Deborah Anne Provias and James Gregory Provias v. Minister of National Revenue, [1989] 2 CTC 2215, 89 DTC 412

Christie, A.C.J.T.C.:—These appeals were heard together on common evidence. The appellants are husband and wife. Although Mr. Provias was present at the hearing, only Mrs. Provias testified.

What is placed in issue by the notices of appeal is the deductibility of losses in computing the appellants’ income for their 1984 taxation years that were incurred on the sale of a multi-unit rental property in Calgary ("the property”). The only questions debated at the hearing are: when did the appellants cease to be resident in Canada and when was the property disposed of? The property was purchased in 1981. In 1984 Mr. Provias secured employment in Australia with Delhi Petroleum Pty. Limited of Adelaide. At that time he was working for Home Oil Company of Calgary. The appellants left Canada in late September or early October 1984 and after a stopover in Fiji they arrived in Australia on October 13, where they remained for two years. They then moved from Australia to the United Kingdom. At the time of the hearing of these appeals, which is over four years after they departed for Australia, the appellants were on a temporary visit to Canada.

The appellants and the individual who acquired the property did not execute an agreement of sale and purchase. The documentary evidence is that on September 21, 1984, the appellants, as joint tenants, signed a transfer of the property to Brian Garratt of Stratford, Ontario. He is the father of Mrs. Provias. This document was registered in the Land Titles Office in Calgary on December 3, 1984. [1] On September 21, 1984, Mrs. Provias also signed a Revenue Canada form entitled “Notice by a Non-Resident of Canada concerning Disposition or Proposed Disposition of Taxable Canadian Property." Included in the document is the statement that it is "For use by a nonresident of Canada to advise that the non-resident (a) has disposed of or (b) proposes to dispose of certain ‘taxable Canadian property'." The appellant's maiden name, Deborah Anne Garratt, appears under "Name of Non- Resident in Full” and the "Present Address of Non-Resident" is given as: "c/o Delhi Petroleum Pty. Limited, 33 King William Street, Adelaide, South Australia." The “Date or Proposed Date of Disposition” of the property is December 1, 1984. On the statement of adjustments pertaining to the sale of the property the adjustment date and the date of possession are both December 1, 1984.

In returns of income dated September 3, 1985, each appellant included a statement of real estate rentals relating to the property for the period January 1, 1984, to November 30, 1984. In the course of cross-examination, evidence was given about the rents being received for the rental units and the interest being paid on the mortgage debt pertaining to the property and these amounts agree with the rental income and interest expenses for the period indicated in the statements of real estate rentals.

The nub of the evidence on behalf of the appellants is that it was their intention and that of Mr. Garratt that on the execution of the instrument of transfer on September 21, 1984, the interest of the appellants in the property terminated and Mr. Garratt thereupon assumed full responsibility for it. While he continued to reside in Stratford, he had assistance from a rental agency in Calgary. The only explanation given for what was reported in the statements of real estate rentals is that a package of papers, all of which were dated during or prior to September 1984, pertaining to the rental business was turned over to an accountant and he is the author of those statements. Mrs. Provias was asked when, in her mind, she ceased to be a resident of Canada and she replied: "I still consider myself, I suppose, a resident of Canada".

In their returns each appellant, in computing income for 1984, sought to deduct against Canadian employment income $16,342 in losses arising out of the rental business plus a capital loss of $2,000 on disposition of the property. The $16,342 included a terminal loss of $10,519 on the disposition of the property pertaining to the undepreciated capital cost of the building.

In reassessing, the respondent assumed that the appellants were not resident in Canada during their 1984 taxation years after October 13. This would bring section 114 [2] of the Income Tax Act into play and as the rental income during the period October 13 to November 30 was reduced to nil by current expenses and there being no other income from a source in Canada during that period there was nothing in relation to which the $10,519 and $2,000 could be deducted.

I think that I must give preferable credence to the documentary evidence over the viva voce evidence. The documents all came into being before the dispute arose that gave rise to this litigation and they are in harmony with each other. From the documents I can only conclude that the property was disposed of by the appellants in December 1984. The notice by Mrs. Provias to Revenue Canada concerning the disposition or proposed disposition of the property gives December 1, 1984, as that date. This is also the date of adjustment and possession in the statement of adjustments. The period covered in the statement of real estate rentals that are included in the appellants’ returns of income for 1984 is January 1, 1984, to November 30, 1984. The instrument of transfer was registered in the Land Registry Office on December 3, 1984. I am also of the opinion that the appellants ceased to reside in Canada when they took up residence in Australia on October 13, 1984.

It follows that these appeals cannot succeed and they are dismissed.

Appeals dismissed.