Date: 19980310
Docket: 95-3648-IT-G
BETWEEN:
ANNE LYONS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(Delivered orally from the Bench at Montreal, Québec on October 27, 1997 and subsequently revised at Ottawa, Ontario on March 10, 1998.)
Lamarre, J.T.C.C.
[1] The Appellant is appealing an assessment made under section 160 of the Income Tax Act (“Act”), notice of which is dated October 26, 1993, whereby the Minister of National Revenue (“Minister”) claimed from the Appellant an amount of $20,074. In assessing the Appellant under section 160 of the Act, the Minister relied upon the facts set at in paragraph 3 of the Reply to the Amended Notice of Appeal which reads as follows:
a) at all material times, Gaston Régimbal was the spouse of the Appellant;
b) in 1989 and 1990, Gaston Régimbal worked for Système Shatov International Ltée ("Shatov");
c) on or about November 1989, Gaston Régimbal directed Shatov to transfer his salary to the Appellant;
d) as directed, Shatov issued cheques to the Appellant during the period commencing on or about November 28, 1989 and ending on or about August 27, 1990, for a total of 21 000 $;
e) the Appellant gave no consideration to Gaston Régimbal for the said cheques;
f) moreover, the Appellant never worked for Shatov nor gave any consideration to Shatov for the said cheques;
g) the aggregate of all amounts that Gaston Régimbal was liable to pay under the Income Tax Act or in respect of the taxation years in which the monies were transferred or any preceding taxation year was 20 074,04 $.
[2] The Appellant objects to the assessment in question on two grounds.
[3] Firstly, she argues that the assessment was made in respect of a transfer of assets that occurred between December 28, 1989 and April 26, 1990. She therefore maintains that the Respondent cannot rely, as she did in the Reply, on any transfer of money that would have occurred before and after that period.
[4] Secondly, the Appellant contends that she never had the beneficial ownership of the cheques totalling $21,000 made out in her name by her ex-husband's employer, Système Shatov International (“Shatov”).
[5] According to section 160 of the Act, where there is a transfer of property between spouses, the transferee and transferor are jointly and severally liable to pay an amount equal to the lesser of:
(a) the amount by which the fair market value of the property transferred exceeds the fair market value of the consideration given for the property,
and
(b) the amount that the transferor is liable to pay under the Act in respect of the taxation year in which the property was transferred or any preceding taxation year.
[6] This is the version of section 160 as amended by 1980-81-82-83, c. 140, and is applicable with respect to transfers of property occurring after November 12, 1981. Formerly, section 160 made the transferor and transferee jointly and severally liable to pay the lesser of (a) the amount that the transferor was liable to pay under the Act on the day of the transfer, and (b) the value of the property transferred. Therefore, before November 12, 1981, the day of transfer of property was crucial to determining the liability of the transferee under section 160. The decision by Mr. Justice Pinard of the Federal Court Trial Division in Furfaro-Siconolfi v. M.N.R., [1990] 1 C.T.C. 188, referred to by counsel for the Appellant, was rendered under this former version of section 160.
[7] An analysis of section 160 as it now reads shows that the exact day of the transfer is no longer important as a transferee is liable for the amount that the transferor is liable to pay in respect of the taxation year in which the property was transferred or any preceding taxation year. In the Notice of Assessment, the Minister established the amount due under the Act by Mr. Régimbal as being $20,074. By the same assessment, the Minister established the liability of the Appellant for that amount in respect of a transfer of property that occurred in 1989 and 1990.
[8] The exact period of transfer of property in the years 1989 and 1990 has therefore no bearing on the assessment. If it is established that Gaston Régimbal was liable to pay an amount of $20,074 under the Act in respect of the taxation year in which the monies were transferred or any preceding taxation year - and this is not contested -, the exact months in which, according to the assessment, the transfers occurred in those years are not important. Therefore, I cannot accept the Appellant's first argument.
[9] Besides, the Appellant cannot argue that natural justice has been denied on the basis that she did not know from the assessment itself the exact period of the transfer of the assets. The Respondent, who relied on a document filed by the Appellant as Exhibit A-3, clearly mentioned in her Reply to the Amended Notice of Appeal the dates of the transfers and clearly indicated on her list of documents the precise cheques on which the Minister based his assessment.
[10] Furthermore, as was stated by the Federal Court of Appeal in Riendeau v. The Queen, 91 DTC 5416, the Minister's mental process in making an assessment cannot affect a taxpayer's liability to pay the tax imposed by the Act itself.
[11] For all these reasons, the Appellant's first argument must be rejected.
