Citation: 2008TCC548
Date: 20080929
Docket: 2008-1290(IT)I
BETWEEN:
PATRICK O’NEILL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb J.
[1]
These
appeals arise as a result of a request by the Appellant for a disability tax
credit in relation to the Appellant’s cousin, Katherine Walsh. The Appellant
has requested this credit in relation to his 1997 to 2006 taxation years.
[2]
The
Notices of Assessment for the Appellant’s 1997 to 2004 taxation years were
introduced as Exhibits and the Notice of Reassessment for the Appellant’s 2002
taxation year was introduced. The dates of these Notices of Assessment (and the
Notice of Reassessment for 2002) are as follows:
|
Taxation Year
|
Date of the Notice of Assessment
(and the Date of the Notice of Reassessment for 2002)
|
|
1997
|
May 14, 1998
|
|
1998
|
June 10, 1999
|
|
1999
|
May 23, 2000
|
|
2000
|
June 7, 2001
|
|
2001
|
May 9, 2002
|
|
2002
|
September 5, 2003 (and December
8, 2003)
|
|
2003
|
July 8, 2004
|
|
2004
|
April 25, 2005
|
[3]
The
Appellant did not file any Notice of Objection to the assessment or
reassessment of his tax liability for any of the taxation years from 1997 to
2004 until after April 25, 2007. This would be after the expiration of the time
period within which the Appellant had the right to file a Notice of Objection
and after the expiration of the time period within which the Appellant could
have requested an extension of time within which to file a Notice of Objection.
The applicable sections of the Income Tax Act (the “Act”) are
sections 165, 166.1, and 169 and these sections provide as follows:
165. (1) A taxpayer who objects to
an assessment under this Part may serve on the Minister a notice of objection,
in writing, setting out the reasons for the objection and all relevant
facts,
(a) where the assessment is in
respect of the taxpayer for a taxation year and the taxpayer is an individual
(other than a trust) or a testamentary trust, on or before the later of
(i) the day that is one year after
the taxpayer's filing-due date for the year, and
(ii) the day that is 90 days after
the day of mailing of the notice of assessment; and
(b) in any other case, on or before the
day that is 90 days after the day of mailing of the notice of assessment.
166.1 (1) Where no notice of
objection to an assessment has been served under section 165, nor any
request under subsection 245(6) made, within the time limited by those
provisions for doing so, the taxpayer may apply to the Minister to extend the
time for serving the notice of objection or making the request.
(2) An application made under subsection
(1) shall set out the reasons why the notice of objection or the request was
not served or made, as the case may be, within the time otherwise limited by
this Act for doing so.
(3) An application under subsection (1)
shall be made by being addressed to the Chief of Appeals in a District Office
or a Taxation Centre of the Canada Revenue Agency and delivered or mailed to
that Office or Centre, accompanied by a copy of the notice of objection or a
copy of the request, as the case may be.
(4) The Minister may accept an
application under this section that was not made in the manner required by
subsection (3).
(5) On receipt of an application made
under subsection (1), the Minister shall, with all due dispatch, consider the
application and grant or refuse it, and shall thereupon notify the taxpayer in
writing of the Minister's decision.
(6) Where an application made under
subsection (1) is granted, the notice of objection or the request, as the case
may be, shall be deemed to have been served or made on the day the decision of
the Minister is mailed to the taxpayer.
(7) No application shall be granted
under this section unless
(a) the application is made within
one year after the expiration of the time otherwise limited by this Act for
serving a notice of objection or making a request, as the case may be;
and
(b) the taxpayer demonstrates that
(i) within the time otherwise limited by
this Act for serving such a notice or making such a request, as the case may
be, the taxpayer
(A) was unable to act or to instruct
another to act in the taxpayer's name, or
(B) had a bona fide intention to object
to the assessment or make the request,
(ii) given the reasons set out in the
application and the circumstances of the case, it would be just and equitable
to grant the application, and
(iii) the application was made as soon as
circumstances permitted.
