Pomerleau c. La Reine

Pomerleau c. La Reine Court (s) Database Tax Court of Canada Judgments Date 2003-02-26 Neutral citation 2003 TCC 92 File numbers 2001-3384(IT)I Judges and Taxing Officers Louise Lamarre Proulx Subjects Income Tax Act Decision Content Docket: 2001-3384(IT)I BETWEEN: NICOLE POMERLEAU, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] ____________________________________________________________________ Appeal heard on February 5, 2003, at Québec, Quebec Before: The Honourable Judge Louise Lamarre Proulx Appearances: For the Appellant: The Appellant herself Counsel for the Respondent: Anne Poirier ____________________________________________________________________ JUDGMENT The appeal from the assessment made under the Income Tax Act for the 1999 taxation year is dismissed in accordance with the attached Reasons for Judgment. Signed at Ottawa, Canada, this 26th day of February 2003. "Louise Lamarre Proulx" J.T.C.C. Citation: 2003TCC192 Date: 20030226 Docket: 2001-3384(IT)I BETWEEN: NICOLE POMERLEAU, Appellant, and HER MAJESTY THE QUEEN, Respondent. [OFFICIAL ENGLISH TRANSLATION] REASONS FOR JUDGMENT Lamarre Proulx, J.T.C.C. [1] This is an appeal under the informal procedure for the 1999 taxation year. [2] The issue is the taxation year in which employment insurance benefits must be included. [3] The facts on which the Minister of National Revenue ("the Minister") relied in making his assessment are set out in paragraph 8 of the Reply to the Notice of Appeal ("the Reply") as follows: [TRANSLATION] (a) in 1999, the appellant received $6,448 in benefits for 1997; (b) Human Resources Development Canada issued the appellant a T4E slip confirming that $6,448 in regular and other employment insurance benefits had been paid to her in 1999; (c) the Minister allowed $6,448 as a deduction for a qualifying retroactive lump-sum payment (hereinafter "QRLSP") but added $1,048.10 to the tax payable; (d) the Minister also calculated an employment insurance overpayment of $1,761.90 under Part VII of the Employment Insurance Act; (e) this amount was deducted in computing taxable income. [4] With regard to subparagraph 8(e) of the Reply, counsel for the respondent requested that the word "taxable" be struck out since, according to the Income Tax Act ("the Act"), this deduction is made from income, not from taxable income. This request was granted since striking out the word did not change the legal debate in any way. [5] The appellant testified. She admitted all the facts alleged in paragraph 8 of the Reply. [6] The appellant stated that her employment insurance claim had been made for and in 1997. [7] She received $6,448 in employment insurance benefits as a result of a decision by the Minister under the Employment Insurance Act in 1999. The employer appealed that decision, and the decision on the appeal was received in 2001. [8] The appellant's employment income in 1999 was $41,466.93. She stated that she had realized when doing her tax return for 1999 that, when she added the employment insurance benefits received that year to her employment income, she had to repay an employment insurance overpayment on line 450 of the return. She had contributed $3,000 to an RRSP that year. She said that, if she had known, she would have contributed more. [9] The appellant suggested that she should include the employment insurance benefits in 1997 or else in 2001, the year the decision was rendered by this Court. Analysis and conclusion [10] Part VII of the Employment Insurance Act is entitled "Benefit Repayment", and it includes sections 144 to 152 of that Act. [11] Section 145 provides that, if a claimant's income for a taxation year exceeds 1.25 times the maximum yearly insurable earnings, the claimant shall repay to the Receiver General 30% of the lesser of (a) the total benefits, other than special benefits, paid to the claimant in the taxation year, and (b) the amount by which the claimant's income for the taxation year exceeds 1.25 times the maximum yearly insurable earnings. The repayment must be made on or before April 30 in the next year. [12] As mentioned in subparagraph 8(d) of the Reply, quoted above, the repayment amount is $1,761.90. This amount is not in dispute. [13] The Minister set out the issue in his Reply as follows: [TRANSLATION] The issue is whether the Minister was justified in using net income in applying Part VII of the Employment Insurance Act. [14] The term "net income" is not found in Part VII of the Employment Insurance Act, nor is it found in the Act. It is used in the tax return forms, as is the term "total income". It seems to me that the Reply should use the legislative terms rather than those used in the forms. In any event, the source of the term should be mentioned if the term is found not in the legislation at issue but in the forms. [15] "Income" is defined in section 144 of the Employment Insurance Act as follows: "income" of a person for a period means the amount that would be their income for the period determined under the Income Tax Act if no amount were (a) deductible under paragraphs 60(v.1) and (w) of that Act, or (b) included in respect of a gain from a disposition of property to which section 79 of that Act applies; [16] Income is computed in accordance with the sections found in Division B of Part I of the Act. [17] Paragraph 60(v.1), which is referred to in the definition of "income" in section 144 of the Employment Insurance Act, is the paragraph that allows the deduction of an unemployment or employment insurance benefit repayment in computing income under the Act. That repayment is not deducted from income for the purpose of calculating the employment insurance benefit repayment. [18] Some lump-sum payments for previous years give rise to tax relief. The legislation on lump-sum payments was enacted in 2000 to offset what taxpayers perceived as tax payments that were too high. The appellant benefited from that legislation, as stated in subparagraph 8(c) of the Reply. [19] The relief occurs in relation to taxable income. Subsection 110.2(2) of the Act provides that the lump-sum payment may be deducted in computing taxable income. However, in computing the tax payable, there must be added an amount calculated in accordance with the provisions of section 120.31 of the Act. That amount is $1,048.10, as indicated in subparagraph 8(c) of the Reply. It is not in dispute either. [20] During the hearing, the appellant stated that she would also have to repay $3,000 received under Quebec's social security legislation (Loi sur la sécurité sociale du Québec) in 1997. In 1997, such an amount was probably included in her income under paragraph 56(1)(u) of the Act. Moreover, as I read the Act, as regards the taxable income computed under Division C of Part I of the Act, and more specifically paragraph 110(1)(f), the said amount would have been deducted in computing taxable income. [21] We will now return to what is basically at issue in this case, namely, the year in which the appellant must include the lump-sum payment she received as employment insurance benefits. Under section 3 and subparagraph 56(1)(a)(iv) of the Act, in computing income for a taxation year, a taxpayer must include any amount received in that year as, on account or in lieu of payment of, or in satisfaction of, employment insurance benefits. The case law is consistent on this point. [22] The appellant was therefore correctly assessed on the basis of the facts and the Act, and her appeal must be dismissed. Signed at Ottawa, Canada, this 26th day of February 2003. "Louise Lamarre Proulx" J.T.C.C.