Midyette v. The Queen, 85 DTC 5565, [1985] 2 CTC 362 (FCTD)

McNair, J:—The sole issue in this income tax appeal is whether a person who is ordinarily resident in Canada by virtue of subsection 250(3) of the Income Tax Act is a taxpayer thas is deemed by section 250 of the Act to be resident in Canada throughout the taxation year so as to become entitled to deduct moving expenses for a move outside Canada under the provisions of section 62 of the Act as modified by section 63.1 thereof.

The plaintiff is a member of the teaching staff of Sir Winston Churchill High School in Calgary, Alberta, and resides in that city. Late in 1977 he was accepted as a participant in an international teaching fellowship exchange program between the Calgary Board of Education and the educational authority in the State of Victoria, Australia. The term of the fellowship was from January 1, 1978 to January 1, 1979. On December 15, 1977 the plaintiff and his family left Canada to travel by air to Melbourne, Australia, where they arrived on January 15, 1978 and took up residence in the house of the plaintiffs Australian counterpart. Melbourne was the plaintiffs new work location under the terms of the program. It is common ground that the distance between the plaintiff’s old residence in Calgary and his new work location in Melbourne is not less than 25 miles greater than the distance between his new residence and his new work location in Melbourne. The plaintiff incurred the expenses of moving his family to Australia for which he was not reimbursed. The plaintiff worked and lived in Melbourne until December 1978. He returned with his family to Calgary in January 1979, resumed residence in his home, and went back to work for the Winston Churchill school.

In filing his income tax return for the 1978 taxation year, the plaintiff claimed to deduct the sum of $3,797 on account of moving expenses, being one-half the round-trip air fare. By notice of assessment dated May 25, 1978, the Minister disallowed the plaintiff’s claim for the deduction of these moving expenses. The plaintiff filed a notice of objection. By notice dated February 26, 1980, the Minister confirmed his assessment.

The Minister’s position was simply that the plaintiff did not move from one residence in Canada to another residence in Canada as required by section 62 of the Act and, having been ordinarily resident in Canada throughout the 1978 taxation year, the plaintiff could not be deemed by section 250 to be resident in Canada throughout the taxation year so as to come within the provisions of section 63.1.

Obviously, the case must turn on the proper construction of sections 62, 250 and 63.1 of the Income Tax Act and more particularly subsection 250(3) thereof.

The Tax Review Board held that the taxpayer was not a servant of the province within the purview of the deeming section 250 and that the move was not to a new permanent residence in Canada within the ambit of the provisions of section 62 relating to moving expenses. The Board does not seem to have addressed the question of whether section 63.1 would have had any effect on section 62 in reaching this result. Presumably, the point was not raised.

At first instance, subsection 62(1) of the Act permits a taxpayer who moves from one residence in Canada to another residence in Canada to deduct the moving expenses thereby incurred, subject to certain exceptions, where the move was made with respect to the commencement of a business or employment at a location in Canada or to attend full-time as a student at a university, college or other post-secondary educational institution.

Section 63.1 was enacted by SC 1976-77, c 4, s 22(1), applicable to the 1976 and subsequent taxation years. The relevant provisions read as follows:

Application to Deemed Residents

63.1 Where a taxpayer is deemed by section 250 to be resident in Canada throughout a taxation year or during a part of a taxation year, in applying sections 60, 62 and 63 in respect of him during the period when he is so deemed to be resident in Canada, the following rules apply:

(b) subsection 62(1) shall be read without reference to the words “in Canada”;

The application of paragraph 63.1(b) to subsection 62(1), in the circumstance where it is appropriate so to do, deletes the words “‘in Canada” so that the rendered version would then read:

Moving Expenses

62. (1) Where a taxpayer

(a) has, at any time

(i) ceased to carry on business or to be employed at the location or locations, as the case may be, . . . at which he ordinarily so carried on business or was so employed, or

(ii) ceased to be a student in full-time attendance at an educational institution . . . that is a university, college or other educational institution providing courses at a post-secondary school level,

and commenced to carry on a busines or to be employed at another location . . . (hereinafter referred to as his “new work location”), or

(b) has, at any time, commenced to be a student in full-time attendance at an educational institution (hereinafter referred to as his “new work location”) that is a university, college or other educational institution providing courses at a post-secondary school level,

an by reason thereof has moved from the residence . . . at which, before the move, he ordinarily resided on ordinary working days (hereinafter referred to as his "old residence”) to a residence . . . at which, after the move, he ordinarily so resided (hereinafter referred to as his “new residence”), so that the distance between his old residence and his new work location is not less than 25 miles greater than the distance between his new residence and his new work location, in computing his income for the taxation year in which he moved from his old residence to his new residence or for the immediately following taxation year, there may be deducted amounts paid by him as or on account of moving expenses incurred in the course of moving from his old residence to his new residence, to the extent that . . .

