Davis – Tax Court of Canada finds that an individual who was well advanced in his steps to return to Canada had a “habitual abode” in the U.S.

An engineer who, after having been employed in the U.S. for 10 years in what turned out to be his final job, started preparing to return to Canada after being laid off at the end of 2012. In addition to his home in Massachusetts, he had a rural home in Nova Scotia, which he visited frequently from the time of its 2009 purchase and where he would see his “platonic” girlfriend. Family was in Alberta.

Given Bocock J’s finding that the taxpayer was a dual resident of Canada, the question as to whether the taxpayer was taxable in Canada on his receipt of the proceeds out of his 401(k) plan on May 6, 2013 turned on which country he was resident in on that day under the tie-breaker rule in Art. IV(2) of the Canada-U.S. Treaty. This question could not be resolved by the centre of vital interest, so that Bocock J turned to the taxpayer’s “habitual abode” on May 6, 2013 and stated:

Mr. Davis’ residency in Canada before May 9, 2013 was preparatory to disengaging from the U.S. and permanently ceasing to be a resident after May 9, 2013. Before May 9, 2013, Mr. Davis … habitually lived in the U.S.

Neal Armstrong. Summary of Davis v. The Queen, 2018 TCC 110 under Treaties – Income Tax Conventions - Art. 4.