Jay Wollenberg v. Minister of National Revenue, [1984] CTC 2043, 84 DTC 1055

Christie, CJTC:—This appeal arises in this way. In the return of income for his 1980 taxation year, which the appellant filed with the Minister of National Revenue, he claimed the sum of $2,514.32 by way of a deduction from his total income. This sum was interest paid on funds borrowed to acquire, in 1979, a /8 interest in some undeveloped land located on North Pender Island, British Columbia. The land was sold in 1980. Nothing was done with it after acquisition and it was in the same condition at the time of sale that it had been when purchased. The appellant made a profit on the sale which he treated as a capital gain. In relation to this gain he calculated the adjusted cost base of the land at the time of disposal to be $13,110.50 with a resulting taxable capital gain of $1,826. In arriving at the adjusted cost base he did not include the $2,514.32 in interest payments because, as indicated, he claimed it as a deduction from his total income. The respondent issued a notice of reassessment, it being his position that the interest could not, in any event, be deducted from the appellant’s total income. What is relevant on this aspect of the appeal in subsection 18(2) of the Income Tax Act (“the Act’’) provides that in computing a taxpayer’s income for a taxation year from a business or property no deduction shall be made in respect of any amount paid on account of interest on borrowed money used to acquire land if, having regard to all the circumstances, the land cannot reasonably be considered to have been, in that year, used in or held in the course of a business carried on in the year by the taxpayer or held primarily for the purpose of gaining or producing income of the taxpayer from the land for that year.

The respondent, however, did accept that the profit realized by the appellant on the sale of the real estate was a capital gain and went on to add the $2,514.32 to the $13,110.50 which revised the adjusted cost base of the land upwards to $15,624.82. This step was taken pursuant to paragraph 53(1 )(h) of the Act which, for the purpose of this case, provides that in computing the adjusted cost base to a taxpayer of land at any time, there shall be added to the cost to him of the land any amount paid by him pursuant to a legal obligation to pay interest on borrowed money used to acquire the land. In the result the appellant’s taxable capital gain was reduced from $1,826 to $568.84. He objected to the assessment. While acknowledging the reduction in his taxable capital gain he pointed out that his overall tax liability for 1980 had been increased. The Minister confirmed the reassessment by notification dated January 18, 1982, and the matter was then appealed to this Court.

In the course of his able argument, Mr Wollenberg was quite candid in saying that he was not relying on what might be regarded as a proper interpretation of the provisions of the Act. He was not and is not familiar with them. His position was founded upon what he described as considerations of fairness and equity. In preparing his 1980 income tax return he consulted and relied upon a publication prepared and made available to the public by Revenue Canada entitled “Your 1980 General Tax Guide — For Residents of British Columbia”. The appellant said that the course of action which he had pursued in preparing his 1980 return was entirely consistent with a reasonable and proper interpretation of the Tax Guide and for the respondent to send him a notice of reassessment increasing his tax liability several months after he had prepared and filed his return of income relying upon the Guide was in substance a repudiation by Revenue Canada of its own publication. This, in the submission of the appellant, was unconscionable.

I have no doubt that the appellant acted bona fide throughout. Nevertheless I believe that a determination by me of the question whether the Tax Guide was misleading, either by commission or omission, with respect to the transaction which gave rise to this appeal would be redundant. I say this because, as I see it, regardless of whether a determination were made in the affirmative or negative, it could not affect the disposition of this appeal. What Parliament has decreed shall be the rules applicable in determining what is payable by way of tax under the provisions of the Act is paramount and cannot be repealed or amended in any manner by whatever Revenue Canada may choose to publish by way of Tax Guides, Interpretation Bulletins or otherwise. This is not to say that publications of the kind just mentioned are totally void of potential legal impact. They can have limited legal consequences in the sense that if a particular provision of the Act is ambiguous, or is ambiguous in a specific context, thereby giving rise to doubt about its meaning, administrative policy and interpretation as reflected in Revenue Canada publications such as Tax Guides and Interpretation Bulletins are “entitled to weight” and can be an “important factor” in the process of proper interpretation. See Hard v The Deputy Minister of Revenue of the Province of Quebec, [1978] 1 SCR 851, per de Grandpré, J delivering the judgment of the Supreme Court of Canada at pages 858-9, and Nowegijick v The Queen, [1983] CTC 20; 83 DTC 5041, per Dickson, J delivering the judgment of the same Court at page 5044. No such doubt exists in this case and therefore, I do not regard the 1980 Tax Guide as germane.

I have considered the question whether the doctrine of estoppel could apply in respect of this matter and I am satisfied that it cannot. Estoppel is incapable of putting aside or overriding the provisions of the Act as enacted by Parliament. There is ample authority for this. I need only refer to two decisions of the Federal Court — Trial Division and the cases referred to therein: Stickel v MNR, [1972] CTC 210; 72 DTC 6178, and Gibbon v The Queen, [1977] CTC 334; 77 DTC 5193.

The appeal is dismissed.

Appeal dismissed.