[OFFICIAL ENGLISH TRANSLATION]
98-260(IT)I
BETWEEN:
FRANCINE BLOUIN WILKINSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 4, 1999, at Ottawa, Canada, by
the Honourable Deputy Judge J.F. Somers
Appearances
For the Appellant: The Appellant herself
Counsel for the Respondent: Carole Benoit
JUDGMENT
The appeal from the assessment made under the Income Tax Act with respect to the 1994 taxation year is dismissed with costs.
Signed at Ottawa, Canada, this 12th day of November 1999.
|
"J.F. Somers" |
D.J.T.C.C.
Translation certified true
on this 16th day of July 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19991112
Docket: 98-260(IT)I
BETWEEN:
FRANCINE BLOUIN WILKINSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Somers, D.J.T.C.C.
[1] This appeal was heard at Ottawa, Canada, on October 4, 1999, under the Informal Procedure.
[2] It is an appeal from an income tax assessment for the 1994 taxation year. By notice of reassessment dated October 2, 1995, the Minister of National Revenue ("the Minister") reassessed the appellant's income tax return for the 1994 taxation year: he disallowed the $2,970 reported as capital gains and therefore reduced the appellant's total income by $2,228, the amount that had been reported as taxable capital gains; and disallowed the $2,228 deducted as net capital losses of other years.
[3] In assessing the appellant's tax return for the 1994 taxation year, the Minister assumed, inter alia, the following facts set out in paragraph 9 of the Reply to the Notice of Appeal, which the appellant either admitted or denied:
[TRANSLATION]
(a) on March 22, 1989, the appellant acquired a total of $9,600 in shares of BCE MOBILE COMMUNICATIONS, INDUSTRIAL HORIZON FUND, 1000THS INDUSTRIAL HORIZON and LE GROUPE VIDÉOTRON LTÉE ("the shares"); (admitted)
(b) on March 1, 1993, the appellant transferred the shares, which were worth $10,009 at the time, into a self-directed RRSP at the Bank of Nova Scotia ("the issuer"), plan number 494-20730-18 ("the self-directed RRSP"); (admitted)
(c) on December 29, 1993, the appellant sold the shares, and the value of the self-directed RRSP that date was $13,046; (admitted)
(d) on March 1, 1994, the Minister approved Form T3012A, Tax Deduction Waiver on a Refund of Your Undeducted RRSP Contributions Made in 1993, so that the issuer could refund the amount of $10,009, designated by the appellant, without withholding tax; (denied)
(e) by letter dated March 5, 1994, the appellant told the issuer that she intended to withdraw the $10,009 in excess contributions by means of Form T3012A authorized by the Minister and also requested that the balance of the self-directed RRSP be returned to her and the said account be closed; (admitted)
(f) during the 1994 taxation year, the appellant withdrew and received all of the funds from the self-directed RRSP, that is, the initial contribution of $10,009 and the accrued appreciation at the date of withdrawal of $3,037, for a total of $13,046; (admitted)
(g) the appellant paid $67 in commission and/or management fees on and out of the self-directed RRSP; (admitted)
(h) the net appreciation the appellant received during the 1994 taxation year from the self-directed RRSP was $2,970 ($13,046 - $10,009 - $67); (denied)
(i) the issuer issued the appellant a T4RSP in the amount of $2,970 for the 1994 taxation year; (admitted)
(j) the $2,970 that the appellant received from the issuer during the 1994 taxation year was not a capital gain; (denied)
(k) the $2,970 that the appellant received from the issuer during the 1994 taxation year was not an excluded withdrawal under subsection 146.01(1) of the Act; (denied)
(l) the $2,970 that the appellant received from the issuer during the 1994 taxation year was a benefit under an RRSP; (denied) and
(m) the appellant must include the $2,970 in computing her income for the 1994 taxation year. (denied)
[4] In addition to testifying when this appeal was heard, the appellant explained the sequence of her transactions in a letter she wrote to Revenue Canada and attached to her tax return. The said letter reads in part as follows:
[TRANSLATION]
The second point concerns a profit I made on shares I had owned since 1989. In 1989, I sold ounces of silver that I had bought in 1982 and 1983, and I incurred a capital loss of about $12,000. I then purchased shares of BCE Mobile Communications, Le Groupe Vidéotron Ltée and the Horizon Industrial Fund. In March 1993, I opened a self-directed RRSP account at ScotiaMcLeod and transferred the shares into it.
