Docket: 2003-4103(IT)I

BETWEEN:

MERRILL LECKIE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on March 26, at Nanaimo (British Columbia)

Before: The Honourable Justice David W. Beaubier
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Bill J. S. Basran

____________________________________________________________________

JUDGMENT

          The appeal from the reassessment made under the Income Tax Act for the 2002 taxation year is allowed, and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

Signed at Regina, Canada on this 7^th day of April 2004.

"D.W. Beaubier"

Beaubier, J.

Citation: 2004TCC259

Date: 20040407

Docket: 2003-4103(IT)I

BETWEEN:

MERRILL LECKIE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Beaubier, J.

[1]      This appeal pursuant to the Informal Procedure was heard at Nanaimo, B.C., on March 26, 2004. The Appellant was the only witness.

[2]      Paragraphs 1 - 9 of the Reply to the Notice of Appeal outline the dispute. They read:

1.       In respect of the allegations of fact contained in the Notice of Appeal and the attachments, he admits that the Canada Customs and Revenue Agency ("CCRA") adjusted the Appellant's Registered Retirement Savings Plan ("RRSP") deduction from $2,369.39 to $602.00, that the Appellant paid $2,369.39 into his RRSP, that a receipt was filed with his tax return and that the CCRA deducted an amount of support paid by the Appellant of $9,815.71 in calculating the Appellant's earned income.

2.       He denies all the other allegations of fact contained in the Notice of Appeal and the attachments.

3.       In filing his Return of Income for the 2002 taxation year, the Appellant deducted the amount of $2,369.39 as an RRSP deduction.

4.       The Minister of National Revenue (the "Minister") initially assessed the Appellant for the 2002 taxation year on May 1, 2003 and reduced the RRSP deduction from $2,369.39 to $602.00.

5.       The Appellant objected to the assessment of May 1, 2003 and on September 12, 2003, the Minister confirmed the assessment as the Appellant's earned income for the 2001 taxation year amounting to $3,258.00 was calculated according to the definition of "earned income" in subsection 146(1) of the Income Tax Act (the "Act") and for purposes of subsection 146(5) of the Act, the Appellant's RRSP deduction limit of $602.00 for the 2002 taxation year was calculated according to the definition of "RRSP Deduction Limit" in subsection 146(1) of the Act.

6.       In assessing tax for the 2002 taxation year and in confirming the assessment, the Minister assumed the same facts, as follows:

a)       in the 2001 taxation year, the Appellant had earned income of $3,258.00, calculated as follows:

Trustee Income	$3,002.00
Net Professional Income	$7,283.00
Net Commission Income	$2,788.00
TOTAL :	$13,073.00
Less: Alimony deducted	$9,815.00
EARNED INCOME:	$3,258.00

b)       the Appellant contributed $2,369.39 to his RRSP in 2002;

c)       the Appellant's unused RRSP deduction room at the end of the 2001 taxation year was $16.00;

d)       in the 2001 taxation year, the Appellant claimed and was allowed a deduction of $9,815.71 for support payments made; and

e)       the Appellant's 2001 Pension Adjustment, 2002 Pension Adjustment Reversal, 2002 Past Service Pension Adjustment and 2002 Prescribed Amount are all Nil.

B. ISSUES TO BE DECIDED

8.    The issue is whether the Appellant's 2001 earned income has been correctly calculated in order to determine the amount the Appellant may deduct as RRSP contributions in the 2002 taxation year.

C. STATUTORY PROVISIONS RELIED ON

9.    He relies on subsections 146(1), 146(5) and 248(1) and paragraph 60(b) of the Act, and on sections 8303, 8304, 8304.1, 8308, 8308.4 and 8310 of the Income Tax Regulations, as amended for the 2002 taxation year.

[3]      At the outset of the hearing, the Respondent's counsel admitted that the sum of $708.25 should be added to the Appellant's earned income described in subparagraph 6 a) of the Reply, consisting of the Appellant's share of partnership income from a hotel. Therefore, the Appeal is allowed respecting that item and the consequent calculations.

[4]      Assumptions 7 d) is correct. The remainder are in dispute on the basis that the Appellant argues that:

1.       All of his income is the result of income that he earned in practice as a lawyer.

2.       He should not be restricted to deducting his support payments from only his "earned income" in any event.

[5]      Ultimately, the question before the Court will be determined by the meaning of "earned income". Subsection 146(1) restricts the "RRSP deduction limit" to... "18% of the taxpayer's earned income for the preceding year"... etc. Subsection 146(1) defines a resident's "earned income" as the taxpayer's income from

(a)       "(i) an office or employment..."

"(ii) a business carried on... or"

"(iii) property, where the income is derived from the rental of real property or from royalties in respect of a work or invention of which the taxpayer was the author or inventor..."

which exceeds

(f)      "an amount deductible under paragraph 60(b)..."

(That is, spousal support paid.)

[6]      The Appellant's remaining 2001 income was pension or interest income and was so declared by the Appellant.

[7]      Thus, the restrictive definition of "earned income" in the Income Tax Act prevents the Appellant from succeeding in his main arguments.

[8]      For these reasons, the Appeal is allowed respecting the amount described in paragraph [3] hereof and this matter is remitted to the Minister of National Revenue for reconsideration and reassessment accordingly.

Signed at Regina, Canada, on this 7^th day of April 2004.

"D.W. Beaubier"

Beaubier, J.

CITATION:

2004TCC259

COURT FILE NO.:

2003-4103(IT)I

STYLE OF CAUSE:

Merrill Leckie v. The Queen

PLACE OF HEARING:

Nanaimo (British Columbia)

DATE OF HEARING:

March 26, 2004

REASONS FOR JUDGMENT BY:

The Honourable Justice D.W. Beaubier

DATE OF JUDGMENT:

April 7, 2004

APPEARANCES:

For the Appellant:

The Appellant himself

Counsel for the Respondent:

Bill J.S. Basran

COUNSEL OF RECORD:

For the Appellant:

Name:

Firm:

For the Respondent:

Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada