Date: 20000124
Docket: 98-3468-IT-I
BETWEEN:
RYAN J. L'ABBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
MacLatchy, D.J.T.C.C.
[1] The Appellant appeals a reassessment by the Minister of National Revenue (the "Minister") for the 1996 taxation year that disallowed the deduction of $2,990.00 claimed as a moving expense for a mortgage insurance fee paid to Canada Mortgage and Housing Corporation (CMHC) in respect of the Appellant's new residence.
[2] The Appellant and his wife owned a home in Windsor, Ontario, purchased in 1995, financed by CMHC, at which time as a condition of financing an insurance fee of $2,377.56 was added to the principal of the mortgage. In April 1996, the Appellant accepted new employment in London, Ontario, selling his home in Windsor and purchasing a new home in London, Ontario, again with financing guaranteed by CMHC for which a further insurance fee of $2,990.00 was included. To sell his home in Windsor, he was required to retire the financing on that home, which included the balance of the insurance fee contained in the final payout. The Appellant claimed the insurance fee on his new purchase as a moving expense resulting in this hearing, his argument centring on the fact that he should be entitled to deduct either the balance of the mortgage insurance fee thrown away on the sale of his house in Windsor or the requirement of the payment of a new insurance fee on his newly purchased home in London.
[3] The relevant subsections of the Income Tax Act are 62(1) and (3) and they read as follows:
"Moving Expenses.
(1) Where a taxpayer has, at any time, commenced
(a) to carry on a business or to be employed at a location in Canada (in this subsection referred to as "the new work location"), or
(b) to be a student in full-time attendance at an educational institution (in this subsection referred to as "the new work location") that is a university, college or other educational institution providing courses at a post-secondary school level.
and by reason thereof has moved from the residence in Canada at which, before the move, the taxpayer ordinarily resided (in this section referred to as "the old residence") to a residence in Canada at which, after the move, the taxpayer ordinarily resided (in this section referred to as "the new residence"), so that the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence a and the new work location, in computing the taxpayer's income for the taxation year in which the taxpayer moved from the old residence to the new residence or for the immediately following taxation year, there may be deducted amounts paid by the taxpayer as or on account of moving expenses incurred in the course of moving from the old residence to the new residence, to the extent that
(c) they were not paid on the taxpayer's behalf by the taxpayer's employer,
(d) they were not deductible by virtue of this section in computing the taxpayer's income for the preceding taxation year,
(e) they would not, but for this section, be deductible in computing the taxpayer's income,
(f) the total of those amounts does not exceed
(i) in any case described in paragraph (a), the taxpayer's income for the year from the taxpayer's employment at the new work location or from carrying on the new business at the new work location, as the case may be, or
(ii) in any case described in paragraph (b), the total of amounts required to be included in computing the taxpayer's income for the year by virtue of paragraphs 56(1)(n) and (o), and
(g) any reimbursement or allowance received by the taxpayer in respect of those expenses is included in computing the taxpayer's income.
(3) Definition of "moving expenses". 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, and
(f) where the old residence is being or has been sold by the taxpayer or the taxpayer's spouse 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 taxes imposed on the transfer or registration of title to the new residence
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."
[4] The intention of the legislation was to encourage mobility for employment opportunities and the Income Tax Act makes specific provision to exempt some of the costs of relocation. As has been said in The Queen v. Phillips, 94 DTC 6177:
"...the legislation contains gaps so that, ... little guidance can be gleaned from the legislative provisions because of their generality. It is the task of the Court to fill in these gaps, in harmony with the legislation and our prior decisions, but only where we are required to do so. Our domain does not include the making of tax policy. Hence, we should avoid deciding issues that need not be decided, leaving them for Parliament to resolve."
The enumeration in subsection 62(3) is not exhaustive as is evidenced by the use of the word "includes". In Seguin v. Canada (1997), 221 N.R. 321, the Federal Court of Appeal on a judicial review stated:
"According to the ordinary meaning of the words used, the provision includes those expenses incurred for physically moving, changing one's residence, and certain other expenses directly related to the actual move and resettlement and not some amount intended to compensate for accessory damages that are unrelated to the actual move to and resettlement in the new residence. Thus, it excludes the interest expenses on the old residence that do not pertain directly to the physical move of the taxpayer and his family, but instead pertain to the bank loan he took out of his old residence".
In Storrow v. The Queen 78 DTC 6551 at 6553:
"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."
[5] A common thread running through these cases is that the costs to be included in moving expenses must be reasonable and sensible in the circumstances. It is the opinion of this Court that the claim by the Appellant in these circumstances is not an expense that can be included as a moving expense. It is an injury suffered as an incident of the move but it is one of those items that must be considered to be a loss or injury to be suffered if a move is contemplated. It will not be included in moving expenses, therefore, is too much of a loss to sustain, negating the move?
[6] It was interesting that shortly after the move by the Appellant the CMHC provisions were changed to allow the portability of the insurance fee from one residence to another. Unfortunately, that was not the case when the Appellant made his move - his loss in this regard is a loss to be considered before the move was to be made. The Appellant argued further that if his loss did not fall within "moving expenses" then it should be considered as a legal fee – it was a fee required to be paid on his new purchase. This Court does not agree with this argument. It does not fall within the meaning of legal fees in connection with the purchase of a new residence. It is an insurance payment and is a requirement to obtaining the benefits of CMHC financing.
[7] The appeal is dismissed.
Signed at Toronto, Ontario, this 24th day of January 2000.
"W.E.MacLatchy"
D.J.T.C.C.