Citation: 2013 TCC 218
Date: 20130718
Docket: 2011-2978(IT)I
BETWEEN:
LAWRENCE P. KUNTZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR JUDGMENT
(The reasons are amended solely to correct the name of
counsel. The text has not been changed.)
Woods J.
[1]
Lawrence Kuntz has appealed an
assessment made under the Income Tax Act for the 2008 taxation year. The
questions to be determined are whether the Minister of National Revenue properly
disallowed a principal residence exemption and properly imposed a penalty for
late-filing the income tax return.
Principal residence
exemption
[2]
In 2008 Mr. Kuntz realized a
taxable capital gain in the amount of $32,880 on the sale of a mobile home. He
submits that the gain qualifies for the principal residence exemption.
[3]
The Crown submits that the
principal residence exemption is not available because Mr. Kuntz never lived in
the home.
[4]
The mobile home at issue was
purchased by Mr. Kuntz in May 2006. He testified that the home had previously
belonged to his mother and that it was leased to third parties at the time of
his purchase.
[5]
Mr. Kuntz stated that he intended
to move into the home after a few months. He therefore terminated the lease
after a period of time and the tenants moved out at the end of March, 2007.
[6]
Mr. Kuntz stated that he started
repair and renovation work on the property after the tenants moved out. The
work was completed in May 2008.
[7]
Mr. Kuntz testified that he was
approached to sell the property about the time that the renovations were
complete. He stated that he agreed to sell because the renovations had been
difficult and he was no longer interested in living in the home. The sale took
place in June, 2008.
[8]
Throughout this period, Mr. Kuntz
lived in a rental apartment which he has occupied since 1999.
[9]
Mr. Kuntz stated that after the
tenants moved out in March 2007, he purchased new appliances for the mobile
home and he brought a few pieces of furniture from his apartment. However, he
never stayed overnight or ate meals at the home and a contractor told him that
it was not possible to stay there because the renovations would be extensive. In
addition, Mr. Kuntz stated that the home was unfit for occupancy due to misuse
by the former tenants.
[10]
In his income tax return for 2008,
Mr. Kuntz claimed rental income in the amount of $262 and a net rental loss of
$8,858. He testified that this should have been the loss for the prior year
since the property was not rented in 2008.
[11]
I would conclude that the
principal residence exemption was properly denied by the Minister because the
mobile home was not “ordinarily inhabited” by Mr. Kuntz. The requirement
that the home be ordinarily inhabited is found in the definition of principal
residence in section 54 of the Income Tax Act. The relevant portion is
reproduced below.
54. Definitions
- In this subdivision,
[…]
“principal residence” of a taxpayer for a taxation
year means a particular property that is a housing unit, a leasehold interest
in a housing unit or a share of the capital stock of a co-operative housing
corporation acquired for the sole purpose of acquiring the right to inhabit a
housing unit owned by the corporation and that is owned, whether jointly with another
person or otherwise, in the year by the taxpayer, if
(a) where the taxpayer is an individual
other than a personal trust, the housing unit was ordinarily inhabited in
the year by the taxpayer, by the taxpayer’s spouse or common-law partner or
former spouse or common‑law partner or by a child of the taxpayer, […]
(Emphasis added)
[12]
The legislative provision above
does not specify a particular length of time that the principal residence must
be inhabited, but it does specify that the residence must be occupied as a
residence by the owner or a related person. This is clear by the term “inhabit”
which generally means to occupy as an abode (Shorter Oxford English
Dictionary). In this case, the mobile home was never lived in by Mr. Kuntz.
He may have intended to live in the property at some future point, but that
never occurred. In circumstances such as these, the principal residence
exemption is not available.
Late-filing penalty
[13]
Mr. Kuntz was assessed a penalty
under subsection 162(1) of the Income Tax Act for failure to file the
2008 income tax return on time. The amount of the penalty that was assessed is
$1,044.06.
[14]
Subsection 162(1) provides:
162. (1) Failure to
file return of income - Every person who fails to file a return of income
for a taxation year as and when required by subsection 150(1) is liable to a
penalty equal to the total of
(a) an amount equal to 5% of the
person’s tax payable under this Part for the year that was unpaid when the
return was required to be filed, and
(b) the product obtained when 1% of the
person’s tax payable under this Part for the year that was unpaid when the
return was required to be filed is multiplied by the number of complete months,
not exceeding 12, from the date on which the return was required to be filed to
the date on which the return was filed.
[15]
According to the testimony of the
litigation officer assigned to this matter, the computer records of the Canada
Revenue Agency (CRA) record that Mr. Kuntz’ 2008 income tax return was
filed electronically on July 22, 2009 (See Ex. R-3). The return was due on
April 30, 2009.
[16]
Mr. Kuntz indicated that he had no
evidence to dispute this but stated that he thought the return was filed on
time by his accountant. This brief and vague testimony is not sufficient to
overcome the evidence led by the Crown.
[17]
Based on the evidence as a whole,
I would conclude that the penalty that was assessed is properly imposed.
Conclusion
[18]
In light of the conclusions above,
the appeal will be dismissed.
Signed at Toronto, Ontario this 18th
day of July 2013.
“J. M. Woods”
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