Bowman T.C.J.:
1 These appeals concern assessments for 1987 and 1988. Once again the difficult question of benefits resulting from an office or employment is raised. The appellant asked that his appeals be heard under the Informal Procedure Rules.
2 The facts are relatively straightforward. They can be briefly stated. In 1986 the appellant was an employee of the Parliament of Canada. In August 1986 it was announced that the position of Clerk to the Ontario Legislative Assembly was vacant. The appellant filed an application. He went before the selection board and was selected. He therefore had to move to Toronto.
3 He looked for a house in the Toronto area and found one in Oakville. Houses in Toronto and its suburbs are considerably more expensive than in Aylmer, Quebec, where he had a large house.
4 He sold his house in Aylmer to the province of Ontario for $104,570, in accordance with a government policy known as “Homeowner Employee Relocation Plan”. The house he bought in Oakville cost him $171,000.
5 The house in Oakville was clearly inferior to the one he owned in Aylmer. In his testimony the appellant compared the two houses. The one in Oakville was a linkhome. It had an area of 1,700 square feet and three bedrooms. The lot was very small and there was a single garage. The house in Aylmer had four bedrooms, a double garage and a large yard. The house had an area of 2,400 square feet. There were other distinguishing characteristics, but this short summary suffices to indicate the poorer quality of the Oakville house despite its higher price. Mr. DesRosiers described the house as “uninhabitable” and after three years he sold it and moved.
6 His house in Aylmer had a $40,000 mortgage on it. His equity was thus $64,000. The mortgage he had on the Oakville house was $94,000.
7 Because of the difference in price between the two houses (about $66,000), the Ontario Legislative Assembly granted the appellant a total sum of $65,000 in two instalments, $15,000 in 1987 and $50,000 in 1988, to reimburse him for the additional cost of purchasing the Oakville house.
8 At its meeting on September 17, 1986 the Management Board of the Assembly adopted the following resolution:
9 On May 24, 1988 the Board granted him the sum of $50,000. In paying these two amounts the Assembly withheld 30 percent for tax.
10 At its meeting of June 21, 1988 the Board adopted the following resolution:
Relocation and Other Assistance Expenses:
Clerk of the Assembly
Moved by Ms Smith, seconded by Mr. Cooke, and agreed, that $50,000 be allowed for the Clerk as a further housing allowance under the Enhanced Relocation Plan, and that the total amount of assistance be subject to an agreement of Mr. DesRosiers to reimburse a proportional amount should he resign or be dismissed within the next three (3) years.
11 Ms. Schoenberger, Human Resources Director for the Legislative Assembly, testified that this condition did not apply to the first amount of $15,000 paid to the appellant in 1987.[FN1: <p>I recognize there is a condition attached to this reimbursement, namely that his employment must continue for at least three years. It could be argued that, since the payment was made to him subject to this condition, it was not income in his hands in 1987 and 1988. In<em>Robertson v. Minister of National Revenue</em><em>(sub nom. Kenneth B.S. Robertson Ltd. v. Minister of National Revenue)</em>(1944), 2 D.T.C. 655 (Can. Ex. Ct.), at 660, Thorson P. said the following:<blockquote><p>This does not, however, dispose of this appeal, for the question remains whether all of the amounts received by the appellant during any year were received as income or became such during the year. Did such amounts have, at the time of their receipt, or acquire, during the year their receipt, the quality of income, to use the phrase of Mr. Justice Brandeis in<em>Brown v. Helvering</em>(<em>supra</em>). In my judgment, the language used by him, to which I have already referred, lays down an important test as to whether an amount received by a taxpayer has the quality of income. Is his right to it absolute and under no restriction, contractual or otherwise, as to its disposition, use or enjoyment? To put it in another way, can an amount in a taxpayer's hands be regarded as an item of profit or gain from his business, as long as he holds it subject to specific and unfulfilled conditions and his right to retain it and apply it to his own use has not yet accrued, and may never accrue?</p></blockquote></p><p>In my opinion this principle does not apply here. The appellant received the money under a resolutory, not a suspensive, condition. This condition attached to the payment was finally met by the appellant. See<em>Hill v. R.</em>(1993), 94 D.T.C. 1078 (T.C.C.), at 1083.</p>]
12 The issue is whether these two amounts are taxable. It is easier to ask than to answer the question. The state of the law on this point is somewhat uncertain.
13 In Pezzelato v. R., [1995] 2 C.T.C. 2890 (T.C.C.), I tried unsuccessfully to reconcile the decisions on the point. Since then there has been the case of Hoefele v. Canada (Attorney General), [1996] 1 F.C. 322 (Fed. C.A.).
14 The two Federal Court of Appeal judgments, Hoefele and Phillips v. Minister of National Revenue, [1994] 2 F.C. 680 (Fed. C.A.), cannot easily be reconciled. In Hoefele, Robertson J.A., dissenting, wrote at 351:
...in light of my colleagues' decision in these applications, the result in Phillips becomes more problematic.
15 It is not easy to see the difference in principle between the two cases. In Hoefele the “benefit” which the taxpayer was supposed to have received was financial assistance in the payment of mortgage interest which the employer had paid the employee in order to compensate for the increased interest costs resulting from a move by the employee from Calgary to Toronto. In Phillips, the case concerned a lump sum the employer paid in order to compensate the employee for the higher cost of accommodation at his new workplace. In the instant case, as in Phillips, the appellant's house at the new workplace was of a poorer quality than the one he had left, though it was more expensive.
16 In Hoefele, Linden J.A. distinguished the case before him from Phillips at 336 as follows:
This conclusion is, in my view, not inconsistent with the decision in Phillips. The facts in that case, a lump sum payment to employees that clearly benefitted them economically by increasing their net worth, are not before us here. In Phillips, I concurred in the result on those facts. These facts are different. The employees here simply traded a house in Calgary for a similar one in Toronto. The employer defrayed some of the extra costs of doing so, without increasing any of the homeowners' equity in the homes. Unlike the situation in Phillips, their net worth was not increased in these cases.
17 I find it hard to see this distinction. A reimbursement is a reimbursement. The reimbursement of part of the mortgage interest to offset higher rates is not essentially different from the reimbursement of part of the higher price of a house. Further, the value of real estate may fluctuate. In the instant case the appellant bought a house of an inferior quality for a higher price. He later sold it because it was uninhabitable. If he had sold it after housing prices fell in 1989 he would have sustained a non-deductible loss. Where is the benefit he is supposed to have received, and on which he was assessed? It is readily understandable that the appellant thought this benefit was illusory and even imaginary. However, I am bound by the interpretation given by Hoefele to Phillips and I must follow it. Although the appellant, from the personal and subjective standpoint, was disadvantaged, in economic terms he still gained an advantage, as he became the owner of a more expensive house. It is impossible to distinguish the instant case from Phillips. If the appellant appeals to the Federal Court of Appeal I hope that that Court can clarify the uncertainty surrounding the precedents.
18 I am thus reluctantly required to dismiss the appeals.
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