Date: 20010709
Docket: 2000-4542-IT-I
BETWEEN:
JAMES P. GRAHAM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
[1] By Notice of Reassessment dated April 29, 1999, the Minister of National Revenue (the "Minister") reassessed the Appellant to include an unreported amount of $22,000.00 in retiring allowance.
[2] The Appellant filed a valid Notice of Objection for the 1995 taxation year and by way of Notice of Confirmation dated March 27, 2000, the Minister confirmed the reassessment. James Graham thereafter appealed the reassessment of his 1995 income tax return to this Court.
[3] The Appellant submitted the following in his Notice of Appeal that he adopted as part of his evidence:
1. The sum of $22,000.00 was paid to him for costs incurred by him and his wife in returning to Halifax, Nova Scotia from London, Ontario. The amount was a reimbursement for living costs, rent, food, etc., while seeking employment in Nova Scotia;
2. This sum also represented a reimbursement for all the money that was lost on the sale of his home in London, Ontario; and
3. These costs exceeded $22,000.00 and were paid for in after tax dollars.
[4] The evidence of the Appellant indicated Pitney Bowes of Canada Limited, the defendant in a wrongful dismissal lawsuit brought by the Appellant, offered to settle the Appellant's wrongful dismissal lawsuit by paying in part
"... in respect of special damages, a cheque in the amount of $22,000.00 drawn to the order of James Graham." (Exhibit A-6)
The Appellant accepted the offer to settle and received the $22,000.00.
[5] Exhibit A-2 is the Appellant's calculation of the special damages. The Appellant calculated his losses of buying and selling his home in London, Ontario in excess of $27,000.00 that included a loss in the resale price, legal fees, repairs, real estate fees and mortgage cancellation fees.
[6] The Minister assessed the Appellant on the basis that:
1. In the 1995 taxation year, the Appellant received $117,500.00 as a result of a wrongful dismissal suit against his previous employer, Pitney Bowes of Canada Limited (hereinafter the "Payor");
2. The amount of $117,500.00 consisted of the following amounts:
(a) the amount of $28,500.00 (the pre-judgment interest) was not assessed as taxable income;
(b) the amount of $67,000.00 was reported by the Payor on a T4A as a retiring allowance;
(c) the unreported amount of $22,000.00 was also paid by the Payor to the Appellant in respect of the loss of an office or employment;
3. The Appellant did not claim moving expenses for the 1995 taxation year; and
4. The Appellant last claimed moving expenses for the 1992 taxation year in respect of his move from Ontario to Nova Scotia.
ISSUE
[7] Should the amount of $22,000.00 received by the Appellant be included in the Appellant's taxable income for the 1995 taxation year?
ANALYSIS
[8] Paragraph 56(1)(a) of the Income Tax Act (the "Act") requires that various amounts in respect of pension, retirement, termination, employment/unemployment, death benefits, transitional assistance benefits paid to employees and prescribed benefits under government assistance programs be included in computing the recipient's income for the year in which they were received.
[9] "Retiring allowance" is defined in subsection 248(1) as:
"retiring allowance" means an amount (other than a superannuation or pension benefit, an amount received as a consequence of the death of an employee or a benefit described in subparagraph 6(1)(a)(iv)) received
(a) on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer's long service, or
(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal,
by the taxpayer or, after the taxpayer's death, by a dependent or a relation of the taxpayer or by the legal representative of the taxpayer.
[10] In Jolivet v. Canada,[1] the Appellant was terminated from her employment without cause. She filed a grievance suit but settled out of court for a cash sum of
$10,000.00 which represented damages. The Minister defined this amount as a retiring allowance and accordingly included it in the Appellant's income. The Appellant appealed to the Tax Court of Canada. Judge Lamarre, in determining whether the $10,000.00 was a retiring amount stated:
A retiring allowance is defined in subsection 248(1) as an amount received, inter alia, "in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account of or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal". If the amount received was in respect of the loss of employment, then it would be characterized as a retiring allowance. In Nowegijick v. The Queen, 83 DTC 5041, Dickson J. of the Supreme Court of Canada said the following at page 5045:
The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters.