169. (1) Where a taxpayer has
served notice of objection to an assessment under section 165, the taxpayer may
appeal to the Tax Court of Canada to have the assessment vacated or varied
after either
(a) the Minister has confirmed the
assessment or reassessed, or
(b) 90 days have elapsed after service of
the notice of objection and the Minister has not notified the taxpayer that the
Minister has vacated or confirmed the assessment or reassessed,
but no appeal under this section may be
instituted after the expiration of 90 days from the day notice has been mailed
to the taxpayer under section 165 that the Minister has confirmed the
assessment or reassessed.
(emphasis added)
[4]
In Bormann v. The Queen,
2006 DTC 6147, the Federal Court of Appeal stated as follows:
3 Section 169(1) of the Income Tax Act obliges a
taxpayer to serve Notice of Objection in order to appeal an assessment. In
other words, service of a Notice is a condition precedent to the institution of
an appeal.
4 As mentioned, the appellant did not serve a Notice of
Objection nor is there evidence that the appellant made an application to the
Ministry to extend the time to file a Notice of Objection.
5 Once it is clear that no application for an extension of
time was made, the law is clear that there is no jurisdiction in the Tax Court
to further extend the time for equitable reasons.
Minuteman Press of Canada Company Limited v. M.N.R., 88 DTC
6278, (F.C.A.).
6 As a result, there is no basis upon which it can be said
that the Tax Court Judge erred in quashing the appellant's appeals for the 1992
to 1998 taxation years.
[5]
In
this case the Appellant had not filed any Notice of Objection to the assessment
of his tax liability for the taxation years 1997 to 2004 until after the
expiration of the time period within which a Notice of Objection could have
been filed nor did the Appellant request an extension of time within which to
file a Notice of Objection for any of these years until after the expiration of
the time period within which such a request could have been made. Since there
is no valid Notice of Objection in relation to the assessment of the
Appellant’s tax liability for any of the 1997 to 2004 taxation years, the
Appellant’s appeals in relation to these years are quashed.
[6]
The
issue in relation to the appeals related to the 2005 and 2006 taxation years is
whether the Appellant is entitled to a disability tax credit in relation to his
cousin, Katherine Walsh. When Katherine Walsh was 12 years old (which would
have been in the 1940’s), her nightdress caught on fire and she suffered burns
to 80% of her body. She has required care since this tragic incident and has
been in a nursing home since 1983. There is no dispute in this case that
Katherine Walsh has a severe and prolonged mental or physical disability.
[7]
The
Appellant has submitted that he and Katherine Walsh lived together when they
were growing up in the same household and grew up as brother and sister.
Katherine Walsh’s mother lived with the Appellant’s mother. The Appellant’s
father was in the merchant navy and would be away a lot and since Katherine Walsh
required extra care, the Appellant’s mother moved into the same household as
Katherine Walsh’s mother. The Appellant’s mother and Katherine Walsh’s
mother were sisters.
[8]
Katherine
Walsh’s mother passed away several years ago and now the Appellant is the only
living close relative of Katherine Walsh. The Appellant looks after Katherine
Walsh’s affairs. Katherine Walsh receives an amount each month as a U.S. Social
Security payment and also receives a monthly amount from Health and Community
Services. These amounts are used to pay the costs of the nursing home.
[9]
The
Appellant stated that he was requesting a transfer of Katherine Walsh’s
disability tax credit. The right to transfer a disability tax credit is in
subsection 118.3(2) of the Act. This subsection provides as
follows:
(2) Where
(a) an individual has, in respect of a person
(other than a person in respect of whom the person's spouse or common-law
partner deducts for a taxation year an amount under section 118 or 118.8) who
is resident in Canada at any time in the year and who is entitled to
deduct an amount under subsection (1) for the year,
(i) claimed for the year a deduction under
subsection 118(1) because of
(A) paragraph (b) of the description of B in
that subsection, or
(B) paragraph (c.1) or (d) of that description
where the person is a parent, grandparent, child, grandchild, brother, sister,
aunt, uncle, nephew or niece of the individual, or of the individual's spouse
or common-law partner, or
(ii) could have claimed for the year a
deduction referred to in subparagraph (i) in respect of the person if
(A) the person had no income for the year and
had attained the age of 18 years before the end of the year, and
(B) in the case of a deduction referred to in clause
(i)(A), the individual were not married or not in a common-law partnership, and
(b) no amount in respect of remuneration for an
attendant, or care in a nursing home, because of that person's mental or
physical impairment, is included in calculating a deduction under section 118.2
(otherwise than under paragraph 118.2(2)(b.1)) for the year by the
individual or by any other person,
there may be deducted, for the purpose of computing
the tax payable under this Part by the individual for the year, the amount, if
any, by which
(c) the amount deductible under subsection (1) in
computing that person's tax payable under this Part for the year
exceeds
(d) the amount of that person's tax payable under
this Part for the year computed before any deductions under this Division
(other than sections 118 and 118.7).
