Citation: 2009TCC260
Date: 20090519
Docket: 2008-855(IT)I
BETWEEN:
JANET CHOBOTAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, D.J.
[1]
This appeal pursuant to
the Informal Procedure was heard at Winnipeg, Manitoba on
May 14th and 15th, 2009. The Appellant called her
accountant, Patrick Peters, C.M.A., her husband, William Chobotar and a real
estate agent, Ernie Hawrysh, who was qualified as an expert to testify as to
the fair market value of the Appellant’s house in the unincorporated village of
Woodridge, Manitoba. Woodridge is about 60 miles southeast of Winnipeg with a population of 100 to 200 people without
natural gas, municipal water or a public sewage system.
[2]
At issue are medical
expenses claimed by the Appellant for her 2005 taxation year in the following
amounts: $35,291.01 for the addition of a room to their house, and sums related
to medical premiums and various items relating primarily to travel to Doctors’
appointments. No evidence was lead to the last items and the appeal respecting
these is dismissed. That leaves the primary claim for the cost of the addition to
the home to be decided.
[3]
Paragraphs 17 and 18 of
the Reply to the Notice of Appeal read:
17. In so assessing the Appellant for the 2005 taxation year, and in
varying the assessment, the Minister assumed the following facts:
(a) the Appellant claimed medical expenses for herself and her
spouse of $38,254 in 2005;
(b) the
Appellant was allowed medical expenses of $2,065 in 2005;
(c) the
Appellant’s spouse has Multiple Sclerosis;
(d) the Appellant and her spouse reside in Woodridge, Manitoba (“residence”);
(e) included in the medical expenses claimed was an amount of
$35,291.01 in home renovations for an addition of a room to the residence
measuring 16 feet by 20 feet which includes a bathroom;
(f) the Appellant’s renovations and addition to her residence was
an alteration of a type that would typically be expected to increase the value
of the dwelling;
(g) the Appellant’s renovations to her residence are of a type that
would normally be incurred by persons who have normal physical development or
do not have a severe and prolonged mobility impairment;
(h) The Appellant claimed medical expenses for travel by personal
vehicle of 56 kilometers from her home in Woodridge, Manitoba to the pharmacy in Steinbach, Manitoba to have prescriptions for her spouse filled;
(i) included in the medical expenses claimed were amounts of
$318.92, for medical premiums; and
(j) medical
premiums in excess of the amounts allowed were not incurred.
B. ISSUES TO BE DECIDED
18. The issue to be decided is:
(a) whether the Appellant is entitled to claim medical expenses in
excess of the amounts allowed by the Minister, in the computation of her
non-refundable tax credits for the 2005 taxation year.
[4]
Assumptions 17(a) to
(f) inclusive, (h) and (i) are correct. Assumption 17(j) was not refuted.
Assumption 17(g) is wrong; the doorway to the addition and the new bathroom
itself are wide enough for Mr. Chobotar’s electric wheelchair and the toilet
and cupboards in the bathroom are designed for his access from the wheelchair.
Mr. Chobotar is a big man who at all material times was confined to his
wheelchair.
[5]
William Chobotar was a
qualified journeyman carpenter and journeyman iron worker and then a customs
officer before Multiple Sclerosis disabled him. The Chobotars have two water
wells on their lot from which they have installed running water. When local
wood supplies for their furnace ran out, Mr. Chobotar installed a geothermic
furnace which draws heat from the well water and re-circulates the cooled water
into the second well – it reverses the process for cooling purposes in the
summer. That heating system is common in Woodridge.
[6]
Originally the house
consisted of a 2-bedroom house, 32’ x 24’, with a basement and an additional 5’
stairwell to it, with a small bathroom, either 5’ x 5’ or 8’ x 4’. The total
area was about 800 square feet. The addition in question measures 16’ x 20’
(about 320 square feet) with closets and a bathroom which was attached to the
back of the house and caused the existing bedrooms to be reduced for the
hallway to the addition and a new window to be installed in one of the bedrooms
(Exhibit A-4). The Rural Municipality of Piney valued the addition at $10,600
and increased the assessed value by $4,770 (Exhibit A-2).
[7]
The new bathroom was
needed because the existing bathroom was too small for the wheelchair and for
exiting the wheelchair. Its door couldn’t be closed. The Chobotars’ choice was
a general renovation to the house and its entire plumbing system, or move Mr.
