|
Citation: 2004TCC502
|
|
Date: 20040716
|
|
Dockets: 2003-3917(IT)I
2004-788(IT)I
|
|
BETWEEN:
|
|
KHALIL HASAN,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent,
|
|
AND:
|
|
LISA N. HASAN,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent.
|
REASONS FOR JUDGMENT
Little J.
A. Statement of Facts
[1] The appeals were heard together on
common evidence.
[2] Lisa N. Hasan is the Daughter
("the Daughter") of Khalil Hasan (the
"Father").
[3] In September 1999 the Daughter
enrolled in the Bachelor of Architecture Program at McGill
University in Montreal, Quebec. The Daughter lived in residence
at McGill University during the 1999-2000 school year.
[4] In September 2000 the Daughter
entered into a lease covering the rental of a small apartment
located at 3600 Avenue du Parc in the City of Montreal. The lease
agreement provided that the rent to be paid for the apartment was
$640.00 per month (Exhibit A-3).
[5] The Daughter lived in the Avenue
du Parc apartment (the "Apartment") from
September 1, 2000 to April 30, 2001.
[6] On or about May 1, 2001 the
Daughter returned to Toronto and worked for Julian Jacobs
Architecture Limited in Toronto from approximately May 1, 2001 to
approximately August 31, 2001. During this time the Daughter
lived in the Father's home in North York, Ontario.
[7] During the period May 1, 2001 to
August 31, 2001 (the "Period") the Daughter paid rent
of $640.00 per month or a total of $2,560.00 for the Apartment.
The Daughter has lived in the Apartment continuously since
September 2000.
[8] During the Period no one lived in
the Apartment but the Daughter stored miscellaneous furniture,
her computer equipment and some of her personal effects in the
Apartment.
[9] When the Daughter filed her Income
Tax Return for the 2001 taxation year she designated the maximum
allowable amount of $5,000.00 of her tuition and education amount
to be transferred to her Father.
[10] When the Daughter filed her Income Tax
Return for the 2001 taxation year she deducted the amount of
$2,560.00 as moving expenses. As noted above the amount of
$2,560.00 was the rent paid for the Apartment during the
Period.
[11] On August 5, 2003 the Minister of
National Revenue (the "Minister") issued a Notice of
Reassessment to the Daughter. The following changes were made to
the Daughter's income for 2001 by the Notice of
Reassessment:
(a) the Daughter's total income
was reduced to $10,288.00;
(b) the Daughter's total federal
non-refundable tax credits were reduced to $1,602.00; and
(c) the Daughter's federal tuition
and education amount available for transfer to her Father was
determined to be $3,516.00 and not $5,000.00 as originally
claimed.
[12] By Notice of Reassessment dated
December 2, 2002 the Minister reassessed the Daughter to disallow
the deduction of the moving expenses in the amount of
$2,560.00.
[13] The Minister also reassessed the Father
to reduce the Tuition and Education Expenses from $5,000.00 to
$3,016.00.
B. Issue
[14] 1.
Is the Daughter allowed to deduct the amount of $2,560.00 as
moving expenses in determining her income for the 2001 taxation
year?
2. Was the Minister correct
in reassessing the Father to reduce the Tuition and Education
amounts from $5,000.00 to $3,016.00? (Note: The adjustment
was made because the Minister disallowed the deduction of the
moving expenses claimed by the Daughter.)
C. Analysis
[15] The phrase "moving expenses"
is defined in subsection 62(3) of the Income Tax Act (the
"Act"):
62. (3) In subsection (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,
(b) the cost
to the taxpayer of transporting or storing household effects in
the course of moving from the old residence to the new
residence;
(c) the cost
to the taxpayer of meals and lodging near the old residence or
the new residence for the taxpayer and members of the
taxpayer's household for a period not exceeding 15 days;
(d) the cost
to the taxpayer of cancelling the lease by virtue of which the
taxpayer was the lessee of the old residence,
(e) the
taxpayer's selling costs in respect of the sale of the old
residence,
(f) where the
old residence is sold by the taxpayer or the taxpayer's
spouse or common-law partner as a result of the move, the cost to
the taxpayer of legal services in respect of the purchase of the
new residence and of any tax, fee or duty (other than any goods
and services tax or value-added tax) imposed on the transfer or
registration of title to the new residence, and
(g) interest,
property taxes, insurance premiums and the cost of heating and
utilities in respect of the old residence, to the extent of the
lesser of $5,000 and the total of such expenses of the taxpayer
for the period
(i) throughout
which the old residence is neither ordinarily occupied by the
taxpayer or by any other person who ordinarily resided with the
taxpayer at the old residence immediately before the move nor
rented by the taxpayer to any other person, and
(ii) in which
reasonable efforts are made to sell the old residence, and
(h) the cost
of revising legal documents to reflect the address of the
taxpayer's new residence, of replacing drivers' licenses
and non-commercial vehicle permits (excluding any cost for
vehicle insurance) and of connecting or disconnecting
utilities,
but, for greater certainty, does not include costs (other than
costs referred to in paragraph (f)) incurred by the
taxpayer in respect of the acquisition of the new residence.
