William J Stocker v. Minister of National Revenue, [1982] CTC 2045, 82 DTC 1078

Assistant Chairman:—This is an appeal by Mr Stocker from an assessment of his income tax for the 1978 and 1979 taxation years. Mr Stocker listed his home with a real estate agent, Century 21 Matika Real Estate Limited, and in the listing agreement, Exhibit A-1, the price asked for was $44,900 and the listing agreement showed that the commission on the sale would be 5.5%. The listing was made in June 1978.

In July of 1978 the property was sold to J Matika Limited or designate (“Matika”). Matika is involved in the agreement of purchase and sale as a purchaser and not as an agent. That agreement, Exhibit A-2, stated that the purchase price was $43,000. There was a downpayment of $5,000 and a balance on closing subject to adjustments of $38,000.

In filing his income tax returns for both of the years 1978 and 1979, the appellant claimed moving expenses in the amounts of $5,312.13 for 1978 and $1,267.48 for 1979. When Mr Stocker filed his return, according to his counsel, he claimed the $5,000 as a real estate commission.

The Minister disallowed all real estate commissions.

In the course of the proceedings Mr Kelly, counsel for the appellant, stated the actual commission involved was not $5,000 but was $2,280 with the result that, since the disallowance was in excess of $2,280, for 1978 if the appellant’s appeal is successful the whole $2,280 real estate commission should be allowed in that year and, even if he is still successful, the appeal for 1979 would have to be dismissed.

In the transaction, as Mr Kelly frankly stated, there was no change of funds with respect to real estate commission. In other words, there was no cheque for $2,280 to the real estate agent pursuant to Exhibit A-1. There was no cash payment to the real estate agent. The only cash that moved was the payment of $38,000 subject to adjustments by the purchaser Matika to the vendor, Mr Stocker.

Now, the amount of $2,280 commission, which Mr Kelly says is a proper moving expense to his client, was computed by taking 5.5% of a figure which, after the deduction of the commission on that basis, produced a net of $38,000. He stated that the figure was approximately $40,280. Nowhere is the figure of $40,280 used. There are only three figures in existence; namely, the figure of $44,900 on the listing agreement, the figure of $43,000 supposedly the purchase price and that is how it is described in the agreement of purchase and sale, and then the amount which the purchaser is going to pay the vendor, namely $38,000.

Mr Kelly’s argument is on the basis that while actually, as he stated quite frankly,no cash or cheque exchanged for the $2,280, the net effect was that his client only received $38,000 and based on Exhibit A-1 he was obligated to pay a 5.5% commission and, therefore, it is to be assumed that obligation was discharged and, therefore, he had a commission payment and a moving expense. There is no doubt about it, if the commission were paid it would be a moving expense.

The Crown takes the position that under section 62 of the Income Tax Act there was no moving expense paid and, consequently, nothing is to be deducted. In making the submission, counsel referred to subsection 62(1), pointing out that in that section there is a phrase used . . there may be deducted amounts paid by him as or on account of moving expenses incurred in the course of moving from his old residence to his new residence.” She stressed the words “paid by him”.

We then go down to the definition of “moving expenses” under subsection 62(3) of the Act and the paragraph in which we are interested is (e), which reads as follows:

(3) In subsection (1), “moving expenses” includes any expense incurred as or on account of

(e) the selling costs in respect of the sale of his old residence.

The submission of counsel for the respondent is that the appellant had no selling costs and, consequently, not having had any selling costs she contends there was nothing paid and no costs were incurred and, consequently, there is no commission to be deducted.

Respondent’s counsel relied on three cases, the first being the recent case of Blair T Harrison v MNR, a decision of Mr Taylor of this Board which is reported at [1981] CTC 2150; 81 DTC 91. That was a similar situation to this and, incidentally, the claim in that particular case was not allowed. Mr Taylor dismissed the appeal, but respondent’s counsel frankly pointed out that the case is now under appeal. In distinguishing the two cases, appellant’s counsel pointed out that in the Harrison case there was something lacking, as Mr Taylor noted, which is present in this case, namely, and referring to the paragraph on 92 in the lower right corner, Mr Taylor states:

In this matter, the appellant presented no agreement of sale supporting the $50,500 value which was critical to his appeal. The letter from Sifton does not fulfill that requirement. The appellant’s case, therefore, comes down to a proposition that “if he had made out the papers” in a manner reflecting the $50,500 and then refunded to Sifton the amounts in question, such refunded amounts (presumably totalling $4,077.50) would have been deductible. That, in itself, is a dubious proposition as noted by counsel for the Minister in citing the recent Royal Trust Corporation case.

And, as stated, that case is under appeal.

The next case cited by counsel for the respondent was the case of Hunter v The King, [1904] AC 161. This case pertained to an insurance policy which required a payment of an annual premium of £66. The individual involved or insured paid only £33, but the company effectively loaned or credited him with the payment of the other £33 on its books and gave him a receipt for the amount. The individual claimed the £66 as a deduction. The Income Tax Act, that is the 1853 Act, according to the report at 162 states:

By the Income Tax Act, 1853 (c 34) s 54, any person who shall have insured his life shall be entitled to deduct the amount of the annual premium “paid by him” from the profits or gains assessable under Sched. D.

The appellant was unsuccessful in his appeal because the House of Lords held that nothing had been paid by him. Counsel for the respondent stresses the same point in this case.

She also referred to the case of Marvin R V Storrow v The Queen, a decision of Mr Justice Collier of the Federal Court, Trial Division, which is reported at [1978] CTC 792; 78 DTC 6551. This case definitely does not pertain to real estate commission as far as counsel pointed out, but at 795 [6553], Mr Justice Collier stated:

The disputed outlays were not, to my mind, moving expenses in the natural and ordinary meaning of that expression. The outlays or costs embraced by those words are, in my view, the ordinary out-of-pocket expenses incurred by a taxpayer in the course of phsyically changing his residence.

Now, we come down to the question of whether or not the amount of $2,280 claimed by the appellant is deductible in computing his income for the 1978 taxation year. As I see it, this appellant paid no amount as a real estate commission. Not having paid an amount as real estate commission, I cannot see how I could hold that subsection 62(3) has been satisfied since no expense was incurred as or on account of the selling costs in respect of the sale of his old residence. Not having incurred an expense with respect to the selling cost of his old residence he cannot have a deduction.

Judgment will go dismissing the appeal for each of the two years.

Appeal dismissed.