Chobotar to a nursing home in Steinbach or Winnipeg, or build the addition. They felt the least disturbance would be the
addition and the costs were comparable to the renovation. Thus, the Court
accepts the fact that the addition was a reasonable expense incurred for
medical purposes.
[8]
Paragraphs 22 and 23 of
the Reply set out the particulars of the Respondent’s dispute respecting the
addition. They read:
22. He submits that the renovation expenses incurred are of the type
that would typically be expected to increase the value of the dwelling, and as
such, are not deductible as a medical expense pursuant to paragraph
118.2(2)(1.2).
23. He further submits that the renovation expenses incurred would
be the type of expenses incurred by persons who do not have a severe and
prolonged impairment, and as such are not deductible as medical expenses
pursuant to paragraph 118.2(2)(1.2).
[9]
Paragraph 118.2(2)(l.2)
reads:
(l.2) for reasonable
expenses relating to renovations or alterations to a dwelling of the patient
who lacks normal physical development or has a severe and prolonged mobility
impairment, to enable the patient to gain access to, or to be mobile or
functional within, the dwelling, provided that such expenses
(i) are not of a
type that would typically be expected to increase the value of the dwelling,
and
(ii) are of a
type that would not normally be incurred by persons who have normal physical
development or who do not have a severe and prolonged mobility impairment;
[10]
Mr. Hawrysh described
the old bathroom as 5’ x 5’. Having seen the size of Mr. Chobotar and heard his
evidence from his wheelchair that the old bathroom was 5’ x 8’, the Court
accepts the Appellant’s claims that the new bathroom and bedroom were necessary
and that the addition was reasonable. Moreover, referring to sub-paragraph 118.2(2)(l.2)(ii),
Mr. Chobotar’s large size is not at all abnormal for people who are confined to
a wheelchair for years as he has been. Nor would the special door sizes,
cupboards and bathroom fixtures be incurred by persons who do not have a severe
and prolonged mobility impairment.
[11]
Thus, the question
remains as to whether the expenses incurred are “of a type that would typically
be expected to increase the value of the dwelling”
paragraph
118.2(2)(l.2)(i). That is to say, not a dwelling; but the Chobotar
dwelling in Woodridge,
Manitoba – “the
dwelling”.
[12]
Woodridge is not incorporated. It is governed and
taxed by the rural municipality in which it is situated (Exhibit A-2). It has
no public running water, sewage or natural gas services. Each of these services
must be provided by the homeowner him/herself. It has between 100 and 200
people who obtain their necessities and services from Steinbach, a town about
28 kilometres away. It is outside of the Winnipeg metropolitan area. Thus the market to sell a house in Woodridge is
limited.
[13]
Ernie Hawrysh spent 27
years employed by the Manitoba provincial government as an Accredited
Assessor of Manitoba, assessing the entire district in a rectangle east of
Winnipeg and the Red River to the U.S. and Ontario borders. He has spent 14 years since then as a
Century 21 realtor in Steinbach, Manitoba, serving that area. All of these
areas include the village of Woodridge. He has done about 45 appraisals per year in these
areas for the last 14 years for banks, credit unions and matrimonial court
disputes. The Court qualified him as an expert qualified to give evidence as to
the value of the house in question in Woodridge.
[14]
On July 18, 2006 Mr.
Hawrysh appraised Chobotars’ house for the Credit Union in Steinbach (Exhibit A-5).
[15]
In his testimony in
this Court, Mr. Hawrysh estimated that the additional value to Chobotars’ house
created by the addition would be about 60% of the amount spent. This amounts
to:
60% x $35,000 (approx) = $21,000
Moreover, he confirmed that this increase in value
would be typical for a house such as Chobotars’ in Woodridge. This testimony was not contradicted.
[16]
The Appellant’s agent
argued that this result caused the Appellant to suffer a loss on her investment
of $35,291.01 as claimed. In other words, the cost of the addition was lost,
when the value of the addition was only 60% of its cost.
[17]
But the Income Tax
Act only allows the claim if the expenses are not of a type that would
typically be expected to increase the value of the dwelling in Woodridge, Manitoba. The evidence is that the money spent on
the addition would typically be expected to increase the value of Chobotars’
house by about $21,000.
[18]
For this reason the
Appellant’s addition failed to meet the requirements of subparagraph 118.2(2)(l.2(i).
[19]
Therefore the appeal is
dismissed in its entirety.
Signed at Saskatoon, Saskatchewan, this 19th day of May 2009.
“D.W. Beaubier”
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