Date: 20000706
Docket: 1999-215-GST-I
BETWEEN:
RENÉ BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Lamarre Proulx, J.T.C.C.
[1]
This is an appeal concerning the application of section 256 of
the Excise Tax Act ("the Act") in respect
of a house constructed by the appellant or another person engaged
by him on the south shore of the St. Lawrence River.
[2]
The issue is whether that place of residence was constructed for
use as the primary place of residence of the appellant or one of
his relations, thus entitling the appellant to the rebate
provided for in the said section 256 of the Act.
[3]
The facts on which the Minister of National Revenue ("the
Minister") relied in denying the rebate are set out as
follows in paragraph 15 of the Reply to the Notice of Appeal
("the Reply"):
[TRANSLATION]
(a)
the facts admitted above;
(b)
in 1996, the appellant built himself a secondary place of
residence at 18560 Rue Champagne in the municipality of
St-Grégoire;
(c)
the value of the secondary place of residence is apparently
$160,000;
(d)
on or about August 19, 1997, the appellant, as a
do-it-yourself homebuilder, applied for a GST rebate
of $3,217.93;
(e)
the rebate application was denied by the respondent for the
reasons set out hereunder;
(f)
on or about November 19, 1997, the appellant told the auditor
that he was occupying his secondary place of residence
occasionally, one day a week or so, that construction was not
entirely completed and that he was planning to make it his
principal place of residence in 1998;
(g)
during the same conversation, the appellant added that he had
started furnishing his secondary place of residence;
(h)
on or about November 21, 1997, the appellant told the auditor
that he had been occupying his secondary place of residence three
or four days a week since August 1997 and repeated his intention
of making it his principal place of residence in 1998;
(i)
during that discussion, the appellant added that his minor son,
Jean-Alexandre Bérubé, had been living in the
secondary place of residence since September 1997;
(j)
during the discussion, the appellant said that the place of
residence was 90 percent completed;
(k)
at the time of the audit, the auditor learned through his
research that the appellant, his spouse Céline Plourde and
his son Jean-Alexandre Bérubé were
giving their address as being 17575 Rue Thibodeau in
the municipality of St-Grégoire, which was the address of
the appellant's principal place of residence;
(l)
on February 17, 1998, the appellant sent his son
Jean-Alexandre Bérubé's transcript
for the fall 1997 term showing his address as that of the
appellant's secondary place of residence;
(m)
however, when he obtained his driver's licence on
September 26, 1997, Jean-Alexandre
Bérubé gave his address as being 17575 Rue
Thibodeau, the address of his father's principal place of
residence;
(n)
it was not until July 3, 1998, that Jean-Alexandre
Bérubé had the address on his driver's licence
changed;
(o)
moreover, Jean-Alexandre Bérubé did not come of age
until September 15, 1998.
[4]
The appellant testified on his own behalf. Claude Picard, a tax
auditing technician with the Quebec Department of Revenue,
testified for the respondent.
[5]
It should be noted at the outset that the appellant and his
family are still living in the family property at 17575 Rue
Thibodeau in St-Grégoire. When he claimed a rebate of
$3,217.93 on August 19, 1997, the appellant said that he had
built the riverfront house to make it his primary place of
residence. During that month, the appellant and his spouse
allegedly lived in the riverfront house one to three days a week.
During the hearing, the appellant explained that their main goal
was to make that house their primary place of residence but that,
because of an unexpected family development, it was instead their
son Jean-Alexandre who lived in it as his principal place
of residence starting in September 1997. The appellant
explained that his 17-year-old son (he was born on
September 15, 1980) had fallen in love and wanted to
live in a more autonomous setting.
[6]
To prove that the house was his son's primary place of
residence, the appellant filed as Exhibit A-1 a
photocopy of his son's probationary driver's licence
dated July 3, 1998. As Exhibits A-2, A-3 and
A-4, he filed Jean-Alexandre's college
transcripts showing his address as 18560 Champagne,
St-Grégoire. Those transcripts are dated January 13,
1998, January 8, 1999, and October 25, 1999, respectively. As
Exhibits A-5 and A-6, the appellant filed invoices
from Université du Québec à
Trois-Rivières dated October 22, 1999, and
February 22, 2000, respectively.
[7]
As Exhibit A-7, the appellant submitted a letter from the
insurers of his residences dated January 23, 1998. It reads as
follows:
[TRANSLATION]
. . .
This is to confirm that the insured, René
Bérubé, has a homeowner's insurance policy with
the insurer for each of the following locations: 17575 Chemin
Thibodeau in St-Grégoire and 18560 Boul.