(emphasis added)
[10]
The
Appellant will only be entitled to claim a transfer of Katherine Walsh’s unused
disability tax credit if he was entitled to claim a deduction under subsection
118(1) of the Act for the reasons listed in clauses 118.3(2)(a)(i)(A)
and (B) of the Act (or could have made such claim if Katherine Walsh had
no income, since she had attained the age of 18 years before the end of 2005).
[11]
Paragraph
(b) of the description of B in subsection 118(1) of the Act provides as
follows:
(b) in the case of an individual who does
not claim a deduction for the year because of paragraph (a) and who, at any
time in the year,
(i) is
(A) a person who is unmarried and who
does not live in a common-law partnership, or
(B) a person who is married or in a
common-law partnership, who neither supported nor lived with their spouse or
common-law partner and who is not supported by that spouse or common-law
partner, and
(ii) whether alone or jointly with one or
more other persons, maintains a self-contained domestic establishment (in which
the individual lives) and actually supports in that establishment a person who,
at that time, is
(A) except in the case of a child of the
individual, resident in Canada,
(B) wholly dependent for support on the
individual, or the individual and the other person or persons, as the case may
be,
(C) related to the individual, and
(D) except in the case of a parent or
grandparent of the individual, either under 18 years of age or so dependent by
reason of mental or physical infirmity,
an amount equal to the total of
(iii) $7,131*, and
(iv) the amount determined by the formula
$6,055* – D
where
D is the dependent person's income for
the year,
[12]
Since
Katherine Walsh was living in a nursing home in 2005 and 2006 (and has
been since 1983) and therefore was not living in the self-contained domestic
establishment maintained by the Appellant, the Appellant would not have been
entitled to claim a deduction in computing his tax payable pursuant to
paragraph (b) of the description of B in subsection 118(1) of the Act even
if Katherine Walsh would not have had any income in 2005 or 2006. As well since
related persons for the purposes of the Act, as defined in section 251
of the Act, do not include cousins, Katherine Walsh is not related to
the Appellant for the purposes of the Act.
[13]
Paragraph
(c.1) of the description of B in subsection 118(1) of the Act provides
as follows:
(c.1) in the case of an individual who,
at any time in the year alone or jointly with one or more persons, maintains a
self-contained domestic establishment which is the ordinary place of residence
of the individual and of a particular person
(i) who has attained the age of 18 years
before that time,
(ii) who is
(A) the individual's child or grandchild,
or
(B) resident in Canada and is the parent, grandparent, brother, sister, aunt, uncle, nephew or
niece of the individual or of the individual's spouse or common-law partner,
and
(iii) who is
(A) the individual's parent or
grandparent and has attained the age of 65 years before that time, or
(B) dependent on the individual because
of the particular person's mental or physical infirmity,
the amount determined by the formula
$15,453* – D.1
where
D.1 is the greater of $11,953*
and the particular person's income for the year,
[14]
Since
Katherine Walsh was living in a nursing home in 2005 and 2006 (and has
been since 1983) and therefore the self-contained domestic establishment
maintained by the Appellant was not the ordinary place of residence of
Katherine Walsh in 2005 or 2006, the Appellant would not have been
entitled to claim a deduction in computing his tax payable pursuant to
paragraph (c.1) of the description of B in subsection 118(1) even if Katherine Walsh
would not have had any income in 2005 or 2006. As well since Katherine Walsh is
a cousin of the Appellant and not one of the relatives included in the list of
eligible relatives in subparagraph (c.1)(ii) of the description of B in subsection
118(1) of the Act, this condition is also not satisfied. All of the conditions
as set out in subparagraphs (c.1)(i), (ii) and (iii) of the description of B in
subsection 118(1) of the Act must be satisfied in order for the
Appellant to be able to make a claim under this paragraph (c.1) of the
description of B in subsection 118(1) of the Act.
