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Citation: 2004TCC259
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Date: 20040407
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Docket: 2003-4103(IT)I
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BETWEEN:
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MERRILL LECKIE,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal pursuant to the
Informal Procedure was heard at Nanaimo, B.C., on March 26, 2004.
The Appellant was the only witness.
[2] Paragraphs 1 - 9 of the Reply to
the Notice of Appeal outline the dispute. They read:
1. In respect of the allegations
of fact contained in the Notice of Appeal and the attachments, he
admits that the Canada Customs and Revenue Agency
("CCRA") adjusted the Appellant's Registered
Retirement Savings Plan ("RRSP") deduction from
$2,369.39 to $602.00, that the Appellant paid $2,369.39 into his
RRSP, that a receipt was filed with his tax return and that the
CCRA deducted an amount of support paid by the Appellant of
$9,815.71 in calculating the Appellant's earned income.
2. He denies all the other
allegations of fact contained in the Notice of Appeal and the
attachments.
3. In filing his Return of
Income for the 2002 taxation year, the Appellant deducted the
amount of $2,369.39 as an RRSP deduction.
4. The Minister of National
Revenue (the "Minister") initially assessed the
Appellant for the 2002 taxation year on May 1, 2003 and
reduced the RRSP deduction from $2,369.39 to $602.00.
5. The Appellant objected to the
assessment of May 1, 2003 and on September 12, 2003, the Minister
confirmed the assessment as the Appellant's earned income for the
2001 taxation year amounting to $3,258.00 was calculated
according to the definition of "earned income" in
subsection 146(1) of the Income Tax Act (the
"Act") and for purposes of subsection 146(5) of
the Act, the Appellant's RRSP deduction limit of $602.00
for the 2002 taxation year was calculated according to the
definition of "RRSP Deduction Limit" in subsection
146(1) of the Act.
6. In assessing tax for the 2002
taxation year and in confirming the assessment, the Minister
assumed the same facts, as follows:
a) in the 2001 taxation year,
the Appellant had earned income of $3,258.00, calculated as
follows:
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Trustee Income
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$3,002.00
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Net Professional Income
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$7,283.00
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Net Commission Income
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$2,788.00
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TOTAL :
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$13,073.00
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Less: Alimony deducted
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$9,815.00
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EARNED INCOME:
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$3,258.00
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b) the Appellant contributed
$2,369.39 to his RRSP in 2002;
c) the Appellant's unused
RRSP deduction room at the end of the 2001 taxation year was
$16.00;
d) in the 2001 taxation year,
the Appellant claimed and was allowed a deduction of $9,815.71
for support payments made; and
e) the Appellant's 2001
Pension Adjustment, 2002 Pension Adjustment Reversal, 2002 Past
Service Pension Adjustment and 2002 Prescribed Amount are all
Nil.
B. ISSUES TO BE DECIDED
8. The issue is whether the Appellant's 2001
earned income has been correctly calculated in order to determine
the amount the Appellant may deduct as RRSP contributions in the
2002 taxation year.
C. STATUTORY PROVISIONS RELIED ON
9. He relies on subsections 146(1), 146(5) and
248(1) and paragraph 60(b) of the Act, and on sections
8303, 8304, 8304.1, 8308, 8308.4 and 8310 of the Income Tax
Regulations, as amended for the 2002 taxation year.
[3] At the outset of the hearing, the
Respondent's counsel admitted that the sum of $708.25 should
be added to the Appellant's earned income described in
subparagraph 6 a) of the Reply, consisting of the Appellant's
share of partnership income from a hotel. Therefore, the Appeal
is allowed respecting that item and the consequent
calculations.
[4] Assumptions 7 d) is correct. The
remainder are in dispute on the basis that the Appellant argues
that:
1. All of his income is the
result of income that he earned in practice as a lawyer.
2. He should not be restricted
to deducting his support payments from only his "earned
income" in any event.
[5] Ultimately, the question before
the Court will be determined by the meaning of "earned
income". Subsection 146(1) restricts the "RRSP
deduction limit" to... "18% of the taxpayer's
earned income for the preceding year"... etc.
Subsection 146(1) defines a resident's "earned income"
as the taxpayer's income from
(a) "(i) an office or
employment..."
"(ii) a business carried on... or"
"(iii) property, where the income is derived from the
rental of real property or from royalties in respect of a work or
invention of which the taxpayer was the author or
inventor..."
which exceeds
(f) "an amount deductible
under paragraph 60(b)..."
(That is, spousal support paid.)
[6] The Appellant's remaining 2001
income was pension or interest income and was so declared by the
Appellant.
[7] Thus, the restrictive definition
of "earned income" in the Income Tax Act
prevents the Appellant from succeeding in his main arguments.
[8] For these reasons, the Appeal is
allowed respecting the amount described in paragraph [3] hereof
and this matter is remitted to the Minister of National Revenue
for reconsideration and reassessment accordingly.
Signed at Regina, Canada, on this 7th day of April
2004.
Beaubier, J.
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