Davis v. The Queen (June 14, 2018 – 2018 TCC 110, Bocock J.).
Précis: The taxpayer was a long term resident of the United States. In 2013 he decided to move back to Canada and liquidated his U.S. 401(k) and received net proceeds (after U.S. withholding tax) of $495,325.03 (the “401(k) proceeds”) sometime immediately following May 6, 2013 and before leaving for Canada on May 9, 2013. CRA taxed the 401(k) proceeds on the basis that he had been a resident of Canada on the date of receipt of the funds. The Tax Court applied the tie breaker rules under the Canada U.S. Tax Treaty and concluded that under those rules Mr. Davis was a resident of the United States at the date the funds were received. Thus the appeal was allowed with costs.
Decision: Mr. Davis had a complex fact pattern:
(i) In the U.S.
 Mr. Davis moved to Massachusetts in 2003, ten years before his return to Canada. He worked for a large investment company as an IT systems engineer. On December 31, 2012, Mr. Davis left that job because his department was closed and moved elsewhere in the U.S. He never worked again in the U.S. Over the course of his employment, he saved and invested in his 401(k) retirement account.
 His banking was conducted in the U.S. He maintained health insurance coverage in the U.S. until June 30, 2013. During that period Mr. Davis attempted to sell his house in the U.S. At one time, Mr. Davis owned two properties in the U.S.: one in Marlborough and the other in Hudson, both in the State of Massachusetts. The Marlborough property was auctioned for sale in December 2012, although it was unclear when that transaction was completed with finality.
 Mr. Davis retains the Hudson property to this day. He lived there until he returned to Canada in May, 2013. His U.S. address for U.S. dealings remains at the Hudson address. Mr. Davis received his 401(k) proceeds by courier delivered to his home in Hudson sometime after May 6, 2013 and before May 9, 2013. There were deductions withheld for U.S. federal tax, state tax and outstanding loans. Mr. Davis asserts that, after receiving the 401(k) proceeds, he commenced his final departure from the U.S., culminating with his final re-entry into Canada on May 9, 2013. Upon crossing the border, he filed customs forms relating to transporting negotiable instruments in excess of $10,000.00, as required. These forms were not adduced at the hearing.
(ii) In Canada
 Mr. Davis bought the rural property near Yarmouth, Nova Scotia in October 2009. Mr. Davis’ girlfriend funded the down payment. Between that time and Mr. Davis’ return in May, 2013, Mr. Davis visited the property frequently. He lives there today, albeit alone for the past several years. During the relevant period, it was uncontested evidence that Mr. Davis and his girlfriend were in a platonic relationship.
 From 2009 to 2013, Mr. Davis brought various goods from the Hudson property to Yarmouth. He believably testified that he always intended to return to Canada. It was simply a question of what “tipped the scales” for his final return. The early morning of April 9, 2013 was a particularly important crossing. At 4:00 am at the border crossing, Mr. Davis completed a customs declaration form relating to a “personal effects accounting document” which indicated “I returned to Canada to resume residence on April 9, 2013”. The form also indicates that other goods would follow.
 When Mr. Davis filed his 2013 tax return, he did so using the software package “Turbo Tax”. He also indicated on that return that his commencement date for residency in Canada was April 9, 2013. That same date was used to indicate “the date you became or ceased to be resident of Canada for income tax purposes in 2013, enter the date”. Mr. Davis was not familiar with tax laws or accountancy. He followed the software program, knew he should disclose his income and completed the tax return as best he could. He also candidly disclosed receipt of his 401(k) proceeds, but also claimed the off-setting entry described above: other deductions. If he was not a resident of Canada on the receipt date, he need not have done the first. In any circumstance, the second was an error.
