Kraus v. R., [1999] 3 CTC 2196, 99 DTC 612 (Informal Procedure)

Bonner T . C.J.:

This is an appeal from an assessment of income tax for the Appellant’s 1990 taxation year. On assessment the Minister of National Revenue included in the computation of the Appellant’s income the sum of $5,132 received from his employer as a transfer allowance. The Respondent relies on paragraph 6(1)(b) of the Income Tax Act (“Act”). The Appellant’s position is that the amount is not taxable income. In effect he takes the position that the costs which he incurred falling within the categories intended to be covered by the transfer allowance are far greater than the amount received.

The Appellant was at all relevant times an employee of the Royal Canadian Mounted Police (“RCMP”). In 1989 the employer transferred the Appellant from Ottawa to Winnipeg. At the time the Appellant was married. His spouse remained in Ottawa for several months to sell the family home. She then joined the Appellant in Winnipeg after the sale.

The transfer allowance was paid under RCMP rules which included the following:

K. 9. a. Entitlement

1. A member, including a reengaged ex-member, who qualifies under one of the following conditions is entitled to a transfer allowance when relocated under the provisions of the RCMP Relocation Directive, excluding local moves and retirement relocation;

1. three years’ service in the RCMP; or

2. upon transfer from the first or subsequent place of duty following completion of initial training and, for a Cst. or native S/Cst., recruit field training.

2. Entitlement to the transfer allowance will be effective on the calendar day that the member departs for the new posting or, if the member precedes his/her dependents, on the calendar day that the dependents depart for the new location.

3. The amount is calculated as follows:

I. For a member who moves his/her dependents, an amount equal to one month’s salary ( /n of annual pay) at his/her substantive rate in effect the day before his/her departure. See App VI-2-F, subsection 1.4 for explanation of dependent.

The evidence indicates that the RCMP indemnifies its members in respect of the cost of moving some but not all common household goods. As well the employer pays a fixed allowance of $500 to cover several categories of cost such as servicing appliances before moving, removal and installation of carpet and curtain rods and pre-packaging of pictures and heirlooms. The Appellant states that this allowance, which he describes as non- taxable, has not sufficed for years.

The allowance now in issue is paid in addition to the indemnity and the $500 allowance previously mentioned. It is intended to cover a broad range of costs for which no other provision is made. Such costs include moving household goods which movers will not transport, cleaning of carpets, the purchase of window coverings and associated hardware, the painting of present and previous residences and the decrease in the life expectancy of household appliances resulting from moving them. As well it is intended to cover home equity losses which do not qualify under the employees Home Equity Assistance Program.

Paragraph 6(1 )(/?) of the Act reads:

Amounts to be included as income from office or employment.

(1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable:

(b) Personal or living expenses. - all amounts received by him in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except

The meaning of the word allowance has been considered in a multitude of decisions including Ransom v. Minister of National Revenue (1967), 67 D.T.C. 5235 (Can. Ex. Ct.); À. v. Pascoe (1975), 75 D.T.C. 5427 (Fed. C.A.) and Gagnon v. R. (1986), 86 D.T.C. 6179 (S.C.C.). In Gagnon the meaning adopted by the Federal Court of Appeal in Pascoe was modified somewhat. The amount paid to the Appellant was a limited predetermined amount fixed not by reference to specific costs actually incurred by the Appellant as a result of the transfer but rather by reference to an arbitrary criterion, the Appellant’s salary. The Appellant was not required to account for the amount received. He was free to spend the money in any way he pleased. These characteristics identify the payment as an allowance within the meaning of paragraph 6(1)(b). I might add that there appears to be no material difference between the payment now in issue and payments held to be allowances within the meaning of paragraph 6(1)(b) in several earlier cases involving payments by the RCMP to members of the force. I refer to McLay v. Minister of National Revenue (1992), 92 D.T.C. 2260 (T.C.C.); Oster v. R. (1994), 95 D.T.C. 104 (T.C.C.); McRae v. R., [1996] 3 C.T.C. 2482 (T.C.C.); and, finally, Morris v. R. (1996), 97 D.T.C. 1546 (T.C.C.); aff’d (1997), 97 D.T.C. 5531 (Fed. C.A.).

For the foregoing reasons the appeal will be dismissed.

Appeal dismissed.