Date: 20000706
Docket: 1999-215-GST-I
BETWEEN:
RENÉ BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Lamarre Proulx, J.T.C.C.
[1] This is an appeal concerning the application of section 256 of the Excise Tax Act ("the Act") in respect of a house constructed by the appellant or another person engaged by him on the south shore of the St. Lawrence River.
[2] The issue is whether that place of residence was constructed for use as the primary place of residence of the appellant or one of his relations, thus entitling the appellant to the rebate provided for in the said section 256 of the Act.
[3] The facts on which the Minister of National Revenue ("the Minister") relied in denying the rebate are set out as follows in paragraph 15 of the Reply to the Notice of Appeal ("the Reply"):
[TRANSLATION]
(a) the facts admitted above;
(b) in 1996, the appellant built himself a secondary place of residence at 18560 Rue Champagne in the municipality of St-Grégoire;
(c) the value of the secondary place of residence is apparently $160,000;
(d) on or about August 19, 1997, the appellant, as a do-it-yourself homebuilder, applied for a GST rebate of $3,217.93;
(e) the rebate application was denied by the respondent for the reasons set out hereunder;
(f) on or about November 19, 1997, the appellant told the auditor that he was occupying his secondary place of residence occasionally, one day a week or so, that construction was not entirely completed and that he was planning to make it his principal place of residence in 1998;
(g) during the same conversation, the appellant added that he had started furnishing his secondary place of residence;
(h) on or about November 21, 1997, the appellant told the auditor that he had been occupying his secondary place of residence three or four days a week since August 1997 and repeated his intention of making it his principal place of residence in 1998;
(i) during that discussion, the appellant added that his minor son, Jean-Alexandre Bérubé, had been living in the secondary place of residence since September 1997;
(j) during the discussion, the appellant said that the place of residence was 90 percent completed;
(k) at the time of the audit, the auditor learned through his research that the appellant, his spouse Céline Plourde and his son Jean-Alexandre Bérubé were giving their address as being 17575 Rue Thibodeau in the municipality of St-Grégoire, which was the address of the appellant's principal place of residence;
(l) on February 17, 1998, the appellant sent his son Jean-Alexandre Bérubé's transcript for the fall 1997 term showing his address as that of the appellant's secondary place of residence;
(m) however, when he obtained his driver's licence on September 26, 1997, Jean-Alexandre Bérubé gave his address as being 17575 Rue Thibodeau, the address of his father's principal place of residence;
(n) it was not until July 3, 1998, that Jean-Alexandre Bérubé had the address on his driver's licence changed;
(o) moreover, Jean-Alexandre Bérubé did not come of age until September 15, 1998.
[4] The appellant testified on his own behalf. Claude Picard, a tax auditing technician with the Quebec Department of Revenue, testified for the respondent.
[5] It should be noted at the outset that the appellant and his family are still living in the family property at 17575 Rue Thibodeau in St-Grégoire. When he claimed a rebate of $3,217.93 on August 19, 1997, the appellant said that he had built the riverfront house to make it his primary place of residence. During that month, the appellant and his spouse allegedly lived in the riverfront house one to three days a week. During the hearing, the appellant explained that their main goal was to make that house their primary place of residence but that, because of an unexpected family development, it was instead their son Jean-Alexandre who lived in it as his principal place of residence starting in September 1997. The appellant explained that his 17-year-old son (he was born on September 15, 1980) had fallen in love and wanted to live in a more autonomous setting.
[6] To prove that the house was his son's primary place of residence, the appellant filed as Exhibit A-1 a photocopy of his son's probationary driver's licence dated July 3, 1998. As Exhibits A-2, A-3 and A-4, he filed Jean-Alexandre's college transcripts showing his address as 18560 Champagne, St-Grégoire. Those transcripts are dated January 13, 1998, January 8, 1999, and October 25, 1999, respectively. As Exhibits A-5 and A-6, the appellant filed invoices from Université du Québec à Trois-Rivières dated October 22, 1999, and February 22, 2000, respectively.
[7] As Exhibit A-7, the appellant submitted a letter from the insurers of his residences dated January 23, 1998. It reads as follows:
[TRANSLATION]
. . .
