Date: 19990126
Docket: A-524-97
| Coram: DÉCARY J.A. |
LÉTOURNEAU J.A.
NOËL J.A.
Between:
CLAUDE L. DESROSIERS,
Applicant,
AND
HER MAJESTY THE QUEEN,
Respondent.
Hearing held at Ottawa, Ontario, Thursday, January 21, 1999
Judgment rendered at Ottawa, Ontario, Tuesday, January 26, 1999
REASONS FOR JUDGMENT BY: NOËL J.A.
CONCURRED IN BY: DÉCARY J.A.
LÉTOURNEAU J.A.
Date: 19990126
Docket: A-524-97
| Coram: DÉCARY J.A. |
LÉTOURNEAU J.A.
NOËL J.A.
Between:
CLAUDE L. DESROSIERS,
Applicant,
AND
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
NOËL J.A.
[1] This is an application for judicial review from a decision by Judge Bowman of the Tax Court of Canada confirming that the applicant had received a benefit from his employment and that as such he had to include the sums of $15,000 and $50,000 in his income for 1987 and 1988 taxation years respectively.
[2] The facts mentioned by the applicant in support of his action are relatively straightforward. In September 1986 he successfully applied for the position of Clerk of the Legislative Assembly of the province of Ontario. Before taking this position he had been Principal Clerk responsible for management of parliamentary committees and private legislation at the House of Commons in Ottawa.
[3] His new job gave him a significant salary increase1 but also required him to move with his family to Toronto, where the real estate market was more costly. The applicant mentioned this concern after the position was offered to him but before he had accepted it. His employer told him at that time that he would be offered financial assistance, but gave no further details.2
[4] Two weeks after he accepted his new position the employer told the applicant that he would be paid an amount calculated by reference to the difference between the selling price of his house in Aylmer and the purchase of an equivalent house in Toronto.3 The taxpayer's house was put up for sale but remained on the market for several months, such that the employer was forced to purchase it in order to facilitate the move. For this purpose the selling price was set at $104,570, in accordance with the fair market value as determined by independent appraisers. The applicant claimed that at the time the average value of equivalent houses in Toronto was about $250,000.4
[5] The applicant said that as he was desirous of minimizing the money his employer had undertaken to pay on his behalf he in April 1987 purchased a house located in Oakville which he considered was clearly inferior to the one he had given up. In his submission, this house was inferior in that:
| 1. it was located 45 km. from his workplace, whereas the other was only 9 km. away; |
| 2. it was a semi-detached house, whereas the other was detached; |
| 3. it had a surface area of 1,700 sq. ft., while the other had a surface area of 2,400 sq. ft.; |
| 4. it had three bedrooms, while the other had four. |
[6] The house in question was purchased for $171,000.5 The applicant moved there with his wife and three children in April 1987. Consistent with the undertaking it had given, the employer paid the applicant the sums of $15,000 in 1987 and $50,000 in 1988, a total amount almost equal to the difference between the selling price of the old house and the cost of purchasing the new one.
[7] In the summer of 1987 the applicant incurred expenses of some $22,000 in order to renovate his new house and create the living space needed to accommodate the members of his family. Despite these expenses the applicant was eventually forced to conclude that the house was still inadequate as it was too small. The decision was taken to dispose of it and at the end of 1988 the applicant and his family moved to a new house which we may assume was more spacious.6
[8] In light of these facts Judge Bowman concluded that the sums of $15,000 and $50,000 received by the applicant in the 1987 and 1988 taxation years were a benefit resulting from his employment and that as such these amounts were taxable. The applicant, who represented himself, considered that he had not received a benefit, relying essentially on the fact that the house he had purchased in Oakville was in every respect inferior to the one he had given up when he accepted his new position. He claimed that, at the very least, the expenses incurred to renovate the house in Oakville should be deducted from the benefit he allegedly received.7
[9] The only question that arises is as to whether, in paying the applicant the sum of $65,000 in order to enable him to acquire a residence in a more costly real estate market and so facilitate his coming to Toronto, the employer conferred a benefit on him within the meaning of s. 6(1)(a) of the Income Tax Act.8 As I see it, the question answers itself.
[10] When he accepted his new position the applicant knew he had to move to Toronto. The fact that he would not have accepted the position without the financial benefit he was promised does not help his case,9 nor does his statement that the house purchased in Toronto was in his view clearly inferior to the one he chose to give up.10 The Revenue Department is not concerned with the use, whether good or bad, that the applicant may have made of the financial assistance he received. What matters is the existence of a benefit which is quantifiable in monetary terms. In the case at bar the employer paid his employee the sum of $65,000 so the latter could purchase a personal asset. A benefit equal to the amount paid by the employer undoubtedly results from this transaction.
[11] I also will not dwell at any length on the taxpayer's argument that the property purchased with this benefit had a fluctuating value.11 The trial judge put the question raised by the taxpayer as follows:
| [TRANSLATION] |
| If he had sold it after residential prices fell in 1989, he would have sustained a non-deductible loss. Where is the benefit he was supposed to have enjoyed and in respect of which he was assessed?12 |
As I mentioned, the benefit resulted from the amount the applicant was paid in order to enable him to acquire a residence in a more costly real estate market. That benefit is measured at the time it was conferred. The fact that the residence acquired with this financial aid might subsequently increase or decrease in value is of no interest to the Revenue Department.