Bécancour in Bécancour.
Each of those two locations is considered by the insurer to be
in use by the insured at least 50 percent of the time and, as a
result, each is a principal place of residence.
For us, the purpose of the references to "principal and
secondary residences" in the policy is merely to
differentiate the above-mentioned two locations, but those
references in no way affect how the insurer views those
residences, which in themselves are considered to be two
principal residences. In this regard, please note that we could
have reversed the terms assigned to each of the two places of
residence and the insurance coverage would not have been affected
in any way.
[8]
Claude Picard had a conversation with the appellant in November
1997 in which the appellant recited the facts set out in
subparagraphs 15(f) to (j) of the Reply. The Minister's
officer checked the telephone books, car insurance records and
correspondence addresses in tax files and asked to see the
insurance policies. He found no indication that the riverfront
residence had become the primary place of residence of the
appellant or one of his relations in August or November 1997. On
the contrary, everything indicated that it was a secondary place
of residence for the appellant.
[9]
Counsel for the respondent argued that, since the property was
occupied by the parents in August, they were the first occupants
and Jean-Alexandre's occupancy should not be
considered, since he was not the first occupant as required by
subparagraph 256(2)(d)(i) of the Act. However,
counsel for the respondent also argued that, if the parents'
use in August was not the first occupancy and even if
Jean-Alexandre's alleged occupancy is considered to be
the first occupancy, there is insufficient evidence that the
property was Jean-Alexandre's primary place of
residence. Moreover, counsel questioned the appellant's
credibility, since the appellant applied for the rebate in August
1997 claiming that the property was his primary place of
residence but in November took the position that it was his
son's primary place of residence.
Conclusion
[10]
Subsections 256(1) and (2) of the Act read as follows:
256(1) In this section,
. . .
"relation" of a particular individual means another
individual who is related to the particular individual or who is
a former spouse of the particular individual;
256(2) Where
(a)
a particular individual constructs or substantially renovates, or
engages another person to construct or substantially renovate for
the particular individual, a residential complex that is a single
unit residential complex or a residential condominium unit for
use as the primary place of residence of the particular
individual or a relation of the particular individual,
(b)
the fair market value of the complex, at the time the
construction or substantial renovation thereof is substantially
completed, is less than $450, 000,
(c)
the particular individual has paid tax in respect of the supply
by way of sale to the individual of the land that forms part of
the complex or an interest therein or in respect of the supply
to, or importation by, the individual of any improvement thereto
or, in the case of a mobile home or floating home, of the complex
(the total of which tax under subsection 165(1) and sections 212
and 218 is referred to in this subsection as the "total tax
paid by the particular individual"),
(d)
either
(i)
the first individual to occupy the complex after the construction
or substantial renovation is begun is the particular individual
or a relation of the particular individual, or
(ii)
the particular individual makes an exempt supply by way of sale
of the complex and ownership of the complex is transferred to the
recipient before the complex is occupied by any individual as a
place of residence or lodging,
the Minister shall, subject to subsection (3), pay a rebate to
the particular individual equal to
. . .
[11] Policy
Statement P-228, which was issued on March 30, 1999,
distinguishes between a primary and a secondary place of
residence as follows:
A primary place of residence may be
differentiated from a secondary place of residence since the
terms primary and secondary are necessarily defined in relation
to each other. Primary suggests something first in order of
importance that is not subordinate or secondary. From this, it
follows that where an individual has more than one place of
residence, the place of residence that is not first in order of
importance to that individual would be that individual's
secondary place of residence as it would be subordinate to the
primary place of residence (e.g. it is used
mainly for recreational purposes or it is occupied less than
another).
. . .
Criteria Indicative of a Primary Place of
Residence
1.
The residential complex or residential unit should be, or should
be demonstrably intended to be, the particular individual's
place of residence, or that of a qualifying relative, for
purposes of:
·
mailing address,
·
income tax (e.g. forms or returns),
·
voting,
·
municipal/school taxes, and
·
telephone listing.
2.
After possession or substantial completion, as the case may be,
the individual or qualifying relative should demonstrate
occupancy by moving most of his or her personal effects (in terms
of use and value) into the residential complex or residential
unit.
3.
Where the individual or qualifying relative does not occupy the
residential complex or residential unit after possession or
substantial completion, as the case may be, there should be
evidence that the occupation of the complex or unit was
frustrated (e.g. by relocation due to employment or lack of
financing).
4.