[15]
Paragraph
(d) of the description of B in subsection 118(1) of the Act provides as
follows:
(d) for each dependant of the individual
for the year who
(i) attained the age of 18 years before
the end of the year, and
(ii) was dependent on the individual
because of mental or physical infirmity,
the amount determined by the formula
$8,466* – E
where
E is the greater of $4,966*
and the dependant's income for the year, and
[16]
Subsection
118(6) of the Act provides as follows:
(6) For the purposes of paragraphs (d)
and (e) of the description of B in subsection (1) and paragraph (4)(e),
“dependant” of an individual for a taxation year means a person who at any time
in the year is dependent on the individual for support and is
(a) the child or grandchild of the
individual or of the individual's spouse or common-law partner; or
(b) the parent, grandparent, brother,
sister, uncle, aunt, niece or nephew, if resident in Canada at any time in the year, of the individual or of the individual's spouse
or common-law partner.
[17]
Since
Katherine Walsh is not one of the eligible relatives listed in subsection
118(6) of the Act, she is not a dependent of the Appellant as defined in
subsection 118(6) of the Act (and was not a dependent in 2005 or 2006)
and therefore the Appellant is not entitled to claim any amount pursuant to
paragraph (d) of the description of B in subsection 118(1) of the Act.
[18]
Since
the Appellant was not entitled to claim a deduction under subsection 118(1)
of the Act for the reasons listed in clauses 118.3(2)(a)(i)(A) and (B)
of the Act (nor could he have made such claim if Katherine Walsh had no
income) the Appellant is not entitled to claim a transfer of Katherine Walsh’s
unused disability tax credit.
[19]
In Leidal
v. The Queen, 2003 TCC 671, [2004] 1 C.T.C. 2297, Associate Chief
Justice Bowman (as he then was) dealt with a situation where a taxpayer was
claiming a disability tax credit in relation to an unrelated individual that
the taxpayer, in that case, had described as an “adopted brother by-fact”.
Associate Chief Justice Bowman (as he then was) stated that:
8 In
law there is no such thing as adopting a brother. One can adopt a child in fact
but one cannot adopt an adult as a brother or sister.
[20]
Since
the Appellant could not have adopted Katherine Walsh as his sister, Katherine
Walsh cannot be treated as a sister of the Appellant for the purposes of the Act
unless she had been adopted by the Appellant’s mother. There was nothing in
this case to suggest that the Appellant’s mother had adopted Katherine Walsh
as Katherine Walsh’s mother lived with the Appellant’s mother while the
Appellant and Katherine Walsh were growing up and, as noted in the letter from
the owner of Walsh’s Personal Care Home, Katherine Walsh’s mother, before she
died, placed Katherine Walsh in the nursing home in 1983.
[21]
Since
Katherine Walsh is not one of the eligible relatives as listed in the
provisions referred to above, the Appellant cannot succeed in relation to his
claim for a transfer of Katherine Walsh’s unused disability tax credit. The
Appellant is also not entitled to claim any deduction pursuant to subsection
118(1) of the Act in computing his tax payable in relation to Katherine
Walsh. This Court cannot expand the list of eligible persons to whom an unused
disability tax credit may be transferred nor the list of eligible persons in
respect of whom an amount may be claimed pursuant to subsection 118(1) of the Act.
It is only Parliament that can expand the list of such eligible persons.
[22]
The Appellant’s appeals
in relation to the assessment of his tax liability for 2005 and 2006 are
dismissed, without costs.
Signed at Halifax,
Nova Scotia, this 29th day of September 2008.
“Wyman W. Webb”
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