Mackay v. R., [1997] 3 C.T.C. 2669

Archambault T.C.J.:

1 The Honourable Kenneth Mackay is appealing a reassessment by the Minister of National Revenue (Minister) with respect to the 1993 taxation year. The notice of reassessment of November 6, 1995 shows a balance due of $2,052. However, the basis of the objection to the reassessment is not altogether clear.

2 As I understand the problem, Mr. Mackay resigned as a judge of the Quebec Superior Court at the end of September 1992. In a letter dated September 17, 1992 in which he requested a refund of expenses, he advised the Office of the Commissioner for Federal Judicial Affairs (F.J.A. Office) that he was retiring at the end of the month. Unfortunately, this letter went unheeded by the F.J.A. Office and he was paid his regular remuneration for the months of October, November and December 1992 and the first two months of 1993.

3 Mr. Mackay was informed that he should have directed his letter of resignation to the Minister of Justice and, having been so advised, sent it to the Honourable Pierre Blais on January 6, 1993.

4 To correct the problem of the non-payment of pension benefits to Mr. Mackay for the period from October 1992 to February 1993, the Department of Supply and Services (D.S.S.) paid, early in 1993, a sum of $43,657.15 to Mr. Mackay. Mr. Mackay decided not to accept this payment and he returned it to D.S.S.. As I understand it, Mr. Mackay wanted D.S.S. to withhold future payments of pension benefits to compensate for the remuneration paid in error after his departure from office. According to Mr. Mackay this approach was accepted by D.S.S. and two pension benefit cheques which had been prepared for the months of March and April 1993, were never sent to him.

5 So, in effect, Mr. Mackay received for the last three months of 1992 income which he declared as employment income in the amount of $39,382 and which was subsequently converted into pension benefits. Since the amount of pension benefits should have been approximately $26,103, Mr. Mackay received an amount in excess of what he was entitled to as pension benefits for 1992.

6 Since Mr. Mackay also received remuneration for the first two months of 1993, he received an amount in excess of the pension benefits to which he was entitled. This amount in excess for 1992 together with the amount in excess for 1993 represent a sum of roughly $21,843 (using the Minister's figures, or $21,411 using Mr. Mackay's figures). The amount of pension benefits that he did not receive for the months of March and April would have represented, according to my estimate, $17,402. Mr. Mackay confirmed that he received his monthly pension benefits from May to December.

7 If my understanding is correct, after all the adjustments made to rectify the situation are considered, Mr. Mackay would seem to have received from D.S.S.[FN1: <p>This is mere speculation but it may explain why the Minister issued an assessment claiming an unpaid amount of $2,052.</p>] in 1992 and 1993, $4,440 (or $4,009, using Mr. Mackay's figures) more than he was entitled to.

8 For tax purposes, the Minister, in dealing with the 1992 taxation year, did not accept the tax return as filed by Mr. Mackay. Mr. Mackay had declared as income the full amount actually paid by D.S.S. and received by him, which came to $153,799.98. The Minister, however, used the income amount indicated on the T-4 filed by D.S.S. and reduced it by the amount of $39,382, representing the total remuneration paid in 1992 after Mr. Mackay's retirement.

9 In processing the 1993 taxation year, the Minister, basing himself on the T-4A filed by D.S.S., included in that taxation year the refund of $43,657.15 paid in 1993 together with the pension benefits received from March to December of the same year for a total of $130,667.05.

10 For that taxation year, Mr. Mackay had declared as pension benefits a sum of $107,205.10. His net and taxable income, as appearing in his tax return, was $113,393. In his proceedings before the Court, Mr. Mackay claimed that he had only received $95,574, representing 8 months of pension benefits ($69,608) and two months of salary ($25,966).

11 Mr. Mackay filed a notice of objection with respect to the 1992 and 1993 taxation years. As a consequence of his representations, the sum of $39,382 was excluded from his income for the 1993 taxation year and, naturally, it was added back in computing his income for the 1992 taxation year. So, as I see it, the net effect of all these adjustments is that the amount paid as remuneration after Mr. Mackay's retirement has in effect been taxed in the 1992 taxation year and this amount was not included in computing his taxable income for the 1993 taxation year.

12 I observe that an amount of $113,393.12 was declared as net and taxable income by Mr. Mackay in his 1993 tax return. In his reassessment of November 6, 1995, the amount of net and taxable income assessed by the Minister is $98,577, an amount lower than that declared by the taxpayer. The evidence and the arguments presented by Mr. Mackay did not disclose any error in the determination of taxable income for the 1993 taxation year, so I do not see the basis for his complaint. Even if I use Mr. Mackay's figure for the total income received from D.S.S., ($95,574) and I add all his other sources of income and deduct all the amounts he has claimed in computing his net and taxable income, I arrive at an amount of $101,762 which is still higher than the amount determined by the Minister in his November 6, 1995 reassessment ($98,577).

13 I have the impression that the problem that Mr. Mackay is concerned with results from the accounting treatment of all the adjustments made by Revenue Canada to correct the problem created by the misunderstanding between himself and the F.J.A. Office. I think a visit to the offices of Revenue Canada Taxation would help in clearing up this misunderstanding.

14 Mr. Mackay had the burden of establishing that the assessment of the Minister was wrong, either in fact or in law. I have heard no evidence nor any argument showing that the Minister assessed an amount of income tax in excess of the amount owing by Mr. Mackay. His appeal is therefore dismissed.