Date: 20000519
Docket: 98-2654-IT-G
BETWEEN:
ROBERT BÉRIAULT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, A.C.J.T.C.C.
[1] The appellant is appealing from an assessment for the 1996 taxation year concerning an amount of $65,120 which the appellant received from his employer, Canadian National Railways ("CN"), as a result of his transfer from St-Luc, Quebec, to Barrie, Ontario. The appellant claims that this amount is not taxable. The respondent argues that it is a benefit received or enjoyed by him in respect of, in the course of, or by virtue of an office or employment within the meaning of paragraph 6(1)(a) of the Income Tax Act, or that it is an allowance for personal or living expenses or an allowance for any other purpose within the meaning of paragraph 6(1)(b).
[2] In 1996, the appellant was transferred from St-Luc, Quebec, to Barrie, Ontario. He received from his employer, CN, two amounts, $50,000 and $15,120, for a total of $65,120. This amount was reported on two T4 slips in two amounts, one of $29,000 and the other of $36,120, as "Other income".
[3] When filing his return of income for 1996, the appellant included the amount of $65,120 in computing his income. However, in his notice of objection and in his notice of appeal filed with this Court, he claimed that this amount was not taxable.
[4] In addition, in his return, he deducted an amount of $20,159.56 as moving expenses.
[5] The appellant testified that, when his house was sold, he incurred a $42,000 loss representing the difference between his cost of $139,000 and the selling price of $97,000. The evidence concerning the cost of the house was somewhat meagre. He had apparently built the house himself. However, counsel for the respondent did not dispute the appellant's allegation that he had incurred a $42,000 loss.
[6] After filing his return, the appellant spoke with Ms. Nguyen, CN's personnel housing director. As a result of this interview, she prepared an amended T4A form indicating that Mr. Bériault had earned other income of $39,883.04.
[7] This new amount was based on a list of expenses which Mr. Bériault had submitted to Ms. Nguyen. He alleged that these expenses related to his transfer from St-Luc to Barrie. The expenses on the list amounted to $64,674.28. The amount of $42,026 was included in this amount and represented the loss which Mr. Bériault claimed he had incurred on the sale of his house. Excluding the $42,026, the figure in question is $22,648.28.
[8] Following her interview with the appellant, Ms. Nguyen wrote a memo concerning the appellant's relocation expenses. That memo reads as follows:
Description of Non-taxable
Relocation expenses Amount
Meals for home search $453.61
Accommodation for home search $1,284.52
Travelling for home search and interim living $420.24
Costs associated with sale of home $19,733.32
Costs associated with purchase of home $1,762.17
Moving expenses $1,151.91
Miscellaneous expenses $431.19
$25,236.96
[9] Ms. Nguyen deducted $25,236.96 from the amount of $65,120 to arrive at the $39,883.04 figure that appears on the amended T4A form.
[10] The question may thus be summarized as follows. This matter concerns an employee who was transferred from St-Luc to Barrie, who sustained a loss on the sale of his house, who incurred expenses and received $65,120 from his employer in connection with his transfer, and who deducted moving expenses of $20,159.56 in computing his income. What are the tax consequences of this?
[11] It seems clear that the amounts of $50,000 and $15,120 were lump sum amounts, that is to say, they were not based on expenses the appellant incurred or on a loss that he sustained. It is also clear from the testimony given by Mr. Bériault and Ms. Nguyen, and from the document at tab 9 of Exhibit I-1 ("Employment Security and Income Maintenance Agreement"), that the appellant was entitled to the amount of $50,000 simply because he was a homeowner and had been transferred from St-Luc to Barrie. The purpose of the payment was not to reimburse him for his loss. He would have received the amount even if he had not sustained a loss. He was not obliged to account for the amount but was free to spend it as he wished.
[12] The same comment applies to the $15,120 which was apparently paid under article 3.2 of the agreement. I cite below an explanatory note from that article:
If the extenuating circumstances involve the relocation of employees to the Metropolitan Toronto area, such employees, provided they are a homeowner and eligible for relocation benefits pursuant to the provisions of Article 6.1 and 6.2 therein, will be allowed a special allowance of $18,000.
[13] It is not entirely clear whether the appellant received the amount of $15,120 under article 3.2 of the agreement or under article 6.8, paragraph (a) of which reads as follows:
Effective June 14, 1995, except as otherwise provided in Article 6.8(c), reimbursement of up to $12,000 for loss sustained on the sale of a relocating employee's private home which the employee occupied as a year-round residence. Loss sustained is determined as the difference between the value determined at the outset plus any real estate agent fees, legal fees, including those legal fees on purchase of a home at the new location, and any mortgage closure penalties, and the amount established as the selling price in the deed of sale.
I believe that the evidence tends rather to show that he received the amount under article 3.2.
[14] Accordingly, I am satisfied that the amounts are allowances within the meaning of paragraph 6(1)(b) of the Act.
[15] In Pezzelato v. The Queen, 96 DTC 1285, at page 1288, I referred to the decision by Noël J. in Ransom v. M.N.R., 67 DTC 5235:
At page 5244 Noël, J. drew a distinction between an allowance and a reimbursement as follows:
An allowance is quite a different thing from reimbursement. It is, as already mentioned, an arbitrary amount usually paid in lieu of reimbursement. It is paid to the employee to use as he wishes without being required to account for its expenditure. For that reason it is possible to use it as a concealed increase in remuneration and that is why, I assume, "allowances" are taxed as though they were remuneration.
[16] I need not repeat here my analysis in Pezzelato and in Desrosiers v. The Queen, 97 DTC 3301 (confirmed by the F.C.A., 99 DTC 5112). In both cases, I tried to reconcile the decisions of the Federal Court of Appeal. However, I am satisfied that the amounts which the appellant received are taxable under section 6 of the Act.
[17] The appeal is dismissed.
[18] The respondent is entitled to her costs should she seek them.
Signed at Ottawa, Canada, this 19th day of May 2000.
"D.G.H. Bowman"
A.C.J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 28th day of June 2000.
Erich Klein, Revisor