Merali v. Minister of National Revenue, (1988) 86 N.R. 78 (FCA)

• Judge: Mahoney, Hugessen and Desjardins, JJ.
• Court: Federal Court of Appeal (Canada)
• Case Date: February 12, 1988
• Jurisdiction: Canada (Federal)
• Citations: (1988), 86 N.R. 78 (FCA)

Merali v. MNR (1988), 86 N.R. 78 (FCA)

MLB headnote and full text

Her Majesty the Queen (appellant) v. Pandju Merali (respondent)

(No. A-272-86)

Indexed As: Merali v. Minister of National Revenue

Federal Court of Appeal

Mahoney, Hugessen and Desjardins, JJ.

February 26, 1988.

Summary:

From 1978-1980 a U.S. resident earned rental income from Canadian property. The taxpayer elected under s. 216(1) of the Income Tax Act to pay tax on the net rental income as if he were a Canadian resident, rather than paying the nonresident withholding tax. The taxpayer incurred noncapital losses of $212,013.00 in 1978-1979, which were nondeductible under s. 216. In 1981 the taxpayer became a Canadian resident. In filing his 1981 return the taxpayer deducted the $212,013.00 as a noncapital loss under s. 111(1)(a). The Minister disallowed the deduction. The taxpayer appealed under s. 172(2) of the Act.

The Federal Court of Canada, Trial Division, in a decision reported 2 F.T.R. 216, allowed the appeal. The court held that noncapital losses sustained by a nonresident taxpayer could be carried forward and deducted in the year the taxpayer became a Canadian resident. The Minister appealed.

The Federal Court of Appeal dismissed the appeal.

Income Tax - Topic 1155

Income from business or property - Deductions - Noncapital losses - Where nonresident becomes a resident - From 1978-1980 a U.S. resident who earned rental income from Canadian property elected under s. 216(1) of the Income Tax Act to pay tax on the net rental income as if he were a Canadian resident - The taxpayer incurred noncapital losses of $212,013.00 in 1978-1979 - In 1981 the taxpayer became a Canadian resident and filed a return deducting the $212,013.00 as a noncapital loss under s. 111(1)(a) of the Act - The Federal Court of Appeal affirmed that the noncapital losses could be carried forward and deducted in the year the taxpayer became a Canadian resident.

Cases Noticed:

Oceanspan Carriers Ltd. v. Minister of National Revenue, [1987] 2 F.C. 171; 73 N.R. 91, dist. [para. 21].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 2 [paras. 8, 18]; sect. 111(1)(a) [para. 2 et seq.]; sect. 111(8)(b) [para. 11]; sect. 114 [paras. 15, 18, 20]; sect. 216(1) [para. 1 et seq.]; sect. 216(1)(c) [paras. 9, 13, 14, 17]; sect. 248(1) [para. 7].

Authors and Works Noticed:

Côté, Pierre-André, The Interpretation of Legislation in Canada (1984), pp. 390-398 [para. 20].

Counsel:

Terrance I. McAuley, for the appellant;

Ian H. Pitfield, for the respondent.

Solicitors of Record:

Frank Iacobucci, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Thorsteinsson, Mitchell, Little, O'Keefe & Davidson, Vancouver, British Columbia, for the respondent.

This appeal was heard in Vancouver, British Columbia, on February 12, 1988, before Desjardins, Mahoney and Hugessen, JJ., of the Federal Court of Appeal. The following decision of the Court of Appeal was delivered by Desjardins, J., on February 26, 1988.