Warren K Zimmer v. Minister of National Revenue, [1981] CTC 2631, 81 DTC 550

D E Taylor:—This is an appeal heard in Halifax, Nova Scotia, on July 28, 1981 against an income tax assessment for the year 1978 in which the Minister of National Revenue did not apply the averaging provisions of subsection 118(1) of the Income Tax Act. In so assessing, the respondent relied, inter alia, upon subsections 2(1), 2(3), section 114, subsection 115(2), sections 118 and 250 of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Both the notice of appeal and the reply to notice of appeal set out appropriately the basis of the dispute between the parties and their contentions as to the facts and the application of the law.

For the appellant:

Until December 1974 I had been a resident in Canada since birth. I departed from Vancouver in December, 1974 and travelled to Australia where I arrived December 22, 1974. I applied for and was granted permanent resident status at that time. I enrolled in the Master of Laws programme at the University of Sydney in 1975 and graduated in March, 1977. After completing the programme I returned to Canada June 30, 1977, arriving in Vancouver on that date. I then travelled to Toronto which is where my parents reside before returning to Halifax which is where I attended law school and now practise law.

When I originally left for Australia I sold nearly all my belongings to help finance the trip. I did not own any real property or keep any residence while I was away as I did not then know when or if I was ever going to return. Nor did I carry on any business here while I was in Australia.

In September 1977 I commenced a nine month articling period with a law firm in Halifax and after filing an income tax return for the September to December period received a Notice of Assessment, in relation to those earnings.

In June 1978 I commenced full time employment and again filed an income tax return for the 1978 taxation year. A Notice of Assessment was received indicating an overpayment of $120.83. Prior to filing my 1978 return I had made inquiries at the District Tax Office in relation to the provisions contained in section 118 of the Income Tax Act. I was told that the general averaging provisions would be applied but subsequently have discovered that they were not applied as indicated by the amount of overpayment in the Notice of Assessment.

My argument in relation to the application of Section 118 to my 1978 income is as follows:

I returned to Canada June 30th, 1977 between that date and the end of the 1977 taxation year, I was physically present in Canada for a total of 185 days. Prior to June 30th, 1977, I had been a permanent resident of Australia since December 22, 1974.

Section 250(1) states: For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been a resident in Canada throughout a taxation year if, (a) he sojourned in Canada in the year for a period, or periods the aggregate of which is, 183 days or more.

This particular section is in very plain language. A person shall be deemed to have been a resident in Canada throughout a taxation year if he sojourns 183 days or more. In 1977 I in fact sojourned for 185 days and by virtue of s. 250(1)(a) should have been deemed a resident throughout the 1977 taxation year. It would appear to me that in 1977 the section was applied otherwise I would not have been liable to pay any income tax in Canada for that taxation year and would not have received a Notice of Assessment for my 1977 income because I was not a resident and residency is required before liability for income tax attaches.Section 2(1) of the Act states:

An income tax shall be paid as hereafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year.

I realize that the term “resident” is not defined in the Income Tax Act apart from the extending meaning of resident in s. 250(1 )(a) and s. 250(3) which states that a reference to a person resident in Canada includes a person who at the relevant time was ordinarily resident in Canada. As I had been absent from

Canada from December 1974 to June 1977 I do not think I could be said to be ordinarily resident in Canada at the end of the 1977 taxation year. The determination

of whether a person is a resident or not is essentially a question of fact and is quite different from both domicile and citizenship.

When I filed my 1978 income tax return the general averaging provisions should have been applied using 1977 as the base year. Section 118 states that “where, in the case of an individual who was resident in Canada throughout the taxation year immediately preceding a particular taxation year. . .” Before the general averaging provisions are applied you must meet certain criteria, namely:

1. you must be an individual

2. resident in Canada. . .

throughout the taxation year immediately preceding a taxation year. . .

The first requirement is certainly fulfilled. Regarding the second part I submit that I qualify here as well. According to s. 250(1)(a), because I in fact sojourned in Canada in 1977 for 185 days, I am deemed to have been a resident throughout the taxation year. It appears that the Minister is saying that I cannot use 1977 as my base year because I returned part way through it and was not therefore resident in Canada throughout the taxation year immediately preceding 1978. I was not, in fact, “resident or ordinarily resident” in Canada in 1977 but was by virtue of s. 250(1)(a) “deemed to have been resident” in Canada throughout the 1977 taxation year. That being so, section 118 should have been applied to my 1978 income return as I was a deemed resident throughout the year immediately preceding; namely, 1977.

For the respondent:

(a) the appellant left Canada in the 1974 taxation year without any specific intention to return;

(b) From the time of his departure from Canada the appellant did not maintain any property, business or bank account anywhere in Canada;

(c) The appellant returned to Canada to take up permanent residence in 1977;

(d) The appellant at no time in his 1977 taxation year sojourned in Canada;

(e) The appellant was not resident in Canada throughout the 1977 taxation year.

The point at issue is whether during the period June 30, 1977 to December 31, 1977, the appellant can claim to have sojourned in Canada. The argument of the appellant is that he was only looking over prospects in Canada until the time in 1978 when he accepted employment as a lawyer. The argument of the respondent is that even if the appellant “sojourned” for a while after June 30, 1977, that date of suspension came to an end at some time before December 31, 1977, either when he agreed to article as a law clerk, or when he had his belongings shipped back from Australia to Halifax.

As I see it, the crux of the matter rests in the admission of the appellant that his “sojourn” in Canada came to an end in June 1978 when he accepted employment in the office of the Crown Attorney. I see no difference, for purposes of the word “sojourn” between the significance of that employment as a lawyer, and the employment he accepted for the purpose of articling in law which commenced in September 1977. His professional standing may have been different after June 1978 than it was in September 1977, and he was continuing his education in a sense. Nevertheless, his taxable status as an employee was no different. The Board is not required to make a determination that even the acceptance by Mr Zimmer of employment in June of 1978 would necessarily characterize him as a resident of Canada. The Board only points up that if such an acceptance brought to an end any “sojourn” that obtained (and that was accepted by the appellant), then the “sojourn” had already been brought to such an end in September 1977.

The appeal is therefore dismissed.

Appeal dismissed.