Date: 19980717

Docket: 97-956-GST-I

BETWEEN:

JOHN A. BURROWS,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Hamlyn, J.T.C.C.

[1] This is the Appellant’s appeal with respect to Goods and Services Tax (“GST”) under the Excise Tax Act (the “Act”), Notice of Reassessment number 960790492129P 7, dated July 18, 1996, regarding an application for rebate of GST.

[2] By Notice of Assessment the Minister of National Revenue (the “Minister”) disallowed the Appellant’s GST New Housing Rebate application in the amount of $3,526.79 for a house in Portland, Ontario.

FACTS

[3] In disallowing the Appellant’s GST New Housing Rebate application, the Minister made the following assumptions of fact:

(a) the house located at Lot 26, Concession 3, Township of North Burgess, Ontario, designated as Parts 11 and 14 of Plan 27R2762, for which the Appellant claimed a New Housing Rebate, was not constructed for use as the primary place of residence of the Appellant;

(b) the house used as the primary place of residence of the Appellant was located at 904-160 George Street, Ottawa, Ontario; and

(c) both the Appellant and his spouse are employed in Ottawa.

[4] According to the Appellant, the Portland residence is his primary residence and he views the apartment in Ottawa as a transient location. He submits that he purchased the Ottawa residence in order to eliminate the commute from Portland. The unit in question was chosen due to its proximity to the Appellant’s work place. He submits that the transitional nature of this residence is evidenced by the fact that three other residences have been occupied by the Appellant while he has owned the Portland residence and that he intends to dispose of the Ottawa apartment upon retirement. The Appellant further submits the fact that he pays higher property tax for the Portland residence supports his submission that this house is his primary place of residence.

ISSUE

[5] Is the Appellant entitled to a rebate pursuant to section 256 of the Act. In particular, did the Appellant construct the Portland residence for use as the primary place of residence as required by paragraph 256(2)(a) of the Act?

SIGNIFICANT EVIDENCE

[6] The Appellant states his intention was that the Portland residence was to be and is his primary residence.

[7] The Appellant further states he and his wife spent more hourly time at the Portland residence than the Ottawa residence. However, in terms of days, more time was spent at the Ottawa residence than at the Portland residence. He emphasizes that his records, such as his driver’s licence and his income tax returns show his address as the Portland residence. The Appellant asserts that the value of his Portland residence exceeds the value of his Ottawa residence and that this factor is important to him in determining his primary residence.

[8] On cross-examination, he admitted that bank statements and insurance policy notices, T-5’s and charitable donations were sent to his Ottawa address.

[9] For income tax purposes, in 1994, the Appellant elected to treat the Portland property as a deemed disposition in order to utilize the expiring capital gains exemption. For income tax purposes, for that taxation year, the Portland residence was not treated, as the term is defined, as a principal residence under the Income Tax Act.

[10] The evidence from a witness called by the Respondent (the Building official for the municipality where the Portland residence was located) indicated that at the time the building permit was obtained for the Portland residence, the property was zoned seasonal residential and on that basis a permit was issued for pre-construction of a cottage. The zoning by-law has now been changed to allow “limited service residential”. The municipal official also stated no occupancy permit was granted to the Appellant for this property.

ANALYSIS

[11] Subsection 256(2) provides a GST rebate for owner-built homes. Under this subsection, if an individual constructs a single unit residential complex for use as the primary place of residence of that individual, then subject to certain conditions he or she is entitled to a rebate of GST.

256.(2) Rebate for owner-built homes - Where

(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a single unit residential complex for use as the primary place of residence of the particular individual or a relation of the particular individual,

...

the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to

...[1]

[12] The policy underlying this provision is to extend a rebate to those individuals purchasing a new house under a specific dollar value. Hence, it is aimed at ensuring that individuals can purchase affordable housing. Consequently, the rebate is restricted to a single dwelling which is the primary place of residence of the individual, rather than to secondary houses such as cottages and summer homes. At issue, is whether or not the Portland residence is the Appellant’s “primary place of residence” as required by paragraph 256(2)(a).

[13] The Minister’s position on the meaning of “primary place of residence” is found in GST Memorandum 500-4-5, Housing and Other Property Rebates in which it states:

“primary place of residence” means a residential unit, owned jointly or otherwise, which is intended to be inhabited by an individual on a permanent basis. Only one residence may be a person's primary residence. For rebate purposes, if a person has more than one place of residence, the following factors are taken into consideration to determine if the residence qualifies as the primary residence: whether the individual intends to use the home as his or her primary residence, the length of time the premises are inhabited, and the designation of that address on personal records.

[14] The Minister’s Policy Paper P-130 entitled Place of residence, elaborates upon the Minister’s position on the meaning of the term “primary place of residence”. The Policy Paper points out that while a person may have more than one place of residence, he may only have one “primary place of residence”. When determining the primary place of residence, the Paper indicates that consideration should be given to the purpose of the stay, the amount of time of the stay and the physical presence at the residence.

[15] The Act does not define the phrase “for use as the primary place of residence” or the term “primary place of residence”. The Oxford Shorter English Dictionary defines “primary” and “residence” as:[2]

Primary. 2. Of the first importance; principal, chief.

Residence. 3. The place where a person resides; his dwelling-place; the abode of a person.

[16] In this case, the Appellant treats his Portland residence as the property of first importance.

[17] His chief residence from his own resolve and the place he intends as his primary residence is the Portland residence. He treats his Ottawa residence as transitory and intends it to be the subject of a sale when his work career ceases in the foreseeable future.

[18] There is a mix of addresses showing both properties as the primary place of residence.

[19] The lack of compliance with municipal laws affecting zoning and occupancy must be weighed with the other factors. However, it is to be observed from the evidence before the Court that the zoning by-laws appear to be honoured in the breach.

[20] While it is clear from the evidence in any given year, he spends more days in Ottawa, I consider perhaps the days of occupancy as opposed to the hours of occupancy more realistic when considering the length of time the property is inhabited. However, in the Appellant’s definition hours is more important.

[21] On balance, the intention of the Appellant is that Portland is his primary place of residency and his life’s focus in terms of residency is the Portland residence.

CONCLUSION

[22] On that basis and in the absence of any other legislative dictates, I conclude the Appellant’s primary place of residence for the period in question was his Portland residence.

DECISION

[23] The appeal from the assessment made under the Excise Tax Act, notice of which is dated July 18, 1996, and bears number 960790492129P 7 is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant’s Portland residence was his “primary residence” for the purposes of the Appellant’s application for New Housing Rebate.

Signed at Ottawa, Canada, this 17th day of July 1998.

“D. Hamlyn”

J.T.C.C.

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