Citation: 2008TCC376
Date: 20080704
Docket: 2007-4483(IT)I
BETWEEN:
FRANÇOIS D. MÉNARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1]
This is an appeal from
an assessment pertaining to the 2001 taxation year. The issue
for determination is whether a total of $7,794 in expenses, incurred in respect
of the residence located on Servant
Street in Laval and deducted in the 2001 taxation year, was incurred
by the Appellant for the purpose of gaining or producing income from property
or from the operation of a business.
[2]
The facts are both
simple and uncontested. The Appellant lived in a dwelling as a tenant.
He decided to purchase a building with the intention that it would eventually become
his residence.
[3]
When the promise to
purchase was signed in the fall of 2000, the vendor made the sale of the
building conditional on his being able to continue to live there until
May 5, 2001, which was roughly a year from then. The Appellant, being
bound by a lease, agreed to this condition.
[4]
Some months later, the
Appellant decided to avail himself of an employment opportunity in Trois-Rivières.
On January 25, 2001, he signed the notarial deed in advance in order to
formalize the transfer of the building and put it on the market, having decided
to pursue his career in Trois‑Rivières.
[5]
Having moved from the Montréal
area to the Trois-Rivières area in 2001, the Appellant claimed a $13,117
deduction on account of moving expenses. The Minister allowed $5,323 of
this amount, but disallowed $7,794, which is why the taxpayer brought this
appeal.
[6]
The taxpayer also brought
an action against the Ministère du Revenu du Québec. The outcome of that
litigation was a judgment of Judge Nicole Mallette of the Court of Québec (Small Claims
Division) in Docket No. 400‑32 008087‑053.
[7]
In the Tax Court of
Canada, the Appellant appears first to have asserted that this judgment was
correct, and then to have claimed the contrary. He made two different
arguments.
[8]
Initially, he submitted
that, since his relocation was deemed eligible, he should be entitled to
deduct all the expenses that he reported.
[9]
In order to distinguish
the instant matter from the matter brought before the Court of Québec, the
Appellant stated that the provincial legislation is different from the
legislation that governs the instant matter, because section 348 of the Taxation Act
(Quebec) specifically provides that the residence in question must be the residence
in which the taxpayer ordinarily lives.
SECTION 348
348. [Deduction of moving
expenses] An
individual contemplated in section 347 who moves, in Canada, from a
residence at which he ordinarily lives may deduct amounts paid by him as moving
expenses in computing his income for the taxation year during which he moves or
for the next year.
(2) . . .
(3) Furthermore, such
expenses may only be deducted by the individual only to the extent that:
(a) they were not paid
on his behalf by his employer;
(b) they are not
deductible in computing his income:
i. for a
preceding taxation year under this section, or
ii. under
a provision of this act other than this section;
(c) they do not exceed
the income from the year from the individual's business or employment, after he
has moved or, in the case of a student enrolled in full-time attendance, the
aggregate of the amounts which must be included in his income for the year
under paragraphs g and h of section 312; and
(d) any reimbursement
or allowance received by him in respect of those expenses is included in
computing his income.
[10]
Paragraph 62(3)(a)
of the Income Tax Act (Canada) provides as follows under the heading
"Definition of moving expenses":
Definition of "moving expenses"
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,
[11]
The Appellant
emphasized the reference to "old residence" in the text, and argued
that the provision does not require the residence to have been occupied by the
owner who is claiming a deduction, whereas the provincial statute in force at
the time specified that the residence in question must be the one in which the individual
"ordinarily lives". In the Appellant's submission, the provincial
provision is more precise, and, in the absence of such precision in the federal
legislation, he must succeed, since he meets the requirements thereof. The
success of the Appellant's claim turns on his interpretation of paragraph 62(3)(a).
[12]
However, the provision
in question must be interpreted as a whole, in light, among other things, of
the part that reads as follows:
. . . moving the taxpayer and members of the taxpayer’s household
from the old residence to the new residence;
[13]
The Appellant's
interpretation is quite far-fetched. How can it be claimed that the building in
issue was his old residence, when the Appellant himself admits that he and his
family never resided there? In fact, he never had the right to live there,
because he granted the vendor-promisor the right to do so until
May 5, 2001. Indeed, he validated this right, stipulated in the fall
of 2000, when he signed the notarial deed on January 25, 2001. This
observation is based on the admission contained in paragraph 8(b) of
the Reply to the Notice of Appeal, which reads as follows:
[TRANSLATION]
b)
On January 25, 2001, the contact to purchase the
house was signed. It contained a clause permitting the vendors to remain
on the premises until May 5, 2001, in consideration of $1,845, plus
heating and electricity costs.
[14]
In order to accept the
Appellant's interpretation, one would need to have a very fertile imagination
in which expectations are more important than the reality of the provision that
gave rise to them.
[15]
Nothing in the evidence
supports the Appellant's interpretation, except perhaps the fact that, at one
point, he clearly wanted the building in question to become his residence. (In
fact, that point in time can be narrowed down to May 5, 2001.)
