Rebus v. The Queen, docket 2001-4329-IT-I (Informal Procedure)

Date: 20020531

Docket: 2001-4329-IT-I

BETWEEN:

RONALD REBUS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Little, J.

A. FACTS

[1]      The Appellant lived in a house located at 6830 LaSalle Street, in the City of Vancouver. The Appellant sold the LaSalle Street property in the fall of 1991.

[2]      On November 5, 1991, the Appellant acquired a vacant lot located at 936 Montroyal Blvd. in the City of North Vancouver. The property is referred to as the "Montroyal Property".

[3]      The Appellant paid $151,500.00 for the Montroyal Property. The Appellant stated that he intended to construct a home for his personal use on the Montroyal Property.

[4]      On November 10, 1991, the Appellant purchased a small garden shed (8' x 6') from Lumberland, a garden and building supply company, at a price of $262.00. The Appellant personally erected the garden shed on the Montroyal Property.

[5]      The Appellant testified that after he sold his home on LaSalle Avenue he lived at his girlfriend's apartment located at 372 East Keith Road in North Vancouver. During this period the Appellant stored his furniture and most of his personal effects in a public storage facility.

[6]      In September 1992, the Appellant rented an apartment suite at 202-4449 Imperial Avenue ("Imperial Property") in the Municipality of Burnaby. The Appellant said that he moved his furniture and personal effects to the Imperial Property in the fall of 1992. The Appellant said that he has resided at the Imperial Property from the fall of 1992 to the present time.

[7]      The Appellant testified that he stored his tools, some work clothes and other personal items in the garden shed on the Montroyal Property.

[8]      The Appellant's girlfriend died in 1994 and the Appellant was laid off when his employer downsized the business operation. Because he was unemployed the Appellant was unable to obtain financing for the home that he intended to construct on the Montroyal Property.

[9]      The Appellant sold the Montroyal Property in the spring of 1997 for a price of $205,000.00.

[10]     The Appellant did not report the capital gain realized by him on the sale of the Montroyal Property because he had concluded that the capital gain was exempt from tax since the Montroyal Property was his principal residence.

[11]     The Minister of National Revenue determined that the Appellant was not entitled to claim the principal residence exemption on the gain realized on the sale of the Montroyal Property. By Notice of Reassessment dated October 10, 2000, the Minister reassessed the Appellant's 1997 taxation year. In the said reassessment the Minister determined that the capital gain realized by the Appellant on the sale of the Montroyal Property was $46,509.00 and the taxable capital gain was $34,881.83.

B. ISSUE

[12]     The issue to be decided is whether the capital gain realized by the Appellant on the sale of the Montroyal Property is exempt from tax since the said property was the Appellant's principal residence.

C. ANALYSIS

[13]     Section 54 of the Income Tax Act (the "Act") defines "principal residence" as follows:

"principal residence" of a taxpayer for a taxation year means a particular property that is a housing unit, a leasehold interest in a housing unit or a share of the capital stock of a cooperative housing corporation acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, if

(a)     where the taxpayer is an individual other than a personal trust, the housing unit was ordinarily inhabited in the year by the taxpayer, by the taxpayer's spouse or former spouse or by a child of the taxpayer,

[14]     In order to determine whether the Appellant is entitled to claim the principal residence exemption with respect to the gain realized on the sale of the Montroyal Property it is necessary to answer the following questions:

1.      Does the garden shed located on the Montroyal Property qualify as a housing unit?

        AND

2.      If the garden shed qualifies as a housing unit did the Appellant ordinarily inhabit the housing unit?

[15]     In consideration of question number one it should be noted that the expression "housing unit" is not defined in the Act. In Flanagan v. M.N.R., 89 DTC 615, Rip, J. of the Tax Court of Canada considered whether the Appellant was entitled to claim the principal residence exemption. Rip, J. said that the determination of whether a "facility" is a housing unit is a question of fact.

