Citation: 2007TCC740
Date: 20071207
Docket: 2006-2606(IT)I
BETWEEN:
JOSEPH LOH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench on September 28, 2007, in Toronto, Ontario.)
Boyle, J.
[1] These are my Reasons for Judgment delivered
orally in Toronto in Mr. Loh’s informal appeal of his
2004 taxation year. There is only one issue to be addressed, whether not the
amount of $6,310 Mr. Loh withdrew from his RRSP in 2004 and used to
buy a house in 2004 was an excluded withdrawal under the Home Buyers Plan
provisions or was properly included by the Minister in his income.
[2] The taxpayer and his wife signed an offer
on a house on October 20, 2003. On that day, the taxpayer also made
an HBP withdrawal from his RRSP in the amount of $13,837 to finance the
deposit. Unfortunately, that deal fell through; however, the HBP regime allowed
them until October 1, 2004 to complete a purchase with these funds.
[3] In 2004, the Lohs did purchase a different
home. The Minister acknowledges the home was a qualifying home and was
purchased in a timely fashion for HBP purposes.
[4] The HBP regime allows a taxpayer to
withdraw up to $20,000 from his RRSP to be used to purchase a home. The
taxpayer therefore withdrew a further $6,310 from his RRSP on April 12, 2004
to complete his house purchase that month.
[5] I do not know why Mr. Loh’s two
withdrawals slightly exceeded the $20,000 HBP limit by $147 but that is not
today’s issue.
[6] Ignoring that $147, Mr. Loh’s issue
today arises solely because he made two HBP withdrawals in two different
calendar years. Had Mr. Loh withdrawn the whole $20,000 at once in either
year, or had he made his two withdrawals during the same year, he would not
have been reassessed or be in Court today. In fact, by virtue of the special
deeming rule in paragraph 146.01(2)(d), he would clearly be onside had
his 2004 withdrawal been made in January 2004 instead of early April.
[7] The HBP provisions are drafted to integrate
into the Act’s RRSP regime, which like computation of income and tax, generally
work by calendar year. At the same time the HBP regime recognizes the realities
of buying and financing homes by allowing for such things as a first purchase
falling through, closing in the next year and the like.
[8] The HBP regime can also accommodate
withdrawing the $20,000 from an RRSP in more than one tranche. The general HBP
provisions work smoothly for multiple withdrawals provided they are made in the
same calendar year. They clearly work smoothly if a subsequent withdrawal is
made in January of the following year.
[9] This could also have worked smoothly for
Mr. Loh had he repaid his 2003 withdrawal before 2004. This would have
reduced his HBP balance, as defined in subsection 146.01(1), to nil by the
operation of that definition and the subsection 146.01(3) repayment
provisions. Mr. Loh could then have withdrawn the entire $20,000 in 2004.
[10] Unfortunately for Mr. Loh, none of
these are what happened. The Minister reassessed Mr. Loh’s 2004 year to
include his 2004 withdrawal of $6,310 in his income and assessed tax on it. The
Minister’s position is that the 2004 withdrawal was not an “excluded withdrawal”
as defined in subsection 146.01(1) because of the requirement in the definition
of “regular eligible amount” in paragraph (i) that Mr. Loh’s HBP
balance at the beginning of 2004 be nil. The Minister reassessed on the basis
that Mr. Loh’s HBP balance at the beginning of 2004 equalled the amount of
his 2003 withdrawal of $13,837.
[11] Mr. Loh questions how this can be the
correct result when the money from both withdrawals was used by him to purchase
a qualifying home in a timely fashion, that is before October 1, 2004.
That is, even if there was a technical problem resulting from the wording of
the way the Act addresses withdrawals in two calendar years (which
technical problem he does not concede), how can the result be that he is to pay
tax on it as if his 2004 withdrawal was any other RRSP withdrawal and not used
to buy his house as it was? This is an entirely understandable concern raised
by Mr. Loh.
