BETWEEN:
and
____________________________________________________________________
Appeal heard on June 5, 2006 at Lethbridge, Alberta
Before: The Honourable Justice D.W. Beaubier
Appearances:
____________________________________________________________________
JUDGMENT
The appeal is dismissed in accordance with the attached Reasons for Judgment.
Signed at Edmonton, Alberta, this 29th day of June, 2006.
"D.W. Beaubier"
Beaubier, J.
BETWEEN:
JAMES KNAPIK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] This appeal pursuant to the Informal Procedure was held at Lethbridge, Alberta on June 5, 2006. The Appellant was the only witness.
[2] The particulars in dispute are set out in paragraphs 9 to 19 inclusive of the Reply to the Notice of Appeal. They read:
9. On filing his income tax return for the 2003 year, the Appellant claimed a deduction for moving expenses of $9,420.44 as follows:
Moving Costs $ 839.95
Legal Fees for New Residence $ 214.00
CMHC Fee $8,366.49
Total Moving Expenses Claimed $9,420.44
10. In assessing the tax of the Appellant for the 2003 year on April 5, 2004, the moving expenses of $9,420.44 were allowed as claimed.
11. By Notice of Reassessment dated December 13, 2004, the Minister of National Revenue, (the "Minister") reduced moving expenses to $839.95 as:
(a) the legal fees relating to the purchase of a new residence are only allowable if the Appellant sold an old residence; and
(b) the CMHC fees are not allowable moving expenses.
12. The Appellant served on the Minister a Notice of Objection for the 2003 year. The Notice of Objection for the 2003 year was filed March 9, 2005.
13. In response to the Notice of Objection, the Minister confirmed the tax assessed for the 2003 taxation year. The tax assessed was confirmed as the legal fees and CMHC fees are not allowable moving expenses.
14. In so reassessing and confirming the tax of the Appellant, the Minister relied on the same assumptions of fact as follows:
(a) the Appellant moved from the United States to Cold Lake, Alberta in 2002;
(b) the Appellant claimed as moving expenses in the 2003 year, legal fees of $214.00 and CMHC fees of $8,366.49;
(c) the legal fees of $214.00 and the CHMC fees of $8,366.49 related to the purchase of a new house in Cold Lake, Alberta;
(d) prior to the move to Cold Lake, the Appellant ordinarily resided in the United States;
(e) the Appellant did not sell a residence in the United States prior to his move to Cold Lake;
(f) the CMHC fees are not a tax, fee or duty imposed on the transfer or registration of title to a new residence.
B. ISSUES TO BE DECIDED
15. The issue to be decided is whether the Appellant is entitled to claim as moving expenses, legal fees of $214.00 and CMHC fees of $8,366.49.
C. STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT
16. He relies on section 62 and subsection 248(1), of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp) (the "Act") as amended for the 2003 taxation year.
17. He submits that the Appellant is not entitled to a deduction for moving expenses in excess of the amount allowed by the Minister as the amounts sought to be deducted do not meet the definition of "moving expenses" in subsection 62(3) of the Act.
18. He submits that the Appellant did not sell his former residence in the United States so no amount of moving expenses are allowable pursuant to paragraph 62(3)(f) of the Act.
19. He further submits that CMHC fees are not a tax, fee or duty imposed in the transfer or registration of title to a new residence and do not meet the definition of "moving expenses" in subsection 62(3) of the Act.
[3] Subparagraphs 14 (a), (b), (c), (e) and (f) of the assumptions were not refuted.
[4] During the period in question, the Appellant was a member of the Royal Canadian Air Force ("R.C.A.F."). His occupation in the R.C.A.F. was that of a CF 18 pilot. He is now employed by the Royal Canadian Mounted Police as an analyst.
[5] In 1995, the Appellant and his family were posted in Cold Lake, Alberta, where he was a pilot with the R.C.A.F.. They owned and sold their home there when they were posted by the R.C.A.F. as follows:
a. One year in Ottawawhere the Appellant attended a language course (1995-6);
b. Germany, (1996-9); and
c. Washington, D.C., U.S.A. (1999-2002).
R.C.A.F. regulations forbade them buying a home in any of these three posting locations.
[6] In 2002, the R.C.A.F. moved Major Knapik and his family back to Cold Lakewhere within one year, in 2003, they built a new home.
