Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE: March 2, 2016
Assessed Person(s): X. F. B. and X. Y. Q
Applicant(s): X. F. B. and X. Y. Q
Respondent(s): City of Toronto
Property Location(s): Withheld
Municipality(ies): City of Toronto
Roll Number(s): Withheld
Appeal Number(s): 3063930
Taxation Year(s): 2014
Hearing Event No. 608254
Legislative Authority: Section 323.(1)(e) of the City of Toronto Act, 2006, c. 11, Sched. A
Heard: January 22, 2016 in Toronto, Ontario
APPEARANCES:
Parties Counsel⁺/Representative
X. F. B. and X. Y. Q X. F. B.
City of Toronto G. Tanner⁺ and J. Renaud
DECISION OF THE BOARD DELIVERED BY MARILYN SHARMA
INTRODUCTION
1This matter came before the Assessment Review Board (“Board”) on September 3, 2015. Due to insufficient information to allow the Board to proceed, the matter was adjourned and rescheduled for hearing on January 22, 2016.
ISSUE
2The issue before the Board is to determine whether the Applicant’s property taxes for the taxation year 2014 should be cancelled, reduced or refunded because of the Applicant’s inability to pay due to sickness or extreme poverty.
DECISION
3The Board finds that based on the evidence before it, the Applicant failed to demonstrate to the satisfaction of the Board that there existed an inability to meet her property tax obligations for the 2014 taxation year as set out in s. 323.(1)(e) of the City of Toronto Act (“Act”).
4Accordingly, the Board dismisses the application for the cancellation, reduction or refund of taxes for the taxation year 2014 on the property located at (address withheld) in the City of Toronto.
Background
5The City of Toronto Act 2006 s. 323.(1)(e) states :
Upon application to the city treasurer made in accordance with this section, the City may cancel, reduce or refund all or part of the taxes levied on land in the year in respect of which the application is made if
(e) the applicant is unable to pay taxes because of sickness or extreme poverty.
6In order to satisfy the conditions set out above, a two part test is applied. Firstly, the Board must determine if sickness or extreme poverty exists. If such is not the case, then the application fails. Secondly, if either is present the Applicant must demonstrate an inability to pay some or all of the taxes.
Evidence
7Mr. X. Y. Q. (known as M. Q.) and Ms. X. F. B. (known as B. B.) are the joint owners of the property. Ms. B. B. who is separated from Mr. M. Q. is the Applicant and appeared with the assistance of a support worker at the hearing.
Sickness
8B. B. submitted a copy of the Form 2 – Doctor’s Statement in which the attending medical practitioner indicated that B. B., since April 8, 2013, is unable to work due to illness. Based on the evidence presented, the City agreed and the Board accepts that B. B., due to her illness, was unable to work during the taxation year 2014. The Board accepts that, based on her sickness, B. B. satisfies the first part of the two-part test and is therefore eligible to apply for relief under the provisions of the Act.
9The Board must now apply the second part of the test, that is, determine whether B. B.’s sickness resulted in an inability to meet her property tax obligation for the taxation year 2014.
Inability to Pay Taxes
10In determining whether an Applicant can be reasonably expected to pay part or all of his/her taxes due to sickness, the Board must examine the evidence presented as well as the overall financial situation (including, but not limited to, expenses and income) of the Applicant and all other members of the household. After considering all the evidence and factors, the Board then makes a determination as to whether the Applicant was unable to meet all or part of his/her tax obligation.
11The following is a breakdown of the finances of the Applicant based on the Form 1 – Financial Information submitted by B. B. and her oral evidence at the hearing:
Assets
Home
12The Applicant own a property located at (address withheld) in Toronto.
a. As of the valuation date January 1, 2012, the Municipal Property Assessment Corporation has assessed the value of the subject property at $596,000 (destination value).
b. According to evidence submitted by B. B. in Exhibit 4, the balance outstanding on the mortgage of the subject property stood at $96,000 in 2011.
