Citation: 2010 TCC 504
Date: 20101007
Docket: 2009-3557(IT)I
BETWEEN:
SYLVIE CHARBON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Paris J.
[1]
This appeal under the informal
procedure pertains to the 2007
taxation year. Ms. Charbon, the appellant, is challenging the
denial by the Minister of National Revenue to grant her a deduction for moving
expenses of $26,054.
[2]
In making the reassessment
regarding her claim for moving expenses, the Minister relied on the following assumptions
of fact set out at paragraph 6
of the Reply to the Notice of Appeal:
[Translation]
(a) In April 2003, the appellant acquired a building
situated at 1128 Duval Street, Mascouche, Quebec;
(b) On
June 15, 2003, the appellant brought legal proceedings against the sellers and
the building inspector as the property she had just acquired had defects caused
by mold problems;
(c) On
October 3, 2004, the appellant moved out of her Mascouche
residence in order to take a job, in October 2004, with the Centre de Santé et
Services Sociaux de Gatineau;
(d) In 2007, the appellant claimed moving expenses
which included, among other things, the cost of legal services in
respect of the legal proceedings involving said residence;
(e) During
the legal proceedings, which ended on May 31, 2007, by a Quebec Superior Court
judgment, the appellant neither rented out her residence nor put it up for sale;
(f) The
residence was sold in November 2007
after work was completed on it;
(g) Over
the course of the years, the appellant claimed, for the same move, the following expenses:
|
|
2004
|
2005
|
2006
|
2007
|
2008
|
|
Expenses claimed
|
$9,
430
|
$13,575
|
$11,797
|
$26,054
|
$6,228
|
|
Expenses
granted
|
$9,430
|
$13,575
|
$0
|
$0
|
$0
|
(h) The moving expenses claimed in 2004 and
2005 were granted without verification; as for those involving the 2006 and
2008 taxation years, they were disallowed at the time of the initial
assessments as they had not been incurred to be employed at a new work location;
(i)
As for the 2007 taxation year, the supporting
documents submitted by the appellant show that the expenses claimed had either
been deducted in 2004 or 2005 or were not eligible moving expenses.
[3]
In her testimony, the appellant
confirmed the facts outlined at paragraphs (a) to (h).
[4]
She related to the Court
that the residence she had purchased in Mascouche had serious problems, including rotten
timbers, gaps around windows and
household mold. She initiated a legal
proceeding against the former owners to have the sale
revoked, and against the inspector she hired to inspect the home prior to
purchasing it, for damages. She spent the 2003-2004 winter season in the house
and experienced health problems she attributed to the home’s unhealthy
conditions.
[5]
In 2004, she found a
job in Gatineau and moved there that same year, in October.
[6]
Since she was seeking
to have the sale of the house revoked, she did not put the house up for sale
when she moved to Gatineau. Nor did she rent it out, as she did not
want to be held responsible for the health problems of eventual tenants.
[7]
She left part of her
furniture in the house, seeing as she returned to the home at least once a
month to ensure its maintenance and compliance with the requirements of her
house insurance policy.
[8]
In May 2007, her case
was heard by the Quebec Superior Court. Although she lost against the former
owners, she was successful against the inspector, who was sentenced to pay the
sum of $17,000 to her.
[9]
Following the judgment,
she had some interior work done and placed ads to rent out the house. However,
her lawyer advised her against it, again for reasons of civil liability if her
tenants became ill.
[10]
Finally, in July 2007, she
hired a real estate agent to sell the house. In November 2007, she sold it at a
substantial loss.
[11]
For tax purposes, in
2004, 2005, 2007 and 2008, Ms. Charbon deducted as moving expenses related to
her home in Mascouche and the legal
proceeding she had initiated. Those
deductions included among other things the amounts paid for electricity, municipal
and school taxes, insurance and mortgage interest, as well as her legal and
expert witness fees.
[12]
The amount claimed by
the appellant in deductions in 2007—$26, 054 $—can be broken down as
follows:
Moving expenses:
$1,870.00
Maintenance expenses for the old residence: $3,743.21
Commission paid to the real estate agent: $7,406.75
Fees paid to the notary or lawyer $7,310.13
Other expenses related to the sale $5,724.30
(specialized inspections and interest)*
[13]
The appellant stated
during her testimony that the mortgage interest was included in the maintenance
expenses. According to her, [Translation] “the other expenses related to the
sale” did not include the expert witness fees incurred for purposes of her
legal proceeding. She also confirmed that most of the “fees paid to the notary
or lawyer” were paid for purposes of the action she had brought. However, she
told her lawyer to review the house sale contract to protect herself from the
possibility of an action by the purchasers owing to the state of the house. She
believed that an unspecified portion of the lawyer’s fees involved the sale
contract. Although she said that the fees deducted included the notary’s fees
involving the transfer of the home, she was unable to specify the amount here
either.
