Vosicky v. R., [1996] 2 CTC 2097 (Informal Procedure)

Archambault J.T.C.C.: — This is an appeal pursuant to the informal procedure. Josef Vosicky disputed the assessment of the Minister of National Revenue (Minister) for the 1992 taxation year. The Minister had reduced the forward averaging credit from $3,400 to $2,900.

FACTS

In 1985, Mr. Vosicky had taxable income not exceeding $34,000. He made the election provided at section 120.1 of the Income Tax Act (Act) which permits forward averaging. Having made this election, Mr. Vosicky had to pay a special tax pursuant to subsection 120.1(2) of the Act on the amount to be averaged at the rate provided by paragraph 117(5.2)(j) of the Act, that is 34 per cent. It should be noted that if he had not made this election, his marginal tax rate would have been much lower, that is roughly 25 per cent.

In 1992, Mr. Vosicky made the election to include the sum of $10,000 in his income. As he had taxable income of about $14,000, the marginal rate applicable to this $10,000 was 17 per cent. Having included part of his averaged income in his income, Mr. Vosicky was entitled to a credit pursuant to subsection 120.1(1) equal to the rate provided by paragraph 117(2)(c) of the Act, 29 per cent. As may be seen, Mr. Vosicky paid tax at the rate of 34 per cent in 1985 and received a credit at the rate of only 29 per cent.

Instead of paying a lower tax as a result of the averaging mechanism, Mr. Vosicky in fact paid a higher tax. In his 1992 income tax return, he calculated his credit using the 1985 rate, that is 34 per cent, not that in effect in 1992, 29 per cent. Mr. Vosicky said that he had relied on the documentation prepared by the Minister in 1985. However, I do not believe that the bulletin on which he relied was as clear as Mr. Vosicky claimed.

It must nevertheless be noted, as Mr. Vosicky claimed, that the situation was highly unfair. The forward averaging mechanism which was supposed to enable him to pay less tax had the opposite effect. The Court has no other choice, however, but to apply section 120.1 of the Act as it read in 1992 and can only confirm the Minister’s assessment for that year. There is no ambiguity: the rate that Mr. Vosicky must use to calculate his forward averaging credit is that provided in paragraph 117(2)(c), that is 29 per cent.

Although it has no power to require the Minister to enter into an administrative arrangement with the taxpayer, the Court hopes that such an arrangement can be found so that the injustice which Mr. Vosicky has suffered may be satisfactorily corrected.

For these reasons, Mr. Vosicky’s appeal in respect of the 1992 taxation year is dismissed and the Minister’s assessment is confirmed, without costs.

Appeal dismissed.