Erikson v. R., [1975] C.T.C. 624, 75 D.T.C. 5429

Collier, J:

1 The plaintiff seeks to appeal income tax assessments by the Minister of National Revenue for the years 1971, 1972 and 1973. All his tackle is in order in respect of 1973. Notice of objection against the assessment for that year and for 1971 was duly filed. The statement of claim, dated February 7, 1975, seeks relief for 1972 and 1973 but does not specifically mention 1971. The defendant agreed to an amendment to include a claim for the 1971 taxation year. That amendment will be allowed.

2 The plaintiff did not file a notice of objection to the 1972 assessment. I shall later recount the circumstances. His statement of claim requests the assessment for that year be set aside. The defendant says that, in the particular circumstances, this Court cannot hear the intended appeal in respect of that year. I shall later deal, as well, with that point.

3 The issue in respect of all three years is identical: whether the plaintiff was “... resident in Canada at any time in the year”.[FN1: <p><em>Income Tax Act</em>, RSC 1952, c 148, subsection 2(1), as amended including the amendments of SC 1970–71–72, c 63.</p>] That question is essentially one of fact.[FN2: <p><em>Thomson</em>v<em>Minister of National Revenue</em>, [1945] Ex. C.R. 17, per Thorson, P at 30, 31;[1945] C.T.C. 63 at 78, 2 D.T.C. 684. That decision was affirmed by the Supreme Court of Canada[1946] S.C.R. 209, [1946] C.T.C. 51, 2 D.T.C. 812. In<em>Beament</em>v<em>Minister of National Revenue</em>, [1952] 2 S.C.R. 486, [1952] C.T.C. 327, 52 D.T.C. 1183, Cartwright, J said at 494 [333, 1186]: “It has frequently been pointed out that the decision as to the place or places in which a person is resident must turn on the facts of the particular case.” See also<em>Schujahn</em>v<em>Minister of National Revenue</em>, [1962] Ex. C.R. 328, [1962] C.T.C. 364, 62 D.T.C. 1225, per Noël, J at 331 [367, 1227].</p>]

4 The plaintiff is by initial calling, at least, an academic. He was born on January 1, 1926 in Chicago, Illinois. His parents were United States citizens. The plaintiff himself has always been an American citizen. His pre-university education was in Chicago. His higher education was taken, among other places, in Oxford, England. He married there on June 20, 1953. He has two sons: Paul, born in Illinois on March 27, 1954, and John, born in Edmonton, Alberta on November 2, 1961. The plaintiff's training has been in medicine. From 1956 to 1958 he lived in Illinois. At that stage he obtained a Ph D in medicine.

5 From 1958 to 1960 he took an appointment as an instructor in anatomy at the University of British Columbia. He and his family lived in Vancouver during those two years. In 1960 he was appointed an Assistant Professor of anatomy in the medical faculty of the University of Alberta, Edmonton. He retained that position and (there is no dispute) “resided” in Edmonton until some time in 1969. He and his wife were divorced in that year. The decree nisi is dated November 6. He resigned from the medical faculty in June of 1969, apparently because of the marriage breakup and divorce proceedings.

6 He never obtained Canadian citizenship. He had landed immigrant status from the time he came to Canada. In the spring of 1971 he took some steps to apply for Canadian citizenship, but almost immediately retracted his application. I am satisfied this was merely a somewhat mis-thought attempt to try and resolve his difficulties in respect of his taxation status: whether he was subject to taxation in Canada or in the United States, or both.

7 I shall set out in more detail the plaintiff's business activities during the years 1960 to 1969. In 1963 or 1964 he invested in two apartment buildings in Edmonton. Eventually he incorporated, in Alberta, a holding company called Erikson Holdings Ltd. The main asset of that company in the years 1971 to 1973 inclusive was a 17-suite apartment building at 9620-82nd Avenue, Edmonton.[FN3: <p>This company was also in the business of purchasing and selling antiquesand objects of art. This was not a major activity.</p>] A number, if not all, of the suites were rented fully furnished. The furniture was owned by the company. From as early as 1967 one suite in the apartment building was not rented. It was essentially used as storage for furniture and other equipment.

8 Erikson Holdings Ltd had 1,000 Class A voting shares and 19,000 Class B non-voting shares. Up to the time of the divorce proceedings, the plaintiff held 999 of the voting shares. His wife held the remaining one Class A share and all the non-voting shares. Following the divorce 7,000 of the Class B shares were transferred to the plaintiff. The shares held by the plaintiff's wife were transferred to an Edmonton solicitor in trust. It appears this was done pursuant to the divorce settlement agreement between husband and wife. That agreement was approved by the court.

• (a) The wife have custody of the two boys.

• (b) The plaintiff pay $550 a month maintenance for his wife and $100 per month each for the two boys. The payments commenced September 1, 1969.

• (c) The family home, owned jointly, was transferred to the wife.

• (d) The plaintiff agreed to a number of terms in respect of the shares of the holding company. He was permitted to vote the shares, without restriction, in the ordinary course in the company's business. He could not, without first notifying his former wife, vote them to dispose of the assets of the company. If he did in fact dispose of the company's assets “... he shall secure the Petitioner for the maintenance payments ...”.

