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Docket: 2003-3917(IT)I |
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BETWEEN: |
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KHALIL HASAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on common evidence with the appeal of Lisa N. Hasan (2004-788(IT)I) on July 8, 2004 in Toronto, Ontario
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Before: The Honourable Justice L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Jason J. Wakely |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2001 taxation year is dismissed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 16th day of July 2004.
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"L.M. Little" |
Little J.
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Docket: 2004-788(IT)I |
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BETWEEN: |
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LISA N. HASAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on common evidence with the appeal of Khalil Hasan (2003-3917(IT)I) on July 8, 2004 in Toronto, Ontario
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Before: The Honourable Justice L.M. Little |
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Appearances: |
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Agent for the Appellant: |
Khalil Hasan |
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Counsel for the Respondent: |
Jason J. Wakely |
____________________________________________________________________
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2001 taxation year is dismissed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 16th day of July 2004.
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"L.M. Little" |
Little J.
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Citation: 2004TCC502 |
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Date: 20040716 |
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Dockets: 2003-3917(IT)I 2004-788(IT)I |
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BETWEEN: |
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KHALIL HASAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent, |
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AND: |
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LISA N. HASAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Little J.
A. Statement of Facts
[1] The appeals were heard together on common evidence.
[2] Lisa N. Hasan is the Daughter ("the Daughter") of Khalil Hasan (the "Father").
[3] In September 1999 the Daughter enrolled in the Bachelor of Architecture Program at McGill University in Montreal, Quebec. The Daughter lived in residence at McGill University during the 1999-2000 school year.
[4] In September 2000 the Daughter entered into a lease covering the rental of a small apartment located at 3600 Avenue du Parc in the City of Montreal. The lease agreement provided that the rent to be paid for the apartment was $640.00 per month (Exhibit A-3).
[5] The Daughter lived in the Avenue du Parc apartment (the "Apartment") from September 1, 2000 to April 30, 2001.
[6] On or about May 1, 2001 the Daughter returned to Toronto and worked for Julian Jacobs Architecture Limited in Toronto from approximately May 1, 2001 to approximately August 31, 2001. During this time the Daughter lived in the Father's home in North York, Ontario.
[7] During the period May 1, 2001 to August 31, 2001 (the "Period") the Daughter paid rent of $640.00 per month or a total of $2,560.00 for the Apartment. The Daughter has lived in the Apartment continuously since September 2000.
[8] During the Period no one lived in the Apartment but the Daughter stored miscellaneous furniture, her computer equipment and some of her personal effects in the Apartment.
[9] When the Daughter filed her Income Tax Return for the 2001 taxation year she designated the maximum allowable amount of $5,000.00 of her tuition and education amount to be transferred to her Father.
[10] When the Daughter filed her Income Tax Return for the 2001 taxation year she deducted the amount of $2,560.00 as moving expenses. As noted above the amount of $2,560.00 was the rent paid for the Apartment during the Period.
[11] On August 5, 2003 the Minister of National Revenue (the "Minister") issued a Notice of Reassessment to the Daughter. The following changes were made to the Daughter's income for 2001 by the Notice of Reassessment:
(a) the Daughter's total income was reduced to $10,288.00;
(b) the Daughter's total federal non-refundable tax credits were reduced to $1,602.00; and
(c) the Daughter's federal tuition and education amount available for transfer to her Father was determined to be $3,516.00 and not $5,000.00 as originally claimed.
[12] By Notice of Reassessment dated December 2, 2002 the Minister reassessed the Daughter to disallow the deduction of the moving expenses in the amount of $2,560.00.
[13] The Minister also reassessed the Father to reduce the Tuition and Education Expenses from $5,000.00 to $3,016.00.
B. Issue
[14] 1. Is the Daughter allowed to deduct the amount of $2,560.00 as moving expenses in determining her income for the 2001 taxation year?
2. Was the Minister correct in reassessing the Father to reduce the Tuition and Education amounts from $5,000.00 to $3,016.00? (Note: The adjustment was made because the Minister disallowed the deduction of the moving expenses claimed by the Daughter.)
C. Analysis
[15] The phrase "moving expenses" is defined in subsection 62(3) of the Income Tax Act (the "Act"):
62. (3) In subsection (1), "moving expenses" includes any expense incurred as or on account of
(a) travel costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of the taxpayer's household from the old residence to the new residence,
(b) the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence;
(c) the cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer's household for a period not exceeding 15 days;
(d) the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence,
(e) the taxpayer's selling costs in respect of the sale of the old residence,
(f) where the old residence is sold by the taxpayer or the taxpayer's spouse or common-law partner as a result of the move, the cost to the taxpayer of legal services in respect of the purchase of the new residence and of any tax, fee or duty (other than any goods and services tax or value-added tax) imposed on the transfer or registration of title to the new residence, and
(g) interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence, to the extent of the lesser of $5,000 and the total of such expenses of the taxpayer for the period
(i) throughout which the old residence is neither ordinarily occupied by the taxpayer or by any other person who ordinarily resided with the taxpayer at the old residence immediately before the move nor rented by the taxpayer to any other person, and
(ii) in which reasonable efforts are made to sell the old residence, and
(h) the cost of revising legal documents to reflect the address of the taxpayer's new residence, of replacing drivers' licenses and non-commercial vehicle permits (excluding any cost for vehicle insurance) and of connecting or disconnecting utilities,
but, for greater certainty, does not include costs (other than costs referred to in paragraph (f)) incurred by the taxpayer in respect of the acquisition of the new residence.