The relevant provisions of section 250 are contained in the following subsections:

Extended Meaning of Resident

250. (1) For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been resident in Canada throughout a taxation year if

(a) he sojourned in Canada in the year for a period of, or periods the aggregate of which is, 183 days or more,

(b) he was at any time in the year, a member of the Canadian Forces,

(c) he was, at any time in the year

(i) an ambassador, minister, high commissioner, officer or servant of Canada, or

(ii) an agent-general, officer or servant of a province,

and he was resident in Canada immediately prior to appointment or employment by Canada or the province or received representation allowances in respect of the year,

(d) he performed services, at any time in the year, in a country other than Canada under a prescribed international development assistance program of the Government of Canada and he was resident in Canada at any time in the 3 months’ period preceding the day on which such services commenced,

(e) he was resident in Canada in any previous year and was, at any time in the year, the spouse of a person described in paragraph (b), (c) or (d) living with that person, or

(f) he was, at any time in the year, a child described in paragraph 109(1 )(d) of a person described by paragraph (b), (c) or (d).

Idem

(2) Where at any time in a taxation year a person described by paragraph (1)(b), (c) or (d) ceases to be a person so described, he shall be deemed to have been resident in Canada during the part of the year preceding that time and his spouse and child who by virtue of paragraph 1(e) or (f) would but for this subsection, be deemed to have been resident in Canada throughout the year, shall be deemed to have been resident in Canada during that part of the year.

Ordinarily Resident

(3) In this Act, a reference to a person resident in Canada includes a person who was at the relevant time ordinarily resident in Canada.

Corporation Deemed Resident

(4) For the purposes of this Act, a corporation shall be deemed to have been resident in Canada throughout a taxation year if . . .

Obviously, the solution must lie in the correct answer to the question whether the words “deemed by section 250 to be resident in Canada” in section 63.1 must be taken to apply to this section in toto so as to give subsection 250(3) the necessary deeming significance or whether these words are limited to the particular categories of persons “deemed to have been resident in Canada” as described in paragraphs 250(1)(a), (b), (c), (d), (e) and (f), subsection 250(2) and subsection 250(4), to the exclusion of subsection 250(3).

Counsel for the plaintiff argues that Parliament, by referring in section 63.1 to section 250 in its entirety without particularising as to the various subsections thereof, clearly intended that the whole of section 250 was to be regarded as a deeming provision. It follows therefore that the plaintiff, although not physically present in Canada at any time during the 1978 year, was ordinarily resident in Canada throughout that taxation year by virtue of subsection 250(3) and is thereby deemed to have been resident in Canada under the whole umbrella of section 250. This brings him within the modified scope of subsection 62(1) with the words “in Canada” deleted therefrom and accordingly qualifies him for the deduction of his legitimate moving expenses from Canada to Australia. It is further argued that the use of the word “includes” in subsection 250(3) extends rather than restricts the meaning of the word “resident” and gives a person ordinarily resident in Canada the status of a person deemed to be resident in Canada the status of a person deemed to be resident in Canada within the statutory scheme of sections 250 and 63.1 of the Act. In short, the fact of being ordinarily resident in Canada operates to deem the plaintiff to have been resident in Canada within the purview of section 250.

It is the position of counsel for the defendant that subsection 250(3) does not deem anything at all. He submits that there is no equity in the taxpayer’s favour and that the plain meaning of the words of section 63.1 and section 250 must be taken to restrict the deeming provisions to subsections (1), (2) and (4) of section 250 and more particularly to the various categories of persons specifically covered by paragraphs 250(1 )(a) through to (d).

The point thus raised is whether the categories of deemed residence close with the specific enumeration or instead are extended by subsection 250(3) to comprehend a person ordinarily resident in Canada.

Counsel cited a number of cases on the question of whether a person is “resident” or “ordinarily resident” in Canada for purposes of taxation where the issue turned directly on that. Hence, no useful purpose would be achieved by reviewing them at length. Suffice it to mention a few. The classic, leading case is Thomson v MNR, [1946] SCR 209; [1946] CTC 51; 2 DTC 812, where the Supreme Court of Canada had to consider the meaning of the terms “resident”, “ordinarily resident” and “sojourns” in order to determine the taxability of Mr Thomson. The majority of the Court held that the appellant was “ordinarily resident in Canada” and not a mere sojourner and was therefore liable for income tax. I will touch only on the varying viewpoints with respect to terminology.

Estey, J stated at 231 (CTC 70; DTC 813):

A reference to the dictionary and judicial comments upon the meaning of these terms indicates that one is “ordinarily resident” in the place where in the settled routine of his life he reguarly, normally or customarily lives.