[12] However, as explained to him, this Court is
bound to ensure that the reassessment results from a correct application of the
provisions of the Act as written in law, and this Court does not have
discretion to depart from those provisions to achieve a result the taxpayer,
the Court or both may view as more fair or appropriate from an economic or tax
policy or other point of view.
[13] I do not have any discretion but to ensure
the provisions of the Income Tax Act are applied, nor do I have any
authority to review how the Minister exercises any discretionary powers she is
given in the Act, nor to review why she finds something to her
satisfaction or acceptable or not when the Act requires her to be
satisfied of something or to decide its acceptability.
[14] I therefore turn to the question of whether
the 2004 reassessment under appeal reflects the correct application of the
provisions of the Act to the facts of this case.
[15] I am satisfied that the reassessment would
be correct but for the special rule set out in paragraph 146.01(2)(d). This
is a deeming rule applicable to the HBP regime in section 146.01. It is a
mandatory rule which must be considered and applied. It is not special relief
that a taxpayer may request. The result of the application of this deeming rule
will be that in certain specific circumstances a withdrawal made in 2004 will
be deemed to have been made in 2003.
[16] If that were the case here, Mr. Loh’s
2004 withdrawal would be deemed to have been made in 2003, and since his 2003
opening HBP balance was nil, his technical problem would no longer exist. Clearly,
the rule is intended to apply to the very case of two withdrawals in different
calendar years. So does it apply to Mr. Loh’s circumstances?
[17] The paragraph 146.01(2)(d) special
rule provides that:
(d) an amount received by an
individual in a particular calendar year is deemed to have been received by the
individual at the end of the preceding calendar year and not at any other time
if
(i) the amount is received in January of the particular year (or at
such later time as is acceptable to the Minister),
[…]
[18] Since Mr. Loh’s 2004 withdrawal was
received in early April 2004, not in January 2004, how this deeming rule
applies to Mr. Loh’s facts depends upon whether early April 2004 is or is
not such a later time as was acceptable to the Minister.
[19] In French this phrase is : « ou à
tout moment postérieur que le ministre estime acceptable ».
[20] I cannot apply this deeming rule unless I
know whether April 12 was a later time acceptable to the Minister. That
fact was not pleaded, was not stated in the assumptions and was not put in
evidence. I do not know that fact.
[21] I note that the Minister’s initial Reply did
not even refer to paragraph 146.01(2)(d). That is consistent with
the Minister not having turned her mind to this special rule nor having
decided, as she is clearly required to do, whether or not April 12, 2004
was or was not an acceptable later time in the particular taxpayer’s
circumstances.
[22] The Minister’s amended Reply sets out that
the Minister has the discretionary power to deem the 2004 withdrawal to have
been made in 2003, and that this Court does not have jurisdiction to judicially
review the exercise of that discretionary power. The Minister is not correct to
say that paragraph 146.01(2)(d) gives her a discretionary power to deem
something. Properly read it is a deeming provision, the result of which turns
on whether or not she finds something acceptable or not in a particular
taxpayer’s circumstances.
[23] If the Minister has made such a
determination whether or not such later date was acceptable, it is correct to
say that this Court cannot judicially review whether or not she should have
found it acceptable, nor how she went about making that determination.
[24] However, if the Minister did not turn her
mind to making such a determination in this case, the deeming rule cannot be
applied one way or another to the facts of this case, that is this Court does
not know based on the factual record before it whether or not the Act,
not the Minister, deems the 2004 withdrawal to have been made in 2003 by virtue
of paragraph 146.01(2)(d).
[25] Does this mean that the Minister’s
reassessment is presumed to be correct because the taxpayer cannot show it was
incorrect? That would be inappropriate. In this case, the missing fact of
whether or not the Minister found April 12 an acceptable later date or
whether she ever turned her mind to it was within the particular knowledge of
the Minister. The Minister did not address this in its pleaded assumptions, so
it is not presumed to be the case either.
