BETWEEN:
and
REASONS FOR JUDGMENT
(Delivered orally from the bench
on September 30, 2005, in Toronto, Ontario.)
[1] These appeals are from assessments made by the Minister of National Revenue for Mr. McGoldrick's 2002 and 2003 taxation years concerning the quantum of taxable benefits. The Minister included the amounts of $990 and $938 in the Appellant's income for the two relevant years, respectively. He determined that these amounts accurately represented the value of free meals provided by the Appellant's employer.
[2] The Appellant appealed his assessments for the 2000 and 2001 taxation years to the Tax Court of Canada and subsequently, to the Federal Court of Appeal. The issue was the inclusion of the meal benefits in his employment income. The Appellant's appeals, and in particular to the Federal Court of Appeal, were dismissed.
[3] The Appellant was encouraged to present these appeals from the following comment in paragraph 11 of the decision of Malone, J.A. in the Federal Court of Appeal,[1] after he stated that the meals provided were a taxable benefit:
He..." the Appellant, "...did not, however, raise a quantum issue in the notice of appeal to the Tax Court. Before that Court, he specifically noted that he was confining his evidence and argument to the question of whether the meals and seasonable gifts were a taxable benefit and did not address the quantum of the benefit. While he might well have been able to challenge the value of the benefit received if it had been an issue before the Tax Court, that was not the case and accordingly that avenue of appeal is not open to him. Of course, this does not preclude him from objecting to the quantum of taxable benefits assessed in subsequent years if he is not out of time to file such objections.
[4] The following facts taken from the judgment of Justice Woods,[2] are accurate as far as they go:
Many of the facts are not in dispute. Mr. McGoldrick is an employee of Casino Rama Services Inc. ('Casino Rama') located near Orillia, Ontario. Casino Rama is a large casino complex with over 2,000 full-time employees..."
The evidence presently is that there were close to 4,000 employees.
The employer provided one meal per shift at no charge to employees such as Mr. McGoldrick and reported the cost as a taxable benefit on T4 slips. It also provided other 'perks' such as entertainment events and free hams and turkeys on holidays and similarly reported the cost as a taxable benefit. The amount of the taxable benefit was calculated by dividing the total cost of providing the benefits by the number of employees entitled to take advantage of them. In Mr. McGoldrick's case, approximately $4.50 per day, or just under $1,000 per year, was reported in respect of all these benefits.
Most of the testimony related to the provision of the free meal per shift. Employees had an opportunity to eat free of charge at the staff cafeteria, the Turtle Island Cafe, on their half hour break. They were generally not allowed to bring food onto the premises for sanitation reasons and Casino Rama's location made it impractical to eat offsite. Further, employees were not allowed to leave the premises during shifts without permission. Accordingly, employees had no alternative for meals, other than vending machines located in lounges. The testimony of the Vice President, Human Resources of Casino Rama was that the provision of meals was for the employer's benefit as it enhanced the attractiveness of the casino.
Mr. McGoldrick did not like eating at the Turtle Island Cafe but because there was no alternative he ate there on most days. ...
I accept the evidence of the Appellant that for 2002 and 2003, he ate there 50% of the available days. He corroborated his evidence with employee meal cards.[3]
[5] The issue of quantum of the benefit in the present appeals is different from the issue considered previously by the Tax Court and the Federal Court of Appeal, which was whether the meals were a benefit. As a floor supervisor, he earns about $37,500 per year and approximately $950 is added to his income as a benefit. He pays some $300 annually in tax for that benefit. It is this $300 that brings him to the Tax Court. He referred to eleven cases included in his Book of Authorities, but I believe I do not need to go further than the Federal Court of Appeal decision of Justice Malone mentioned above.
[6] In the previous decisions, the Courts found that the meals, turkeys and hams, were a benefit. I am bound by the Federal Court of Appeal decision in this regard and commence from that premise. With respect to quantum, the Minister's position is taken from the Reply to the Notice of Appeal, and specifically, the assumptions in paragraphs 9(e) and (h), which read:
(e) The taxable allowances and benefits reported in the T4 statements of remuneration paid that were issued to the Appellant by the Employer in the amounts of $990.65 and $938.37 in 2002 and 2003, respectively, represent the value of meals provided by the Employer, without cost to the Appellant; by the Employer;
...
(h) the value of the meals was determined by the Employer using an equitable method of calculation that took into account the cost of food and its preparation and service;
In support of this, the Respondent called as a witness Elizabeth Anne Huisman, Executive Director, Finance, for Casino Rama, and I accept her evidence.
[7] The Appellant's position, as presented by both the Appellant and his agent, was that the employer's accounting to determine the value of meals was incorrect. The Appellant called Steven Chase, Director, Food and Beverages, for Casino Rama to support his position. The evidence of Mr. Chase is of assistance to the Appellant's position as to the value of the meals. The Minister concluded that the value of each available meal is $4.50. The Appellant submits it is $2.00 per meal.
[8] The evidence with respect to quantum, as I find it, considering all of the evidence presented, includes the following:
(i) The Appellant, in fact, ate in the Turtle Lounge 50% of the times available to him yet he is deemed, in the employer's accounting and by the Minister, to have eaten 100% of the available free meals.
(ii) Also available to the Appellant were in-house vending machines where he could have a lunch at least equal, in his estimation, to the Turtle Lounge for $2.00. This included an egg salad sandwich at 75 ¢ , a pudding cup at 75 ¢ and fruit at 50 ¢ .
(iii) The Appellant added that if he were permitted to bring his own lunch, it would be equal to or better and cheaper than that provided by his employer, including the vending machines.