Rand, J stated at 224 (CTC 63; DTC 815):

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 person 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.

[Emphasis added]

The learned judge went on to make this significant statement at 226( CTC 65; DTC 816):

Giving to “residing” in paragraph (a) the fullest signification of which it is capable, “ordinarily resident” becomes superfluous.

Kerwin, J took the view that the words “resident” and “ordinarily resident” should be given their common usage meaning inasmuch as they were not defined in the Act.

Kellock, J said at 229 (CTC 68; DTC 819-20):

With respect to the collocation of the word “residing” and the phrase “ordinarily resident” in clause (a), the phrase would seem to assume that a person may be resident in Canada without being “ordinarily resident”. It is not necessary to consider just what the distinction may be in any particular circumstances.

Taschereau, J, dissenting, stated a completely dissimilar view at 228 (CTC 60; DTC 822):

The context further indicates that the words “‘ordinarily resident” are broader than the word “residing”, and that the former were used to cover a field that the latter did not occupy. The aim of Parliament was to tax, not only the residents of Canada, those who have their permanent home, their settled abode, but also those who live here most of the time, even if they were absent on temporary occasions. The first group comes under the qualification of “residents”, and the second under that of “ordinarily residents”.

In Beament v MNR, [1952] 2 SCR 486; [1952] CTC 327; 52 DTC 1183, where the soldier was held not to be resident or ordinarily resident in Canada, Cartwright, J made the following comments at 493 (CTC 331-32; DTC 1185- 86):

The Income War Tax Act does not contain a definition of the words “resident” or “ordinarily resident” and it is common ground that they should be given the everyday meaning ascribed to them by common usage.

The question whether, as used in section 7(a), the words “ordinarily resident” are more or less comprehensive than, or synonymous with, the word “resident” was argued before us but it does not appear to me to be necessary to pursue this inquiry in this case. It has already received attention in Thomson v Minister of National Revenue 1946 SCR 209.

The case would undoubtedly go the other way today because of paragraph 250(1)(b) of the Act regarding members of the Canadian Forces.

In The Queen v Reeder, [1975] CTC 256; 75 DTC 5160 (FCTD), the taxpayer was a resident Canadian who was temporarily abroad for some eight months in France in the course of his employment with the Michelin company and it was found that he was resident in Canada throughout the taxation year and was therefore not exempt from Canadian income tax. It is implicit from the reasons of Mahoney, J that he decided the issue on the basis that the taxpayer was ordinarily resident in Canada. The learned judge specifically referred to subsection 250(3) of the Act, stating at 260 (DTC 5162):

The Act does not define the word “resident”. It does however expand its meaning somewhat.

250 (3) In this Act, a reference to a person resident in Canada includes a person who was at the relevant time ordinarily resident in Canada.

The bulk of judicial prose generated on the subject of fiscal residence has related to the peripatetic lifestyle of the leisurely wealthy — the jet setters of yesteryear.

While of the opinion that the taxpayer was far removed from the jet set, Mahoney, J listed the material factors for determining residence and, after briefly analyzing the same, concluded at 261 (DTC 5163):

I am satisfied that had the Defendant been asked, while in France, where he regularly, normally or customarily lived, Canada must have been the answer.

Saunders v MNR, [1980] CTC 2436; 80 DTC 1392 was the case of the professor on sabbatical leave from the University of Calgary to pursue medical studies at an American university who claimed exemption from Canadian income tax on the ground that he was not resident in Canada. Mr J B Goetz, QC, of the Tax Review Board, applied the criteria laid down by Mr Justice Mahoney in the Reeder case and also relied on Thomson to conclude that the taxpayer clearly came within the judicial interpretation of a person “ordinarily resident in Canada” within the meaning of subsection 250(3) and thereby was subject to tax for the period in question.

The learned Board member made this statement at 2440 (DTC 1395-96):

The question of the determination of residence, for taxation purposes, is not an easy one and each case must turn on its own facts involving relevant criteria and indicia. Subsection 2(1) of the Income Tax Act, in effect at the time (1975-1976) read as follows:

(1) An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

Subsection 250(3) then comes into play in determining whether the txpayer was ordinarily resident in Canada.

In a paper presented to the Twenty-Ninth Tax Conference, 1977, Professor Brian G Hansen, after his preliminary introduction, dealt first with the topic of The Statutory Establishment of Residence. This is what he said at 683:

There is nothing remarkable about the creation of residence in the Income Tax Act. There are very few definition sections relating to the matter. Subsection 250(3) extends or narrows, depending on what your predisposition is, the meaning of residence to include “ordinarily resident”. Whether this has had any effect on the general question of residence will be considered later.

