Kenneth Charabin v. Minister of National Revenue, [1988] 1 CTC 2419, 88 DTC 1284

Rip, T.C.J.: —The appellant, Kenneth Charabin, appeals from a notice of assessment for 1980 in which the respondent, the Minister of National Revenue, added to his income a sum of $42,000 received by him in the year from Charabin Seed Farm Ltd. ("corporation"), of which he was a shareholder, as a loan on the basis the loan was not made to enable or assist Mr. Charabin to acquire a dwelling for his habitation in accordance with subparagraph 15(2)(a)(ii) of the Income Tax Act ("Act").

Subparagraph 15(2)(a)(ii) read as follows in 1980:

15(2) Where a particular corporation, a corporation to which the particular corporation is related or a partnership of which either or both of the corporations is a member has in a taxation year made a loan to a person (other than a corporation resident in Canada) who is a shareholder of the particular corporation or who is connected with a shareholder of the particular corporation, the amount thereof shall be included in computing the income for the year of the person to whom the loan was made unless

(a) the loan was made

(ii) to an employee of the lender or to the spouse of an employee of the lender to enable or assist the employee or his spouse to acquire a dwelling for his habitation,

and bona fide arrangements were made at the time the loan was made for repayment thereof within a reasonable time;

Mr. Charabin carried on the business as a sole proprietor in 1971. In that year he caused architectural plans and specifications to be made for the construction of a residence for himself and his family and construction of the residence commenced.

The plans provided not only for the residence but also for future construction of a seed plant, machine shed, stables and corral, a swimming pool area and a rumpus room.

The following is a schedule prepared by the appellant which sets out the years construction of the house was undertaken and costs:

Mr. Charabin's family moved into the structure built as his residence in December 1971. The main frame of the house included the basic frame and windows. A furnace was in the basement and some duct work was done. The basement had no floor. On the main floor scatter rugs were on the plywood floor. Gyprock was installed for walls during the winter of 1971 and 1972; the walls were completed while the family resided in the building. The house included a kitchen, living room, dining room and those bedrooms on the main floor. Mr. Charabin agreed with the Minister’s counsel that there were no holes in the house and was "a complete house". The carpet installed in 1974 was in the living room; in the same year linoleum was placed on the kitchen and bathroom floors. By 1974 additional work such as the installation of panelling and cupboards was completed and water supply was fully installed. The rumpus room was constructed in the basement of the house in 1979. Construction of the pool started during autumn 1979. Work on the office and studio took place during the winter of 1979 and 1980. In 1982 a bathroom was installed in the basement.

The corporation was incorporated in 1974 under the laws of Saskatchewan to carry on the business of seed processing previously carried on by Mr. Charabin.

Arrangements for the loan by Mr. Charabin from the corporation and its repayment appear to have been made in 1980. No documentation in respect of the loan was adduced in evidence. At the time the appellant had a dwelling and was not contemplating moving out of that dwelling and acquiring a new dwelling.

The word "dwelling" is defined as follows:

1. The action of dwell v. . . . A place of residence; a dwelling-place, habitation, house.

The Shorter Oxford English Dictionary

A building or other shelter in which people live: HOUSE

Webster's New Collegiate Dictionary

The Shorter Oxford English Dictionary defines “dwell”, inter alia, as "To remain as in a permanent residence; to have one's abode; to reside.”

The French language version of subparagraph 15(2)(a)(ii) uses the phrase "d'acquérir une habitation destinée à son propre usage” for the words "to acquire a dwelling for his habitation” in the English version of that provision. The “Petit Robert" dictionary defines “habitation” as:

1. Le fait de loger d'une manière durable dans une maison, sous un toit. . . . 2. Lieu où l'on habite.

The Shorter Oxford English Dictionary defines “habitation” as:

1. The action of dwelling in or inhabiting; occupancy by inhabitants. 2. concr. A place of abode or residence . . . .

The Shorter Oxford English Dictionary defines "acquire" as:

1. To gain, or get as one's own (by one's own exertions or qualities). 2. To receive, to come into possession of.

At the latest at the end of 1974, and probably earlier, Mr. Charabin and his family were residing in a building that was a place of abode. He and his family were living in the house in a "manière durable”. The house included everything that one would consider to constitute a residence: bedrooms, kitchen, washrooms, dining and living areas. The house was a dwelling and a "habitation" as defined by dictionaries as understood by the average Canadian. A dwelling had been completed prior to 1979.

The swimming pool, office and rumpus room could not reasonably be considered a dwelling in and by itself. One is tempted to ask whether a building consisting only of a swimming pool, office and rumpus room is a dwelling. What was done in 1980 was to add additional rooms and recreation area to a pre-existing dwelling.

I do not accept counsel for the appellant's submission that a dwelling is completed only when its construction has been completed in accordance with its original plans and specifications. I believe I can take judicial notice that it is not uncommon for people who move into a newly constructed home, if not any home, to have plans or hopes to alter the building sometime in the future. These plans do not derogate from the nature of their house as a dwelling.

It is not plans and specifications that determine whether a dwelling exists or not. It may be true, as argued by counsel for the appellant, that if a taxpayer constructs his home, including a swimming pool, rumpus room and office in one stage the respondent will not add the amount of the loan a taxpayer received as a shareholder of a corporation to his income; the Act does not set out any minimum or maximum qualifications as to what a dwelling ought or ought not to include.

On the other hand, however, once a house is built and is treated as a dwelling by a family notwithstanding it is not completed in accordance with original plans and specifications, any structure attached to the dwelling years later is not an “acquisition of a dwelling”, since the family already possesses a dwelling, but is an addition to the dwelling: see W.J. McCracken

V. M.N.R., [1981] C.T.C. 2875; 81 D.T.C. 793. Also, on the facts of the case at bar, I fail to see that the acquisition of a swimming pool, rumpus room and office, together or separately, is the acquisition of a dwelling.

I find that when the loan between the appellant and the corporation took place the appellant already owned a dwelling and the appellant did not acquire any dwelling in 1980. He lived in the same dwelling throughout the year, the preceding year and the following years.

The appeal is dismissed.

Appeal dismissed.