Earlier this month, the Scrabble neighborhood welcomed 2,800 new phrases into the official worldwide Scrabble dictionary. Now containing over 279,000 phrases, this orthographic tome is utilized in tournaments and houses around the globe because the official arbiter of all playable phrases. Among the many new phrases added to acceptable Scrabble play have been three two-letter phrases: ew (an “expression of disgust”), okay and ze (a gender-neutral pronoun.) As avid Scrabble gamers will attest, two-letter phrases play an necessary function within the recreation. They’re the “lifeblood of high-score Scrabble, enabling us to make these high-scoring parallel performs involving many phrases,” in line with Philip Nelkon, four-time U.Okay. nationwide Scrabble champion, as reported in The Guardian.
This week, a distinct two-letter phrase performed a vital function in a choice of the Tax Courtroom, in a case involving a Toronto rabbi, the clergy residence deduction and the which means of the phrase “or” within the Revenue Tax Act.
The clergy residence deduction
The aim of the clergy residence deduction is to offer a subsidy for the usage of a clergyperson’s residence. That is an exception to the essential rule within the Revenue Tax Act which typically restricts the flexibility for people to deduct private and residing bills. Underneath the Tax Act, to assert the clergy residence deduction, the person have to be a member of a clergy or of a spiritual order or an everyday minister of a spiritual denomination and customarily have to be answerable for, or ministering to, a diocese, parish or congregation.
The quantity eligible for the clergy residence deduction relies on the clergyperson’s scenario. If the clergyperson is supplied with free housing, maybe in a house owned by the church, mosque or synagogue, the honest market rental worth of that free housing have to be included within the clergyperson’s earnings as a taxable employment profit. Underneath the primary subparagraph of the clergy residence deduction rule, nevertheless, the clergyperson might then deduct the identical quantity from his or her earnings.
Underneath the second paragraph of the clergy residence deduction rule meant to cowl the clergyperson who rents or owns their very own residence, a deduction could be taken for both the lease really paid by the clergyperson for his or her place of residence or the honest market rental worth of such a residence if the clergyperson owns the residence.
Through the tax years underneath overview (2014 and 2015), the taxpayer was employed by a Toronto synagogue as its principal rabbi. Throughout these years, the taxpayer lived in a house situated inside straightforward strolling distance of the synagogue. Whereas the house was legally owned by the synagogue, the taxpayer and his spouse have been thought of to be useful house owners of three/8ths of the house, whereas the synagogue was the useful proprietor of the remaining 5/8ths.
For each the 2014 and 2015 tax years, the synagogue issued a T4 slip to the rabbi indicating the worth of the taxable housing employment profit referring to the 5/8ths of the house the synagogue owned as $45,000. This quantity was included within the rabbi’s earnings as an employment profit and he claimed a clergy residence deduction of the identical quantity underneath the primary subparagraph of the clergy residence deduction. The rabbi, nevertheless, additionally claimed an extra clergy residence deduction within the quantity of $39,460 in respect of the three/8ths portion of the house that he and his spouse beneficially owned, pursuant to the second subparagraph of the clergy residence deduction rule.
The Canada Income Company disallowed the rabbi’s deduction underneath the second subparagraph on the premise that clergy residence deduction can’t be claimed underneath each subparagraphs. The problem earlier than the Tax Courtroom, subsequently, was whether or not whether or not the phrase “or” between the primary and second subparagraphs of the clergy residence deduction rule is disjunctive or conjunctive.
The ambiguous “or”
For the non-grammarians amongst us (and for individuals who haven’t spent a lot time poring over our tax statute), while you come throughout an inventory of things, guidelines or situations within the Tax Act, they’re sometimes joined both by the phrase “or,” or the phrase “and.” If they’re joined by “or,” the legislative provision is alleged to be disjunctive which means that both situation A applies or situation B applies, however not each. If the checklist is joined by “and,” then each situations apply on the similar time.
So as to decide whether or not the rabbi was in a position to declare a clergy residence deduction underneath the principles in each the primary and second subparagraphs, the Tax Courtroom needed to resolve on the suitable which means of the phrase “or” within the context of the clergy residence laws.
The decide first started his evaluation by making use of the seminal rule of statutory interpretation as set out by the Supreme Courtroom of Canada which discovered that if the phrases of a selected statute are “clear and plain, they need to be given their impact and never be altered by legislative objective or object.” The decide then turned to the Oxford English Dictionary which states that “or” is “used to coordinate two (or extra) sentence components between which there’s another.” Whereas “or” could be conjunctive in restricted circumstances, prior jurisprudence concluded that “or” within the unusual sense is “prima facie disjunctive.”
The decide additionally targeted on the existence of a comma earlier than “or” on the finish of the primary subparagraph discovering it “an necessary interpretative help indicating that this ‘or’ is disjunctive.” Quoting prior jurisprudence, “The presence of a comma ‘opens the door to a disjunctive interpretation.’”
Lastly, the decide turned to the French model of the clergy residence deduction laws, the place the French phrase “soit” is used. This roughly interprets to “both, or” in English. As prior jurisprudence concluded, “the usage of the phrase ‘soit’ is important, because it clarifies the French textual content and because it has no counterpart within the English textual content. Though each ‘soit’ and ‘ou’ are disjunctive particles used to precise another, it was a deliberate selection by the legislator to make use of these distinct phrases to point a disjunction.”
The decide subsequently dominated that “the unusual definition, comma placement, and the French model of the availability present that the phrase ‘or’ within the first subparagraph is disjunctive,” which means that the rabbi was not entitled to assert clergy bills pursuant to each subsections.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Property Planning with CIBC Monetary Planning & Recommendation in Toronto.