[12] As to the Appellant’s second argument, she contends that she never had the beneficial ownership of the cheques made out to her by Shatov. I heard her testimony and that of her ex-husband, Mr. Régimbal. I would begin by stating that considering my decision on the first argument, I will admit in evidence all documents that were filed subject to the objection raised by counsel for the Appellant. These documents show the exact number of cheques that were made out to the Appellant by Shatov and on which the assessment is based, and include as well the Appellant's bank statements covering the years 1989 and 1990. I consider these documents to be fully relevant and they were duly enumerated on the Respondent's list of documents.
[13] Both Mr. Régimbal and the Appellant testified that the Appellant never benefited from the money. The cheques made out by Shatov to the Appellant represented Mr. Régimbal's salary. His own bank account was seized by two main creditors: Revenue Canada and his ex-wife.
[14] The Appellant was married to Mr. Régimbal on June 30, 1989. They had met eight months before the wedding. The Appellant had been working for the same company - not Shatov - for sixteen years, and her weekly salary of $344 was regularly deposited in her bank account, as per Exhibit R-1. The Appellant testified that during the first months of her marriage, her husband was not bringing in any income. At the same time, she said that he was responsible for paying the rent.
[15] On November 28, 1989, Mr. Régimbal instructed his employer, Shatov, of which he was a shareholder, to issue cheques to the order of the Appellant. This way, his salary would not be seized by his creditors. According to the bank statements filed as Exhibit R-1, one amount of $3,000 had been deposited in the Appellant's bank account on November 29, 1989, which amount corresponds to the exact amount of the cheque made out to her the day before. Another amount, of $1,000, was deposited in the same bank account on December 27, 1989. One cheque for $1,000, had been issued to her on December 22 and another, in the amount of $2,000, on December 28, 1989. According to the Appellant, the amount of $1,000 deposited in her bank account might have been taken out of the cheques made out to her. On June 28, 1990, an amount of $1,600 was also deposited in her bank account. On June 27, 1990, a cheque in the amount of $3,000 was made to her.
[16] Furthermore, the bank statements show other deposits, apart from her salary, varying between $500 and $968. Counsel for the Appellant argued that the Respondent did not prove that these amounts deposited in the Appellant's bank account corresponded to the cheques made out to the Appellant by Shatov. On this point it is the Appellant who has the burden of showing on a balance of probabilities that the cheques issued to her by Shatov were not for her own benefit.
[17] The Appellant stated that she may have cashed the cheques and remitted the money to her husband who was travelling a lot and who had no credit card. The Appellant said she did not know that her husband owed money to Revenue Canada. She seemed to know however that her husband's bank account had been seized, and she acknowledged that it was because she did not want her husband's salary being seized that she agreed to cash the cheques for him.
[18] Contrary to what was the case in Delisle v. Canada, [1995] 1 C.T.C., 2007, referred to by counsel for the Appellant, I am not convinced that the Appellant never used this money for her own benefit and that she was only acting as agent for her husband at that time.
[19] In the bank statements filed under Exhibit R-1, it is noteworthy that the Appellant always kept in her account total amounts varying from approximately $3,000 to $6,000 every month. These amounts are far greater than her own salary. Other than from her salary, nobody explained where these amounts were received (if they were not received from her husband) nor what the debits were precisely for if they were not for her own use. Neither the Appellant nor the witness from the Royal Bank who was called by the Appellant gave any explanation on this point or concerning the symbols appearing beside the figures in the bank statements. Counsel for the Appellant only tried to object to the filing of these documents which, in my view, are important for resolving the issues in this case.
[20] No evidence was adduced to contradict the content of these documents, which leads me to believe that the Appellant had the use of the money from the cheques in issue for her own benefit during the time she knew that her husband's bank account had been seized.
[21] Furthermore, the fact that Mr. Régimbal declared the amounts of the cheques in his tax returns does not change the result. In fact, it was his salary; he had to declare it in his tax returns and he simply transferred it afterwards to the Appellant.
[22] From the evidence before me I cannot infer, as in Wink v. M.N.R., [1988] 2 C.T.C. 2253, referred to by counsel for the Appellant, that the Appellant and her husband had no intention of effecting a valid transfer or creating any legally enforceable rights between them. I therefore conclude that the Appellant has not established on a balance of probabilities that the amount of $21,000 was never conveyed or transferred to her. She was therefore liable under section 160 of the Act for the payment of the $20,074 owed by Mr. Régimbal in the taxation year in which the property was transferred or any preceding year.
[23] The appeal is dismissed with costs.
Signed at Ottawa, Canada, this 10th day of March 1998.
"Lucie Lamarre"
J.T.C.C.