Citation: 2010 TCC 453
Date: 20100830
Docket: 2009-1261(OAS)
BETWEEN:
CHARLES D. QUINN,
Appellant,
and
THE MINISTER OF HUMAN RESOURCES
AND SOCIAL DEVELOPMENT,
Respondent,
and
MARILYNE C. QUINN,
Other Party.
REASONS FOR JUDGMENT
Woods J.
[1]
The appellant, Charles
D. Quinn, appealed to a Review Tribunal under the Old Age Security Act (the
“OAS Act”) regarding a decision in respect of his entitlement to a
guaranteed income supplement (GIS). The period at issue is from July 2007 to
June 2008 (the “Payment Period”).
[2]
The GIS is intended to
provide additional financial assistance to old age security pension recipients
with modest incomes. Income earned by applicants and their spouses reduces the
amount of this monthly benefit.
[3]
Under subsection 28(2)
of the OAS Act, the Review Tribunal is required to refer questions of
income and sources of income to the Tax Court. A reference to this Court was
made relating to Mr. Quinn’s appeal. The Review Tribunal informed the Court
that the appeal related to a decision as to the income from a particular
source, and that the appeal was being referred for decision on that ground.
[4]
The Review Tribunal’s
letter to the Court also requested that the appellant’s spouse, Marilyne C.
Quinn, be added as a party to the appeal. The parties were not aware of this
request but Mrs. Quinn was present in the courtroom and was brought in as a
party on mutual consent. Mrs. Quinn indicated that she wished her husband to
act for her at the hearing.
[5]
The essential question
for consideration is whether, in determining the GIS for Mr. Quinn, his income
should be determined for the 2006 calendar year, as submitted by the respondent,
or for the 2007 calendar year, as submitted by Mr. Quinn. I was informed that
the aggregate amount at issue for the appellant and his spouse is approximately
$3,000.
Legislative
scheme
[6]
Under the GIS
legislative scheme, income is generally determined in accordance with the Income
Tax Act based on the income for the calendar year immediately prior to the
commencement of the relevant payment period. This is referred to in the
legislation as the “base calendar year.” In this case, the Payment Period is
from July 2007 to June 2008. Accordingly, the base calendar year is 2006.
[7]
In circumstances where
income is expected to drop as a result of a loss of a source of income,
relieving provisions are available. These provisions enable the benefit to be
based on income for a later calendar year.
[8]
The relevant
provisions are subsections 14(1),(2),(3),(5),(7) and section 18 of the OAS
Act. During the Payment Period, these provisions read:
Statement of income to be
made
14(1) Every person by whom an application for a supplement in respect
of a current payment period is made shall, in the application, make a statement
of the person’s income for the base calendar year.
Additional statement where
retirement in current payment period
14(2) Where in a current payment period a person who
is an applicant, or who is an applicant’s spouse or common-law partner who has
filed a statement as described in paragraph 15(2)(a),
ceases to hold an office or employment or ceases to carry on a business,
that person may, not later than the end of the payment period immediately after
the current payment period, in addition to making the statement of income
required by subsection (1) in the case of the applicant or in addition to
filing a statement as described in paragraph 15(2)(a)
in the case of the applicant’s spouse or common-law partner, file a statement
of the person’s estimated income, other than the estimated income from that
office or employment or from that business, as the case may be, for the
calendar year in which the person ceased to hold that office or employment
or ceased to carry on that business, in which case the person’s
income for the base calendar year shall be calculated as the total of
(a) the person’s income for that calendar year,
calculated as though the person had no income from that office or
employment or from that business, as the case may be, and no pension
income for that calendar year, and
(b) any pension income received by the person in that part
of that calendar year that is after the month in which the person ceased to
hold that office or employment or ceased to carry on that business, divided by
the number of months in that part of that calendar year and multiplied by 12.
Additional statement where
retirement in the last month of the calendar year that is in the current
payment period
14(3) Despite subsection (2), where in the last month of
a calendar year that ends in the current payment period a person who is an
applicant, or who is an applicant’s spouse or common-law partner who has filed a
statement as described in paragraph 15(2)(a), ceases
to hold an office or employment or ceases to carry on a business, the person
may, not later than the end of the payment period immediately after the current
payment period, in addition to making the statement of income required by
subsection (1) in the case of the applicant or in addition to filing a
statement as described in paragraph 15(2)(a) in the
case of the applicant’s spouse or common-law partner, file a statement of the
person’s estimated income for the calendar year immediately after the month in
which the person ceased to hold that office or employment or ceased to carry on
that business, in which case the person’s income for that calendar year is
deemed to be the person’s income for the base calendar year.
