Tax Court of Canada Judgments

Date: 19990831

Docket: 98-1160-IT-I

BETWEEN:

CYNTHIA O'BRIEN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Beaubier, J.T.C.C.

[1] This appeal pursuant to the Informal Procedure was heard at Ottawa, Ontario on July 30, 1999. The Appellant was the only witness.

[2] Paragraphs 2 to 5 of the Reply to the Notice of Appeal outline the problem. They read:

2. In computing her total credits for the 1996 taxation year, the Appellant claimed $1,014.22 as total income tax deducted from information slips.

3. In reassessing the Appellant for the 1996 taxation year, the Minister of National Revenue (the "Minister") revised the total income tax deducted for an amount of $6.44.

4. In so reassessing the Appellant, the Minister made the following assumptions of fact:

a) in the 1996 taxation year, the Appellant was a resident of Canada;

b) in the 1996 taxation year, the Appellant worked in Australia;

c) the Appellant's salary in Australia, for the 1996 taxation year, was $3,382.05;

d) the Appellant's deduction at source in Australia for the 1996 taxation year, was $1,014.22;

e) the Appellant's total income for the 1996 taxation year, was $5,316.05;

f) as the Appellant's basic federal tax, for the 1996 taxation year was nil, her federal foreign tax credit was nil;

g) the total income tax deducted for the 1996 taxation year has been correctly revised to the amount of $6.44.

B. ISSUES TO BE DECIDED

5. The issues are:

a) whether the Appellant is allowed to a federal foreign tax credit;

b) whether the total income tax deducted for the 1996 taxation year has been correctly revised to the amount of $6.44.

[3] Assumptions 4 a) to f) inclusive are correct.

[4] Exhibit R-1 is the Appellant's 1996 T1 Special Income Tax Return. Page 3 describes the calculation for the Federal foreign tax credit as follows:

Line 507	Income tax on profits tax paid to a foreign country	1,014.22
508	Net foreign income 3,382.05 Basic
	Net income 5,310.05 x federal =	0
	tax (0)

[5] Article 4 of the Canada-Australia Convention provides that tax paid in Australia is deductible from tax payable in Canada. Thus, if there is no tax payable in Canada, Australia tax cannot be "deducted". Similarly, subsection 126(1) grants a "deduction".

[6] No Canadian income tax is owed because there is no tax from which a deduction can occur.

[7] For this reason, the appeal is dismissed.

Signed at Ottawa, Canada this 31^st day of August, 1999.

"D.W. Beaubier"

J.T.C.C.