The deeming provisions of the Act, while in the main unremarkable, are at least more detailed. The basic provisions here are subsections 250(1) and (2). Perhaps the most important paragraph is 250(1)(a), which provides that if you sojourn in Canada for a period or periods of more than 183 days, you shall be deemed to be resident. Other parts of subsection 250(1) deal with ambassadors, ministers, high commissioners, officers or servants of Canada and agent-generals, officers or servants of a province who were resident in Canada prior to their appointment or received representation allowances, members of the Canadian Forces and persons who performed services in a country other than Canada under a prescribed international development assistance program of the Government of Canada and who were resident in Canada within the three months preceding the commencement date of such services. Paragraph 250(1)(e) catches naturally enough spouses of the above persons who have been resident in Canada in any previous year and paragraph 250(1)(f) completes the circle by covering the children of such persons. The termination of such services is dealt with by subsection 250(2).

Professor Hansen referred in approbative terms to an excellent article by Gwyneth McGregor on the subject of "Deemed Residence” which appeared in (1974), XXII, Canada Tax Journal, 381. She contrasted common law residence with the deemed statutory residence afforded by subsection 250(1) to the categories of persons enumerated in the respective paragraphs thereof. The learned commentator made this significant statement at 382- 83:

All the paragraphs of subsection 250(1) except paragraph (a) refer to people who are normally residents of Canada but happen to live and work outside the country in the employ of the government of Canada or a province for a period of time. Many or most of them may have their homes and families, and all their ties, in the countries where they are serving, and under the common law rules they would be non-residents of Canada during their stay abroad. This provision of the Act, however, makes them residents of Canada even though they may not set foot in the country during the year.

It seems to me that the comments of these two scholars largely contradict the proposition being advanced by plaintiff's counsel to the effect that the deeming provisions apply to all of section 250 of the Act and not just those specific subsections thereof which deem a person “to have been resident in Canada", ie (1), (2) and (4). Nonetheless, counsel for the plaintiff strenuously contends that his client is entitled to the protection of the deeming umbrella of all of section 250 without regard to any paragraph particularisation. He says that subsection 250(3) deems it so.

Dickson, J gave this excellent and succinct explanation of the purpose of a deeming clause in R v Sutherland, [1980] 2 SCR 451, at 456:

The purpose of any “deeming” clause is to impose a meaning, to cause something to be taken to be different from that which it might have been in the absence of the clause.

Dreidger, Construction of Statutes, (2nd ed) concludes his discourse of the meaning of “deemed" with this cautionary note at 27-28:

The purpose to be served by a deeming clause must always be borne in mind, for it obviously could not serve any purpose other than that stated in the statute that contains it.

Viewed in this light, it is my opinion that subsection 250(3) of the Act is not a deeming clause and that the plain meaning of the words used therein bespeaks an intention to extend any narrow or limited signification of residence in the sense of actual physical presence at any given time to the circumstantial concept of the person who has centralized his ordinary mode of living at some place in Canada or has maintained a sufficient nexus or connection therewith as to be logically regarded as being ordinarily resident in Canada, even though physically absent therefrom. In my view the subsection is not capable of being strained beyond the plain and proper meaning of the words to read as though a person ordinarily resident in Canada shall be deemed to be “a person resident in Canada" so as to come within the deeming scope of section 250, which is the construction for which the plaintiff contends. The linch-pin of subsection 250(3) has failed to hold. And now the final point.

The modernised principle for the interpretation of fiscal legislation is well stated by Estey, J in Stubart Investments Limited v The Queen, [1984] 1 SCR 536 at 578; [1984] CTC 294 at 316; 84 DTC 6305 at 6323:

Professor Willis, in his article, supra, accurately forecast the demise of the strict interpretation rule for the construction of taxing statutes. Gradually, the role of the tax statute in Courts today apply to this statute the plain meaning rule, but in a substantive sense so that if a taxpayer is within the spirit of the charge, he may be held liable. See Whiteman and Wheatcroft, supra, at p 37.

While not directing his observations exclusively to taxing statutes, the learned author of Construction of Statutes, (2nd ed, 1983), at p 87 E A Dreidger, put the moder rule succinctly:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

In my opinion, the plain meaning of the words of section 63.1 read in conjunction with those of section 250 in their entire context and in keeping with the object and spirit of the Act indissolubly links the deemed ^taxpayer" to the person "deemed to have been resident in Canada” within the rubric of subsections 250(1), (2) and (4) and more particularly to those sorts of persons described in paragraphs (a), (b), (c) and (d) of subsection 250(1) thereof.

For the foregoing reasons, the plaintiff’s appeal is dismissed, with costs.

Appeal dismissed.