My contribution to that self-directed RRSP account was cancelled in March 1994 for the reasons given below. I sold my shares, withdrew the money (which was the only money in the account) and closed my self-directed RRSP account at ScotiaMcLeod. I then repaid the tax savings of $2,800 I had obtained for the 1992 taxation year. The reason I took such action was that I had used the Home Buyers' Plan in 1993 (my RRSP at CS COOP) and could therefore not contribute to an RRSP.
In fact, I hoped to be able to use the Home Buyers' Plan in 1994 rather than in 1993 and to use the RRSP contributions I made in March 1993. However, the Home Buyers' Plan was not available to me in 1994 because the government limited the program to first-time buyers when it extended it in February 1994. That is why my March 1993 RRSP contribution was cancelled.
This preamble is necessary to explain the fact that, between the time I transferred my shares into a self-directed RRSP in March 1993 and the time that contribution and that self-directed RRSP were cancelled, the shares generated a profit (finally) of $2,970.81. Since the shares were in an RRSP at the time, I was issued a T4RSP.
However, it is my view that, in the circumstances, what was involved was not a withdrawal from an RRSP but rather a mere capital gain because of the fact that the entire transaction was cancelled and is henceforth deemed not to have occurred. This is important to me, since I can then use the capital loss I incurred in 1989 (loss incurred on the same sums of money) . . .
[5] The issue is whether the $2,970 that the appellant received from the issuer during the 1994 taxation year must be included in her income for that year as income from an RRSP.
[6] The respondent is relying, inter alia, on section 3, subsections 146(1), 146(8), 146(8.2), 146.01(1), 146.01(10) and 248(1) and paragraph 56(1)(h) of the Income Tax Act as amended and as it applied for the 1994 taxation year.
[7] The situation in this appeal is analogous to the one explained by Judge Garon of this Court in St-Hilaire v. Canada [1996] T.C.J. No. 884. He stated the following at paragraph 22:
In any case, the Court concurs in the viewpoint of the respondent that the clear intent of Parliament is indicated in subsections 146(8) and (8.2). Under subsection 146(8), an amount withdrawn from an RRSP must generally be included in income and the taxpayer can only claim a deduction in the specific situation provided for in subsection 146(8.2). The consequences of the general rule of taxation stated in subsection 146(8) of the Act can be explained at least in part in the instant case by the fact that the income from the RRSP in question was not taxed throughout these years (except for 1991) precisely because this was an RRSP. For example, if this had not been an RRSP, the "interest" portion of the income from the property in question would have had to be included in the appellant's income under paragraph 12(1)(c) and subsection 12(4) of the Act or the earlier provisions, which were applicable at various times for each of the years in which the fund existed. The appellant thus benefited from the postponing of tax on this interest for a great many years. It should be borne in mind that the accumulation of income from an RRSP without having to include these amounts in income for purposes of the Income Tax Act is one of the two benefits resulting from the existence of an RRSP, the other being the deduction of amounts paid as RRSP premiums in computing income. It would not be fair to other taxpayers if such interest was only included in income at the time the RRSP funds were withdrawn.
[8] A taxpayer makes a tax election by investing in an RRSP, and that investment gives rise to two benefits: the possibility of claiming a deduction and the fact that accrued interest is free of tax until withdrawn. However, it is not possible to obtain a capital gain and have the 75 percent inclusion rate apply.
[9] In the circumstances, the appeal is dismissed and the Court confirms the Minister's assessment for the 1994 taxation year.
Signed at Ottawa, Canada, this 12th day of November 1999.
|
"J.F. Somers" |
D.J.T.C.C.
Case law consulted:
Marion R. Buller Bennett and Her Majesty the Queen (1999 CarswellNat 712)
Bell v. M.N.R., 88 DTC 1702
Kennedy v. M.N.R., 81 DTC 187
Campbell v. M.N.R., 79 DTC 231
Translation certified true
on this 16th day of July 2003.
Sophie Debbané, Revisor