Investments
13The Applicant B. B. stated in the Form 1 - Financial Information the following investments:
a. Bonds: $100,000
b. Stocks: $183,236
c. Registered Retirement Savings Plan (“RRSP”): $ 74,286
d. Locked-in Retirement Account (“LIRA”): $ 8,028
e. Tax Free Savings Account (“TFSA”): $ 12,000
$377,550
Sources of Income
14B. B. informed the Board that she had not yet received a Notice of Assessment from the Canada Revenue Agency with regard to her 2014 taxes. B. B. submitted a copy of the 2014 Revenue Canada Tax Filing (T1 General) for the taxation year 2014 which she filed and which shows, among other things the following:
- Long Term Disability Income: $38,727.80
- Dividend Income: $ 7,259.74
- Interest Income: $ 1,556.75
- RRSP/Other Income: $ 2,328.57
- Misc. Income ($71.28 + $101.24) $ 172.52
Total Income: $50,045.38
Income Tax Refund
15Based on the evidence submitted by B. B. in her 2014 Income Tax Filing, B. B. is expected to receive an income tax refund of $8,097.80.
Extraordinary Income
16B. B. informed the Board that in 2014 she received a retroactive payment of Disability Income of approximately $30,000. B. B. further stated that she applied this sum to pay down the mortgage of the subject property.
Expenses
17B. B. submitted into evidence a copy of the Form 1 – Financial Information showing that her monthly expenses amounted to $8,693.00. The Board notes that there appears to be an intermingling of resources associated with the divorce settlement of B. B. and her former spouse especially with regard to a monthly expenditure of $2,430.00 for legal expenses indicated in the Form 1 – Financial Statement submitted by B. B. The Board agrees with Counsel for the City who indicated that the City does not recognize such legal expenses as part of the normal expenses of a household.
Responsibility to pay Property Taxes
18B. B. informed the Board that the non-payment of property taxes in 2014 was as a result of her having no knowledge regarding the payment of the taxes since this responsibility had always been undertaken by her former spouse. B. B. further stated that she and her spouse were in divorce proceedings and when he left the home in and around 2013 she had no knowledge of the requirement to pay the property taxes because her spouse had redirected all mails to a different address and therefore she did not receive any mails from the City regarding property taxes.
19The Board refers to Exhibit 2 submitted by B. B. which is a letter from B. B.’s solicitor in which he states in part the following:
My client was the sole occupier of the above-captioned property from late January 2013 to the present.
Recently there has been a settlement of the matrimonial issues between my client and Mr. xxx which settlement requires my client to pay all the property taxes from late January 2013 to the present.
20The Board is not persuaded that B. B. was unaware of her responsibility to pay the property taxes as evidenced in the document titled Financial Statement (Property and Support Claims) submitted to the Ontario Superior Court of Justice dated January 30, 2014 in which she acknowledged that property taxes in the amount of $346.00 per month were required– see Exhibit 4 submitted by the Applicant.
Board’s Analysis
21The test under s. 323.(1)(e) of the Act refers to whether the Applicant is unable to pay property taxes due to sickness or extreme poverty.
22In the Board’s view the threshold for individuals who claim an inability to pay their property taxes because of sickness cannot simply be that the individuals are unable to make ends meet in the year under appeal. The individuals must demonstrate that after having called upon every resource available to them and having explored every reasonable opportunity to mitigate any financial stresses that exist, they have no means of being able to pay some or all of their property taxes. In addition, the individuals must demonstrate that they have taken steps and explored every reasonable opportunity to manage their debts and mitigate their tax responsibility. The Board is of the view that the Act envisages that an individual seeking relief on application under s. 323.(1)(e) of the Act should clearly demonstrate that for the year under appeal the Applicant had no resources available to meet his/her obligations to provide for the basic necessities of living and at the same time pay some or all of his/her property taxes.
23In viewing an application under this section of the Act, the Board does not only look at the income and expenses of the Applicant but also looks at the full spectrum of the Applicant’s financial resources available to him/her and determines whether there was any opportunity that would allow him/her to mitigate their tax obligation. The Board’s responsibility is to also be cognizant of the extra burden that other taxpayers are required to assume when the Board grants relief from property taxes of a property owner. The Board maintains the position that the payment of property taxes is a primary responsibility of all home owners and when that burden is removed from one home owner that burden is then shifted to all other taxpayers and consequently, this responsibility should not be taken lightly.