[16] During the hearing the Father
maintained that the amount of $2,560.00 that was paid in rent by
his Daughter for the Apartment would qualify as "moving
expenses" because this amount was paid by his Daughter to
store her furniture during the Period. The Father maintained that
this payment qualifies under paragraph 62(3)(b) of
the Act. The Father also noted that if his Daughter had
not paid the rent during the Period she would have to pay a
penalty equal to three months rent to cancel the lease.
[17] Counsel for the Respondent maintained
that the rental payments paid by the Daughter for the Apartment
during the Period would not come within the meaning of
paragraph 62(3)(b) of the Act. The main
argument by counsel for the Respondent is that
paragraph 62(3)(b) of the Act permits the
deduction of storage costs when a taxpayer is moving household
effects from the old residence to a new residence.
[18] In support of his position counsel for
the Respondent referred to the following Court decisions:
1. Yaeger v. M.N.R.,
86 DTC 1217. In that decision Chief Judge Couture
referred to the French version of paragraph 62(3)(b)
of the Act which reads as follows at page 1221:
(b) de frais de transport et d'entreposage des
meubles du contribuable qui doivent être transportés
de son ancienne résidence dans sa nouvelle
résidence.
In Yaeger Chief Judge Couture translated these words as
follows:
The cost of transporting and warehousing the furniture of the
taxpayer that must be transported from his old residence
into his new residence. (Emphasis added)
2. In Storrow v. The
Queen, 78 DTC 6551 Mr. Justice Collier of the
Federal Court, Trial Division said at pages 6553-6554:
The plaintiff submits that a moving expense is an expense of
moving from one dwelling to another; it includes all costs
directly and solely related to the move from the time of the
decision to leave to the time of resettlement. The additional
monies laid out to acquire a comparable residence in Vancouver,
the interest on that amount, and the costs of registration, of
installing the dishwasher and new locks were all incurred, it is
said, because of the move from one residence to another.
For the defendant, it is contended the amounts in issue are
not really expenses at all; they are the extra costs incurred, in
this case, in replacing an asset, the old residence.
I agree generally with the defendant's contention.
The disputed outlays were not, to my mind, moving expenses in
the natural and ordinary meaning of that expression. The outlays
or costs embraced by those words are, in my view, the ordinary
out-of-pocket expenses incurred by a taxpayer in the course of
physically changing his residence. The expression does not
include (except as may be specifically delineated in
ss. 62(3)) such things as the increase in cost of the new
accommodation over the old (whether it be by virtue of sale,
lease, or otherwise), the cost of installing household items
taken from the old residence to the new, or the cost of replacing
or re-fitting household items from the old residence (such as
drapes, carpeting, etc.). Moving expenses, as permitted by ss.
62(3), do not, as I see it, mean outlays or costs incurred in
connection with the acquisition of the new residence. Only
outlays incurred to effect the physical transfer of the taxpayer,
his household, and their belongings to the new residence are
deductible (Emphasis added).
3. In Séguin v.
Canada, [1997] F.C.J. No. 1220 (CA), 97 DTC 5457 the taxpayer
attempted to deduct as moving expenses the amounts of mortgage
interest that he paid on his old residence until he was able to
sell it".
The Federal Court of Appeal disallowed the deduction
concluding that "the mortgage interest resulting from the
loan on a house that the taxpayer is no longer inhabiting has
more to do with his desire to keep the house until he has his
price instead of selling it.
[19] Based on the reasoning contained in the
Court decisions referred to above, I have concluded that in order
to qualify as a moving expense under
paragraph 62(3)(b) of the Act the amount paid
must have been paid when a taxpayer physically moves or
changes her residence. That did not happen in this situation.
The facts are that the Daughter moved into the Parc Avenue
Apartment in September 2000 and she continues to reside in the
Parc Avenue Apartment. I have therefore concluded that the amount
of $2,560.00 paid by the Daughter in 2001 would not qualify as a
moving expense.
[20] The Father also argued that his
Daughter should be allowed to deduct the rental payments of
$2,560.00 that she paid in the Period under
paragraph 18(1)(a) as business expenses.
[21] I have concluded that the rental
payments of $2,560.00 paid by the Daughter in the Period were
personal expenses and that the deduction of those payments is
prohibited under paragraph 18(1)(h) of the Act.
[22] I have also concluded that the Minister
was correct in reducing the Tuition and Education amounts that
were claimed by the Father from $5,000.00 to $3,016.00.
[23] The appeals are dismissed, without
costs.
Signed at Vancouver, British Columbia, this 16th day of
2004.
Little J.
Email this Content