10 Mrs Erikson, following the divorce, continued to reside with the two boys in Edmonton. That is still the situation.

11 Following his resignation from the medical faculty in June of 1969, the plaintiff completed some laboratory research in Edmonton until Christmas. Early in 1970 he returned to the United States. He said he was under considerable mental stress because of the break-up of his marriage. His plans were uncertain. He first visited his parents in Illinois. In the spring of that year he travelled. He lived for a time in Sacramento. In the summer of 1970 he returned to Edmonton for a period of one to two months. He used, as a place to stay, the storage suite in the apartment block, a motel, or went camping with his younger son.

12 In the fall of 1970 he obtained an appointment as an Associate Professor in the Department of Histology of the Dental School at Loyola University, Maywood, Illinois. This was not, in the years in issue here at least, a full-time position. The plaintiff still holds that appointment. In the fall of 1970 he lived with his parents in Illinois. He had brought a number of personal belongings, including some furniture, from Edmonton. In subsequent years, while in Illinois, he has kept a room in a private club in Chicago.

13 His general activities and movements since the fall of 1970 and through the taxation years in question have been as follows. From September to the end of February he taught three subjects at Loyola. In his first year, he was paid $9,000. Latterly his salary has been $3,800. In March and April of each year he went to Florida to visit his father. In the summers, after school recessed (generally May through August) he came to Edmonton.

14 The plaintiff testified his prime purpose in returning to Edmonton each summer was to visit his children, particularly the younger boy. He wanted to spend as much time with him as possible. I unhesitatingly accept that evidence. While in determining “residence” the intention of the particular taxpayer can only be a minor factor and must always be viewed objectively against all the surrounding facts, I am satisfied the plaintiff returned to Edmonton in the summer months of each year only because his children were living there. If they had lived with their mother elsewhere, I am satisfied he would have gone to that place, wherever it might have been. His Edmonton business pursuits were purely incidental.

15 In the summer of 1971 the plaintiff stayed in Edmonton approximately one month. He lived either in the storage suite or at a summer type cottage at Wizard Lake, Alberta. That cottage is held by Erikson Holdings Ltd. It is used for camping; it has no heat, water or electricity.

16 The storage suite in the apartment has cooking and living facilities but, from the description given in evidence, could certainly not be described as premises in which one would choose to live for any length of time as part of a general mode or settled routine of life. It, as I have earlier stated, contained miscellaneous furniture and equipment for other suites, some personal items belonging to the plaintiff, and his basic needs such as a bed and essential appliances.

17 From May 1 to September 1, 1972 the plaintiff again came to Edmonton . During that period, however, he went on a 5-week trip to Africa with his younger son. Again, while in Canada he stayed in the storage suite or at Wizard Lake.

18 In 1973 he once more came back to Edmonton from May until September. He spent most of the time with his younger son.

19 I now turn to the evidence relating to the business operation of the apartment building on 82nd Avenue. Prior to the fall of 1969 he managed it by himself. From the winter of 1970 to the spring of 1971, because he was travelling, he engaged National Trust to manage the property for him. He found they were not “frugal” enough. Thereafter he has managed the apartment himself. When in Edmonton in the summer months, he has personally done a good deal of the necessary outside work. He has had, in the three taxation years in question, a caretaker arrangement with one of the tenants. That person in effect managed the apartment on the site and was in sole charge while the plaintiff was not in Edmonton. She cleaned the hallways, did what general work was required (as much as she could do), collected the rents and deposited them in a bank account. She had the right to rent suites to new tenants. She forwarded accounts or bills to the plaintiff in the United States. He paid them.[FN4: <p>As I understand it, this arrangement with the caretaker tenant stillpersists.</p>]

20 The holding company had a company car which was kept in Edmonton. When the plaintiff was there, he used it on company business. He also owned his own personal car. It, for a time, was registered in the United States but was later brought back to Canada and registered in Alberta.

21 I earlier stated the holding company was, to some extent, in the antique and art business. Originally some of the pieces were purchased by the company from the plaintiff's ex-wife. Other pieces have been subsequently acquired from other sources. In the years in question some were located in Canada and the United States. Advertisements for the sale of some of these pieces had been placed in various newspapers in North America, including the Edmonton Journal.

22 The maintenance cheques payable to the plaintiff's wife for herself and the two children were and are drawn on the Edmonton bank account of Erikson Holdings Ltd. The plaintiff has the sole signing authority.

