Anthony v. The Queen

Anthony v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2010-10-21
Neutral citation
2010 TCC 533
File numbers
2009-618(IT)I
Judges and Taxing Officers
Brent Paris
Subjects
Income Tax Act
Decision Content
Docket: 2009-618(IT)I
BETWEEN:
GERALDINE ANTHONY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on common evidence with the appeals of Heather Friesen, 2009-619(IT)I, Leslie Morgan, 2009- 620(IT)I and Jarrod Baker, 2009‑621(IT)I, on September 24 and 25, 2009 and on March 18 and 19, 2010, at Toronto, Ontario
By: The Honourable Justice Brent Paris
Appearances:
Counsel for the Appellants:
Jacques Bernier
Counsel for the Respondent:
Bobby Sood and Darren Prevost
____________________________________________________________________
JUDGMENT
The appeals from reassessments made under the Income Tax Act for the 2003 and 2004 taxation years are allowed, without costs, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the parking provided to the Appellant by her employer was a benefit from employment and the value of that benefit was $675 in 2003 and $693 in 2004.
Signed at Ottawa, Canada, this 21st day of October, 2010.
“Brent Paris”
Paris J.
Docket: 2009-619(IT)I
BETWEEN:
HEATHER FRIESEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on common evidence with the appeals of Geraldine Anthony, 2009-618(IT)I, Leslie Morgan, 2009-620 and
Jarrod Baker, 2009‑621(IT)I, on September 24 and 25, 2009 and on March 18 and 19, 2010, at Toronto, Ontario
By: The Honourable Justice Brent Paris
Appearances:
Counsel for the Appellants:
Jacques Bernier
Counsel for the Respondent:
Bobby Sood and Darren Prevost
____________________________________________________________________
JUDGMENT
The appeals from reassessments made under the Income Tax Act for the 2003 and 2004 taxation years are allowed and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the parking provided to the Appellant by her employer was a benefit from employment and the value of that benefit was $675 in 2003 and $693 in 2004.
Signed at Ottawa, Canada, this 21st day of October, 2010.
“Brent Paris”
Paris J.
Docket: 2009-620(IT)I
BETWEEN:
LESLIE MORGAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on common evidence with the appeals of Geraldine Anthony, 9-619(IT)I, Heather Friesen, 2009-619(IT)I and Jarrod Baker, 2009‑621(IT)I, on September 24 and 25, 2009 and on March 18 and 19, 2010, at Toronto, Ontario
By: The Honourable Justice Brent Paris
Appearances:
Counsel for the Appellants:
Jacques Bernier
Counsel for the Respondent:
Bobby Sood and Darren Prevost
____________________________________________________________________
JUDGMENT
The appeals from reassessments made under the Income Tax Act for the 2003 and 2004 taxation years are allowed and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the parking provided to the Appellant by her employer was a benefit from employment and the value of that benefit was $675 in 2003 and $693 in 2004.
Signed at Ottawa, Canada, this 21st day of October, 2010.
“Brent Paris”
Paris J.
Docket: 2009-621(IT)I
BETWEEN:
JARROD BAKER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on common evidence with the appeals of Geraldine Anthony, 2009-618(IT)G, Heather Friesen, 2009-619(IT)I and
Leslie Morgan, 2009- 620(IT)I, on September 24 and 25, 2009 and on March 18 and 19, 2010, at Toronto, Ontario
By: The Honourable Justice Brent Paris
Appearances:
Counsel for the Appellants:
Jacques Bernier
Counsel for the Respondent:
Bobby Sood and Darren Prevost
____________________________________________________________________
JUDGMENT
The appeals from the reassessment made under the Income Tax Act for the 2004 taxation year is allowed and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the parking provided to the Appellant by his employer in 2004 was a benefit from employment and the value of that benefit was and $269.50.
Signed at Ottawa, Canada, this 21st day of October, 2010.
“Brent Paris”
Paris J.
Citation: 2010 TCC 533
Date: 20101021
Docket: 2009-618(IT)I, 2009-619(IT)I
2009-620(IT)I, 2009-621(IT)I
BETWEEN:
GERALDINE ANTHONY, HEATHER FRIESEN,
LESLIE MORGAN and JARROD BAKER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Paris J.
[1] The issues in these appeals are whether the free parking provided to the Appellants by their employer was a benefit under paragraph 6(1)(a) of the Income Tax Act (Act), and if so, what the value of that benefit was.
[2] The Appellants were employed by Branksome Hall, a non-profit private school in the Toronto neighbourhood of Rosedale. They, along with approximately 100 other employees, were reassessed for their 2003 and 2004 taxation years to include $92 per month in their income, which the Minister of National Revenue (Minister) determined to be the value of the free parking provided by Branksome Hall, including GST and PST.
[3] These four appeals were chosen as test cases and were heard on common evidence.
Background
[4] Branksome Hall is located on a 23-acre campus at the intersection of Mount Pleasant Road and Elm Avenue in Toronto. At the time of the hearing, the school had about 870 students and 160 faculty and staff.
[5] Prior to September 2003, the school provided unreserved free parking to faculty and staff, in several different lots, in various locations on its campus. In September 2003, it implemented a system of assigned parking spots for employees. The new system was necessary because some of the parking areas were redeveloped for other uses, which reduced the supply of parking places. As in the past, the school did not charge for parking. Employees who did not park at the school were not given any additional compensation.
[6] After September 2003, employees were required to apply to the school for a parking space. Each year the demand was slightly greater than the supply, and a few employees did not get a space. In all, there were 105 parking spaces available. An unspecified number of these were “tandem” spaces, meaning one car had to be parked directly in front of another. The car that was behind could only leave if the first car was moved. Employees
[7] The gates to the parking area at the school were locked during evenings and weekends. On weekdays the gates would be opened at 6:00 a.m. and, depending on the lot, would be locked at 6:00 p.m. or 10:00 p.m. The lots were closed for the Christmas holidays, during March break and for the summer holidays. Students were not allowed to park on school property.
Evidence of the Appellants
[8] Ms. Leslie Morgan was Associate Director of Human Resources at Branksome Hall and had worked at the school since 1997. In 2003 and 2004, she drove to work and parked at the school. She said she did so for convenience, and that she did not believe she saved any money by driving rather than by taking public transit. She also said that there were free parking spots on Elm Avenue and on surrounding streets where one could park until 4:00 p.m. She worked until 4:30 p.m.
[9] During the audit that led to these reassessments, Ms. Morgan was asked to give the Canada Revenue Agency (CRA) auditor a list of employees who used the free parking for the period January 2003 to December 2004. She said that, in preparing the list for the CRA auditor, she had assumed that all employees who parked at the school after September 2003 had also parked there prior to September 2003. In her testimony, Ms. Morgan said that she later realized that there was no way of knowing who had parked at the school prior to September 2003, because prior to that time the school did not keep a record of who parked at the school and therefore that the list she provided was unreliable to this extent. She had advised the auditor that this was the case, in a follow-up letter.
[10] Ms. Geraldine Anthony was an administrative assistant at the school in 2003 and 2004. She often drove to work, but sometimes took the subway. She drove for convenience, and like Ms. Morgan, said she did not save anything by driving instead of taking transit. From September 2003 on, she was assigned a tandem parking spot at the school. She indicated that she did not encounter any difficulties using the tandem spot.
[11] Mr. Jarrod Baker started teaching at Branksome Hall in September 2003. He drove to work, but in the 2003-2004 school year, no parking space was available for him at the school, so he parked on the surrounding streets. He said that he was able to park on Crescent Street, a five—minute walk from the school, until 4:00 p.m. daily. On those occasions when he worked past 4:00 p.m., he would move his car during the day to Sherbourne Street, where parking was only prohibited from 9:00 a.m. to 11:00 a.m. daily. In September 2004, he was assigned a parking spot at the school. He said he chose to park there for convenience, reliability, and out of necessity.
[12] The remaining Appellant, Ms. Heather Friesen, was unable to attend the hearing of these appeals. Counsel indicated that she intended to rely on the evidence given by the other three Appellants concerning parking at Branksome Hall.
Evidence of Eugene Zenger
[13] Mr. Zenger was the Director of Facilities at Branksome Hall during the relevant period. He testified that approximately 0.3 acres of school property was used for employee parking, and he estimated that the cost of snow removal and salting together with the amortized cost of paving for this area was approximately $20,000 per year.
[14] Mr. Zenger also gave evidence that in 2005 he had made enquiries with the owner of Clifton Manor, an apartment building across the street from the school, about the possibility of the school renting parking there in the future. He said that in December 2005, he received an email from the property manager at Clifton Manor indicating that the cost of parking was $85 per spot per month but that if the school rented 10 spots, the cost would be $55 per spot per month[1].
Expert Evidence
[15] Three expert witnesses (one for the Appellants and two for the Respondent) gave opinion evidence about the fair market rental rate for the parking at the school. Each expert used the direct comparison approach in their valuation of the parking in issue. This approach values property by reference to transactions involving similar properties.
[16] The Appellants’ expert, Mr. Edward Bruce, examined parking rates at Clifton Manor, at several commercial parking lots in the vicinity of Branksome Hall, and at a number of public institutions such as schools, hospitals and health care facilities with lots adjacent to their facilities.
[17] He rejected the commercial lots and the lots operated by hospitals as relevant comparables, because they were operated for profit. He said that zoning restrictions prevented Branksome Hall from allowing parking on its premises with an exception for parking incidental to the operation of the school. Mr. Bruce concluded that the parking at Branksome Hall could not be used in a commercial operation, and that the rental value of the school parking was not comparable to the rental value of parking space in lots operated with a profit motive.
[18] The comparables which Mr. Bruce felt were most indicative of the value of the Branksome Hall parking, after making certain adjustments, were:
(i) parking offered at Clifton Manor;
(ii) parking at several long-term health care facilities and rehabilitation centres in Toronto; and
(iii) parking at the campuses of Seneca College in Markham, in the Township of King (north of the GTA) and at Don Mills and Finch.
[19] Clifton Manor offered underground parking across the street from the school on Elm Avenue for $85 per month. However, on the basis of the offer made to Mr. Zenger in December 2005, Mr. Bruce used a monthly rental rate of $55 per month for this comparable. Mr. Bruce applied a discount to the Clifton Manor parking rate on the basis that the Branksome Hall parking spaces, being in surface lots, were inferior to underground parking.
[20] Mr. Bruce also relied heavily on the monthly rates charged for employee parking at seven health care facilities in various parts of Toronto. Mr. Bruce said that the first five of these facilities was operated by “Toronto Rehab” and charged $42 per month for employee parking in 2009. The Providence and Bridgepoint facilities charged $30 and $60 per month to their employees, respectively.
[21] Finally, Mr. Bruce also considered parking offered at the three Seneca College locations as reliable indicators of the value of parking at Branksome Hall. The parking rates in those locations ranged from $44 to $54 per month at the time of Mr. Bruce’s report.
[22] He also applied a discount to take into account the increase in parking rates over time and applied a 25% discount for tandem stalls to take into account “potential disruption and inconvenience” to users.
[23] In conclusion, in Mr. Bruce’s opinion, the fair market rental value of the employee parking spots at the Branksome Hall was $40 per month for an individual parking space and $30 per month for a tandem space in 2003. He found that the value for both types of spaces increased by $1 per month for 2004.
[24] The Respondent’s first expert witness, Mr. Brian Walsh, testified that, in his opinion, the fair market rental rate of the Branksome Hall parking was $75 per month per parking spot in 2003. In arriving at that rate, Mr. Walsh relied on three different sets of comparables:
(i) properties at commercial lots on the periphery of the Rosedale neighbourhood;
(ii) parking at universities and private colleges in what he described as “the surrounding area”; and
(iii) parking at residential apartment buildings in the neighbourhood of the school.
[25] He described the trend that he observed in the commercial parking rates that he reviewed, namely, that the rates decreased going north along Yonge Street and moving either east or west from Yonge Street. The commercial lot closest to Branksome Hall charged a rate of $150 per month, which he said was at the low end of the range ($100-$217) of commercial lots he looked at.
[26] Mr. Walsh chose certain university and private college parking lots on the basis that they were “similar in character” to Branksome Hall and close in proximity and size to the parking areas at Branksome Hall. He felt those lots would would offer comparative rates for staff parking. The rates at these lots varied from $83 to $155 per month.
[27] Mr. Walsh also considered parking offered at five residential apartment buildings in Rosedale, where the charges ranged between $85 and $105 per month. The closest building to Branksome Hall was Clifton Manor, which according to his research offered underground parking for $85 per month. He was unaware of the offer made to Mr. Zenger for a discount rate for 10 spots.
[28] On the basis of what Mr. Walsh referred to as “the collective patterns of all of the data” relating to the three categories of parking he examined, he arrived at a value of $85 per month for the equivalent monthly parking at Branksome Hall at December 31, 2008. He further determined that rates at the commercial lots closest to the school had increased by 12% between 2003 and 2008, and on the basis of this figure, obtained a value of $75 per month for parking at Branksome Hall in 2003.
[29] The Respondent’s second expert, Mr. Don Bennett, relied on four comparables, all of which were commercial lots on Bloor Street offering monthly parking rates. These lots charged between $120 plus tax and $262.39 plus tax per month.
[30] Applying an adjustment of 50% for location and 10% to take into account that the Branksome Hall parking was in a surface lot as opposed to being covered, Mr. Bennett arrived at a fair market rental rate of $80 per month for the Branksome Hall parking spaces.
[31] Mr. Bennett stated that he rejected street parking as an appropriate comparable because of restrictions in effect on the streets surrounding Branksome Hall. These restrictions included no parking between 7:00 a.m. and 9:00 a.m., between 9:00 a.m. and 1:00 p.m., between 8:00 a.m. and 4:00 p.m. and from 4:00 p.m. to 6:00 p.m. Elm Avenue offered unrestricted parking daily before 4:00 p.m., but Mr. Bennett noted that only 13 spaces were available there.
First issue: Did the Appellants receive a benefit?
Appellants’ position
[32] First, the Appellants’ counsel argued that free parking provided to the Appellants did not represent either a material acquisition, or anything of value. He said that the Appellants had no right to receive the free parking, and were required to apply each year for it. If there were more applicants than spaces, not everyone was given a space, and no compensation was provided to those who applied but did not receive a space.
[33] Counsel also submitted that the Appellants did not save any money by being allowed to park at the school. Ms. Morgan and Ms. Anthony testified that it cost them as much to drive as take transit.
[34] Counsel conceded that the free parking at the school was convenient for the Appellants, but suggested that convenience alone was not an economic benefit. Finally, counsel argued that the cost to the school of providing the parking was minimal – less than a dollar a day according to the evidence of Mr. Zenger.
[35] In the alternative, counsel submitted that if an economic benefit accrued to the Appellants in this case, the benefit was incidental to the operation of the school. Counsel said that the parking was a “mere incident” of the school’s infrastructure, and could only be used for school purposes.
Analysis
[36] Paragraph 6(1)(a) brings into income the value of any benefits received by an employee as a result of his or her employment. The relevant portions of that provision read as follows:
6(1) There shall be included in computing the income of a taxpayer for a
taxation year as income from an office or employment such of the following amounts as are applicable
(a) the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, …
[37] In Schroter v. The Queen,[2] Dawson JA reviewed the relevant case law and set out the principles to be used in order to determine whether a benefit, within the meaning of paragraph 6(1)(a), has been received. The following portions of her reasons are relevant for the purpose of establishing whether the Appellants in this case received a benefit from employment:
15 Paragraph 6(1)(a) is cast in broad terms. It attempts to capture in employment income various fringe or ancillary benefits, whether received in monetary or other form. …
16 In R. v. Savage, [1983] 2 S.C.R. 428 (S.C.C.), the Supreme Court held the meaning of the phrase "benefits of any kind whatsoever" in paragraph 6(1)(a) was "clearly quite broad" and the phrase "in respect of" was intended to convey the widest possible scope. The paragraph was held to take into income a material acquisition which conferred an economic benefit, so long as the acquisition did not fall within one of the exceptions, and so long as the acquisition was received in connection with employment.
17 In Phillips v. Minister of National Revenue, [1994] 2 F.C. 680 (Fed. C.A.) at page 693, this Court expressed the intent of the provision in the following terms:
An economic advantage received by an employee from his or her employer will be deemed a benefit within the meaning of paragraph 6(1)(a) unless the employee can demonstrate that the payment was not a benefit in respect of employment, but made in his or her capacity as a person. Framed in this manner, the test is able to embrace conveniently the categories of gifts, loans and other contractual arrangements.
…
20 … this Court confirmed in Phillips that to be a taxable benefit a payment must confer an economic advantage on the employee. The Court cautioned, however, that economic benefit “cannot be assessed on the basis of subjective criteria and that the taxation of benefits cannot be made to depend on the perceptions of individual taxpayers.
…
23 A further factor relevant to the economic advantage analysis has been articulated by this Court in cases such as Lowe v. R, [1996] 2 C.T.C. 33 (Fed. C.A). If an employee receives an economic advantage, but the primary beneficiary of that receipt is the employer, no benefit arises under paragraph 6(1)(a). At issue in Lowe was whether an expense paid trip to New Orleans constituted benefit under paragraph 6(1)(a). At paragraph 15 the Court wrote:
[…] It seems to me in light of existing jurisprudence that no part of the appellant’s trip expenses should be regarded as a personal benefit unless that part represents a material acquisition for or something of value to him in an economic sense and that if the part which represents a material acquisition or something of value was a mere incident of what was primarily a business trip it should not be regarded as a taxable benefit within paragraph 6(1)(a) of the Act.
[38] The Appellant’s argument that they did not receive a material benefit by virtue of being given free parking at the school cannot succeed. Firstly, I find that the Appellants did have a right to a parking spot at the school by virtue of their employment.
[39] Prior to September 2003, the evidence shows that there was sufficient parking for all employees, and after September 2003 (September 2004 in Mr. Baker’s case) a parking space was assigned to them and they were entitled to use that space during the school year. Quite rightly, counsel acknowledged that they received “something for nothing” and even the evidence led by them indicated that this benefit was material. Mr. Zenger said that the cost to the school of providing the parking was at least $20 per month and Mr. Bruce put the fair market rental rate of the parking at $40 per month.
[40] The fact that no compensation in lieu of parking was given to the employees who did not get a spot or who did not want one does not change the fact that the right enjoyed by the Appellants was something of value.
[41] I am also not persuaded that the benefit to the Appellants was merely incidental to any benefit to the school. In fact, there was no evidence at all that any benefit arose to the school as a result of providing parking to its employees. None of the Appellants were required to use their vehicle in the course of their employment, and I fail to see how Branksome Hall could have otherwise been the primary beneficiary of the parking arrangement.
[42] I am likewise unconvinced that the Appellants saved nothing by parking at the school. In their testimony, Ms. Morgan and Ms. Anthony were comparing driving their own vehicles and parking at the school with taking public transit. The appropriate comparison, however, would be between driving to work and parking at the school, and driving to work and parking somewhere else for the duration of the workday. In the absence of evidence on this point, this argument must fail.
Second issue: How is the benefit valued?
[43] Having found that the Appellants received a benefit from Branksome Hall in the form of free parking, the “value” of that benefit must be included in their income. The first question that arises is the basis on which the benefit is to be valued.
Appellants’ position
[44] Counsel for the Appellants argued that the word “value” in paragraph 6(1)(a) can mean something other than fair market value. He pointed out that in other sections of the Act, such as section 69, Parliament has used the term fair market value. He submitted, therefore, that if Parliament intended to require that the fair market value of employment benefits be included in income, it would have used those words.
[45] Counsel referred to the decision of this Court in Detchon et al v. The Queen[3], where the taxpayers were teachers at a private school, and their children were allowed to attend the school free of charge. The Minister assessed the taxpayers on the basis that they had received a benefit from their employer in the form of free tuition for their children, and that the value of the benefit was equal to the amount of tuition charged to other parents whose children attended the school.
[46] Rip J. (as he then was) held that the value of the benefit received by the taxpayers, in respect of each of their children that attended the school, was equal to the employer’s average cost per student of providing the schooling, rather the amount charged to the other parents. In doing so, Rip J. said:
[T]here is no obligation for an employer to charge its employees for a good or service any more than its actual cost of the good or service. The employer need not add any profit element and indirect overhead costs to any good or service it provides to its employees: ABC Steel Buildings Ltd. et al v. M.N.R., 74 DTC 424 (T.R.B.).
Counsel for the Appellants cited two other cases, Stauffer v. The Queen[4] and Spence v. The Queen[5], in which this Court followed Detchon and found that the value of the employment benefits in issue was equal to the employer’s cost of providing the benefits.
[47] It was also submitted by the Appellants that the context and purpose of paragraph 6(1)(a) militated to favour a finding that the employer’s cost was the appropriate measure of the value of a benefit provided to employees. Counsel stated that this interpretation of “value” accords with the purpose of paragraph 6(1)(a) which was to prevent employees who received non-cash compensation from being better off than they would be if they received cash compensation. He said that paragraph 6(1)(a) aims at taxing amounts that pass from an employer to an employee, which is the cost to the employer of providing the benefit.
[48] Counsel said that the application of the principle that there is no obligation on an employer to charge mark-up on the goods or services it sells or provides to an employee makes even more sense in this case, given that Branksome Hall is a non‑profit entity. He also cited the CRA's own administrative policy, which states that employee discounts on merchandise are not normally regarded as employment benefits. This is set out in paragraph 27 of Interpretation Bulletin IT-470R:
27. Where it is the practice of an employer to sell merchandise to employees at a discount, the benefits that an employee may derive from exercising such a privilege are not normally regarded as taxable benefits. However, this does not extend to an extraordinary arrangement with a particular employee or a select group of employees nor to an arrangement by which an employee is permitted to purchase merchandise (other than old or soiled merchandise) for less than the employer's cost. Furthermore, this treatment does not extend to a reciprocal arrangement between two or more employers whereby the employees of one can exercise such a privilege with another by whom the employees are not employed. A commission received by a sales employee on merchandise acquired for that employee's personal use is not taxable. Similarly, where a life insurance salesperson acquires a life insurance policy, a commission received by that salesperson on that policy is not taxable provided the salesperson owns that policy and is obligated to make the required premium payments thereon.
[49] The CRA also accepts that the value of subsidized meals provided by an employer to its employees is the employer’s cost of supplying and serving the meals (see IT-470R, paragraph 28).
[50] The Appellants’ counsel contended that valuing employee benefits at the employer’s cost for the purposes of paragraph 6(1)(a) is also preferable from an administrative perspective, because the employer’s cost of providing the benefit is within the employer’s knowledge or can be easily calculated. He said that this approach results in greater certainty and predictability, which the Supreme Court has underlined as important considerations in the interpretation of fiscal legislation.
Analysis: Second issue
[51] In Schroter, cited earlier in these reasons, the Federal Court of Appeal has confirmed that, generally speaking, fair market value is the appropriate measure of the value of an employment benefit for the purposes of paragraph 6(1)(a) of the Act. In that case, the taxpayer argued that the value of the benefit he received from his employer was only equal to the amount it would have cost him to commute to work using public transit. The Court of Appeal rejected the notion that an employment benefit could be valued using this “costs saved” approach and said:
47 The equal treatment of taxpayers is facilitated by valuing their benefits at their fair market value. On an administrative basis, the Canada Revenue Agency recognizes this and instructs employers that where the fair market value of a parking pass cannot be determined, no benefit should be added to an employee’s remuneration. Where the fair market value can be determined, employers are instructed that the value of the benefit is based on the fair market value of the parking pass, less any payment the employee makes to use the space. See: Canada Revenue Agency, Employers’ Guide – Taxable Benefits and Allowances 2009, T4130(E) Rev. 09.
48 Given the inherent fairness of this method of valuation, and the absence of objective evidence demonstrating that a fair market value based valuation is somehow inappropriate on the facts of this case, the Tax Court judge did not err by valuing the parking pass in the amount of its fair market value.
[52] This interpretation of the word “value” in paragraph 6(1)(a) is consistent with the interpretation that has been placed on the same word in other provisions of the Act. For example, in Steen v. The Queen,[6] the Federal Court Trial Division held that the words “the value of the shares”, in paragraph 7(1)(a) of the Act (dealing with stock option benefits), referred to the fair market value of the shares. In arriving at this conclusion, Rouleau J. said:
35 The plaintiff argued before me that because the word "value" is used in paragraph 7(1)(a) rather than the term "fair market value", which is used in several other provisions of the Act, some difference in meaning was intended by the legislators. However, for most purposes concerning provisions of the Act the term value has been held to mean "market value" or "fair market value". In Untermyer Estate v. A.G. for British Columbia, [1929] S.C.R. 84 the issue before the Court was the value to be attributed to certain shares held by the appellant at the time of his death for succession duty purposes. Speaking for the Court, Mignault, J. stated at 91:
We were favoured by counsel with several suggested definitions of the words "fair market value". The dominant word here is evidently "value", in determining which the price that can be secured on the market -- if there be a market for the property (and there is a market for shares listed on the stock exchange) -- is the best guide. It may, perhaps, be open to question whether the expression "fair" adds anything to the meaning of the words "market value", except possibly to this extent that the market price must have some consistency and not be the effect of a transient boom or a sudden panic on the market. The value with which we are concerned here is the value at Untermyer's death, that is to say, the then value of every advantage which is properly possessed, for these advantages, as they stood, would naturally have an effect on the market price. Many factors undoubtedly influence the market price of shares in financial or commercial companies, not the least potent of which is what may be called the investment value created by the fact -- or the prospect as it then exists -- of large returns by way of dividends, and the likelihood of their continuance or increase, or again by the feeling of security induced by the financial strength or the prudent management of a company. The sum of all these advantages controls the market price, which, if it be not spasmotic or ephemeral, is the best test of the fair market value of property of this description.
I therefore think that the market price, in a case like that under consideration, where it is shown to have been consistent, determines the fair market value of the shares. [Emphasis added.]
36 In Montreal Island Power Company v. The Town of Laval Des Rapides, [1935] S.C.R. 304, in analyzing the propriety of an assessment of the actual value of a parcel of submerged land for taxation purposes, Duff, C.J.C. noted the following at 305:
[...] The meaning of "actual value," when used in a legal instrument, subject, of course, to any controlling context, is indicated by the following passage from the judgment of Lord MacLaren in Lord Advocate v. Earl of Home (1891) 28 Sc. L.R. 289, at 293:
Now, the word "value" may have different meanings, like many other words in common use, according as it is used in pure literature, or in a business communication or in conversation. But I think that "value" when it occurs in a contract has a perfectly definite and known meaning unless there be something in the contract itself to suggest a meaning different from the ordinary meaning. It means exchangeable value -- the price which the subject will bring when exposed to the test of competition.
When used for the purpose of defining the valuation of property for taxation purposes, the courts have, in this country, and, generally speaking, on this continent, accepted this view of the term "value." [Emphasis added.]
[53] Also, in Youngman v. The Queen,[7] it appears that the Federal Court of Appeal accepted that the “value” of a shareholder benefit, required to be included in a taxpayer’s income under section 15, was equal to the fair market value of the benefit. At paragraph 19, the Court said:
19 In order to assess the value of a benefit, for the purposes of paragraph 15(1)(c), it is first necessary to determine what that benefit is or, in other words, what the company did for its shareholder; second, it if necessary to find what price the shareholder would have had to pay, in similar circumstances, to get the same benefit from a company of which he was not a shareholder.
[54] The decision of the Federal Court of Appeal in Schroter would suggest that the decisions from this Court in Detchon, Stauffer and Spence should be viewed with caution. While Schroter leaves open the possibility that another approach to valuation might be used where there is “objective evidence demonstrating that a fair market based-valuation is somehow inappropriate on the facts of [the] case”, I am unable to see that such evidence was before the Court in Detchon or Stauffer or Spence.
[55] In Detchon, for example, the fair market value of the tuition was readily apparent from what other parents paid for their children’s tuition. In any event, the Court did not set out its reasons for rejecting a fair market valuation for the benefit in favour of the employer’s cost approach. In Stauffer, the Court simply followed Detchon without analyzing the issue. In Spence, the Court relied expressly on Detchon, and held that the benefit of reduced tuition offered to the children of the taxpayers at a school run by their employer was to be valued on the basis of the employer’s costs. Although Spence was decided after the Court of Appeal decision in Schroter, the judge does not appear to have had the benefit of the appellate court’s reasons. Furthermore, there is no mention of any circumstances in Spence that would justify displacing the general rule that employment benefits should be valued at their fair market value.
[56] The decision of the Court of Appeal in Schroter also suggests to me that the proposition put in Detchon that employee discounts are not benefits that would be caught under what is now paragraph 6(1)(a) is also doubtful. Since the fair market value of goods or services is what an unrelated third party is willing to pay for the goods or services, a discount offered by an employer to its employees from the normal sale price would be a discount from fair market value, and would be a benefit to the employee, equal in value to the discount unless, of course, it could be shown that the goods or services could not be sold to the public at the normal selling price.
[57] In light of Schroter, I would decline to place any weight on the Detchon, Stauffer or Spence decisions.
[58] I find that the evidence in this case does not show that a fair market valuation of the parking provided to the Appellants is in any way inappropriate. The evidence discloses that there is a market for parking in the area of the school, and that the rates for that parking are determinable. As such, a fair market value is, in my view, the fairest method of valuation in the circumstances.
[59] Even if I had accepted that the parking benefit to the Appellants should be valued at Branksome Hall’s cost of providing the parking, I would have concluded that the evidence adduced by them was not sufficient to prove what those costs were. I find that the estimate of costs prepared by Mr. Zenger is unreliable, and may materially under-estimate those costs.
[60] Firstly, Mr. Zenger did not take into account any cost of maintaining the driveways used to access the parking lots. Although some of those driveways were not used exclusively for the purpose of access, it would be reasonable to allocate at least a portion of the costs associated with those areas to the cost of providing the parking lot. The paved areas that were used exclusively to access the parking spaces and to allow cars to turn in to and out of the spaces should certainly have formed part of his calculations but the evidence leaves some doubt as to whether this was the case.
[61] As well, Mr. Zenger did not include any costs of the parking area in front of 10 Elm Avenue, because he said this area was for visitor parking. The evidence of Ms. Judy Gordon, director of financial and administration at Branksome Hall, was that eight of the employee parking spots were located in front of 10 Elm.[8] Finally, as pointed out by counsel for the Respondent, the cost estimate omitted any amount for insurance or for gates or fencing used to enclose the parking areas.
Third issue: Value of the parking benefit
Appellants’ position
[62] Counsel for the Appellants argued that Mr. Bruce’s valuation of the parking at Branksome Hall was the most reliable indication of value before the Court, because it took into account the zoning restrictions on the use of the school property that limited parking to an accessory use to the operation of the school. Since the school could not operate a commercial parking lot open to the public, he said Mr. Bruce correctly rejected the commercial lots in the vicinity of the school as comparable for the purpose of establishing market value, and chose comparables whose utility more closely matched that of the parking at Branksome Hall.
[63] He further submitted that the evidence of value provided by the Respondent’s two expert witnesses should be given little weight because, unlike Mr. Bruce’s report, neither of their reports conformed to the standard set by the Appraisal Institute of Canada for the preparation of a formal opinion of value as set out in the Institute’s publication entitled