Benefits - Taxable or Not? #168

By Gerry Neely
B.A., LL.B.

National Revenue's unsuccessful attempt to add to a taxpayer's income may be of interest to your clients whose employers require them to move and to all licensees wearing uniforms. In two separate cases, payments were made to taxpayers by their employers which the Minister of National Revenue wanted to classify as income from employment.

In the first case the taxpayer whose job was with the Federal Government, moved from Ottawa to Edmonton and in the process sold a house in Ottawa with a 12.5 % mortgage and purchased a house in Edmonton with 14.25 % interest on the mortgage financing.

Federal Government employees who relocate at the employer's request and incur additional expenses upon the purchase of a new residence are compensated and compensation includes a mortgage interest differential payment. In this case, the remaining term of the Ottawa mortgage was three years, so over the next three years the taxpayer received approximately $2,600 to compensate him for the higher interest charges on the Edmonton property.

The Minister of National Revenue argued that this was an additional economic benefit to the taxpayer. The taxpayer said that this payment did nothing more than reimburse him for the cost incurred because of his employer's request that he move to Edmonton. The judge decided the issue against the Minister of National Revenue.¹

Another case involved a plainclothes police officer who was paid $500 pursuant to the terms of a collective agreement, to defray the cost of providing outsize clothing he needed to conceal police equipment such as a revolver, handcuffs and walkie-talkie. M.N.R. concluded that this was a benefit and added the sum of $500 to the policeman's income. The issue was the same and again, the judge held that the payment was not a benefit but instead compensation for an expense the employer ordered the policeman to incur.²

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A licensee told a vendor that he represented a person who had previously inspected the vendor's house and was prepared to make an offer, which however was to be subject to an unlimited inspection. The vendor's evidence was that he discussed limiting the inspection to structural soundness, foundations and a search for infestation in detail with the licensee.

Neither party was aware of the instructions given by the other to the licensee. The conditional clause in the offer to purchase which had been accepted by the vendor provided that the sale was subject to "satisfactory inspection of the building structure." The vendor (a barrister) gave evidence that he was told by the licensee that this clause provided for the limited inspection the vendor wanted.

The inspection report confirmed that there were no structural deficiencies and no insect infestation, but that there were other deficiencies which the inspector listed. The purchaser declined to proceed and the vendor sued for damages when the property resold for a lower price.

The trial judge held that the licensee was agent for the purchaser when he approached the vendor, and became agent of the vendor when the vendor signed an exclusive listing. He interpreted the conditional clause to mean an unlimited inspection. The licensee was liable for negligently misrepresenting that the clause had the restricted meaning the vendor relied upon when accepting the offer to purchase.

in addition, the trial judge stated that the licensee had a duty to advise the vendor of the purchaser's instructions concerning the inspection. This non-disclosure was a breach of duty to his principal, the vendor.

The Court of Appeal confirmed the trial judge's findings.³

	1.	Splane v. The Queen, 1990 D.T.C. 6442.
	2.	The Queen v. Hoffman, 90 D.T.C. 6405.
	3.	Whitson v. Heslop, Court of Appeal Victoria Registry V01039, December 20, 1990.

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