The Court reviewed the facts and concluded that the tie-breaker rules boiled down to the second tier test of “Habitual abode”:
(ii) Second Tier Tie-breaker - - Habitual abode
 To determine habitual abode, one must identify the period for measure. The parties agree the critical income date is the receipt date. Residency for this dual treaty resident on that date is the determinative date. To reiterate, this is May 6, 2013. Before April 9, 2013, Mr. Davis was not a resident of Canada. After May 9, 2013, he was not a resident of the U.S.; the period in issue is the period surrounding May 6, 2013.
 Justice Campbell in Lingle provided the following synopsis:
 The Appellant argues that even if the conclusion of Bell J. respecting the Commentary in Allchin is wrong and the Commentary is relevant, it contains nothing that would define an habitual abode as the place where the taxpayer “stays more frequently”. The Commentary on Article IV(2) does not contain a test requiring a comparison between the frequency of stays in Canada and the United States.
 The relevant paragraphs, 16 to 20 from the Commentary on Article IV(2) of the OECD Model, provide:
16. Subparagraph b) establishes a secondary criterion for two quite distinct and different situations:
a) the case where the individual has a permanent home available to him in both Contracting States and it is not possible to determine in which one he has his centre of vital interests;
b) the case where the individual has a permanent home available to him in neither Contracting State.
Preference is given to the Contracting State where the individual has an habitual abode.
17. In the first situation, the case where the individual has a permanent home available to him in both States, the fact of having an habitual abode in one State rather than in the other appears therefore as the circumstance which, in case of doubt as to where the individual has his centre of vital interests, tips the balance towards the State where he stays more frequently. For this purpose regard must be had to stays made by the individual not only at the permanent home in the State in question but also at any other place in the same State.
19. In stipulating that in the two situations which it contemplates preference is given to the Contracting State where the individual has an habitual abode, subparagraph b) does not specify over what length of time the comparison must be made. The comparison must cover a sufficient length of time for it to be possible to determine whether the residence in each of the two States is habitual and to determine also the intervals at which the stays take place.
 Lingle was referenced by Respondent’s counsel. The Court questioned counsel extensively on the reference. Some consensus surrounded the view that frequency of stays would quantitatively establish the habitual abode. The Federal Court of Appeal, in referencing a different paragraph in Lingle, upheld the decision of Justice Campbell and refined and expanded the test as follows :
 To the extent that the sentence per se could be found to be ambiguous, it is, however, clear from a reading of the reasons as a whole and paragraph 30 that, at the point where the sentence occurs, the judge had already concluded that the appellant did not have an “habitual abode” in the United States “because he did not regularly, customarily or normally live in the United States”: see paragraph 30.
 The appellant argued that the proper test to be applied for determining where a taxpayer has his “habitual abode” is to look at where he or she “is habitually present”. He relies upon a tentative conclusion of Dr. J.F. Avery Jones who, … , is currently a judge on the United Kingdom First Tier Tax Tribunal.
 The Tax Court found that the appellant “regularly, normally and customarily lived in Canada”: see paragraph 30 of the reasons for judgment. By the appellant’s proposed test, the Tax Court found that he was habitually present in Canada, but not in the United States.
 On balance, given all the facts as stated throughout and upon applying these quantitative and qualitative measures, the Court determines that Mr. Davis’ habitual abode was in the U.S. on or before May 9, 2013. He regularly, customarily or normally lived there prior to and immediately after the receipt date. This may not have been true after May 9, 2013, but the critical date framing the material time was the receipt date, May 6, 2013, three days before. Prior to that time, the contrary completion in boxes on forms and returns of the date April 9, 2013 merely reinforces taxpayer misunderstanding and, at most, establishes dual residency begging the very question for this Court. Mr. Davis’ residency in Canada before May 9, 2013 was prepatory to disengaging from the U.S. and permanently ceasing to be a resident after May 9, 2013. Before May 9, 2013, Mr. Davis, based upon the factual circumstances before the Court, habitually lived in the U.S. based upon frequently, duration and regularity .
Accordingly Mr. Davis’ appeal was allowed with costs.