[16]     In the Flanagan case Rip, J. held that the expression "housing unit" could encompass any facility that can be inhabited by a person and that is suitably equipped. In the Flanagan case the Appellant owned two well-equipped mobile vans. Each van contained a bed, a sink, a stove, cupboards, and a toilet. The vans also had electrical power. Rip, J. found that the vans qualified as a housing unit. Rip, J. said at page 618

A "housing unit" need not be a building. ...A van and trailer, suitably equipped, are capable of providing the same type of shelter and comfort as a traditional house.

[17]     In the case at bar, the garden shed had no water supply, no electrical supply, no stove, no dishes and no cupboard and was not equipped for normal living. The garden shed, in the words of Judge Rip, was not suitably equipped to qualify as a housing unit. In my opinion the garden shed does not qualify as a housing unit.

[18]     I will also deal with the second question, i.e. did the Appellant "ordinarily inhabit" the garden shed?

[19]     The Appellant testified that he slept in the garden shed on a number of occasions during the summer months. However, the Appellant said that in 1992 and 1993 he frequently lived at his girlfriend's house. The Appellant also stated that in 1993 he rented an apartment on Imperial Avenue in Burnaby where he kept his clothes and furniture and where he regularly resided.

[20]     The word "ordinarily" was considered in Neufeld v. M.N.R., 81 DTC 18. The Court said that the phrase "in most cases, usually, or commonly" seemed to suit as a definition.

[21]     The word "inhabit" is defined in the Oxford English Dictionary as follows: "to dwell in, occupy as an abode, to live permanently in".

[22]     In Thomson v. M.N.R., 2 DTC 812, the Supreme Court of Canada was dealing with the residence for tax purposes of Mr. Thomson. In that case Mr. Justice Kellock said at page 819:

"Ordinarily" is defined as "in conformity with rule or established custom or practice," "as a matter of regular practice or occurrence," "in the ordinary or usual course of events," "usually," "commonly," "as is normal or usual."

[23]     If we combine the two words we could say that the words "ordinarily inhabit" mean "normally occupy as a home".

[24]     Based on the testimony of the Appellant and his statement that he normally resided in his Imperial Avenue apartment, it is impossible for me to conclude that the Appellant "normally or usually occupied the garden shed as a home",

[25]     The Appellant is therefore not entitled to claim the principal residence exemption with respect to the gain realized on the sale of the Montroyal Property.

[26]     At the conclusion of the hearing, Counsel for the Minister stated that the taxable capital gain realized by the Appellant in his 1997 taxation year should be reduced from $34,881.83 to $31,205.55.

[27]     The appeal is allowed for the purpose of making the revision as proposed by Counsel for the Minister.

Signed at Vancouver, British Columbia, this 31st day of May 2002.

"L.M. Little"

J.T.C.C.

COURT FILE NO.:                             2001-4329(IT)I

STYLE OF CAUSE:                           Ronald Rebus and

                                                          Her Majesty the Queen

PLACE OF HEARING:                      Vancouver, British Columbia

DATE OF HEARING:                        May 10, 2002

REASONS FOR JUDGMENT BY:     The Honourable Judge L.M. Little

DATE OF JUDGMENT:                     May 31, 2002

APPEARANCES:

For the Appellant:                      The Appellant himself

Counsel for the Respondent:      Pamela Meneguzzi

COUNSEL OF RECORD:

For the Appellant:

Name:                

Firm:                  

For the Respondent:                  Morris Rosenberg

                                                Deputy Attorney General of Canada

                                                          Ottawa, Canada

2001-4329(IT)I

BETWEEN:

RONALD REBUS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on May 10, 2002 at Vancouver, British Columbia, by

the Honourable Judge L.M. Little

Appearances

For the Appellant:                      The Appellant himself

Counsel for the Respondent:      Pamela Meneguzzi

JUDGMENT

          The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment to delete the taxable capital gain of $34,881.83 and substitute a taxable capital gain of $31,205.55 in accordance with the attached Reasons for Judgment.

Signed at Vancouver, British Columbia, this 31st day of May 2002.

"L.M. Little"

J.T.C.C.