[26] In the case of a self-represented taxpayer
in an informal appeal to this Court, my aim is to try to ensure the appellant
is satisfied that when he is unsuccessful, he has been listened to and
understands why the result is what it is. At the very least, I want an
informal self-represented taxpayer to leave knowing I am satisfied that the
reassessment he is appealing from is the correct result of the application of
the relevant provisions of the Act to the facts in evidence even if he
still doesn’t understand or accept my explanation or accept my findings of
fact.
[27] In this case, it appears the Minister may
well not have turned her mind to applying paragraph 146.01(2)(d). Certainly,
if she did turn her mind to it whether or not she found April 12
acceptable or not is not in evidence. That it wasn’t pleaded as a fact or an
assumed fact suggests she did not make such a decision one way or another. The
Court is unable to know the outcome of the application of the paragraph
146.01(2)(d) deeming rule.
[28] That means I do not know if the 2004
withdrawal was made in 2003 or 2004 for purposes of the HBP, and I am therefore
unable to determine if the withdrawal made by Mr. Loh in April 2004
is or is not a “regular eligible amount” or an “excluded withdrawal”.
[29] Since it is apparent and I find the
Minister did not turn her mind to whether or not April 12, 2004 was or was
not an acceptable date for purposes of the special deeming rule, this would not
be an appropriate situation for me to make an inference of fact that she did
find it not acceptable from the fact she reassessed.
[30] This appeal requires me to review whether
the reassessment has properly applied the Act’s provisions relating to
the HBP to Mr. Loh’s circumstances. Such a review of whether all of the HBP
provisions have been properly applied does not constitute a review of how or
why the Minister decided what was acceptable or what was not acceptable. This
Court does not have jurisdiction to judicially review the Minister’s decision-making
process where the Act requires her to make a decision, such as whether
or not to exercise a discretionary power given to her or whether or not she
found something acceptable or not in the HBP provisions in question.
[31] This Court does need to be satisfied that
the Income Tax Act provisions that are applicable are properly applied. That
does not constitute judicial review of a ministerial decision. In this case, I
cannot be satisfied the Act’s provisions have been properly applied
because I don’t know that the Minister even considered whether April 12, 2004
was acceptable, much less whether she decided if it was acceptable or
unacceptable for purposes of applying the particular deeming rule.
[32] Paragraph 146.01(2)(d) is not
drafted as a discretionary provision that may or may not be applied by the
Minister. Unlike many of the Act’s relieving provisions, the taxpayer
does not have to request its relief. Again, it requires the Minister to decide
if the later date is or is not acceptable, and it is only that decision of
acceptability that is within the Minister’s discretion and not subject to
judicial review by this Court.
[33] I was referred to this Court’s 1999
decision in Bergeron v. Her Majesty the Queen, 1999 TCC 971037. While factually similar to the facts in
Mr. Loh’s case, the Reasons in Bergeron do not address the
paragraph 146.01(2)(d) deeming rule (then found in subparagraph 146.01(2)(f)(ii)).
In Bergeron, the matter must not have been raised or there must have
been evidence or at least an assumption that the Minister did not find the
later date acceptable in that case. Such is not the case here.
[34] The Minister’s reassessment cannot in the
circumstances be upheld. What then is the appropriate relief or remedy? I
certainly cannot substitute my view of what the Minister should have found
acceptable. That would be in the nature of a judicial review power this Court
doesn’t have.
[35] Since I cannot conclude the HBP provisions
have been properly applied and I don’t have the fact needed from the
Minister to properly apply them, I am allowing the appeal and vacating the 2004
reassessment appealed from.
[36] Importantly, since Mr. Loh’s 2004 year
was initially assessed by the Minister on July 21, 2005,
Mr. Loh’s 2004 taxation year is not statute barred and the Minister has
until July 21, 2008 under the provisions of the Act to again
reassess him for the 2004 withdrawal if she decides that April 12, 2004
was not an acceptable date for the second withdrawal.
Signed at Ottawa, Canada, this 7th
day of December 2007.
"Patrick Boyle"
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