24Based on all the evidence provided and having regard to the intention and requirements of the Act as described in the aforementioned, the Board makes the following findings:
i. There is significant equity in the subject property amounting to a minimum of $500,000 (based on 2012 valuation) which can be leveraged to pay her property taxes levied in 2014 of $3,853.64. The Board is satisfied that the Applicant was knowledgeable in her ability to leverage the equity in the property as evidenced by documents submitted by the Applicant showing that a line of credit in the amount of $300,000 was secured against the equity in the property. The Board notes that the Applicant invested the $300,000 in stocks and bonds.
ii. In addition to the subject property, the Board notes that the Applicant also had other assets at her disposal including an RRSP in the amount of $74,286 and a LIRA in the amount of $8,028.
iii. The Board notes that in 2014 the Applicant used the extra-ordinary income of $30,000 to pay down the mortgage. The Board had no evidence to suggest that the mortgage was in jeopardy and thus an urgent lump sum payment of $30,000 was demanded. The Board is of the view that the property taxes for 2014 in the amount of just under $4,000 could have been obtained from this source of funds.
iv. The Board notes that the evidence submitted by B. B. indicates that she expects to receive a sum of just over $8,000 from the Canada Revenue Agency representing a refund of income taxes for the taxation year 2014 which is more than sufficient to cover the payment of her property taxes for 2014.
v. Based on the evidence provided, at the start of 2014 the Applicant had a TFSA that was unencumbered and readily accessible to liquidate the full extent of the property taxes due in 2014. According to evidence provided by B. B. the value of the TFSA is $12,000. Although B. B. indicated that these funds were paid in legal fees, the Board is of the view that property taxes should be given top priority.
vi. Revenue Canada documents show that the Applicant receives interest income from investments that she holds in stocks, bonds, RRSP, LIRA and TFSA. Based on evidence provided, the Applicant earned investment income for the taxation year 2014 amounting to over $11,000. The Board is satisfied that the Applicant had ample income from this particular source to meet her property tax obligation for the 2014 taxation year.
vii. The Board agrees with Counsel for the City and is not convinced that the expenses associated with extra piano lessons in the amount of $392 per month as well as $198 per month for the purchase of a computer (which adds up to more than the monthly payment of the property taxes) are congruent with a situation for which relief should be sought under this section of the Act. The Board is of the view that the first priority obligation should be the payment of property taxes. In addition, the Board concurs with Counsel for the City that legal expenses that are attributable to the flooding in the home and divorce proceedings should not be included as part of a household normal operating expenditure. Under this specific category, B. B. has indicated an expenditure of $2,430.00 per month which is equivalent to $29,160.00 for the taxation year 2014.
25The Board is of the view that the payment of property taxes remains one of the foremost obligations of all home owners; and the Board must be mindful of the fact that when relief from taxes is granted to any taxpayer such burden is passed on to other taxpayers. Having considered all the evidence before it in this application, the Board finds that the Applicant has not demonstrated an overwhelming inability to pay her property taxes and concludes that:
The Applicant had a variety of assets (including financial instruments) that could have been used or leveraged to obtain funding to meet her property tax obligation for the taxation year 2014.
The ability to leverage value from the property was an avenue actually used by the Applicant to secure a line of credit in the amount of $300,000 which was used for investments such as stocks and bonds. Therefore a similar avenue could have been sought to meet her tax obligation since the main asset had substantial equity.
In addition to the main asset (the subject property), the Applicant has other assets such as stocks, bonds, RRSP and LIRA amounting to over $360,000 that could have been similarly leveraged or used to obtain funds to pay the property taxes for 2014.
The Applicant had an income tax refund amounting to over $8,000 for the taxation year 2014 which was two times the amount of the taxes due and could be applied to settling the property tax account in 2014.
The Applicant also had at her disposal funds in the amount of $12,000 in a TFSA which, in the Board’s view, could have been utilised to meet the property tax debt for 2014.
Although B. B. stated that she was unaware of her obligation to pay the property taxes, the Board notes that correspondence from B. B.’s solicitors dated July 28, 2015 indicates that as part of her settlement agreement B. B. agreed to assume full responsibilities for the payment of the property taxes from late January 2013 to the present.
CONCLUSION
26The Board finds that the Applicant did not take any deliberate steps nor did she explore every reasonable opportunity to manage the variety of assets and financial resources at her disposal in such a manner that would allow her to meet her property tax obligation for the taxation year 2014.
27The Board finds that based on the evidence before it, the Applicant failed to demonstrate to the satisfaction of the Board that there existed an inability to meet her property tax obligations for 2014 as set out in s. 323.(1)(e) of the City of Toronto Act.
28Accordingly, the Board dismisses the application for the cancellation, reduction or refund of taxes for the taxation year 2014 on the property located at (address withheld) in the City of Toronto.
“Marilyn Sharma”
MARILYN SHARMA MEMBER Assessment Review Board A constituent tribunal of Environment and Land Tribunals Ontario Website: www.elto.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248```