgagee,
Victoria
&
Grey
Trust
Company,
in
order
that
Mr.
Pollard
could
satisfy
an
obligation
on
the
mortgage
given
to
Victoria
&
Grey
on
his
previous
residence
in
Stratford,
Ontario.
It
is
also
not
disputed
that
the
$6,115
is
the
amount
of
increased
interest
payable
over
the
duration
of
the
mortgage
term,
which
is
five
years,
on
the
new
residence.
The
Minister’s
position
is
nonetheless
that
such
interest
is
not
a
selling
cost
attributable
to
the
sale
of
the
Stratford
residence.
The
appellant
contends
that
at
the
time
of
sale
his
Stratford
property
was
subject
to
a
mortgage
in
favour
of
Victoria
&
Grey.
This
mortgage
was
for
a
five-year
term
with
four
years
remaining
to
maturity.
There
were,
according
to
Mr.
Pollard,
no
prepayment
privileges
available
to
him.
The
terms
of
the
sale
required
that
Mr.
Pollard
provide
a
clear
title
to
the
purchaser,
with
the
result
that
the
mortgagee,
in
order
to
provide
Pollard
with
a
discharge
of
the
mortgage
required
an
interest
penalty
payment
amounting
to
$6,115.
Mr.
Pollard
did
not
have
the
funds
available
to
pay
this
penalty,
nor
was
he
in
a
position
to
borrow
funds
by
way
of
increasing
the
principal
amount
of
the
mortgage
on
the
new
residence
since
that
would
have
taken
the
mortgage
over
the
limit
for
which
he
could
apply.
Therefore,
(and
I
note
that
this
proposal
came
from
Victoria
&
Grey),
the
trust
company
agreed
to
provide
to
Mr.
Pollard
the
funds
required
to
pay
the
penalty
by
utilizing
a
formula
which
was,
in
effect,
an
increase
in
the
rate
of
interest
charged
on
the
mortgage
on
the
new
Waterloo
residence
in
excess
of
the
prevailing
market
rate
for
a
mortgage
of
that
duration.
The
interest
increase
was
calculated
in
such
a
manner
that
the
value
of
the
increased
rate
of
return
to
Victoria
&
Grey
over
the
term
of
the
mortgage
would
be
$6,115,
the
exact
amount
that
was
required
to
pay
the
penalty
on
the
discharge
of
the
existing
mortgage
on
the
former
residence.
According
to
Mr.
Pollard
that
was
the
only
practical
way
in
which
he
could
complete
the
sale.
Counsel
for
the
appellant
contends
that
the
arrangement
made
by
Mr.
Pollard
with
Victoria
&
Grey
enabled
him
to
obtain
the
amount
of
money
necessary
for
him
to
obtain
a
discharge
on
his
former
residence.
As
I
have
noted,
the
provision
of
a
clear
title
was
a
condition
of
the
sale.
Counsel
argued
that
the
direct
and
immediate
object
of
the
prepayment
was
to
effect
the
sale,
and
therefore
was
a
selling
cost
within
the
meaning
of
paragraph
62(3)(e)
of
the
Income
Tax
Act.
I
have
considered
the
evidence,
the
arguments
submitted
and
the
cases
cited.
I
note
that
Collin
v.
M.N.R.,
[1986]
1
C.T.C.
2603;
86
D.T.C.
1477
is
under
appeal,
and
although
analogous
is
not
entirely
on
point.
However,
the
rationale
in
that
case
is
of
some
import
and
must
be
considered
in
dealing
with
the
facts
before
me.
The
decision
in
O’Gorman
v.
M.N.R.,
[1981]
C.T.C.
2400;
81
D.T.C.
281
deals
with
a
somewhat
distinguishable
situation,
and
on
the
facts
in
that
case
it
is
clear
that
the
expenses
sought
to
be
deducted
by
the
taxpayer
were
not
and
could
not
in
any
way
be
considered
to
be
selling
costs.
In
my
view
the
O’Gorman
decision
is
distinguishable
and
is
of
limited
utility
in
the
case
at
bar.
In
this
appeal,
I
accept
as
suggested
in
Interpretation
Bulletin
IT-178R2,
that
mortgage
prepayment
or
discharge
fees
incurred
in
the
sale
are
legitimate
and
accepted
selling
costs
within
the
meaning
of
the
relevant
sections.
I
further
conclude
that
the
amount
of
$6,115
was
the
amount
required
by
Victoria
&
Grey
Trust
as
a
penalty
payment,
without
which
the
appellant
would
not
have
been
provided
with
a
discharge
of
mortgage,
and
it
would
follow
that
the
sale
would
probably
have
been
aborted.
That
amount,
in
my
view,
constitutes
a
mortgage
prepayment
or
discharge
fee.
Victoria
&
Grey
structured
the
interest
payments
on
the
appellant’s
new
residence
to
enable
the
appellant
to
pay
the
penalty
of
$6,115
and
for
no
other
purpose.
Although
the
method
is
somewhat
unique,
or
perhaps
the
proper
description
is
convoluted,
the
added
costs,
nonetheless,
are
costs
incurred
in
order
to
complete
the
sale,
and
in
my
view
are
properly
deductible
as
a
selling
cost.
Accordingly,
the
appeal
is
allowed
and
the
matter
is
referred
back
to
the
respondent
for
reassessment
on
the
basis
that
the
actual
costs
incurred
in
taxation
year
1983
are
deductible
pursuant
to
the
provisions
of
section
62
of
the
Income
Tax
Act.
I
have
chosen
not
to
specify
the
precise
amount
deductible
in
that
taxation
year
because
on
the
evidence
it
is
uncertain
whether
the
mechanism
utilized
to
put
the
appellant
in
funds
was
a
loan
of
the
full
amount
needed
to
pay
the
penalty,
which
was
then
paid
in
1983
with
repayment
of
the
loan
structured
over
the
term
of
the
new
mortgage,
or
whether
Victoria
&
Grey
in
this
fashion
permitted
the
appellant
to
pay
the
penalty
over
the
five-year
term
of
the
new
mortgage,
in
which
case
the
deduction
will
be
limited
to
the
amount
actually
paid
in
the
taxation
year
1983.
That
is
an
issue
or
a
matter
that
can
be
dealt
with
on
reassessment,
and
I
trust
that
it
will
be
resolved
rather
than
being
referred
back
to
this
Court
or
some
other
Court.
The
appeal
is
allowed
as
I
have
indicated.
Costs
to
be
taxed
and
submitted
to
the
Registrar
and
the
Taxing
Officer.
Appeal
allowed.
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