Date: 19980710
Dockets: 96-4431-IT-G; 96-4432-IT-G; 96-4433-IT-G
BETWEEN:
TODD BIDERMAN, MATTHEW BIDERMAN, JUSTIN BIDERMAN,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent,
Reasons for Judgment
McArthur, J.T.C.C.
[1] These appeals concerning the Appellants' assessments, dated July 19, 1995, were heard on common evidence. The Minister of National Revenue (the "Minister") assessed the Appellants $74,723[1] in respect of a Transfer of Property to them by their father, Michael B. Biderman, within the meaning of section 160 of the Income Tax Act (the "Act"). It is not in dispute that at all material times Michael B. Biderman was indebted to Revenue Canada and had been since 1989.
[2] Dale Rochelle Biderman, wife of Michael B. Biderman and mother of Matthew Biderman, Todd Biderman and Justin Biderman, died of cancer on October 6, 1991, leaving three children under the age of 18 years. Letters probate were granted on May 15, 1992, appointing Michael B. Biderman executor of the estate. The testatrix left her entire estate to her husband and failing him, in trust for her children.
[3] During the years 1990 through to 1994, Revenue Canada officers expended considerable effort to collect the indebtedness, which in 1992 was in excess of $50,000 from Michael B. Biderman.
[4] On September 30, 1994, Michael B. Biderman executed a disclaimer of his interests as a beneficiary of his wife's estate. At the time of her death, Dale Rochelle Biderman owned property at 1370 Hastings Drive, London, Ontario and 500 common shares in Jandale Holdings Ltd. Hastings Drive was her principal place of residence where her husband and children continue to live. Jandale was incorporated by her family, Janice Slopen her sister, and she and her siblings retained the common shares.
[5] The real property was transferred to the Appellants by Transfer/Deed, registered October 7, 1994 and the shares were transferred by a Declaration of Transmission dated September 30, 1996, by Michael B. Biderman in his capacity as executor of the estate with respect to Jandale.
[6] The fair market value of Hastings Drive, at the time of the transfer was $180,000. There was no evidence as to the value of the shares of Jandale Holdings Ltd. Since his wife's death, Michael B. Biderman has continued to occupy the real property, with his children, as his own.
[7] Hastings was transferred within three years from the date of the death of Dale Rochelle Biderman which avoided the vesting of the real property in favour of Michael B. Biderman.[2] Given the presumption in favour of vesting, the remaining assets of the deceased may well have vested in the person beneficially entitled. Michael B. Biderman is a lawyer who is presently suspended from practising law in Ontario and earns a modest income as a paralegal.
[8] On September 30, 1994, Michael B. Biderman executed a disclaimer and waiver of any claim interest or title in his deceased wife's estate. The Appellants submit that as a result of the disclaimer the estate was required to transfer the estate assets to Earl Biderman in trust for the Appellants. At the time of the transfer to them, the Appellants Todd, Matthew and Justin were 18, 20 and 16 years old.
Position of the Appellants
[9] The disclaimer by their father, Michael B. Biderman, meant that he never owned the estate assets in his personal capacity. The transfer of the real property and the shares to the Appellants was from the estate and not from Michael B. Biderman personally.
Respondent's Position
[10] Michael B. Biderman had owed Revenue Canada over $70,000. As former spouse of the deceased and father of the Appellants, he was not dealing with the Appellants at arm's length. In May of 1992, he undertook to pay Revenue Canada $20,000 from the distribution of his deceased spouse's estate. On November 27, 1992, the Minister registered in the Federal Court a certificate of judgment certifying as payable by Michael B. Biderman, the sum of $60,926 and a writ of fieri facias was issued February 24, 1993.
[11] When Michael B. Biderman surrendered his interest in the estate resulting in the estate's assets going to his three sons, the Minister assessed his three sons pursuant to section 160 of the Act on the basis that their father had an interest in the estate assets when he signed the Disclaimer and Waiver.
[12] Subsection 160(1) of the Act reads as follows:
"Where a person has, ...transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to
...
(c) a person with whom he was not dealing at arm's length,
..."
[13] Subsection 248(1) of the Act reads in part as follows:
"'property' means property of any kind whatever whether real or personal or corporeal or incorporeal and, without restricting the generality of the foregoing, includes
(a) a right of any kind whatever, a share or a chose in action,
..."
Analysis
[14] The purpose of section 160 of the Act is to prevent a taxpayer from defeating the claim of the Minister to unpaid taxes by transferring his assets to persons with whom he is not dealing at arm's length.
[15] The Appellants submit that Michael B. Biderman validly disclaimed an interest in his deceased wife's estate on September 30, 1994 and that he had no interest whatsoever in the real property or of the Jandale shares at the time the estate transferred them to the Appellants.
[16] Even if I go as far as finding Michael B. Biderman executed a valid disclaimer, I have no difficulty concluding that he had a right derived from the will which had the net value of the real property and the shares and by disclaiming that right a transfer of property resulted within the meaning of section 160 of the Act. The purpose of section 160 is to ensure that the tax debtor does not put assets out of reach of Revenue Canada. The voiding of the devise and bequest by a disclaimer prevents the Minister from collecting tax money owing.
[17] Michael B. Biderman transferred to his sons the rights that he had in the estate of his wife. He provided that framework whereby his children became eligible, as the only other named beneficiaries in the will, to be chosen to inherit the property willed by Dale Rochelle Biderman.
[18] The word "transfer" is to be interpreted in a very broad sense as referred to in the Estate of David Fasken v. Minister of National Revenue 49 DTC 491 (Exch).
[19] In the Queen v. Kieboom 92 DTC 6382 (FCA), a taxpayer caused his company to issue common shares to his wife and children. The Court found that this indirect transfer was in fact a transfer. The taxpayer had divested himself of certain rights to receive dividends should they be made. An analogy can be made in the present instance. Michael B. Biderman divested himself of certain rights to receive a house and shares. He divested himself of a right to the assets of his wife's estate. That is a transfer of property within the meaning of subsection 160(1). Although a transfer resulted from an operation of law it was set in motion by the disclaimer and waiver as expressed in Les Placements R.I.O. Inc. v. The Queen 97 DTC 1223, TCC at 1226.
[20] The word property has been widely interpreted. The definition in subsection 248(1) is all encompassing. In Kieboom (supra) the word "property" is indicative and descriptive of every possible interest which a person can have.
[21] Michael B. Biderman was living at 1370 Hastings Drive, London, at the time of Dale Rochelle Biderman's death. He continued to live there after her death, taking advantage of his inheritance and he still lives there today. He negotiated with Revenue Canada on the basis that the assets willed were his personally. He benefited from those assets for almost three years by having a home for himself and his children and as such he cannot be said to disclaim under the will. He could only surrender or release his interest in the estate.
[22] In conclusion, I find that the interest or right that Michael B. Biderman had in the estate was passed to his three sons by an indirect means such that the property was transferred within the meaning of section 160 of the Act.
[23] The appeal is dismissed with costs.
Signed at Ottawa, Canada, this 10th day of July 1998.
"C.H. McArthur"
J.T.C.C.