David J. McGhee v. Minister of National Revenue, [1986] 2 CTC 2120, 86 DTC 1569

Taylor, T.C.J.:—This is an appeal heard in Toronto, Ontario, on June 2, 1986, against an income tax assessment for the year 1982, in which the Minister of National Revenue disallowed an amount of $1,120 claimed as moving expense. The appellant is a lawyer whose employment in Calgary, Alberta, was terminated early in 1982. Unable to locate alternate employment there, he decided to move to Toronto, Ontario. It was his testimony that he concluded that the most economical method by which he could do so was by purchasing a used “Van” and doing the physical moving himself. Again, by his testimony the van cost $1,500, and he took six days to travel from Calgary to Toronto with his furniture and belongings in the van. He left his furniture in the van while he lived for a few months with friends in Toronto, and searched for employment. In September 1982, he sold the van for only $200, — its condition having deteriorated badly during the trip from Calgary. In filing his 1982 income tax return he claimed an amount of $1,500 for moving expenses — but supplied no details. When requested by Revenue Canada to submit additional information he filed the appropriate form T1- M, which showed:

In a reassessment dated July 3, 1984, the Minister of National Revenue . . did not permit the Appellant to deduct $1,120 of the moving expenses claimed on the basis that travel costs in the amount of $300 and meals in the amount of $80 were reasonable in the circumstances and where no receipts in support of qualified moving expenses were submitted.” (Taken from reply to notice of appeal).

Further, also in the reply to notice of appeal, the Minister indicated as his findings or assumptions upon which the assessment was based:

— the purchase of the van by the Appellant was an expenditure to acquire a Capital asset for his personal use;

— the loss in the amount of $1,300.00 (the “loss”) incurred by the Appellant on the sale of the van is a loss on the sale of a personal use capital asset;

— the loss incurred by the Appellant is not a moving expense of the Appellant;

— the damage deposit of $440.00 is not a cost to the Appellant of cancelling the lease of his old residence and is not a moving expense of the Appellant;

— the Appellant incurred travel costs in the amount of $300.00 and meal expenses in the amount of $80.00 and no other moving expenses.

In argument counsel for the Minister noted that the “damage deposit" of $440 (supra) was actually a claim the appellant should make against his former landlord not as part of “moving expenses"; and that there was no provision in the Act for the deduction of “capital" amounts such as the van for “moving expenses". However, the appellant continued to restrict his claim to the original $1,500.

Analysis

As I see it, the $440 amount above is not necessarily related to a determination of the issue. For whatever reason the appellant claimed and continues to claim only a total of $1,500 for his moving expenses. It is clear that the major item in the dispute (actually in excess of the total) is the $1,300 net amount allegedly used up by the appellant in the move. There were no actual receipts for the purchase of the van, the gas, oil, meals, rooms, etc., used by the appellant in the way he describes the move, but the Minister did not pursue this “lack of documentation" point very vigorously. Accordingly I do not intend to deal with it as a primary point. In my view, the issue in this appeal comes down to whether the purchase, use and eventual sale of the van — at a net cost of $1,300 — was deductible as a “moving expense". The problem to be overcome by the appellant, is that detailed in points (b), (c) and (d) of the reply to notice of appeal (supra), and can be paraphrased by saying that the Minister has considered the amount of $1,300 as a loss on the “purchase and sale of a capital asset", rather than an expense item.

I would also note that it was clear to the Court from the testimony and evidence submitted by Mr. McGhee that he had not “.. . commenced . . . to be employed . . ." at a new work location (subsection 62(1)) of the Income Tax Act, S.C. 1970-71-72, c. 63, as amended, when he relocated to Toronto. Rather, he had commenced to search for employment after he arrived in Toronto. That situation, in my view, would have left his entire claim in jeopardy (and this was pointed out by the Court to counsel for the respondent), but the Court will not decide the matter on that point — the Minister, for whatever reason, having already allowed the taxpayer some relief (the amount of $380) in the assessment at issue. Mr. McGhee provided no response to this point raised by the Court, nor did he in argument provide any basis in fact or law for the deduction he sought under the peculiar circumstances of the appeal. He appeared content to argue that his claim was reasonable and sensible, and its' rejection by the Minister was simply inappropriate. While Mr. McGhee’s disaffection with the treatment he had received from Revenue Canada was evident at the hearing he presented no jurisprudence or substantive logic which would have had a positive effect on his appeal. It could equally be said that the Minister provided little which would support the assessment.

