John G Critchley v. Minister of National Revenue, [1983] CTC 2365, 83 DTC 278

Guy Tremblay:—

1. The Point at Issue

The point at issue is whether the appellant, an officer in the Canadian Armed Forces, is correct in deducting in the computation of his income for the 1979 taxation year expenses totalling $506.94 incurred when he moved his family from British Columbia to Ontario.

2. The Burden of Proof

2.01 The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof results particularly from several judicial decisions, including the judgment delivered by the Supreme Court of Canada in Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

2.02 In the same judgment, the Court decided that the assumed facts on which the respondent based his assessment or reassessment are also deemed to be correct. In the present case, the assumed facts are described in the reply to the notice of appeal as follows:

6. In so reassessing the Appellant, the Respondent found or assumed:

(a) the facts hereinbefore pleaded;

(b) that the Appellant has claimed as moving expenses, the connection of certain appliances and services namely, a television, a telephone and electricity/- water totalling $42.65. These expenses were not incurred as a result of the appliances being transported or due to their being stored as a result of the move from Chilliwack, British Columbia to London, Ontario, and accordingly are not deductible as moving expenses;

(c) that the Appellant has claimed $19.00 as moving expenses associated with veterinarian charges for tranquilizers and rabies shot for their 9 year old dog. The dog is not a member of the Appellant’s household and in any event, the expenses do not flow from the move from Chilliwack, British Columbia to London, Ontario;

(d) that the Appellant claimed as moving expenses the cost which his lawyer incurred and charged him to wire money from the sale of his old residence in Chilliwack to the Appellant when he was residing in Ontario. The cost of wiring money is not a cost of moving from Chilliwack and more particularly is not an expense associated with the sale of his residence in Chilliwack;

(e) that the Appellant claimed as moving expenses the cost of carrying his house in Chilliwack from September 1, 1979, to October 1, 1979, which cost totalled $431.79. These are not costs associated with either selling a house or moving. This carrying cost is not an expense associated with the sale of his residence in Chilliwack.

3. The Facts

3.01 The appellant is an officer in the Canadian Armed Forces. Until July 1979 he resided in the town of Chilliwack, in the province of British Columbia.

3.02 As a result of his being transferred from British Columbia to Ontario, the appellant incurred expenses. Some were admitted by the respondent. These expenses are well described in the notice of appeal which also includes the appellant’s opinion, as substantially submitted by his wife before the Board:

(a) transportation of appliances

In my opinion, the applicances have not been moved until they are reconnected, just as china is not considered moved until unpacked, or carpets considered moved until unrolled and laid, or draperies considered moved until they are hung. Charges for reconnecting are part of the unpacking cost and therefore, an eligible transportation expense. The expenses consist of:

$10.65	appliances
15.00	TV
12.00	telephone
5.00	electricity/water

(b) travelling costs for member of household

For 9 yrs our dog has been a member of the household. She has lived in the house, eaten in the house, slept in the house, and moved with the family from Nfld to BC to Ont. Costs related to moving her (as below) should be eligible.

$19.00 veterinarian charges for tranquilizers and rabies shot

(c) selling costs of old residence

(I) money transfer cost

Since financing by purchaser was completed after my departure from BC, it was necessary for my lawyer to wire the money from the sale of the old residence to Ont at a cost of $13.50. This is considered a selling expense.

(II) The selling price of the old residence was finalized on 2 Aug 79. The house was vacated on 24 Aug 79, in time for the intended 1 Sept 79 change of ownership. However, new owner could not arrange financing until 1 Oct. Former owner incurred the following extra expenses by this delay of 30 days.

financing costs	$385.02
taxes (1/12 X 381.00)	31.75
insurance	10.00
sewer (1/12 X 60.14)	5.02
	$431.79

These costs incurred from Sept 1 to Oct 1 were necessary to sell the house, and should be considered a selling cost in respect of the sale of the old residence.

4. Law — Cases at Law — Analysis

4.01 Law

Section 62 of the Income Tax Act is the provision involved in this case. The only paragraph in dispute is 62(3) which is the definition of moving expenses. It reads as follows:

62 (3) In subsection (1), “moving expenses” includes any expense incurred as or on account of

(a) travelling costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of his household from his old residence to his new residence,

(b) the cost to him of transporting or storing household effects in the course of moving from his old residence to his new residence,

(c) the cost to him of meals and lodging near the old residence or the new residence for the taxpayer and members of his household for a period not exceeding 15 days,

(d) the cost to him of cancelling the lease, if any, by virtue of which he was the lessee of his old residence,

(e) the selling costs in respect of the sale of his old residence, and

(f) where his old residence is being or has been sold by the taxpayer or his spouse as a result of the move, the cost to him of legal services in respect of the purchase of his new residence and of any taxes imposed on the transfer or registration of title to his new residence,

but, for greater certainty, does not include costs (other than costs referred to in paragraph (f)) incurred by the taxpayer in respect of the acquisition of his new residence.