This is to confirm that the insured, René Bérubé, has a homeowner's insurance policy with the insurer for each of the following locations: 17575 Chemin Thibodeau in St-Grégoire and 18560 Boul. Bécancour in Bécancour.
Each of those two locations is considered by the insurer to be in use by the insured at least 50 percent of the time and, as a result, each is a principal place of residence.
For us, the purpose of the references to "principal and secondary residences" in the policy is merely to differentiate the above-mentioned two locations, but those references in no way affect how the insurer views those residences, which in themselves are considered to be two principal residences. In this regard, please note that we could have reversed the terms assigned to each of the two places of residence and the insurance coverage would not have been affected in any way.
[8] Claude Picard had a conversation with the appellant in November 1997 in which the appellant recited the facts set out in subparagraphs 15(f) to (j) of the Reply. The Minister's officer checked the telephone books, car insurance records and correspondence addresses in tax files and asked to see the insurance policies. He found no indication that the riverfront residence had become the primary place of residence of the appellant or one of his relations in August or November 1997. On the contrary, everything indicated that it was a secondary place of residence for the appellant.
[9] Counsel for the respondent argued that, since the property was occupied by the parents in August, they were the first occupants and Jean-Alexandre's occupancy should not be considered, since he was not the first occupant as required by subparagraph 256(2)(d)(i) of the Act. However, counsel for the respondent also argued that, if the parents' use in August was not the first occupancy and even if Jean-Alexandre's alleged occupancy is considered to be the first occupancy, there is insufficient evidence that the property was Jean-Alexandre's primary place of residence. Moreover, counsel questioned the appellant's credibility, since the appellant applied for the rebate in August 1997 claiming that the property was his primary place of residence but in November took the position that it was his son's primary place of residence.
Conclusion
[10] Subsections 256(1) and (2) of the Act read as follows:
256(1) In this section,
. . .
"relation" of a particular individual means another individual who is related to the particular individual or who is a former spouse of the particular individual;
256(2) Where
(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex that is a single unit residential complex or a residential condominium unit for use as the primary place of residence of the particular individual or a relation of the particular individual,
(b) the fair market value of the complex, at the time the construction or substantial renovation thereof is substantially completed, is less than $450, 000,
(c) the particular individual has paid tax in respect of the supply by way of sale to the individual of the land that forms part of the complex or an interest therein or in respect of the supply to, or importation by, the individual of any improvement thereto or, in the case of a mobile home or floating home, of the complex (the total of which tax under subsection 165(1) and sections 212 and 218 is referred to in this subsection as the "total tax paid by the particular individual"),
(d) either
(i) the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual, or
(ii) the particular individual makes an exempt supply by way of sale of the complex and ownership of the complex is transferred to the recipient before the complex is occupied by any individual as a place of residence or lodging,
the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to
. . .
[11] Policy Statement P-228, which was issued on March 30, 1999, distinguishes between a primary and a secondary place of residence as follows:
A primary place of residence may be differentiated from a secondary place of residence since the terms primary and secondary are necessarily defined in relation to each other. Primary suggests something first in order of importance that is not subordinate or secondary. From this, it follows that where an individual has more than one place of residence, the place of residence that is not first in order of importance to that individual would be that individual's secondary place of residence as it would be subordinate to the primary place of residence (e.g. it is used mainly for recreational purposes or it is occupied less than another).
. . .
Criteria Indicative of a Primary Place of Residence
1. The residential complex or residential unit should be, or should be demonstrably intended to be, the particular individual's place of residence, or that of a qualifying relative, for purposes of:
· mailing address,
· income tax (e.g. forms or returns),
· voting,
· municipal/school taxes, and
· telephone listing.
2. After possession or substantial completion, as the case may be, the individual or qualifying relative should demonstrate occupancy by moving most of his or her personal effects (in terms of use and value) into the residential complex or residential unit.
3. Where the individual or qualifying relative does not occupy the residential complex or residential unit after possession or substantial completion, as the case may be, there should be evidence that the occupation of the complex or unit was frustrated (e.g. by relocation due to employment or lack of financing).
4. Where the individual or qualifying relative has taken out insurance, the stated use of the place of residence for purposes of the insurance policy should be as the insured's personal residence, i.e. homeowner's or tenant's insurance rather than seasonal or rental property.