23 The Minister contends that on all the above facts the plaintiff must be found to have been a resident in Canada (for some period of time at least) in each of the years in question.[FN5: <p>It seems to me the plaintiff was, if nothing else, clearly a resident ofthe United States for part at least of the three years, 1971, 1972, and 1973.It is also of importance that the plaintiff appears to have a more thanmodest income from an estate interest in the United States. His major sourceof income, as I see the facts, is not in Canada.</p>]

24 The defendant says the plaintiff was undoubtedly a resident of Canada, for tax purposes, up to and including most of 1969. I agree with that. It is urged on behalf of the Minister the plaintiff has not, since 1969, by his actions, personal and business activities, and routine of life, since divorced himself from that Canadian residency. Considerable reliance is placed by the defendant on the fact the plaintiff, through the holding company, has continued to manage the Edmonton apartment business; that in the summer months in particular he has actively participated in the day to day business operation of the apartment; that he has been paid fees from the holding company. It is further asserted that in the years in question the settled and ordered routine of the plaintiff's life has been (almost without deviation) as follows: part-time teaching from September until March, a two-month holiday visit to Florida, a four to five-month residence in Edmonton not only to visit his children but to take part actively in his business affairs, then in September the resumption of the cycle. All this, it is urged, makes the plaintiff a “resident” within the appropriate section of the Income Tax Act.

25 I digress to set out certain excerpts from previous decisions dealing with residence.

26 In the Thomson case (earlier cited) Kerwin, J said at pages 211–12 [52–3]:

There is no definition in the Act of “resident” or “ordinarily resident” but they should receive the meaning ascribed to them by common usage. When one is considering a Revenue Act, it is true to state, I think, as it is put in the Standard Dictionary, that the words “reside” and “residence” are somewhat stately and not to be used indiscriminately for “live”, “house”, or “home”. The Shorter Oxford English Dictionary gives the meaning of “reside” as being “To dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place.” By the same authority “ordinarily” means “1. In conformity with rule: as a matter of regular occurrence. 2. In most cases, usually, commonly. 3. To the usual extent. 4. As is normal or usual.” On the other hand, the meaning of the word “sojourn” is given as “to make a temporary stay in a place; to remain or reside for a time”.

The gradation of degrees of time, object, intention, continuity and other relevant circumstances, shows, I think, that in common parlance “residing” is not a term of invariable elements, all of which must be satisfied in each instance. It is quite impossible to give it a precise and inclusive definition. It is highly flexible, and its many shades of meaning vary not only in the contexts of different matters, but also in different aspects of the same matter. In one case it is satisfied by certain elements, in another by others, some common, some new.

The expression “ordinarily resident” carries a restricted signification, and although the first impression seems to be that of preponderance in time, the decisions on the English Act reject that view. It is held to mean residence in the course of the customary mode of life of the percon [ sic] concerned, and it is contrasted with special or occasional or casual residence. The general mode of life is, therefore, relevant to a question of its application.

For the purposes of income tax legislation, it must be assumed that every person has at all times a residence. It is not necessary to this that he should have a home or a particular place of abode or even a shelter. He may sleep in the open. It is important only to ascertain the spatial bounds within which he spends his life or to which his ordered or customary living is related. Ordinary residence can best be appreciated by considering its antithesis, occasional or casual or deviatory residence. The latter would seem clearly to be not only temporary in time and exceptional in circumstance, but also accompanied by a sense of transitoriness and of return.

But in the different situations of so-called “permanent residence”, “temporary residence”, “ordinary residence”, “principal residence” and the like, the adjectives do not affect the fact that there is in all cases residence; and that quality is chiefly a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question. It may be limited in time from the outset, or it may be indefinite, or so far as it is thought of, unlimited. On the lower level, the expressions involving residence should be distinguished, as I think they are in ordinary speech, from the field of “stay” or “visit”.

27 The present case is close to the line. I am satisfied, however, on a balance of probabilities, the plaintiff was not at any time in the years in question “resident” in Canada. He visited Canada primarily to be with his younger son. It is true he had retained business interests in this country and he actively participated in those business activities while in Edmonton. But, in my opinion, the time spent in this country was not truly part of an ordered, customary, or general mode of life. The plaintiff had, to my mind, effectively severed his Canadian residential ties with one qualification. His children still resided in this country in the custody of their mother. That was the magnet drawing him back during school vacation.

28 Finally, I should record some comment as to the credibility of the plaintiff .He pleaded his own case in this court. He obviously is not informed as to court or trial procedures. He is equally obviously well-educated, and very intelligent. Like so many educated people who, for some reason, choose to handle their own litigation, he tended to be argumentative in giving his evidence, particularly in cross-examination. I am satisfied, however, after observing him closely while testifying that he gave his evidence essentially fairly and truthfully.

29 The assessment for the taxation years 1971 and 1973 are, therefore, referred back to the Minister for reassessment with a direction that the plaintiff was not resident in Canada in those years.

30 I am, unfortunately, unable to assist the plaintiff in respect of the assessment for 1972. No notice of objection was filed. The plaintiff assumed that, having taken the point for the 1971 taxation year (that he was not a resident of Canada), the objection would cover ensuing taxation years .I can understand that reasoning and I accept it.

31 By subsection 165(1) of the Income Tax Act an objection to an assessment must be served within 90 days of the mailing of the notice. The plaintiff at the hearing, on my urging, applied for an order extending the time within which notice of objection for 1972 might be served. I have, however, since concluded the Federal Court has no jurisdiction to extend the time. The application must be made to the Tax Review Board (see subsection 167(1)). I express no opinion as to whether or not, if such an application were now made to the Board, the Board could, having in mind the provisions of paragraph 167(5)(a), grant it.

32 The plaintiff is entitled to his costs of this action.