[16] During the hearing the Father maintained that the amount of $2,560.00 that was paid in rent by his Daughter for the Apartment would qualify as "moving expenses" because this amount was paid by his Daughter to store her furniture during the Period. The Father maintained that this payment qualifies under paragraph 62(3)(b) of the Act. The Father also noted that if his Daughter had not paid the rent during the Period she would have to pay a penalty equal to three months rent to cancel the lease.
[17] Counsel for the Respondent maintained that the rental payments paid by the Daughter for the Apartment during the Period would not come within the meaning of paragraph 62(3)(b) of the Act. The main argument by counsel for the Respondent is that paragraph 62(3)(b) of the Act permits the deduction of storage costs when a taxpayer is moving household effects from the old residence to a new residence.
[18] In support of his position counsel for the Respondent referred to the following Court decisions:
1. Yaeger v. M.N.R., 86 DTC 1217. In that decision Chief Judge Couture referred to the French version of paragraph 62(3)(b) of the Act which reads as follows at page 1221:
(b) de frais de transport et d'entreposage des meubles du contribuable qui doivent être transportés de son ancienne résidence dans sa nouvelle résidence.
In Yaeger Chief Judge Couture translated these words as follows:
The cost of transporting and warehousing the furniture of the taxpayer that must be transported from his old residence into his new residence. (Emphasis added)
2. In Storrow v. The Queen, 78 DTC 6551 Mr. Justice Collier of the Federal Court, Trial Division said at pages 6553-6554:
The plaintiff submits that a moving expense is an expense of moving from one dwelling to another; it includes all costs directly and solely related to the move from the time of the decision to leave to the time of resettlement. The additional monies laid out to acquire a comparable residence in Vancouver, the interest on that amount, and the costs of registration, of installing the dishwasher and new locks were all incurred, it is said, because of the move from one residence to another.
For the defendant, it is contended the amounts in issue are not really expenses at all; they are the extra costs incurred, in this case, in replacing an asset, the old residence.
I agree generally with the defendant's contention.
The disputed outlays were not, to my mind, moving expenses in the natural and ordinary meaning of that expression. The outlays or costs embraced by those words are, in my view, the ordinary out-of-pocket expenses incurred by a taxpayer in the course of physically changing his residence. The expression does not include (except as may be specifically delineated in ss. 62(3)) such things as the increase in cost of the new accommodation over the old (whether it be by virtue of sale, lease, or otherwise), the cost of installing household items taken from the old residence to the new, or the cost of replacing or re-fitting household items from the old residence (such as drapes, carpeting, etc.). Moving expenses, as permitted by ss. 62(3), do not, as I see it, mean outlays or costs incurred in connection with the acquisition of the new residence. Only outlays incurred to effect the physical transfer of the taxpayer, his household, and their belongings to the new residence are deductible (Emphasis added).
3. In Séguin v. Canada, [1997] F.C.J. No. 1220 (CA), 97 DTC 5457 the taxpayer attempted to deduct as moving expenses the amounts of mortgage interest that he paid on his old residence until he was able to sell it".
The Federal Court of Appeal disallowed the deduction concluding that "the mortgage interest resulting from the loan on a house that the taxpayer is no longer inhabiting has more to do with his desire to keep the house until he has his price instead of selling it.
[19] Based on the reasoning contained in the Court decisions referred to above, I have concluded that in order to qualify as a moving expense under paragraph 62(3)(b) of the Act the amount paid must have been paid when a taxpayer physically moves or changes her residence. That did not happen in this situation. The facts are that the Daughter moved into the Parc Avenue Apartment in September 2000 and she continues to reside in the Parc Avenue Apartment. I have therefore concluded that the amount of $2,560.00 paid by the Daughter in 2001 would not qualify as a moving expense.
[20] The Father also argued that his Daughter should be allowed to deduct the rental payments of $2,560.00 that she paid in the Period under paragraph 18(1)(a) as business expenses.
[21] I have concluded that the rental payments of $2,560.00 paid by the Daughter in the Period were personal expenses and that the deduction of those payments is prohibited under paragraph 18(1)(h) of the Act.
[22] I have also concluded that the Minister was correct in reducing the Tuition and Education amounts that were claimed by the Father from $5,000.00 to $3,016.00.
[23] The appeals are dismissed, without costs.
Signed at Vancouver, British Columbia, this 16th day of 2004.
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"L.M. Little" |
Little J.
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CITATION: |
2004TCC502 |
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COURT FILE NO.: |
2003-3917(IT)I |
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STYLE OF CAUSE: |
Khalil Hasan and Her Majesty the Queen |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
July 8, 2004 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice L.M. Little |
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DATE OF JUDGMENT: |
July 16, 2004 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Jason J. Wakely |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |
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CITATION: |
2004TCC502 |
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COURT FILE NO.: |
2004-788(IT)I |
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STYLE OF CAUSE: |
Lisa N. Hasan and Her Majesty the Queen |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
July 8, 2004 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice L.M. Little |
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DATE OF JUDGMENT: |
July 16, 2004 |
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APPEARANCES: |
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Agent for the Appellant: |
Khalil Hasan |
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Counsel for the Respondent: |
Jason J. Wakely |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |