T-1946-78
Otto John Rath (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Mahoney J.—Ottawa, March 5
and 7, 1979.
Income tax — Income calculation — Deductions — Moving
expenses — Plaintiff transferred from Edmonton to Ottawa
near end of sabbatical year — Portion of plaintiffs goods
moved from Berkeley, California, after use during sabbatical,
to Ottawa where goods were stored — Goods in storage
destroyed by fire and only partially insured — Whether or not
moving expenses from Berkeley to Ottawa deductible, and
whether or not value of destroyed, uninsured goods valid and
deductible moving expense — Income Tax Act, S.C. 1970-71-
72, c. 63, s. 62.
Plaintiff appeals reassessments of his 1974 and 1975, income
tax returns disallowing claims, as deductions under section 62
of the Income Tax Act, of the uninsured value of household
goods and personal effects destroyed by fire while in storage in
the course of a move. The goods were stored in Ottawa after
being moved from Berkeley, California, at the end of plaintiff's
sabbatical. Rather than being moved back to Edmonton where
plaintiff worked, the portion of plaintiff's goods that had been
at Berkeley were moved to Ottawa where plaintiff had been
transferred. Defendant argues that the loss of the value of the
goods and effects destroyed, or the cost of replacing them, is
not a moving expense, and even if it were a moving expense, it
would not be deductible because it was not incurred in the
course of moving them between two points in Canada.
Held, the appeal is dismissed. Plaintiff's old residence was
Edmonton, not Berkeley, and he was entitled to deduct his
moving expenses from Edmonton to Ottawa. The Act does not
stipulate that the movement of his goods and effects must
invariably be between the same two points although that gener
ally would be so. The quantum of the damage suffered by the
plaintiff in the destruction of his goods and effects, even if the
amount can be considered to have been paid by him, is not
simply a moving expense in the natural and ordinary meaning
of that term. The outlays necessarily incurred to replace those
goods were not outlays incurred to effect their physical transfer
nor were they specifically allowed by subsection 62(3).
Storrow v. The Queen [1979] 1 F.C. 595, applied.
INCOME tax appeal.
COUNSEL:
Mrs. O. J. Rath for plaintiff.
Charles G. Pearson for defendant.
SOLICITORS:
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: The plaintiff appeals reassess
ments of his 1974 and 1975 income tax returns
disallowing claims, as deductions under section 62
of the Income Tax Act,' of the uninsured value of
household goods and personal effects destroyed by
fire while in storage in the course of a move.
The plaintiff is a senior officer in a federal
government department. He was employed at
Edmonton, Alberta. In August, 1973, he began a
leave of absence for educational purposes. He
moved with his family and a portion of his
household goods and personal effects to Berkeley,
California. Toward the end of his leave he was
offered, and accepted, a posting from his Edmon-
ton appointment to an Ottawa appointment, effec
tive July 15, 1974. The goods and effects in Berke-
ley were, as common sense dictated, shipped direct
to Ottawa and put in storage while the plaintiff,
with his family, returned to Edmonton to settle
both his official and personal affairs before pro
ceeding to Ottawa. A new house was acquired in
Ottawa. The goods and effects that had been left
in Edmonton were shipped and moved directly into
the Ottawa house; they are not involved in the
issue here. The goods and effects shipped from
Berkeley, while in storage in Ottawa, were totally
destroyed by fire.
The total valuation put on the lost goods was
$74,808.19.* Insurance covered $22,000 of the
loss. The plaintiff claimed the $52,869.19 balance
as a section 62 deduction in his 1974 return. That
amount exceeded his 1974 earnings at his new
work location and the deduction was disallowed to
the extent of the excess only in the initial assess
ment of the return. The disallowed balance was
claimed and allowed in 1975. Large refunds
I S.C. 1970-71-72, c. 63.
* The correct amount, disclosed during examination for dis
covery, was $75,350.76; however the pleadings were not
amended.
ensued upon the initial assessments and the reas
sessments in issue have resulted in demands for
their repayment.
The defendant says, firstly, that the loss of the
value of the goods and effects destroyed or, in the
alternative, the cost of replacing them, is not a
moving expense at all and, secondly, that it is not
deductible, even if it is a moving expense, because
it was not incurred in the course of moving them
between two points in Canada. The relevant provi
sions of the Income Tax Act, as it stood in 1974,
follow:
62. (1) Where a taxpayer
(a) has, at any time,
(i) ceased to carry on business or to be employed at the
location or locations, as the case may be, in Canada at
which he ordinarily so carried on business or was so
employed, ...
and commenced to carry on business or to be employed at
another location in Canada (hereinafter referred to as his
"new work location"), ...
and by reason thereof has moved from the residence in Canada
at which, before the move, he ordinarily resided on ordinary
working days (hereinafter referred to as his "old residence") to
a residence in Canada at which, after the move, he ordinarily so
resided (hereinafter referred to as his "new residence"), so that
the distance between his old residence and his new work
location is not less than 25 miles greater than the distance
between his new residence and his new work location, in
computing his income for the taxation year in which he moved
from his old residence to his new residence or for the immedi
ately following taxation year, there may be deducted amounts
paid by him as or on account of moving expenses incurred in
the course of moving from his old residence to his new resi
dence, to the extent that
The limitations that follow are not in issue. The
only one applicable, contained in paragraph (J),
has been referred to. It required a portion of the
deduction to be deferred. Subsection 62(2) has no
application. Subsection (3) provides:
62. ...
(3) In subsection (1), "moving expenses" includes any
expense incurred as or on account of
(a) travelling costs (including a reasonable amount expend
ed for meals and lodging), in the course of moving the
taxpayer and members of his household from his old resi
dence to his new residence,
(b) the cost to him of transporting or storing household
effects in the course of moving from his old residence to his
new residence,
(c) the cost to him of meals or lodging near the old residence
or the new residence for the taxpayer and members of his
household for a period not exceeding 15 days,
(d) the cost to him of cancelling the lease, if any, by virtue
of which he was the lessee of his old residence, and
(e) his selling costs in respect of the sale of his old residence.
While the plaintiff was represented by counsel
before the Tax Review Board, his case, in this
Court, was presented by his wife, who was the only
witness. The plaintiff did not, himself, testify. It
appears desirable, in those circumstances, to deal
with some matters which, while not material to the
issue, are obviously very important to them. The
facts that the Ottawa storage arrangements were
made by the Edmonton office of the Department
of Supply and Services while they were in Berkeley
and that, as a result, they were frustrated in their
efforts to buy adequate insurance because they
could not get the particulars of the construction of
the warehouse, its distance from a fire hydrant and
so on, and the further fact that the refunds had
long been spent to replace the lost goods when
their repayment was demanded with, to add insult
to injury, interest, all render most understandable
the very genuine grievance which they obviously
feel. Like the learned Assistant Chairman of the
Tax Review Board, I have every sympathy for
them. While the plaintiff holds a well paid office,
the returns in evidence do not lead to the conclu
sion that the family is wealthy and the loss was
substantial, if not ruinous. Obviously, not all the
surrounding circumstances are in evidence and it is
not for the Court to say whether the plaintiff
would be wise to seek to have the Governor in
Council consider the matter on an ex gratia basis.
Returning to the Act as it stood in 1974, the
term "residence" as used in section 62 is clearly
defined, modified by the adjectives "old" and
"new", as a location within Canada at which the
taxpayer ordinarily resided on working days. I
have no hesitation in finding that the plaintiff's old
residence was Edmonton, not Berkeley, and he was
entitled to deduct "amounts paid by him as or on
account of moving expenses incurred in the course
of moving" from Edmonton to Ottawa. The basis
of the deduction is a move by the taxpayer from
his old to new residence. The Act does not stipu
late that the movement of his goods and effects
must invariably be between the same two points
although, it stands to reason, that would generally
be so. Here, it was entirely reasonable, indeed
necessary, if a prodigal waste were not to result,
for the plaintiff, in the course of his move from
Edmonton to Ottawa, to transport the subject
goods from Berkeley to Ottawa and to store them
in Ottawa. I am satisfied that, if the amount
claimed were on account of a moving expense at
all, it would, in the circumstances, be deductible.
I do not intend here to dwell upon the import of
the word "paid" in section 62. It may be that the
fact that the deduction is apparently limited to
"amounts paid" would exclude the plaintiff's claim
in any case. That, however, is a point that would
be better dealt with on an occasion when the Court
has the benefit of hearing counsel on both sides. It
is not necessary to decide it here.
In Storrow v. The Queen, 2 Mr. Justice Collier
dealt with a number of expenses which, like the
plaintiffs loss, would not have been incurred had
the taxpayer not moved. Their nature appears in
the following passage from the judgment.
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
subsection 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
subsection 62(3), do not, as I see it, mean outlays or costs
incurred in connection with the acquisition of the new resi
dence. Only outlays incurred to effect the physical transfer of
2 [1979] 1 F.C. 595 at page 599.
the taxpayer, his household, and their belongings to the new
residence are deductible.
While the subject matter of the deductions sought
in the Storrow case are entirely different from
those here: costs incurred in connection with the
acquisition of the new residence, rather than
damage incurred in transit, the principle is the
same.
The quantum of the damage suffered by the
plaintiff in the destruction of his goods and effects,
even if that amount can be considered to have been
paid by him, is simply not a moving expense in the
natural and ordinary meaning of that term. The
outlays necessarily incurred to replace those goods
were not outlays incurred to effect their physical
transfer nor were they specifically allowed by sub
section 62(3).
JUDGMENT
The plaintiffs action is dismissed with costs.
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