Additional statement where
retirement before current payment period
14(5) Where, in the circumstances described in
paragraphs (a) and (b), a
person who is an applicant, or who is an applicant’s spouse or common-law
partner who has filed a statement as described in paragraph 15(2)(a), ceases to hold an office or employment or ceases to
carry on a business, the person may, not later than the end of the current
payment period, in addition to making the statement of income required by
subsection (1) in the case of the applicant or in addition to filing a
statement as described in paragraph 15(2)(a) in the
case of the applicant’s spouse or common-law partner,
(a) where the person ceases to hold that office or
employment or to carry on that business in the last calendar year ending
before the payment period, file a statement of the person’s estimated
income for the calendar year ending in the current payment period, in which
case the person’s income for that calendar year is deemed to be the person’s
income for the base calendar year; and
(b) where the person ceases to hold that office or
employment or to carry on that business in a month that is before the payment
period and after the last calendar year ending before the payment period, file
a statement of the person’s estimated income for the calendar year ending in
the current payment period showing also any income actually received by the
person in that calendar year from that office or employment or from that
business, as the case may be, in which case the person’s income for the base
calendar year shall be calculated as the total of
(i) the
person’s income for that calendar year, calculated as though the person had no
income from that office or employment or from that business, as the case may
be, and no pension income for that calendar year, and
(ii) any
pension income received by the person in that part of that calendar year that
is after the month in which the person ceases to hold that office or employment
or to carry on that business, divided by the number of months in that part of
that calendar year and multiplied by 12.
Where statement filed under
subsection (2), (3) or (4)
14(7) Where
under subsection (2), (3) or (4) a statement of estimated income is filed by an
applicant or an applicant’s spouse or common-law partner, no supplement
calculated on the basis of that statement may be paid to the applicant for any
month in the current payment period before
(a) the month immediately following the month shown in the
statement as the month in which the applicant or the applicant’s spouse or
common-law partner, as the case may be, ceased to hold the office or employment
or ceased to carry on the business, or
(b) the month shown in the statement as the month in which
the applicant or the applicant’s spouse or common-law partner, as the case may
be, suffered the loss of income due to termination or reduction of pension
income,
whichever is applicable.
Adjustment of payments of
supplements
18 Where it is determined that the
income for a base calendar year (in this section referred to as the “actual
income”) of an applicant for a supplement does not accord with the income of
the applicant (in this section referred to as the “shown income”) calculated on
the basis of a statement or an estimate made under section 14, the following
adjustments shall be made:
(a) if the actual income exceeds the shown income, any
amount by which the supplement paid to the applicant for months in the payment
period exceeds the supplement that would have been paid to the applicant for
those months if the shown income had been equal to the actual income shall be
deducted and retained out of any subsequent payments of supplement or pension
made to the applicant, in any manner that may be prescribed; and
(b) if the shown income exceeds the actual
income, there shall be paid to the applicant any amount by which the supplement
that would have been paid to the applicant for months in the payment period if
the actual income had been equal to the shown income exceeds the supplement
paid to the applicant for those months.
[Emphasis added.]
Discussion
[9]
The provisions above
enable Mr. Quinn’s GIS to be determined based on 2007 income if his business
ceased either in 2006 (s. 14(5)) or 2007 (s. 14(2)). However, since the relief
only applies to months after the business ceases (s. 14(7)), the business
cessation must be before July 2007 in order to obtain relief for the entire
Payment Period. The relevant parts of the legislation have been underlined.
[10]
I would also note that
Mr. Quinn is entitled to use 2008 income if his business ceased between January
2008 and July 2008.
[11]
The question to be
determined in this reference is whether Mr. Quinn had a business that ceased
sometime in these periods.
[12]
In reviewing this
matter, the Minister decided that there was a business and that it did not
cease either in 2006 and 2007. Based on the assumptions in the reply, it
appears that the Minister did not make any determination regarding 2008.
[13]
It is not at all
surprising that the Minister took this position because Mr. Quinn himself had represented
in submissions that his gravel business was continuing and would continue until
the property was sold. It appears that these representations were being made in
support of deductions that were claimed for income tax purposes.
[14]
At the hearing, Mr.
Quinn expressed some frustration that the tax return preparer had claimed these
deductions because there was not sufficient income for the deductions to be
used. He seems to believe that it would have been better to forego the
deductions and be entitled to the additional $3,000 benefit under the OAS
Act. This is not relevant to the question to be determined but it does help
explain the positions of the parties.
[15]
Against this rather
unusual background, I now turn to the facts. Most of the evidence was provided
by Mr. Quinn, although Mrs. Quinn also testified briefly.
[16]
Mr. Quinn retired from
employment as a school bus driver in 2000, when he reached the age of 65. The
combined pension and investment income of he and his spouse appears to be about
$20,000.
[17]
At all relevant times,
the Quinns lived on an 80 acre property in Dawson Creek,
British Columbia. They are recently separated and Mr. Quinn still lives on the
property.
[18]
From about 1976 to
1995, Mr. Quinn carried on a small gravel business on the back 40 acres of the
property. The business involved removing ash and pebble rock for sale locally.
The material was not suitable for roads with heavy loads.
[19]
When this material was
exhausted, shale was exposed on the property. Since the Crown owns the minerals
on the property, the Ministry of Transportation and Highways checked the shale
deposit. It appears that they determined that it was quite extensive.
[20]
On three occasions
between 1997 and 2006, the Ministry approached Mr. Quinn about removing shale
for road work. Each time, contracts were entered into which provided access to
the shale site for a fee. The first contract in 1997 was worth appropriately
$14,000 and the last contract in 2006 was worth approximately $78,000 (before
expenses). At no time, did Mr. Quinn solicit these contracts and no work was
involved at his end. As Mr. Quinn stated, all he had to do was sit and count
the trucks.
[21]
After the 2006
contract was completed, Mr. Quinn began soliciting the Ministry and oil
companies to use the shale for further road work. Mr. Quinn’s focus was in
selling the back 40 acres for this purpose.
[22]
In his 2006 and 2007
income tax returns, Mr. Quinn claimed deductions for travel expenses relating
to the solicitation and also expenses relating to machinery and equipment used
to clear part of the property to facilitate the sale (i.e., minimize the cost
of a new road necessary for access).
[23]
Mr. Quinn also made a
claim for a rebate concerning GST paid on the purchase price of a backhoe. This
claim was denied on the basis that there was no commercial activity.
[24]
The property has not
been sold to date. Part of the problem is that the new owner would have to
build an access road, which would be very expensive. Another problem is that
the Ministry no longer uses shale for its road work. Mr. Quinn has been trying
to convince them otherwise but he has not been successful. Since 2006 there
have been no offers for the property and no requests for access to the shale.
[25]
Recently, the back 40
acres have been listed for sale by a real estate agent.
[26]
The testimony provided
by Mr. Quinn was not as coherent as I would have liked. I accept the testimony
as generally reliable; however, I have taken into account that it was
self-interested. Based on the evidence as a whole, and on a balance of
probabilities, my findings are summarized below.
(a)
Mr. Quinn carried on a
business of earning income from pebble and shale on his property from 1976 to
2006. The three contracts from the Ministry were unsolicited but they were
essentially a continuation of the business that was started in 1976.
(b)
After 2006, Mr. Quinn
undertook considerable effort to sell the property. I have trouble accepting
the testimony of Mr. and Mrs. Quinn that they would not accept another contract
to provide access to the shale. I accept that having trucks regularly on the
property was difficult, but the evidence also reveals that the Quinns were not
well off financially. The income generated from the 2006 contract was significant.
If access fees were again offered by the Ministry, I am not satisfied that the
offer would have been rejected. Nevertheless, I accept that the focus of Mr.
Quinn’s efforts was on a sale – not access.
(c)
Expenses incurred
subsequent to the 2006 contract were laid out to facilitate a sale of the
property. They were not expenses incurred in the course of the pebble and shale
business.
[27]
In these circumstances,
I find that the pebble and shale business ceased sometime in 2006 after the
Ministry contract ended.
[28]
Accordingly, for
purposes of this reference, it is determined that Mr. Quinn’s GIS for the
Payment Period should be determined using 2007 income. The appeal will be
allowed on that basis.
[29]
The parties shall bear
their own costs.
Signed at Ottawa, Canada this 30th
day of August 2010.
“J. M. Woods”
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