5. Where the individual owned or leased another place of residence at the time the residential complex or co-op share in question was acquired, constructed or substantially renovated, the disposition of that place of residence or clear evidence that that place of residence is offered for sale or rental at or before the occupation of the complex or residential unit may indicate that the complex or unit is the individual's primary place of residence.
6. Where an individual or qualifying relative owns or leases more than one place of residence and continues to occupy both of them, the following factors may indicate which one is the primary place of residence:
· the amount of time spent at any one of the places of residences,
· the location of the individual or qualifying relative's place of work,
· the availability of amenities particular to the personal needs of the individual or qualifying relative, and/or individual residing with him/her, and
· the suitability of the property for use by the individual or qualifying relative as a place of residence throughout the year.
[12] A policy statement is, of course, not the Act and does not bind the Court. However, it is interesting to see how the wording of the Act has been interpreted by the government authorities who have given the matter some thought.
[13] The wording of section 256 of the Act does not allow for two primary places of residence. It states that a tax rebate will be paid to a particular individual who constructs a residential complex for use as the primary place of residence of that individual or a relation of that individual. The French version uses the term "résidence habituelle". Identifying an individual's primary place of residence is a question of fact. It will be determined on the basis of the factual elements that usually exist with regard to an individual's most important place of residence. The elements taken into account or suggested by the government authorities in determining the primary place of residence, as set out above, seem quite reasonable to me. But they are not exhaustive. An individual may use other factual elements to try to prove that a place of residence is his or her primary place of residence. However, the individual's evidence must satisfy the Court on the balance of evidence that it is indeed a primary place of residence.
[14] I will begin by giving my opinion on the appellant's first argument, namely that the waterfront residence was constructed to become his primary place of residence. This was perhaps a wish for the distant future, when he retired, but there are no indications that it was his immediate intention. Such indications could include putting the current primary place of residence up for sale, changes of address, moving arrangements or other actions showing an immediate intention to change the primary place of residence. No facts were presented indicating that the appellant intended to change his primary place of residence.
[15] Since the appellant, in his Notice of Appeal and at the hearing, abandoned his argument that the place of residence was constructed by him to become his primary place of residence and adopted the argument that it was to be used by Jean-Alexandre, all that remains for me to do is to analyse the evidence regarding Jean-Alexandre's primary place of residence. It should be noted that Jean-Alexandre did not testify. His testimony was important, since it was his primary place of residence that was at issue. The Minister's allegations in the Reply were not refuted. Subsequent proofs of address were provided but, given the absence of other evidence, such proofs are not sufficient to establish that the residence in question was Jean-Alexandre's primary place of residence. For example, there was no evidence that Jean-Alexandre had full authority over the premises. If I go by the appellant's comments, I think rather that the parents continued to have access to the place of residence as if it were theirs. There was no evidence that Jean-Alexandre's occupancy was mentioned to the insurer. The insurer's letter dated January 23, 1998, indicates that the appellant had homeowner's insurance on the riverfront residence just as he had on the house on Rue Thibodeau. The insurance policies were not filed in evidence. Account must also be taken of Jean-Alexandre's youth at the time in question. What may be plausible in the case of an older child whose parents want to help him get settled has very little plausibility in the case of a son who is still a minor and who is a long way from having finished his schooling and being ready to support himself.
[16] Given the change in the appellant's story, the fact that Jean-Alexandre did not testify, the insurer's letter and Jean-Alexandre's age, and on the weight of the evidence set out above, I can only conclude that, on the balance of probabilities, the appellant did not construct the house for use as his son's primary place of residence.
[17] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, this 6th day of July 2000.
"Louise Lamarre Proulx"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
[OFFICIAL ENGLISH TRANSLATION]
1999-215(GST)I
BETWEEN:
RENÉ BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 19, 2000, at Québec, Quebec, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Louis Cliche
JUDGMENT
The appeal from the goods and services tax assessment made under the Excise Tax Act, notice of which is dated November 24, 1997, and bears number 012229, is dismissed in accordance with the attached Reasons for Judgment.
Signed Ottawa, Canada, this 6th day of July 2000.
|
"Louise Lamarre Proulx" |
J.T.C.C.