[7] Subsections 62(1) and (3) of the Income Tax Act respecting 2003 read as follows:
Moving expenses
62. (1) There may be deducted in computing a taxpayer's income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation, to the extent that
(a) they were not paid on the taxpayer's behalf in respect of, in the course of or because of, the taxpayer's office or employment;
(b) they were not deductible because of this section in computing the taxpayer's income for the preceding taxation year;
(c) the total of those amounts does not exceed
(i) in any case described in subparagraph (a)(i) of the definition "eligible relocation" in subsection 248(1), the taxpayer's income for the year from the taxpayer's employment at a new work location or from carrying on the business at the new work location, as the case may be, and
(ii) in any case described in subparagraph (a)(ii) of the definition "eligible relocation" in subsection 248(1), the total of amounts included in computing the taxpayer's income for the year because of paragraphs 56(1)(n) and (o); and
(d) all reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer's income.
...
Definition of "moving expenses"
(3) In subsection 62(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,
(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 62(3)(f)) incurred by the taxpayer in respect of the acquisition of the new residence.
S.C. 1970-71-72, c. 63, s. 1"62"; S.C. 1976-77, c. 4, s. 20; S.C. 1977-78, c. 1, s. 27; S.C. 1980-81-82-83, c. 140, s. 31; S.C. 1984, c. 45, s. 21; S.C. 1985, c. 45, s. 26; S.C. 1998, c. 19, s. 102; S.C. 1999, c. 22, s. 17; S.C. 2000, c. 12, s. 142.
[8] Paragraph 62(3)(f) is the essence of the Respondent's assessment:
1. Did the Appellant and his wife sell an old residence as a result of the move and incur these costs in respect of the purchase of the new residence?
2. Were these costs for legal services, taxes, fees or duties imposed on the transfer or registration of title to the new residence?
3. Finally, was this an "eligible relocation" pursuant to subsection 248(1) of the Income Tax Act in that the distance from the old residence to the new work relocation was not less than 40 kilometres?
[9] In answer to question [8], 2, the Canada Mortgage and Housing Corporation ("C.M.H.C.") fees of $8,366.49 do not fall within the wording of paragraph 62(3)(f) and are not deductible.
[10] The legal fees of $214 were admitted by the Respondent in the Reply to have been incurred to register title to the new residence. On the evidence described, the Court finds that the Appellant's "residence" for tax purposes was either Cold Lake, Alberta or Ottawa, Ontario throughout these moves. If it was ColdLake, he had not moved more than 40 kilometres from his old residence in ColdLake to a new work location in Cold Lakein 2002 with subsection 248(1). If it was Ottawa, he had not sold an old residence there when he was transferred in 1996, within paragraph 62(3)(f). As a result, his appeal respecting the legal fees of $214 also fails.
[11] The Appellant also raised a second legal argument. The total sum of $7,648 was reimbursed to the Appellant as a result of the move and he received a T4A slip for 2002 respecting the $7,648. He claims that this was not a "benefit" and was not taxable under paragraph 6(1)(a) and pursuant to the decision in MacInnis v. The Queen 2002-113(IT)I and 2003 TCC 94. This argument is valid and the sum of $7,648 is not a "benefit", pursuant to the MacInnis decision. However, the T4A filed in evidence is for the year 2002. This appeal is for the year 2003. If in fact the T4A sum of $7,648 was included in the Appellant's 2003 income, his appeal respecting this sum is allowed and this matter is referred to the Minister of National Revenue for reconsideration and reassessment for the year 2003.
[12] However, if the 2002 T4A sum of $7,648 was reported by the Appellant in 2002, as it apparently should have been, this Court is without jurisdiction to deal with the matter.
[13] Because the appeal is for the year 2003 and because the Court believes that the $7,648 sum was reported in 2002, the appeal is dismissed. If it was reported as income by the Appellant in 2003, the Appellant is given leave to apply to re-open this appeal within 45 days from the date of this Judgment.
[14] There is no order respecting costs.
Signed at Edmonton, Alberta, this 29th day of June, 2006.
"D.W. Beaubier"
Beaubier, J.
COURT FILE NO.: 2005-3355(IT)I
STYLE OF CAUSE: James Knapik v. The Queen
PLACE OF HEARING: Lethbridge, Alberta
REASONS FOR JUDGMENT BY: The Honourable Justice D.W. Beaubier
DATE OF JUDGMENT: June 29, 2006
APPEARANCES:
|
For the Appellant: |
The Appellant himself |
|
Counsel for the Respondent: |
Mark Heseltine |
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada