Merali v. Minister of National Revenue, (1986) 2 F.T.R. 216 (TD)

• Judge: Denault, J.
• Court: Federal Court (Canada)
• Case Date: November 12, 1985
• Jurisdiction: Canada (Federal)
• Citations: (1986), 2 F.T.R. 216 (TD)

Merali v. MNR (1986), 2 F.T.R. 216 (TD)

MLB headnote and full text

Merali v. Minister of National Revenue

(No. T-872-84)

Indexed As: Merali v. Minister of National Revenue

Federal Court of Canada

Trial Division

Denault, J.

April 15, 1986.

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 non-resident withholding tax. The taxpayer incurred non-capital losses of $212,013.00 in 1978-1979, which were non-deductible 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 non-capital 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, allowed the appeal. The court held that non-capital losses sustained by the non-resident taxpayer could be carried forward and deducted in the year he became a Canadian resident.

Income Tax - Topic 1155

Income from business or property - Deductions - Non-capital losses - Where non-resident 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 non-capital 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 non-capital loss under s. 111(1)(a) of the Act - The Federal Court of Canada, Trial Division, held that the non-capital losses could be carried forward and deducted in the year the taxpayer became a Canadian resident.

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 111(1)(a), sect. 111(8)(b) [para. 5]; sect. 216 [para. 4].

Counsel:

I.H. Pitfield, for the plaintiff;

T.I. McAuley, for the defendant.

Solicitors of Record:

Thorsteinsson, Mitchell, Little, O'Keefe & Davidson, Vancouver, B.C., for the plaintiff;

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

This appeal was heard on November 12, 1985, at Vancouver, B.C., before Denault, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on April 15, 1986.