David Macklem Curzon v. Minister of National Revenue, [1996] 3 CTC 249, 96 DTC 6524

Cullen J.: — This is an application for judicial review, pursuant to section 18.1 of the Federal Court Act, of a decision of Mark Deakin, Director, Kitchener District Office of Revenue Canada, dated September 14, 1995, whereby Mr. Deakin refused to grant relief under subsections 220(3.1) to 220(3.7) (the “Fairness Legislation”) of the Income Tax Act, R.S.C. 1952, c. 148, as amended, to increase Mr. Curzon’s (the “applicant”) net capital loss pool by $2,000 in respect of his 1984 taxation year. The applicant acted pro se.

THE FACTS

The facts in this case are not in dispute. Mr. Curzon claimed $2,000 from his capital loss pool to reduce his taxable income on his 1984 income tax return. Revenue Canada’s subsequent assessment notice informed Mr. Curzon that he had not taken advantage of a pension income credit. The assessment made the change to incorporate the pension income credit into Mr. Curzon’s return. This reduced Mr. Curzon’s income tax to zero, without using any of his capital loss pool. In 1994, when he requested a printout of the Pool from the years 1972 through 1993, Mr. Curzon realized that the $2,000 had not actually been added to his capital loss pool.

In a March 6, 1995 letter, Mr. Curzon made an application to the Fairness Committee of the Kitchener District Office of Revenue Canada, Taxation (the “Kitchener Office”), in which he asked for a review of his 1984 taxation year. In a March 28, 1995 letter on Mr. Curzon’s behalf, Dorothy Curzon made submissions to the Fairness Committee that since Mr. Curzon had no reason to expect that the tax office had changed his inclusion of $2,000 into his capital loss pool without informing him, he had not noticed the change. For that reason, the $2,000 should be reinstated into Mr. Curzon’s capital loss pool (see Mr. Deakin’s affidavit, “Exhibit C”).

The original Fairness Committee decision was given on April 18, 1995, by James K. More, Director of Client Assistance at the Kitchener office. Mr. More wrote that he could not comply with Mr. Curzon’s request to increase the capital loss carry forward from 1984 by $2,000 because Mr. Curzon had not actually used this amount in 1984 (see Mr. Curzon’s “Exhibit D”).

Mr. Curzon made written submissions to the Kitchener office on August 25, 1995 (see Mr. Curzon’s “Exhibit C”), to the effect that the above had occurred because there were inconsistencies in the instructions contained within the Income Tax Guide for 1984.

Mr. Deakin replied to these submissions on September 14, 1995 (Mr. Curzon’s “Exhibit E”) that, after a thorough review of the submitted letters, the documentation on file, and the appropriate legislation, he agreed with the original Fairness Committee decision and confirmed the same. Mr. Deakin’s decision is the subject of this judicial review.

THE ISSUE

The sole issue before this court is whether Mr. Deakin, the Minister’s statutory delegate, discharged his duty to act fairly in declining to exercise the discretion granted to him under subsections 220(3.1) to 220(3.7) of the Income Tax Act to increase Mr. Curzon’s capital loss pool in respect of the 1984 taxation year.

ANALYSIS

The applicant's submissions

Mr. Curzon submitted to this Court that:

1. The Income Tax Guide for 1984 (hereinafter, the “Tax Guide”) was the sole guide issued to the public with the blank filing forms in the 1984 income tax kit. To aid in calculating line 253, the Guide contained instructions that the taxpayer had the option to choose to use up to $2,000 of tax loss carry forward in order to reduce tax payable. Those instructions read as follows:

You may claim in 1984 that part of net capital losses which has not been applied in any prior year. Deduct the loss first from any taxable capital gains made in 1984. Then, if any loss remains, you may deduct up to a limit of $2,000 from other sources of income. ... (see Mr. Curzon’s Exhibit “F’)

2. The Guide, regarding line 253, gave no indication that paragraph 11 l(8)(a) of the Income Tax Act, Part I, Division C, contained a modifier to the calculation for line 253. Paragraph 111 (g)(a) reads, in part, as follows:

111(8) Definitions. - In this section,

(a) “net capital loss”. — “net capital loss” of a taxpayer for a taxation year means the amount, if any, by which

(i) the amount determined under subparagraph 3(e)(i) in respect of the taxpayer for the taxation year exceeds

(ii) the lesser of

(A) the amount determined under subparagraph 3(e)(ii), and

(B) the amount determined under paragraph 3(d)

in respect of the taxpayer for the taxation year;

3. The instructions for calculating line 253 in the Guide are in conflict with paragraph 11 l(8)(a) of the Income Tax Act, in that the instructions for line 253 state that there is an option to use the tax loss carry forward in the line 253 calculation, while paragraph 111 (8)(a) denies this option;

4. The effect of the above conflict was that the modifying paragraph 111(g)(a) caused Mr. Curzon’s tax loss carry forward pool to be reduced by $2,000 for the 1984 tax year;

5. The Income Tax Assessment Notice (see Mr. Curzon’s Exhibit “B”) gave no indication that $2,000 had been removed from his capital loss carry forward pool.

