Ian D. Starkie v. Her Majesty the Queen (Informal Procedure), [1995] 1 CTC 2398

Taylor J.T.C.C.:—This is an appeal under the informal procedure heard in Toronto, Ontario on November 2, 1994, against an income tax assessment for the year 1991 in which the respondent had included an amount of $25,000 in taxable income, that amount arising out of a payment made to the appellant by his employer, the Ontario Ministry of Correctional Services ("Correctional Services") when he moved from London, Ontario to Toronto, Ontario. The general circumstances related to the payment are outlined in the following documents-which of course show some difference of emphasis:

The relevant facts are as follows:

Notice of appeal

—In 1987 my employer, the Province of Ontario, required that I relocate from Toronto to London, Ontario.

—In 1990 my employer required that I return to Toronto.

-During the period 1987-90, real estate values in Toronto area increased substantially more than in the London area.

-My employer agreed to pay housing differential based on information supplied by the London and Toronto Real Estate Boards.

—An amount of $25,000 was paid to me in July 1991 and applied to my mortgage.

-Belatedly, in August 1991, my employer’s interpretation of Revenue Canada guidelines, caused them to begin deducting tax from salary in respect of the $25,000 payment.

-Enquiries made to Revenue Canada officials locally received a variety of responses, the most disquieting of which said, "your employer’s interpretation is the problem here".

Reply to notice of appeal

-at all material times the appellant was employed by Correctional Services;

-at the request of Correctional Services, the appellant moved from Toronto, Ontario to London, Ontario in 1987;

-the appellant sold his residence at 610-45 Carlton Street, Toronto, Ontario in 1987;

-during the period of time he was resident in London, Ontario, the appellant rented accommodations;

—at the request of Correctional Services, the appellant moved from London, Ontario to Toronto, Ontario in 1990;

—in 1990 the appellant purchased a residence at 103-5 Grey stone Walk Drive, Scarborough, Ontario;

-in September 1990, the appellant applied to Correctional Services to be considered for a benefit under the ERP;

—the ERP was a program made available by Correctional Services to its employees who were relocating at the employer’s request to an area where housing costs exceeded those in the former location to assist such employees to acquire housing in the more expensive area;

—the appellant received the benefit from the ERP in July 1991;

—the appellant received the ERP benefit by virtue of his office or employment with Correctional Services;

-in the alternative, the appellant received the ERP benefit as an allowance for personal or living expenses.

The respondent relied on subsections 5(1) and 248(1) and paragraphs 6(l)(a) and 6(l)(b) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act”) as amended for the 1991 taxation year.

The appellant testified that he had been transferred many times during his service with Correctional Services but this was the only time he had received any compensation in connection with the moves. His general attitude had been that he was prepared to serve wherever the employer required—and while he felt this had probably been rather costly over the years, he had the opportunity of varied work experiences. When relocating in London, in 1987, he had been unable to find accommodation he wished to purchase, and his wife had not found an employment position. Therefore he had rented originally on an interim basis. However, after several months the possibility of another move appeared-not necessarily back to Toronto-and he continued to rent rather than buy. He had sold his Toronto residence at a slight profit-and had used the capital returned to him from the sale to assist his family. The move back to Toronto had required the purchase of a residence at a much greater cost than he expected-housing prices had risen dramatically. As Mr. Starkie saw the situation—even at best-the $25,000 at issue barely restored him to an equivalent position like that he had before the move to London in 1987, and certainly did nothing to assist him in the costs involved in earlier moves.

For the respondent, the situation was simple-Mr. Starkie had made choices, perhaps not always economically beneficial-but he had to retain employment and consider career advancement. The $25,000 at issue aided Mr. Starkie in his personal living accommodation, and was therefore a benefit.

Analysis

As I understand this situation-the $25,000 at issue was a lump sum payment, albeit related to a form of calculation based on the apparent difference in housing costs, taking into account as well as possible the ownership of the one residence in Toronto sold in 1987, the rental accommodation in London from 1987 to 1990, and then the reacquisition of a different residence in Toronto in 1990. The transfers outlined, and even those of years prior to 1987, which Mr. Starkie experienced, may have had a negative effect on his financial situation. Further, there did not seem to be any option for Mr. Starkie when he was approached regarding the location of his employment at different times. However, in my view, it is clear that the appellant did make personal use of the capital he had invested in the first Toronto home sold in 1987, and the $25,000 at issue was to be used to acquire living accommodation on his return to Toronto in 1990. That even leaves aside the significant fact that he did not purchase equivalent accommodation in London but rather chose to rent there even though his reasons for doing so seemed valid at the time. The amount at issue was a benefit and the respondent’s assessment is to be upheld.

On the same subject I would refer to a recent judgment of this Court—Krull v. Canada, November 28, 1994 (Taylor J.T.C.C.), Court File No. 93-3191 (unreported)-in which the relevant jurisprudence is reviewed as I comprehend it. A copy of that judgment is attached [not included].

The appeal is dismissed.

Appeal dismissed.