[16]
If his move to Trois-Rivières
had taken place in 2003, and he had lived in the Laval
building effective May 5, 2001, this litigation would undoubtedly
never have been instituted.
[17]
The Appellant was not
living in the Laval building at the relevant time. A title
to property, or a right eventually leading to such title being obtained, is not
evidence of the use of the property at the time that the right in question was
acquired. Such an interpretation would result in aberrations if it were
accepted.
[18]
The absence of the
words "ordinarily lives" in paragraph 62(3)(a) of the Income
Tax Act led the Appellant to believe that he could rely on this omission to
his advantage. However, he undoubtedly understood that his interpretation would
be rejected since it is based on no serious considerations whatsoever, even
when the words "old residence" are isolated from their context as
the Appellant would have it.
[19]
Indeed, in ordinary
language, the term "residence" does not connote anything related to a
right in or title to property. Residence means a place in which one lives.
A residence can be temporary, seasonal, permanent, transitory, and so
forth, but it does not include a building in which an individual, in this case
its owner, never lived.
[20]
Although the decisions
submitted deal with situations that are very different from this one, certain
passages from those decisions are very relevant.
[21]
Here is what the
Federal Court of Canada stated in Séguin v. Canada, A‑52‑97,
[1998] 2 C.T.C. 13, 97 DTC 5457:
6 Although
the purpose of the provision is no doubt to encourage mobility of employment,
and the enumeration in subsection 62(3) of the Act is not exhaustive, as is
indicated by the use of the verb "includes" ("comprend")
in that section, since its purpose is not to cover all possible moving
expenses, we do not think section 62 as a whole can be read as it was by the
tax court judge.
7 What
section 62 allows, within its first subsection, is a deduction by the taxpayer
of the amounts
·
62(1) ...
62(1) ...paid by him as or on account of moving expenses incurred in the course
of moving from his old residence to his new residence.
·
62(1) payées
à titre ou au titre des frais de déménagement engagés pour déménager de son
ancienne résidence pour venir occuper sa nouvelle résidence ...
8 According
to the ordinary meaning of the words used, the provision includes those
expenses incurred for physically moving, changing one's residence, and certain
other expenses directly related to the actual move and resettlement, and not
some amount intended to compensate for accessory damages that are unrelated to
the actual move to and resettlement in the new residence. Thus, it excludes
the interest expenses on the old residence that do not pertain directly to the
physical move of the taxpayer and his family, but instead pertain to the bank
loan he took out on his old residence.
[22]
In L’abbé v. Canada, [2000] 2 C.T.C. 2132 (T.C.C.), Docket
No. 98‑3468(IT), Judge McLatchy stated the following:
5 A common thread running through these
cases is that the costs to be included in moving expenses must be reasonable
and sensible in the circumstances. It is the opinion of this Court that the
claim by the Appellant in these circumstances is not an expense that can be
included as a moving expense. It is an injury suffered as an incident of the
move but it is one of those items that must be considered to be a loss or injury
to be suffered if a move is contemplated. It will not be included in moving
expenses, therefore, is too much of a loss to sustain, negating the move?
[23]
In preparing his case,
the Appellant undoubtedly noticed the weakness of his reasoning, which is based
on an erroneous and inappropriate interpretation, and this caused him to
retreat behind a second argument, the basis of which is an entirely different
issue, namely, a terminal loss.
[24]
With respect to this
issue, the Appellant tried to explain that his plan underwent a transformation
while in progress. In order to account for the fact that the vendor remained in
the building in question, he asserted that this was a condition of the sale. He
was amenable to the condition because he himself was bound by a lease.
[25]
He wanted to cover his
costs for a short period, that is, until his lease expired and he could live in
the building. The acceptance of the job offer in Trois‑Rivières definitively
ended his plan to make the building he purchased his new residence. At that
point, he thought that he could make a good profit, but he did not.
[26]
Hence, the Appellant
asserted that this was a commercial activity.
[27]
Lastly, the Appellant
stated that if his arguments regarding the deduction of his moving fees are not
accepted, they should be accepted with respect to his operating costs, or else
the effect would be to totally deny the existence of the costs associated with
the building purchase.
[28]
Taxpayers are to be
taxed based on actual facts, not on theories posited by interested taxpayers.
[29]
In the instant case,
the Appellant never really intended his venture to be commercial in nature. He
was essentially seeking to recoup his investment following a decision about his
career path. In order to minimize his losses, he is attempting to distort the
facts or interpret them with a view to obtaining certain tax advantages.
Unfortunately, a taxpayer's tax burden is to be assessed or determined based on
the actual facts.
[30]
Since the Appellant has
not succeeded in showing that his arguments are well‑founded, his appeal
must be dismissed.
Signed at Ottawa, Canada, this 4th day
of July 2008.
"Alain Tardif"
Translation certified true
on this 7th day of August
2008.
Susan Deichert, Reviser
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