Ganges Harbor at dawn on Salt Spring Island. Gulf Islands, B.C.Maxvis/AFP/Getty Images
A court has ruled against a British Columbia taxpayer who claimed $134,000 in moving expenses for his relocation from Vancouver to Salt Spring Island, B.C., finding he made the move for personal reasons, not to be closer to work.
In dismissing the taxpayer’s appeal of a Canada Revenue Agency (CRA) decision denying his expenses, the court relied on an e-mail message sent by the taxpayer that appeared to indicate that his primary reason for moving was that his partner wanted to relocate.
“During cross-examination, the [taxpayer] attempted to limit the damage done by his e-mail message,” the judge wrote in his decision. “Those attempts were unsuccessful.”
In Angus v. The King, a Tax Court of Canada decision released on Sept. 4, a taxpayer working as a transportation co-ordinator for the film industry claimed expenses related to a 2021 move to Salt Spring.
In court, the taxpayer stated that he relocated to be closer to job opportunities on Vancouver Island, located to the west of Salt Spring, where an increasing number of productions were being filmed.
Under the Income Tax Act, a taxpayer may claim certain moving expenses, such as real estate commissions on the sale of a home, when relocating to a new residence that is 40 kilometres closer to their new job than their old residence.
To deduct the moving expenses, the taxpayer’s move must qualify as an “eligible relocation” under the Act, one of the requirements being that it “occurs to enable the taxpayer to carry on a business or to be employed at a location.”
The CRA denied the claim, arguing that the relocation didn’t occur to allow the taxpayer to be employed at a new work location. At the appeal, the Crown argued that the taxpayer made the move for personal reasons, failing to meet the “eligible relocation” requirement.
In making his decision, the judge considered an e-mail message the taxpayer wrote indicating his reason for leaving Vancouver was that someone “had tried to burn down the building that was adjacent to our property on East 5th Ave. The arsonist tried twice, and this was very upsetting to my partner.” He added: “I also worked on a project that was being filmed on Vancouver Island.”
The judge noted that, typically, an e-mail message would be considered “hearsay” and therefore be inadmissible into evidence. Nevertheless, the judge decided to admit the e-mail under a “party admission” exception.
In this case, the taxpayer sent the e-mail to Crown counsel, through his representative in the appeal, in response to a question posed before the hearing.
“The rule against hearsay is about fairness, and so, in general, you can’t rely on statements that can’t be tested in court,” says Jennifer Mak, partner with Counter Tax Litigators in Toronto. “But in this case, the taxpayer was present in court, and he could be, and was, cross-examined about the facts set out in his e-mail.”
In cross-examination, the taxpayer only appeared to confirm that the reason for the move was personal, testifying that the couple’s Vancouver home “was a very comfortable house, I must say that. You know, but partners being partners, they have influence.”
Upon reviewing the testimony and evidence, the judge stated that he was satisfied, on the balance of probabilities, that the taxpayer’s move was made primarily for personal reasons.
Ms. Mak says that where the CRA finds an inconsistency in a taxpayer’s argument, it will “use it to drive their position,” as it did in Angus v. The King.
“We see strategy frequently shaping the outcome of tax disputes,” Ms. Mak adds. “How the position is framed from the start, and how consistently it’s carried through, often decides where the case ends up.”
She noted that in the decision, both the “Crown and the court placed significant emphasis on the reason that the taxpayer left as opposed to the reason for choosing the new location.
“While the reason he chose to leave his current residence may have been personal, he could have moved anywhere, and somewhere closer [to his old residence], but he chose to move to that particular location [on Salt Spring] for business reasons.”
Editor’s note: A previous version of this article stated Jennifer Mak is an associate at Counter Tax Litigators in Toronto. She has recently been named partner.