Relevant legislative provisions
[14]
The deduction of moving
expenses is provided for in subsection 62(1) of the Income Tax Act (the Act):
62(1) There
may be deducted in computing a taxpayer’s income for a taxation year amounts
paid by the taxpayer as or on account of moving expenses incurred in respect of
an eligible relocation, to the extent that
(a) they were not paid on the taxpayer’s behalf in
respect of, in the course of or because of, the taxpayer’s office or
employment;
(b) they were not deductible because of this section in
computing the taxpayer’s income for the preceding taxation year;
(c) the total of those amounts does not exceed
(i) in any case described in subparagraph (a)(i) of the
definition “eligible relocation” in subsection 248(1), the total of all
amounts, each of which is an amount included in computing the taxpayer’s income
for the taxation year from the taxpayer’s employment at a new work location or
from carrying on the business at the new work location, or because of
subparagraph 56(1)(r)(v)
in respect of the taxpayer’s employment at the new work location, and
(ii) in any case described in subparagraph (a)(ii) of the definition “eligible
relocation” in subsection 248(1), the total of amounts included in computing
the taxpayer’s income for the year because of paragraphs 56(1)(n) and (o); and
(d) all reimbursements and allowances received by the
taxpayer in respect of those expenses are included in computing the taxpayer’s
income.
248(1) “eligible relocation” means
a relocation of a taxpayer where
(a) the
relocation occurs to enable the taxpayer
(i) to
carry on a business or to be employed at a location in Canada (in
section 62 and this subsection referred to as “the new work location”), or
(ii) to be
a student in full-time attendance enrolled in a program at a post-secondary
level at a location of a university, college or other educational institution
(in section 62 and in this subsection referred to as “the new work location”),
(b) both the residence at which the taxpayer ordinarily resided before the
relocation (in section 62 and this subsection referred to as “the old
residence”) and the residence at which the taxpayer ordinarily resided after
the relocation (in section 62 and this subsection referred to as “the new
residence”) are in Canada, and
(c) the distance between the old residence and the new work
location is not less than 40 kilometres greater than the distance between the
new residence and the new work location
except that, in applying subsections
6(19) to (23) and section 62 in respect of a relocation of a taxpayer who is
absent from but resident in Canada, this definition shall be read without
reference to the words “in Canada” in subparagraph (a)(i), and without reference to paragraph (b);
[15]
Subsection 62(3) of the
Act provides a non-exhaustive list of expenses included in moving expenses:
62(3) In subsection 62(1), “moving expenses” includes any
expense incurred as or on account of
(a) travel costs (including a reasonable amount
expended for meals and lodging), in the course of moving the taxpayer and
members of the taxpayer’s household from the old residence to the new
residence,
(b) the cost to the taxpayer of transporting or storing
household effects in the course of moving from the old residence to the new
residence,
(c) the cost to the taxpayer of meals and lodging near
the old residence or the new residence for the taxpayer and members of the
taxpayer’s household for a period not exceeding 15 days,
(d) the cost to the taxpayer of cancelling the lease by virtue
of which the taxpayer was the lessee of the old residence,
(e) the taxpayer’s selling costs in respect of the sale
of the old residence,
(f) where the old residence is sold by the taxpayer or
the taxpayer’s spouse or common-law partner as a result of the move, the cost
to the taxpayer of legal services in respect of the purchase of the new
residence and of any tax, fee or duty (other than any goods and services tax or
value-added tax) imposed on the transfer or registration of title to the new
residence,
(g) interest,
property taxes, insurance premiums and the cost of heating and utilities in
respect of the old residence, to the extent of the lesser of $5,000 and the
total of such expenses of the taxpayer for the period
(i) throughout which the old residence is neither
ordinarily occupied by the taxpayer or by any other person who ordinarily
resided with the taxpayer at the old residence immediately before the move nor
rented by the taxpayer to any other person, and
(ii) in which reasonable efforts are made to sell the old
residence, and
(h)
the cost of revising legal
documents to reflect the address of the taxpayer’s new residence, of replacing
drivers’ licenses and non-commercial vehicle permits (excluding any cost for
vehicle insurance) and of connecting or disconnecting utilities,
but, for greater certainty, does not
include costs (other than costs referred to in paragraph 62(3)(f))
incurred by the taxpayer in respect of the acquisition of the new residence.
Respondent's
position
[16]
According to the
respondent, the amounts deducted by the appellant in 2007 did not satisfy the
conditions of subsection 62(1) of the Act. More specifically, the legal fees
and payments to the expert witnesses were not incurred for the purpose of the
appellant moving, but were rather for the legal proceeding she initiated in
respect of the state of the house she purchased in 2003.
[17]
The respondent claims
that the maintenance expenses are not deductible either because they do not
relate to the move, which took place in 2004. Even if there had been a nexus
between the move and those expenses, paragraph 62(3)(g) limits the
deduction of maintenance expenses to $5,000. In the case at bar, the appellant
admitted having deducted $114 in maintenance expenses as moving expenses in
2004. Therefore, she could only deduct $2,886 (that is to say, $5,000 - $2,114)
in maintenance expenses in 2007. Finally, only the amounts disbursed between July
and November 2007 would be admissible, that is the period during which the appellant
put her house up for sale.
[18]
With respect to the
moving expenses ($1,870) and the commission paid to the real estate agent ($7,406.75),
counsel for the respondent stated that there was no evidence of payments and, also,
given the amount of time that had elapsed between the appellant’s move in 2004 and
the date of the so-called payments in 2007, they could not be regarded as
moving expenses.
Analysis
[19]
In my opinion, the
legal fees and amounts paid to the expert witnesses for purposes of the action
brought by Ms. Charbon against the sellers of her home in Mascouche and against the inspector are not related to the
appellant’s move and relocation in 2004. The event that gave rise to the action—the purchase of the house in Mascouche—took place in 2003, well before Ms. Charbon
found new employment and moved to Gatineau. Those
amounts are not moving expenses and are not deductible under subsection 62(1) of
the Act.
[20]
As regards the
maintenance expenses, paragraph 62(3)(g) limits deductible maintenance
expenses to expenses for the period in which reasonable efforts are made to sell the old residence, which, in this case, corresponds to the
period from July to November 2007. The documents produced by the appellant indicate
the following expenses during that period:
Municipal taxes 6
months x $1,484.79 = $742.40
12
months
School taxes 6
months x $259.97 = $129.98
12
months
Interest (mortgage) 6
months x $3,106.57 = $1,553.29
12
months
House insurance 6
months x $964 = $482
12
months
Hydro
$256.68
TOTAL
$3,164.35
[21]
I agree with the
respondent that subsection 62(3)(g) sets a maximum of $5,000 for maintenance
expenses relating to a move, and that the appellant claimed having spent $2,114
on maintenance in 2004. Therefore, at the most, the appellant is entitled to deduct,
in 2007, $2,886 for that purpose.
[22]
The moving expenses of
$1,870 deducted by the appellant were not related to the move itself and are
not deductible.
[23]
However, the commission
paid to the real estate agent would certainly be an expense related to the sale
of the old residence as described in paragraph 62(3)(e). I accept the
testimony of Ms. Charbon as evidence of payment and I also note that the amount
of commission with taxes, which in this case was $7,406.75, on the selling
price of the house ($130,000) represents a commission rate of approximately
five per cent, which seems reasonable. That amount is therefore deductible.
[24]
As regards the legal
and notary’s fees for services rendered at the time of the sale of the house, the
appellant could not recall the amounts and did not have in her possession any
accounts or invoices in that respect. Considering that the onus of proof of
those expenses was on the appellant, I cannot allow any amount for those
expenses.
[25]
For these reasons, the appeal
is allowed in part and the appellant is entitled to a further deduction for
moving expenses of $10,292.75, including $2,886 for maintenance expenses and
$7,406.75 for the commission paid on the sale of her home.
Signed at Ottawa, Canada, this 7th
day of October 2010.
“B. Paris”
Translation certified true
on this 6th day of December 2010.
Daniela Possamai, Translator
CITATION: 2010 TCC 504
COURT FILE NO.: 2009-3557(IT)I
STYLE OF CAUSE: SYLVIE CHARBON AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: September 22, 2010
REASONS FOR
JUDGMENT BY: The Honourable Justice B. Paris
DATE OF JUDGMENT: October 7, 2010
APPEARANCES:
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For the appellant:
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The appellant herself
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Counsel for the respondent:
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Mélanie Sauriol
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COUNSEL OF RECORD:
For the appellant:
Name:
Firm:
For the
respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa, Canada
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