Date: 20000426
Docket: 1999-4108-IT-I
BETWEEN:
DAVID CHARLES WOODS,
EXECUTOR OF THE ESTATE OF THE LATE EDNA LILIAN WOODS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Teskey, J.T.C.C.
[1] The Appellant appeals the reassessment of income tax for the taxation year 1998 against the estate of the late Edna Lillian Woods and in the Notice thereof, elected the informal procedure.
Issue
[2] The sole issue is whether a house, known as 2021 Lenester Avenue in Ottawa (the "house"), was personal use property in the hands of the estate trust.
Facts
[3] The deceased lived in the house with her husband for many years. Her husband, the father of her two children, died in 1979.
[4] The deceased, in and around 1985, renewed an old school friendship, with Elmore Halpeny ("Halpeny").
[5] Halpeny moved into the house and never paid any rent or household expenses. The deceased and Halpeny were good friends and he became good friends of David Charles Woods ("David") and his sister.
[6] The deceased died unexpectedly on July 9, 1993 at the age of 76, leaving a trust will that named David as executor and bequeath the whole of the estate equally to her two children, namely David and her daughter.
[7] David resided in his own house at Chelsea, Québec, and the daughter resides in her own house in Calgary, Alberta.
[8] Halpeny was in his early to mid-80's in 1993. He continued to live in the house after the deceased's death. In January 1994, David suggested that he should start looking for an apartment in Ottawa for himself. In the spring of 1994, an apartment was located, but Halpeny remained in the house expense free until August of 1994 and never made any demands of the estate.
[9] David attempted on his own to sell the house in the spring of 1994, while he was having it painted and small renovations were being performed for purpose of the sale.
[10] In June of 1994, the property was listed for sale with a real estate agent. An offer was received and accepted in October 1994 and the sale closed in January of 1995.
[11] While David was getting the house ready to transfer title, he was at the house on numerous occasions to do small jobs and to remove the chattels therefrom. On a couple of occasion, he stayed overnight to facilitate these tasks.
[12] David licensed to a third party partial use of the house for November and December of 1994, retaining the right to enter the premises to get the house ready for closing. The licensees only stayed and paid for one month's partial use of the house.
Analysis
[13] The Minister of National Revenue (the "Minister") assumed that the house was not held nor used for income producing purposes and on the facts herein, I agree with that assumption.
[14] In regards to David's couple of overnight stays in the house, I do not charactize them as personal use. His stays were in his capacity as executor to assist him to renovate and remove items. He was saving the trust money.
[15] I therefore conclude and find that neither David nor his sister made any personal use of the house from the time of their mother's death, until the sale thereof in January 1995.
[16] "Personal use property" is not defined in the Income Tax Act (the "Act"), however, section 54 of the Act includes certain properties. It reads:
“personal-use property” of a taxpayer includes
(a) property owned by the taxpayer that is used primarily for the personal use or enjoyment of the taxpayer or for the personal use or enjoyment of one or more individuals each of whom is
(i) the taxpayer,
(ii) a person related to the taxpayer, or
(iii) where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary,
[17] This can be paraphrased as follows: Personal use property of a trust is property owned by the trust, that is used primarily for the personal use or enjoyment of a beneficiary under the trust or any person related to the beneficiary.
[18] Property that is held by trust is not personal use property unless a beneficiary of the trust or a person related to the beneficiary uses the property primarily for personal use. If this were not so there would be no need for provision 54-(a)(iii) of the Act.
[19] Upon the evidence before me, I am not prepared to say that the deceased and Halpeny were living in a conjugal relationship.
[20] David and his sister therefore were not related to Halpeny.
[21] Since Halpeny was not related to neither David nor his sister, his use of the house did not make the house personal use property, and since neither David nor his sister used the house primarily for personal use, the house is not personal use property.
[22] Since the house is not personal use property, the restriction found in subparagraph 40(2)(g)(iii) of the Act does not apply and the estate is entitled to claim net capital loss in the amount of $18,140.67. The actual amount of the loss was not in dispute.
[23] For these reasons, the appeal is allowed, with costs, and the reassessment is deferred back to the Minister for reconsideration and reassessment on the basis that the estate of the late Edna Lilian Woods is entitled to claim, in computing taxable income for the 1998 taxation year, net capital losses of other years in the amount of $18,140.67.
Signed at Ottawa, Canada on the 26th day of April 2000.
“ Gordon Teskey ”
J.T.C.C.