4.02 Cases at Law

The counsel for the respondent referred the Board to the following cases:

1. Marvin R V Storrow v The Queen, [1978] CTC 792; 78 DTC 6551;

2. André Vézina v The Queen, [1979] CTC 3089; 79 DTC 861;

3. John R O’Gorman v The Queen, [1981] CTC 2400; 81 DTC 281.

4.03 Analysis

4.03.1 As the quantum of the expenses is not in dispute, the only point at issue is the interpretation with regards to the Income Tax Act.

4.03.2 The preliminary remarks made in the Storrow (supra) case concerning the interpretation of a definition, as in the present case, is useful to be quoted:

(a) Where a definition section uses the words “includes”, as it does in ss 62(3), then the expression said to be defined includes not only those things declared to be included, but such other things “. . . as the word signifies according to its natural import”.

(b) The words “moving expenses” must be construed in their ordinary and natural sense in their context in the particular statute.

4.03.3 In the said Storrow (supra) case the taxpayer submits:

. . . that a moving expense is an expense of moving from one dwelling to another; it includes all costs directly and solely related to the move from the time of the decision to leave to the time of resettlement. The additional monies laid out to acquire a comparable residence in Vancouver, the interest on that amount, and the costs of registration, of installing the dishwasher and new locks were all incurred, it is said because of the move from one residence to another.

Mr Justice Collier of the Federal Court — Trial Division said concerning these expenses:

The disputed outlays were not, to my mind, moving expenses in the natural and ordinary meaning of that expression. The outlays or costs embraced by those words are, in my view, the ordinary out-of-pocket expenses incurred by a taxpayer in the course of physically changing his residence. The expression does not include (except as may be specifically delineated in ss 62(3)) such things as the increase in cost of the new accommodation over the old (whether it be by virtue of sale, lease, or otherwise), the cost of installing household items taken from the old residence to the new, or the cost of replacing or re-fitting household items from the old residence (such as drapes, carpeting, etc). Moving expenses, as permitted by ss 62(3), do not, as I see it, mean outlays or costs incurred in connection with the acquisition of the new residence. Only outlays incurred to effect the physical transfer of the taxpayer, his household, and their belongings to the new residence are deductible.

The Board being bound by this decision cannot accept the expenses concerning the connection of appliances in the new home.

4.03.4 Concerning the selling costs claimed by the appellant, are they “selling costs in respect of the sale of his old residence” as provided in paragraph 62(3)(e) quoted above? In my view, these kinds of expenses embrace only those related directly to the sale of the former home, and not all the expenses or costs incurred in connection with the sale of his old residence. Taxes, financing cost, etc of the former home before the sale cannot be considered as selling costs. The same expenses, after the sale are supposed to be on the shoulders of the purchaser. In this case, it seems that the legal agreement was passed at the beginning of August (paragraph 3.02(c)(ll)) with possession by the purchaser at the beginning of September. The Board cannot see why the expenses of the purchaser would be deductible in the computation of the appellant-vendor income.

Let us suppose that it would have taken six months for a real estate agent to find a purchaser, the taxes and financing costs for those six months could not be considered as selling costs. In fact, they are expenses because the home is not sold. In my opinion, they cannot be considered as “in respect of the sale”.

Unfortunately, the expenses of $431.79 cannot be considered as deductible. The Board, however, is of the opinion that because the cost of $13.50 for the transfer of money related directly to the sale, and because the appellant is in another city as a result of the move, the expense should be allowed.

4.03.5 The Board thinks, contrary to the contention of the counsel for respondent, that the dog is a member of the household. The Income Tax Act does not say “member of the family”, but of the household. In the French version, it says “maisonnée” and not “famille”. Despite this fact, can it be said that the $19 veterinarian charges for tranquilizers and rabies shot are deductible?

This question must be answered affirmatively because of paragraph 62(3)(a). I shall quote it again: “travelling costs . . . in the course of moving the taxpayer and members of his household from his old residence to his new residence”; the words “. .. in the course of moving ...” are large enough to include the said expense. In the French version, one can read “frais de déplacement engagés pour le déménagement . . .”, the meaning of the word “engagés” is also very large.

5. Conclusion

The appeal is allowed in part and the matter referred back to the respondent for reassessment in accordance with the above reasons for judgment.

Appeal allowed in part.