Where the individual or qualifying relative has taken out
insurance, the stated use of the place of residence for purposes
of the insurance policy should be as the insured's personal
residence, i.e. homeowner's or tenant's insurance rather
than seasonal or rental property.
5.
Where the individual owned or leased another place of residence
at the time the residential complex or co-op share in question
was acquired, constructed or substantially renovated, the
disposition of that place of residence or clear evidence that
that place of residence is offered for sale or rental at or
before the occupation of the complex or residential unit may
indicate that the complex or unit is the individual's
primary place of residence.
6.
Where an individual or qualifying relative owns or leases more
than one place of residence and continues to occupy both of them,
the following factors may indicate which one is the
primary place of residence:
· the
amount of time spent at any one of the places of residences,
· the
location of the individual or qualifying relative's place of
work,
· the
availability of amenities particular to the personal needs of the
individual or qualifying relative, and/or individual residing
with him/her, and
· the
suitability of the property for use by the individual or
qualifying relative as a place of residence throughout the
year.
[12] A policy
statement is, of course, not the Act and does not bind the
Court. However, it is interesting to see how the wording of the
Act has been interpreted by the government authorities who
have given the matter some thought.
[13] The
wording of section 256 of the Act does not allow for two
primary places of residence. It states that a tax rebate will be
paid to a particular individual who constructs a residential
complex for use as the primary place of residence of that
individual or a relation of that individual. The French version
uses the term "résidence habituelle".
Identifying an individual's primary place of residence is a
question of fact. It will be determined on the basis of the
factual elements that usually exist with regard to an
individual's most important place of residence. The elements
taken into account or suggested by the government authorities in
determining the primary place of residence, as set out above,
seem quite reasonable to me. But they are not exhaustive. An
individual may use other factual elements to try to prove that a
place of residence is his or her primary place of residence.
However, the individual's evidence must satisfy the Court on
the balance of evidence that it is indeed a primary place of
residence.
[14] I will
begin by giving my opinion on the appellant's first argument,
namely that the waterfront residence was constructed to become
his primary place of residence. This was perhaps a wish for the
distant future, when he retired, but there are no indications
that it was his immediate intention. Such indications could
include putting the current primary place of residence up for
sale, changes of address, moving arrangements or other actions
showing an immediate intention to change the primary place of
residence. No facts were presented indicating that the appellant
intended to change his primary place of residence.
[15] Since the
appellant, in his Notice of Appeal and at the hearing, abandoned
his argument that the place of residence was constructed by him
to become his primary place of residence and adopted the argument
that it was to be used by Jean-Alexandre, all that remains
for me to do is to analyse the evidence regarding
Jean-Alexandre's primary place of residence. It should
be noted that Jean-Alexandre did not testify. His testimony
was important, since it was his primary place of residence that
was at issue. The Minister's allegations in the Reply were
not refuted. Subsequent proofs of address were provided but,
given the absence of other evidence, such proofs are not
sufficient to establish that the residence in question was
Jean-Alexandre's primary place of residence. For
example, there was no evidence that Jean-Alexandre had full
authority over the premises. If I go by the appellant's
comments, I think rather that the parents continued to have
access to the place of residence as if it were theirs. There was
no evidence that Jean-Alexandre's occupancy was
mentioned to the insurer. The insurer's letter dated January
23, 1998, indicates that the appellant had homeowner's
insurance on the riverfront residence just as he had on the house
on Rue Thibodeau. The insurance policies were not filed in
evidence. Account must also be taken of
Jean-Alexandre's youth at the time in question. What
may be plausible in the case of an older child whose parents want
to help him get settled has very little plausibility in the case
of a son who is still a minor and who is a long way from having
finished his schooling and being ready to support himself.
[16] Given the
change in the appellant's story, the fact that
Jean-Alexandre did not testify, the insurer's letter
and Jean-Alexandre's age, and on the weight of the
evidence set out above, I can only conclude that, on the balance
of probabilities, the appellant did not construct the house for
use as his son's primary place of residence.
[17] The
appeal is accordingly dismissed.
Signed at Ottawa, Canada, this 6th day of July 2000.
"Louise Lamarre
Proulx"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
[OFFICIAL ENGLISH TRANSLATION]
1999-215(GST)I
BETWEEN:
RENÉ BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 19, 2000, at Québec,
Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Louis Cliche
JUDGMENT
The
appeal from the goods and services tax assessment made under the
Excise Tax Act, notice of which is dated November 24,
1997, and bears number 012229, is dismissed in accordance with
the attached Reasons for Judgment.
Signed Ottawa, Canada, this 6th day of July 2000.
J.T.C.C.
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