I have been unable to locate a specific case in the jurisprudence which would determine this issue as the basis of precedent — but I have reviewed John G. Critchley v. M.N.R., [1983] C.T.C. 2365, 83 D.T.C. 278. I do not have in this appeal, either of the items therein allowed to that taxpayer by Judge Tremblay, “the dog as a member of the household", and the “transfer of money", so I need not comment on them. But some relation to the present appeal may be seen in the disposition of the costs for “connecting appliances” in the new home. I do not read the case to be authority for a proposition that “capital amounts" are not deductible — as I read it, the reason for disallowance must have been because costs in connection with the "acquisition of his new residence" (subsection 62(3)) are restricted to such items as legal fee, transfer and registration — (paragraph 62(3)(f) ). That situation may have been somewhat enlarged by recent assessing practice or case law, but that is not the issue before this Court. As I see it, these items

— “legal fees", "taxes imposed on the transfer of registration of title’, might well be considered capital items in themselves. They could be added on to the capital acquisition cost of a new asset in most, if not all, ordinary circumstances. The same holds true for "the selling costs in respect of the sale of his old residence" (paragraph 62(3)(e) ). It is simply the cost of disposing of a capital asset — a "personal use capital asset” to use the expression mentioned by the Minister on the reply to notice of appeal (supra). I have also reviewed Otto John Rath v. The Queen, [1982] C.T.C. 207; 82 D.T.C. 6175, in which that appellant was denied a deduction for goods lost in transit stage. I regard that as an indication that the preservation and insurance of his personal goods was a responsibility of Mr. Rath and not considered by the Minister as "moving expenses". I do not regard that as applying directly to the case before the Court since in this case the van was used for transportation and storage until new accommodation was found.

I believe this to be a situation in which the Court may resort to whatever assistance may be found in the Revenue Canada assessing practices — at least as outlined in Interpretation Bulletin IT-178R2 in effect for the taxation year at issue. From the Bulletin I would quote paragraph 17:

17. The cost of moving a mobile home is ordinarily not deductible under section 62. However, where personal effects are in a mobile home when it is moved, the cost of moving the home is considered an eligible moving expense to the extent it does not exceed the estimated cost of moving the personal effects separately.

As I read that interpretation of "moving expenses", it would appear to me that if Mr. McGhee had used a mobile home as his Calgary residence, that the cost of moving his belongings in that mobile home to Toronto would have been deductible, to the extent that cost did not exceed a reasonable estimate of moving these belongings without moving the mobile home. In this matter, there is no evidence before the Court that the cost of moving and storing Mr. McGhee's belongings and then separately moving and relocating himself, would have been less than the $1,300 net which he says it costs. It appears eminently reasonable. Presumably Mr. McGhee could have rented a van, similar to the one in this appeal, and moved himself and his belongings, and that rental cost — if properly substantiated — would have been deductible. That he accomplished the same thing by purchasing, using, and selling the van does not appear to me to be sufficient reason to invalidate his claim.

In my view the original claim of $1,500 should not be disallowed on the grounds that either — (a) the van was a "capital" asset while being used by Mr. McGhee; or (b) he personally transported himself and his belongings from Calgary to Toronto therein. That method was simply his choice of options available to him and I do not find it barred by the Act.

The appeal is allowed in order that Mr. McGhee may claim an amount of $1,120 as "moving expenses" in addition to the $380 already allowed by Revenue Canada. The entire matter is referred back to the respondent for reconsideration and reassessment. No costs are to be awarded.

Appeal allowed.