The law

In assessing Mr. Curzon’s submissions, we must bear in mind that it is not the role of this Court to provide the applicant with a hearing de novo. Rather, in an application for judicial review of a tribunal’s decision, this Court can only examine whether the tribunal followed the proper steps in its decision-making process. Therefore, the only issue before this Court today is whether the decision of the Minister’s statutory delegate to decline to increase Mr. Curzon’s capital loss pool in respect of the 1984 taxation year was arrived at fairly; i.e., followed the correct procedures, considered all the relevant facts and law, etc.

Section 220 of the Income Tax Act, added by S.C. 1991, c. 49, subsec tion 18(1), is applicable to the 1985 and subsequent taxation years and is often referred to as the Fairness Legislation. Subsection 220(3.2) permits the Minister to accept late-filed elections and reads as follows:

220(3.2) Where

(a) an election by a taxpayer or a partnership under a provision of this Act or a regulation that is a prescribed provision was not made on or before the day on or before which the election was otherwise required to be made, or

(b) a taxpayer or partnership has made an election under a provision of this Act or a regulation that is a prescribed provision,

the Minister may, on application by the taxpayer or the partnership, extend the time for making the election referred to in paragraph (a) or grant permission to amend or revoke the election referred to in paragraph (b).

If the Minister permits an election to be filed pursuant to subsection 220(3.2), the date of the late election, amended election, or revocation is covered by subsection 220(3.3):

220(3.3) Where, under subsection (3.2), the Minister has extended the time for making an election or granted permission to amend or revoke an election,

(a) the election or the amended election, as the case may be, shall be deemed to have been made on the day on or before which the election was otherwise required to be made and in the manner in which the election was otherwise required to be made, and in the case of an amendment to an election, that election shall be deemed, otherwise than for the purposes of this section, never to have been made; and

(b) the election that was revoked shall be deemed, otherwise than for the purposes of this section, never to have been made.

A decision under the Fairness Legislation is discretionary. It is not the case where a decision-maker must arrive at a certain outcome; rather, the decision-maker, after considering all of the circumstances, may come to a certain conclusion. Discretionary decisions cannot be made arbitrarily or in bad faith and, like other decisions, are subject to judicial review. The scope of judicial review, however, is quite narrow. This Court cannot substitute its decision for that of the Minister’s statutory delegate. Rather, the Court must determine whether the decision was made fairly, not arbitrarily or in bad faith.

To determine whether the decision was made fairly, the Court examines the decision-making process itself. Mr. Curzon made a number of submissions to Revenue Canada. He received several replies from Revenue Canada. After a full and complete review of Mr. Curzon’s submissions, the documentation on file, and the applicable legislative provisions of the Income Tax Act, the Minister’s statutory delegate, Mr. Deakin, decided that Mr. Curzon’s was not a case in which it would be appropriate to grant any relief under the Fairness Legislation. Mr. Deakin informed Mr. Curzon of his decision by letter dated September 14, 1995. This Court can find no unfairness in the decision-making process as it affected Mr. Curzon.

I further address Mr. Curzon’s submissions concerning inconsistencies between instruction given in the 1984 Tax Guide and the Income Tax Act.

The basis of Mr. Deakin’s decision rested on a mistake in calculation of income made by Mr. Curzon. Specifically, in his submissions regarding the calculation of his income for the 1984 taxation year, Mr. Curzon referred to line 253, which dealt with capital losses of other years; in this case, 1972 to 1983. On the other hand, paragraph 11 l(8)(a) of the Income Tax Act required a taxpayer, if he had other income and if he had capital losses, in calculating his income for the 1984 taxation year, to use up to $2,000 of the capital loss incurred in the current year to offset the other income. paragraph 111 (8)(a) thus applied to Mr. Curzon, who had other income and capital losses in 1984. Mr. Curzon, then, should instead have used Line 127 of the 1984 tax return, which referred to taxable capital gains or allowable capital losses of the current (i.e, 1984) year. Accordingly, the Minister, in calculating Mr. Curzon’s income for the year, followed paragraph 11 l(8)(a) in determining the amount of Mr. Curzon’s net capital loss in 1984, and applied $2,000 incurred in that year to the income of that year. Had Mr. Curzon not had any loss in 1984, he would have had the choice but to use losses from other years.

Therefore, there is no conflict between the instructions for line 253 contained in the Income Tax Guide for 1984, and the Income Tax Act. Line 253 does not refer to a loss in the 1984 taxation year. The loss that was used in the computation of Mr. Curzon’s income was covered in another portion of Mr. Curzon’s income tax return, namely, line 127.

CONCLUSION

On the basis of the evidence of both parties, it is clear that Mr. Deakin fully considered Mr. Curzon’s submissions and arrived at a decision supported by the evidence; that Mr. Deakin did not err in any other way; and that Mr. Curzon was accorded procedural fairness throughout the decision process. In addition, the relief sought under the Fairness Legislation is available only from the taxation years 1985 onward. Mr. Curzon’s request for relief was in respect of a year to which the Fairness Legislation did not apply.

This application is dismissed.

Application dismissed.