[12] In his judgment the trial judge mentioned the legal uncertainty resulting from recent decisions by this Court in Phillips13 and Hoefele14 and added that in the circumstances it is easy to see why the applicant regarded the benefit which was being taxed in his hands as [TRANSLATION] "illusory" or "imaginary".15 Judge Bowman invited the applicant to appeal his judgment, suggesting that this Court use the opportunity to clarify the state of the law.
[13] I do not feel there is any need here to say more than is necessary to dispose of the action at bar. Suffice it to say that on the facts on issue here, there is nothing illusory or imaginary in the benefit conferred on the applicant or the value of that benefit at the time it was conferred.
[14] The application for judicial review should be dismissed. As the respondent did not claim any costs, no order should be made in this regard.
| Marc Noël J.A. |
I concur.
Robert Décary J.A.
I concur.
Gilles Létourneau J.A.
Certified true translation
Bernard Olivier, LL. B.
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT No.: A-524-97
| STYLE OF CAUSE: Claude L. Desrosiers and Her Majesty The Queen |
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: January 21, 1999
REASONS FOR JUDGMENT BY: Noël J.A.
DATED: January 26, 1999
APPEARANCES:
Claude L. Desrosiers FOR THE APPLICANT
Arnold H. Bornstein FOR THE RESPONDENT
J. P. Malette
SOLICITORS OF RECORD:
Claude L. Desrosiers FOR THE APPLICANT
Morris Rosenberg FOR THE RESPONDENT
Deputy Attorney General of Canada
Docket: A-524-97
Ottawa, Ontario, Tuesday, January 26, 1999
| Coram: DÉCARY J.A. |
LÉTOURNEAU J.A.
NOËL J.A.
Between:
CLAUDE L. DESROSIERS,
Applicant,
AND
HER MAJESTY THE QUEEN,
Respondent.
JUDGMENT
The application for judicial review is dismissed.
| Robert Décary J.A. |
Certified true translation
Bernard Olivier, LL. B.
__________________1 The applicant's salary went from $65,000 to $79,500.
2 Applicant's memorandum, Part I, paras. 11 et 12.
3 The resolution of the internal committee of the Legislative Assembly authorizing this decision reads as follows: An amount be allowed to the Clerk as a differential payment between the cost of selling his Ottawa home and purchasing a Toronto home, plus whatever other benefits are recommended for allocation expenses according to Management Board Guidelines;
Applicant's record, document A-2.
4 Applicant's memorandum, Part I, para. 15.
5 The applicant financed this purchase by a mortgage loan of $94,000 at an interest rate comparable to the hypothec of $40,000 on his house in Aylmer.
6 No particulars were given as to the new residence or the selling price of the house in Oakville.
7 An amount of $20,000 was allegedly spent solely to accommodate his family in the limited space in his new house and as such should have been deducted from the benefit received. (See applicant's supplementary memorandum.)
| 6(1) Doivent être inclus dans le calcul du revenu d'un contribuable tiré, pour une année d'imposition, d'une charge ou d'un emploi, ceux des éléments appropriés suivants: a) . . . la valeur de la pension, du logement et autres avantages de qualque nature que ce soit qu'il a reçus ou dont il a joui dans l'année au titre, dans l'occupation ou en vertu d'une charge ou d'un emploi . . . [mon souligné] | 6(1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable; (a) . . . the value of board, lodging and other benefits of any kind whatever received or enjoyed by him in the year in respect of, in the course of, or by virtue of an office or employment . . . [my emphasis] |
9 Applicant's memorandum, Part II, para. 1. Section 6(3) of the Act provides inter alia that:
| Une somme qu'une personne a reçue d'une autre personne . . . . . b) au titre ou en paiement intégral ou partiel d'une obligation découlant d'une entente intervenue entre le payeur et le bénéficiaire immédiatement avant, pendant ou immédiatement après une période où ce bénéficiaire faisait partie des cadres du payeur ou était employé par ce dernier,est réputée être, aux fins de l'article 5, une rémunération des services que le bénéficiaire a rendus à titre de cadre ou pendant sa période d'emploi, sauf s'il est établi que, indépendamment de la date où a été conclue l'entente, . . . cette somme ne peut pas raisonnablement être considérée comme ayant été reçue c) à titre de contrepartie totale ou partielle de l'acceptation de la charge ou de la conclusion du contrat d'emplo . . . [mon souligné] | An amount received by one person from another . . . . . (b) on account or in lieu of payment of, or in satisfaction of, an obligation arising out of an agreement made by the payer with the payee immediately prior to, during or immediately after a period that the payee was an officer of, or in the employment, of the payer,shall be deemed, for the purposes of section 5, to be remuneration for the payee's services rendered as an officer or during the period of employment, unless it is established that, irrespective of when the agreement, if any, under which the amount was received was made . . . it cannot reasonably be regarded as having been received (c) as consideration or partial consideration of accepting the office or entering into the contract of employment . . . [my emphasis] |
10 I say "in his view" since in monetary terms the Toronto house was clearly superior to the one in Aylmer.
11 Applicant's memorandum, Part II, para. 10; [TRANSLATION] I did not receive any benefit within the meaning of the Income Tax Act because the equity associated with a real estate property is at best ephemeral and realizing a profit or loss can only be calculated when the last residence is sold, and it is impossible at any other point to calculate whether there has been a capital gain or loss.
12 Reasons for Judgment, applicant's record, Part III, p. 5.
13 M.N.R. v. Phillips, [1994] 2 F.C. 680.
14 Attorney General of Canada v. Hoefele, [1996] 1 F.C. 322.