In the case of Anderson v. The Queen, 98 DTC 1190, Judge Rip of this Court said that for the purposes of determining whether the sum received by a taxpayer is a retiring allowance, the words "in respect of" in subsection 248(1) "direct that a broad scope of inclusion be considered as to what constitutes a sufficient connection between the loss of employment and the amounts received".
I find here that the Release signed by the Appellant is clear enough and indicates that the $10,000.00 amount was received by the Appellant in respect of the loss of her employment. She admitted that if she had not signed the Release, she would not have been paid. It is equally clear to me that, as was said by Pinard J. in Merrins v. M.N.R., 94 DTC 6669 (F.C.T.D.), "had there been no loss of employment, there would have been no grievance, no settlement, no award and, therefore, no payment of the sum to the Appellant". Pinard J. went on to say that:
... the use of [the words "in respect of"] within the definition of "retiring allowance" as found in subsection 248(1) of the Act surely conveys a connection between the plaintiff's loss of employment and his subsequent receipt of the amount of $60,000.00 as paid by his former employer, ...
The fact that both parties intended to characterize the $10,000.00 as damages does not change the fact that the Appellant, indeed, received the amount as a consequence of the loss of her employment.
It is purely hypothetical to say that had the Appellant not lost her employment, she would have received that amount. I can only conclude that such amount paid on account of damages is a retiring allowance because there exists a sufficient nexus between the receipt and the loss of employment (see Overin v. M.N.R., 98 DTC 1299 (T.C.C.)).
[11] From the evidence, the $22,000.00 was a portion of the amount received by the Appellant for being wrongfully dismissed. The amount was paid in respect of loss of employment or office. Therefore the $22,000.00 is a "retiring allowance" pursuant to paragraph 56(1)(a)(iii) of the Act.
[12] The purpose of paragraph 6(1)(a) of the Act is to ensure that various ancillary or "fringe" benefits, which are commonly associated with an office or employment, is included in the computation of income of an employee or officer. In this case, the Appellant received $22,000.00 by virtue of his employment.[2]
[13]Therefore the Appellant must include this amount in his income pursuant to paragraph 6(1)(a) of the Act.
MOVING EXPENSES
[14] Moving expenses are addressed under section 62. Section 62 is designed to allow taxpayers to deduct, in computing their income, moving expenses incurred by them in relocating closer to an employment site, place of business or post-secondary educational institution. In general, a taxpayer who moves is permitted to deduct moving expenses if the move is made in connection with the commencement of employment at a particular location in Canada. The Appellant's evidence was that he moved from London, Ontario and returned to Nova Scotia to seek employment. As such he is outside the parameters of section 62.
CONCLUSION
[15] On review of the facts, the $22,000.00 is determined as special damages, which were granted to the Appellant for the loss of the sale of his house in London, Ontario. The $22,000.00 is connected to the loss of the Appellant's employment and as such the Minister has properly characterized it as a retiring allowance.
DECISION
[16] Accordingly, the appeal is dismissed.
Signed at Ottawa, Canada, this 9th day of July 2001.
"D. Hamlyn"
J.T.C.C.
COURT FILE NO.: 2000-4542(IT)I
STYLE OF CAUSE: James P. Graham and
Her Majesty the Queen
PLACE OF HEARING: Halifax, Nova Scotia
DATE OF HEARING: June 28, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D. Hamlyn
DATE OF JUDGMENT: July 9, 2001
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Marcel Prevost
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-4542(IT)I
BETWEEN:
JAMES P. GRAHAM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on June 28, 2001 at Halifax, Nova Scotia, by
the Honourable Judge D. Hamlyn
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Marcel Prevost
JUDGMENT
The appeal from assessment made under the Income Tax Act for the 1995 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 9th day of July 2001.
|
"D. Hamlyn" |
J.T.C.C.
[1] [2000] T.C.J. No. 48.
[2] It is to be noted that any amount received as a result of employment may be included pursuant to paragraph 6(1)(a). See Viacheslav Galanov v. M.N.R., 87 DTC 647, where the payment to the discharge of a mortgage upon dismissal from employment was held to be an amount to be included in the computation of income from employment.