[9] The Appellant's most serious complaint about his employer's dining facility, apart from the $4.50 charge, was the menu. In this regard he presented Exhibit A-1, a menu for February 2005, not a relevant year, which included stuffed green peppers four days in a row, as follows:
February 18: Sandwich day
February 19: Chicken, pork, stuffed green peppers
February 20: Stuffed green peppers, sausage, pizza
February 21: Hungarian meatballs, chicken
February 22: Stuffed green peppers, sole fingers, chicken
February 23: Stuffed green peppers, sole fingers
Although the 4,000 or so employees were treated equally with respect to the $4.50 meal, each case must be considered on its own merits.
[10] I have no hesitation in concluding that for Mr. McGoldrick, the Turtle Lounge meal had a value of $2.25, being 50% of the value attributed by the Minister for the relevant years, the $990 and $938, and find the benefit amounts should be $495 and $469, respectively, for 2002 and 2003. The decision does not end with this finding.
[11] The Minister's counsel submitted that it did not matter whether the Appellant used the benefit or not; if the value was $4.50 per meal, as equitably calculated by his employer averaged over the 4,000 employees, then it is irrelevant whether or not he used the Turtle Lounge 50% of the time or 100% of the time, or anything in between. The free meals were available throughout the working year and the Appellant provided no relevant or helpful evidence that the value of meals was less than that assessed by the Minister.
[12] In support of the Respondent's position, he referred to the cases of Detchon v. The Queen,[4] Soper v. M.N.R.[5] and Richmondv. The Queen.[6] In Richmond, the taxpayer worked at Metro Hall, Toronto, and was given a reserved parking spot at no charge by his employer. Since he lived very close to Metro Hall, Richmond used the parking space only about 20% of the year. The space was available to him every day throughout the year. The Minister included in Richmond's income $1,800 representing the value of a full year reserved parking in the area. Justice Bell concluded:
This issue was considered by Judge Rip in Soper. In that case a corporation purchased three houses in Florida and later sold same. During the years in question, the Appellant, the controlling shareholder of the corporation, was able to use one of the properties whenever she wished. She chose to use it for a few weeks only each year. The issue was whether the benefit conferred on her was equal to the fair rental value for the whole year or only for such time as she actually used the premises. This Court found that the Minister was correct in determining the quantum of benefit by using the fair rental value approach because the properties were clearly being maintained for the shareholder all year round and she received substantially all of the benefit to the exclusion of everyone else.
Whether the Appellant used the property is of little consequence. It was available to him and was accordingly a benefit to him. He adduced no evidence to establish that the value of the assigned exclusive parking spot was less than that assessed by the Minister. In the circumstances, the Appellant cannot succeed in his appeal. Accordingly, the appeal is dismissed.
With respect to Mr. McGoldrick, the Minister applied the same reasoning.
[13] Malone, J.A., appears to take a different position to that of Justices Rip and Bell. He stated at paragraphs 9, 10 and 11, and I note that paragraph 11 was quoted earlier, so I will read 9 and 10 in part:
As a general rule, any material acquisition in respect of employment which confers an economic benefit on a taxpayer and does not constitute an exemption falls within paragraph 6(1)(a)...
And he refers to Savage:[7]
In this case, the benefit is the money saved by the taxpayer in preparing a lunch or in making a food purchase from the casino vending machines while at work.. ...
Then in paragraph 10, he goes on to say:
In oral argument, the appellant frequently noted that, in his view, the meals were not worth the $4.50/day ascribed by the employer as the taxable benefit. That amount was based on the cost to the employer of providing the meals and seasonal gifts, including the PST and GST. He also indicated that although assessed as a tax benefit on the basis that he received such a meal every day he worked more than five hours, in fact he often declined to go to the cafeteria. As a person living alone, he often did not take the turkeys or hams offered at holidays.
While his comments were obiter dicta, they cannot be simply ignored. I can only conclude that the Federal Court of Appeal's observations are directives for the very purpose I am confronted with.
[14] Again the Federal Court of Appeal stated in paragraph 11 set out above, that the Appellant might well have been able to challenge the value of the benefit received if it had been an issue before the Tax Court of Canada, and added that the Appellant is not precluded from an objection to quantum in subsequent years. The Federal Court of Appeal is of the opinion that the quantum of the benefit to the Appellant is the money saved in preparing a lunch or making a food purchase from the casino vending machines while at work. This I conclude was one-half the benefit assessed by the Minister.
[15] By no means is this conclusion intended to apply to all the Casino Rama employees, or even to the 200 or so employees that the Appellant referred to in some generality who may support his position. Any case is dependent on its particular facts.
[16] I accept as a fact that the amounts calculated by the employer and referred to in the assessments of the Minister of $938 and $990, which I believe is $4.50 a meal, is a fair value; and I accept the Appellant's evidence that he used the cafeteria one-half of the time.
[17] The appeal is allowed. The matter is referred back to the Minister for redetermination and reassessment on the basis that the value of the meals that are benefits of employment of the Appellant, and to be included in the Appellant's income, are reduced by 50% to $495 and $469 for the 2002 and 2003 taxation years, respectively, as required by paragraph 6(1)(a) of the Income Tax Act.
[18] I allow costs to the Appellant in the amount of $500.
Signed at Ottawa, Canada, this 7th day of December, 2005.
COURT FILE NO.: 2004-4470(IT)I
STYLE OF CAUSE: Douglas J. McGoldrick and The Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 30, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice C.H. McArthur
DATE OF JUDGMENT: October 7, 2005
APPEARANCES:
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Ontario