[OFFICIAL ENGLISH TRANSLATION]
1999-3933(IT)I
BETWEEN:
PAUL LEBLANC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on July 19, 2000, at Québec, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Stéphane Arcelin
JUDGMENT
The appeal from the assessments made under the Income Tax Act for the 1995 and 1996 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 1st day of November 2000.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 19th day of September 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20001101
Docket: 1999-3933(IT)I
BETWEEN:
PAUL LEBLANC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal for the 1995 and 1996 taxation years.
[2] The issues are as follows:
(a) whether the expenses claimed in the 1995 and 1996 taxation years in respect of the property located at Chalk River were made or incurred by the appellant for the purpose of gaining or producing income from a business or property; and
(b) whether the Minister correctly determined the interest on the excess refunded when he issued the reassessments dated December 14, 1998, against the appellant in respect of the 1995 and 1996 taxation years.
[3] In making the assessments that are the subject of this appeal, the Minister of National Revenue (the "Minister") relied on the following facts:
[TRANSLATION]
(a) the property, situated at 49 Cook Street in the town of Chalk River in the province of Ontario, was purchased by the appellant in 1988;
(b) the property was used as a family residence during the period from 1988 to 1992;
(c) the appellant, a member of the Canadian Forces, was transferred in 1992 to the Valcartier military base in the province of Quebec for a temporary posting of two years;
(d) the appellant rented his residence to a serviceman for a two-year period ending in May 1994;
(e) in September 1993, the appellant was informed that he would not be returning to work at the Petawawa base;
(f) the appellant, with the assistance of a real estate broker, put his house on the market as of February 1994;
(g) the appellant's property was not rented for the period extending from June 1994 until it was sold in March 1996;
(h) the appellant received a monthly amount of $600 from the Canadian Army, for the period from June 1994 to May 1995 because his property in Chalk River was uninhabited;
(i) the appellant had no reasonable expectation of profit in relation to the property in Chalk River during the 1995 and 1996 taxation years;
(j) the rental expenses claimed for the 1995 and 1996 taxation years in relation to the Chalk River property were the appellant's personal or living expenses and were not made or incurred by the said appellant for the purpose of gaining or producing income from a business or property;
(k) the income tax return for the 1995 taxation year had to be filed no later than April 30, 1996;
(l) on March 18, 1996, the appellant was refunded an amount of $3,575.82 in excess of what he was entitled to for the 1995 taxation year;
(m) in respect of the 1995 taxation year, the prescribed interest on the excess of $2,875.34 that was refunded amounted to $717.36 for the period from April 30, 1996, to December 14, 1998;
(n) the income tax return for the 1996 taxation year was supposed to be filed no later than April 30, 1997;
(o) on April 14, 1997, the appellant was refunded an amount of $1,788.09 in excess of what he was entitled to for the 1996 taxation year;
(p) in respect of the 1996 taxation year, the prescribed interest on the excess of $970.12 that was refunded amounted to $140.62 for the period from April 30, 1997, to December 14, 1998.
[4] Under oath, the appellant admitted the substance of the facts assumed by the Minister, with the exception of subparagraphs (i) and (j) of the Reply to the Notice of Appeal (the "Reply").
[5] The appellant, a serviceman by training with a long and brilliant career in the Canadian Forces (the "C.F."), testified in a frank, honest and very cordial manner.
[6] He explained that he had suffered major financial losses as a result of his transfers, which he had agreed to but had not sought.
[7] To begin with, he said that in 1988 he had purchased a residence on Cook Street in Chalk River, Ontario. In 1992, he was assigned to a mission requiring him to be away for a two-year period. During that time, he rented his residence to a colleague.
[8] On his return from the mission, the military authorities assigned him to another posting that required him to sell the family residence.
[9] In the meantime, the financial outlook in the Chalk River area had considerably deteriorated primarily because of the closing of a military base and several businesses, thus creating a lot of uncertainty in the real estate market.
[10] Apart from that problem, he had to abandon the idea of renting his residence; the C.F. in fact provided for the payment of compensation on a definite transfer, on condition that the property was not inhabited so that its sale would not be adversely affected.
[11] The appellant accordingly suffered a financial loss of two kinds. First, the rental income and, subsequently, the compensation paid by the army were below the actual expenses. Second, the real estate market having depreciated in value, the appellant had to suffer heavy financial losses on the sale of his residence.
[12] The appellant having left matters in the hands of his accountant, the losses suffered were claimed by the accountant as if they were expenses made or incurred for the purpose of gaining or producing income from a property or business.
[13] The appellant himself acknowledged that what was involved was not a business in that he had not made a plan or set things up so as to make the operation viable or profitable. The appellant essentially wanted to reduce his losses arising from the obligation to sell the family residence as much as possible; in other words, the appellant essentially did everything he could to minimize his losses.
[14] The evidence also established that, at the time in question, the C.F. had no real support program in cases where a serviceman had to sell his residence because of a permanent transfer. The only thing the Forces offered was a monthly compensation for a limited time that bore no relation to the actual losses and that, moreover, in order to be payable, required the residence to be unoccupied or unrented.
[15] In the months following the sale of his residence, the C.F. put an improved, advantageous and, above all, more realistic system in place. The appellant was not able to benefit from the revised plan since the program was not retroactive.
[16] In contending that the expenses involved were personal and that, as a result, the appeal was unfounded, the respondent relied on paragraphs 18(1)(a) and 18(1)(h) of the Income Tax Act (the "Act"):
. . .
(a) General limitation - an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
...
(h) Personal and living expenses - personal or living expenses of the taxpayer, other than travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business;
...
and on the relevant case law, including the decisions in
· Audet v. The Queen, [1999] CarswellNat 296;
· Mastri v. The Queen, 94 DTC 6499 (F.C.A.);
· Mohammad v. The Queen, [1998] 1 F.C. 165 (F.C.A.);
· Moldowan v. The Queen, [1978] 1 S.C.R. 480; and
· Tonn v. The Queen, [1996] 2 F.C. 73 (F.C.A.).
[17] For his part, the appellant acknowledged that the case law did not favour him but that there were surely other decisions supporting the merits of his claim. Regrettably, the facts disclosed by the evidence do not allow for any conclusion other than that personal expenses were indeed involved. The Court understands that the losses incurred by the appellant as a result of a decision over which he had no control (his two transfers) were real losses.
[18] However, this Court has an obligation to abide by the Act and the case law, which, in the case at bar, requires that the merits of the respondent's position with regard to the assessments be affirmed. It is not my place to comment on or criticize the C.F.'s administrative measures as they apply to servicemen's moves, but it does seem to me that they should not let their members, who devote their lives to the well-being of the people of Canada through work, sacrifice and constraints of all kinds on their family life, be severely penalized financially as well when duty forces them to leave the area where they have established their family residence.
[19] The Minister cannot replace the Department of Defence and assume its obligations. The appellant was an unfortunate victim of outdated and petty administrative measures.
[20] Having regard to the foregoing, this Court must essentially comply with the provisions of the Act, which, in the case at bar, require me to confirm that the assessments were correctly made. As for the interest, that is something over which I have no jurisdiction; the Minister alone has the discretion to intervene in that matter.
[21] Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 1st day of November 2000.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 19th day of September 2003.
Sophie Debbané, Revisor