Canada v. Montgomery, docket T-863-96

     Date : 19971014

     Docket : T-863-96

BETWEEN:

     HER MAJESTY THE QUEEN,

     Plaintiff

     - and -

     ALAN MONTGOMERY

     Defendant

     - and -

     BRITISH COLUMBIA ASSESSMENT AUTHORITY and

     GUY MOUSSEAU

     Intervenors

     REASONS FOR JUDGMENT

McGILLIS, J.

[1]      The Department of National Revenue ("Department") has appealed by way of trial de novo from a decision in which a judge of the Tax Court of Canada concluded that the professional dues paid by the defendant ("Montgomery") to the Appraisal Institute of Canada were deductible from his income in the 1988 taxation year.

[2]      In 1988, Mr. Montgomery was a real estate appraiser who was employed by the Department as the Chief of the Real Estate Appraisal Section in the Hamilton District Office. As part of his job description, Mr. Montgomery was required to hold the Accredited Appraiser designation of the Appraisal Institute of Canada. In 1988, Mr. Montgomery held that designation, and paid his annual professional membership dues to the Appraisal Institute of Canada. He was also a member of the Royal Institution of Chartered Surveyors in England, and paid professional membership dues to that organization. Mr. Montgomery was not reimbursed, and was not entitled to be reimbursed, by his employer for the payment of those dues. In calculating his income for the 1988 taxation year, Mr. Montgomery deducted those professional dues under subparagraph 8(1)(i)(i) of the Income Tax Act.

[3]      The Department reassessed Mr. Montgomery for the 1988 taxation year. It disallowed the deduction for the dues paid to the Appraisal Institute of Canada, but allowed the deduction for the dues paid to the Royal Institution of Chartered Surveyors. Mr. Montgomery objected to the reassessment by filing a Notice of Objection. The reassessment was confirmed by a Notice of Confirmation.

[4]      The Appraisal Institute of Canada is a corporation without share capital incorporated in April 1960. It offers an educational program which consists of courses, demonstration appraisal reports and articling. A person who successfully completes the program will acquire the Accredited Appraiser designation. The by-laws of the Appraisal Institute of Canada require each member to pay annual membership dues in order to maintain the designation and to remain a member in good standing. The Appraisal Institute of Canada is a non-profit organization governed by a national council composed of members elected from across the country. In 1988, there were seven provincial associations.

[5]      The question to be determined on this appeal is whether the dues paid by Mr. Montgomery to the Appraisal Institute of Canada in 1988 were deductible from income under subparagraph 8(1)(i)(i) of the Income Tax Act.

[6]      Subparagraph 8(1)(i)(i) of the Income Tax Act provides as follows:

     ...

[7]      During the course of argument, counsel for the Department conceded that real estate appraisers are members of a profession. With respect to the remaining requirements in subparagraph 8(1)(i)(i) of the Income Tax Act, the facts of this case establish unequivocally that the dues were payable annually in order to maintain the professional status of an Accredited Appraiser, and that Mr. Montgomery was not reimbursed and was not entitled to be reimbursed, for the payment of those dues. As a result, the sole matter required to be determined is whether a real estate appraiser in Ontario has a professional status recognized by statute, within the meaning of subparagraph 8(1)(i)(i) of the Income Tax Act.

[8]      In support of the argument that a real estate appraiser has a professional status recognized by statute, counsel for Mr. Montgomery and counsel for the intervener referred to certain statutes which require, for stated statutory purposes, the preparation of an appraisal by a member of the Appraisal Institute of Canada.¹ Given the reference in those statutes to the requirement of an appraisal prepared by a member of the Appraisal Institute of Canada, counsel argued that the profession had been "recognized by statute" within the meaning of subparagraph 8(1)(i)(i) of the Income Tax Act. I cannot accept that argument. In my opinion, a statutory provision requiring the preparation of an appraisal by a member of the Appraisal Institute of Canada does not constitute a recognition by statute of the professional status of that group; it merely indicates that a member of that group must perform the appraisal required by the statutory provision. A profession only possesses "...a professional status recognized by statute", within the meaning of subparagraph 8(1)(i)(i) of the Income Tax Act, following the enactment of legislation permitting it to regulate its affairs in accordance with express rights, duties and powers.² In 1988, there was no legislation anywhere in Canada permitting the self-regulation of the Appraisal Institute of Canada or any of its affiliated groups as a profession. As a result, in 1988, a real estate appraiser did not have "... a professional status recognized by statute", within the meaning of subparagraph 8(1)(i)(i) of the Income Tax Act. I note in passing that, in 1994, New Brunswick enacted legislation permitting the New Brunswick Association of Real Estate Appraisers to regulate its affairs³

[9]      I have therefore concluded that, in 1988, the payment of Mr. Montgomery's annual professional dues was not necessary "...to maintain a professional status recognized by statute", within the meaning of subparagraph 8(1)(i)(i) of the Income Tax Act. In the circumstances, the deduction claimed by Mr. Montgomery for the payment of his 1988 dues in the Appraisal Institute of Canada was properly disallowed by the Department.

[10]      The appeal is allowed with costs.

OTTAWA, ONTARIO

October 14, 1997

¹      See Expropriation Act, S.B.C. 1987, c.23, s. 19(2) and Expropriation Act General Regulation, B.C. Reg. 451/87, as amended on January 27, 1988; Government Employee Housing Plan Act, R.S.Y. 1986, c. 80, s.5; Nursing Homes Act, S.A. 1985, c.N-14.1 and Nursing Homes General Regulations, Alberta Regulation 232/85, s.7(d)

²      See also M.N.R. v. Montgomery (1970), 70 D.T.C. 6080, 6083 (Ex. Ct.); Her Majesty the Queen v. Swingle (1977), 77 D.T.C. 5301, 5308 (F.C.T.D.); Stewart v. Minister of National Revenue (1983), 82 D.T.C.1767, 1769 (T.R.B.); Laithwaite v. Her Majesty the Queen (1995), 95 D.T.C. 710, 712 (T.C.C.).

³      New Brunswick Association of Real Estate Appraisers, S.N.B. 1994, c. 108.