Lopes v. R., [1997] 1 CTC 2169 (Informal Procedure)

Teskey J.T.C.C.: — The Appellant, in his Notice of Appeal, wherein he appealed his assessment of income tax for the years 1993 and 1994, elected the informal procedure.

Issues

Originally, there were four issues to be determined. After hearing the evidence, both parties consented to the appeals being allowed and the assessments referred back to the Minister of National Revenue (the “Minister”) for reconsideration and reassessment on two of the issues on the following basis:

1993: The Appellant is entitled to the disability tax credit pursuant to subsection 118.3(1) of the Income Tax Act (the “Act”) and to have added to his income the sum of $1,625.00.

1994: The Appellant is entitled to the disability tax credit pursuant to subsec tion 118.3(1) of the Act and to have deducted from income the sum of $1,625.00.

The two remaining issues are:

1. Is the Appellant entitled to deduct from income moving expenses of $10,337.35 when he moved from Ontario to Nova Scotia?

2. Should the Appellant’s claim for medical expenses be increased by the amount paid on his behalf pursuant to a health service plan and by an amount supposedly paid as an Ontario Hospital Insurance Plan (OHIP) premium?

Issue 1

The Appellant moved to Nova Scotia in 1993, planning to set up his own consulting business. Both in 1993 and 1994, no net income was earned from a consulting business in Nova Scotia.

In August of 1992, the Appellant’s employment with ZRV Holdings Limited (“Holdings”) was terminated and all work for Holding ceased. Holdings maintained the Appellant on it’s payroll through 1992 and into 1993, although no work was performed.

It is section 62 of the Act that allows a taxpayer in circumstances described therein to write-off moving expenses against income. However, the expenses can only be written-off against income earned at the new work location.

The operative portion of Section 62, under the heading “Moving expenses” and paraphrased, reads:

(1) Where a taxpayer has at any time, commenced

(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as “the new work location”), or

there may be deducted amounts paid by the taxpayer as or on account of moving expenses...to the extent that

(f) the total of those amounts does not exceed

(i) in any case described in paragraph (a), the taxpayer’s income for the year from the taxpayer’s employment at the new work location or from carrying on the new business at the new work location, as the case may be, or

Since the Appellant’s consulting business did not produce any net income in either 1993 or 1994, there isn’t any business income against which to write-off the moving expenses. He did receive income from Holdings after he moved to Nova Scotia, but it was not earned or worked for in Nova Scotia. The money was severance money from employment that ceased in August of 1992.

The Appellant fails in his appeal on this issue.

Issue 2

During 1993, the Appellant claimed medical expenses (hospitalization and doctors) which included $3,369.02, which related to amounts actually paid by Manulife Insurance Company, pursuant to a medical insurance policy. He also claimed as an expense $414.40, which he claimed in his Notice of Appeal was a payment paid to OHIP, also in 1993. He had a private plan covering drugs, which required that he pay $3.00 on each prescription purchased by him and which paid the remainder of the prescription costs. He claimed as an expense the total cost of all extra hospitalization, tests, doctors bills and drug expenses (which included the portion paid by the insurance plans).

The Appellant argued that since premiums for the insurance plans were paid with taxpayer’s dollars, he should be able to expense the medical bills in total eventhough only a very small portion of these bills were actually paid by himself. The fact the insurance premiums were paid with tax paid dollars is irrelevant.

Subsection 118.2(1) is the provision of the Act that allows the deduction from income of medical expenses. This provision only allows expenses “actually paid” by the taxpayer. The operative portion reads:

(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted...

A

B is the total of the individual’s medical expenses ... and that were paid by either the individual or the individual’s legal representative.

[Emphasis added.]

Since the Appellant is alive and of sound mind, the insurance companies cannot be said to be his legal representative. Thus the only portion the Appellant can use as a deduction are those medical and drug costs that he actually paid from his own funds and he cannot include the portion he was reimbursed for by the insurance companies.

The Appellant was unable to give any explanation about the alleged payment of $414.40 to OHIP. There were no OHIP premiums payable by anyone in 1993 in Ontario. The Appellant’s unsubstantiated claim of $414.40 in 1993 fails.

The Appellant thus fails on all issues not agreed upon at the trial. As what was conceded by the Respondent at trial was less than half of the assessed tax, there will be no order as to costs.

Appeal dismissed.