Date: 20040401
Docket: A-597-02
Citation: 2004 FCA 148
CORAM: DESJARDINS J.A.
LÉTOURNEAUJ.A.
NADON J.A.
BETWEEN:
RAYNALD GRENIER, domiciled and residing
at 930 chemin St-Louis,
Sillery, Quebec G1S 1C7
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Hearing held at Québec, Quebec, on March 30, 2004.
Judgment delivered at Québec, Quebec, on April 1, 2004.
REASONS FOR JUDGMENT: DESJARDINS J.A.
CONCURRED IN BY: LÉTOURNEAU J.A.
NADON J.A.
Date: 20040401
Docket: A-597-02
CORAM: DESJARDINS J.A.
BETWEEN:
RAYNALD GRENIER, domiciled and residing
at 930 chemin St-Louis,
Sillery, Quebec G1S 1C7
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
DESJARDINS J.A.
[1] Dr. Raynald Grenier, the appellant, has practised dermatology in the Québec area since 1975. He has also become a forestry producer. He acquired his first piece of forest land in 1967. Over the next 30 years, he acquired some 60 other lots, thus becoming, so he says, one of the largest forestry producers in the Québec area. He is a registered forestry producer with the ministère des Ressources naturelles [Ministry of Natural Resources]. In 1989, he won a prize for "forest building" in the Québec area.
[2] The appellant is challenging a Tax Court of Canada decision (Grenier v. Canada, [2002] T.C.J. No. 650, Archambault T.C.J.) dismissing his appeals from reassessments by the Minister of National Revenue (the Minister) for taxation years 1993 to 1996 inclusive.
[3] The appellant raises three issues:
I. First, he claims the Tax Court Judge erred in upholding the Minister's decision that his chief source of income for the taxation years in question was neither farming nor a combination of farming and some other source of income and that the amount of his deductible farm losses was accordingly subject to the limits set out in subsection 31(1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th. Supp.) (the Act).
II. Second, he claims the Tax Court Judge erred in allowing the Minister to reopen the assessment for taxation year 1993 to include unreported income of $26,184. The appellant argues that it was too late for the Minister to do so. He denies that he made any misrepresentation attributable to neglect or carelessness and that the Minister's reassessment was in keeping with subsection 152(4) of the Act.
III. Last, the appellant contends that subsection 31(1) of the Act violates his guaranteed rights under section 15 of the Canadian Charter of Rights and Freedoms (the Charter).
I.
[4] On the first point, the appellant argues that he belongs to the first of the three classes of farmers to which Dickson J. referred in Moldowan v. Canada, [1978] 1 S.C.R. 480, at pages 487 and 488 of the reasons, because he is, so he says, a "taxpayer, for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine."
[5] In my view, however, the appellant cannot belong to this class, and the Tax Court Judge correctly applied the criteria set out in Moldowan for determining whether farming constitutes a taxpayer's chief source of income.
[6] The Tax Court Judge, repeatedly noting deficiencies in the evidence, doubted whether the first two Moldowan criteria-time devoted to farming activities and capital invested-were met in the case at bar. He was certain, though, that the appellant had not met the third criterion: present and future profitability of the business.
[7] In terms of present profitability, the evidence shows that from 1980 to 2000, the appellant's forestry business constantly produced losses, except for 1997, 1998 and 1999, in which small incomes were reported. These small incomes would have turned into losses if the appellant had deducted, as he usually did, the property taxes that he had to pay.
[8] The appellant reported $329,547 in business income between 1980 and 2001, and over $4 million for the economic value of his lands, the annual growth of which was apparently about $200,000. The Tax Court Judge rightly rejected this evidence because under income, the appellant was lumping capital together with unrealized capital gains.
[9] As for the future profitability of his business, the appellant showed no interest in cutting wood. His only strategy was to plant the largest possible number of trees in the most efficient way possible on the basis of forest management plans suggested by the engineers. The Tax Court Judge had no objective element on the basis of which to conclude that the appellant could make large profits, even at the time of his retirement. In fact, by the appellant's own admission, he wanted to own an old-growth forest, part of which might be left to his children.
[10] The Tax Court Judge rightly held that the appellant could not be considered to be a farmer of the first class, because his chief source of income for tax years 1993 to 1996 was "neither farming nor a combination of farming and some other source of income" under subsection 31(1) of the Act.
II.
[11] With respect to the second issue raised by the appellant, in my view the Tax Court Judge made no error in holding that the Minister could reassess for 1993 under subsection 152(4) of the Act.
[12] The appellant argued that he had kept books in accordance with Revenue Canada Information Circular 78-10R3 and that he could not be penalized for money that he claimed not to have received because his salary was capped for the years in question.
[13] Subsection 152(4) of the Act allows the Minister to make a reassessment after the normal reassessment period if the taxpayer ". . . has made any misrepresentation that is attributable to neglect, carelessness or wilful default . . . ."
[14] The Tax Court Judge found that the appellant had been neglectful in failing to check with the Régie de l'assurance-maladie du Québec (RAMQ) [Quebec Health Insurance Board] the total of his fees paid. The appellant relied solely on his statements, two of which were missing. Whatever the case, mere "carelessness" on the part of the taxpayer (see subsection 152(4) of the Act) empowers the Minister to intervene. The appellant's failure to compare the statements that he received from the RAMQ with his bank deposits was, at the very least, careless.
[15] The capping of his remuneration is not a valid excuse in the case at bar because a letter from the Association of Dermatologists of Quebec, dated October 26, 1996, which the appellant attempted to put in evidence before us (it was not in evidence before the Tax Court Judge), has to do with the 1994-1995 professional practice year, whereas the only taxation year at issue here is 1993. Furthermore, counsel for the appellant admitted before the Tax Court of Canada that $26,184 had been received for taxation year 1993 (see transcript, Appeal Book, volume C-1, pages 5 and 6).
[16] The Tax Court Judge was thus justified in holding that the Minister could issue a reassessment in the case at bar even though it was after the normal reassessment period.
III.
[17] Third, the appellant submits that pursuant to the application of subsection 31(1) of the Act and contrary to section 15 of the Charter, he was being discriminated against for having two sources of income.
[18] The Court allowed the appellant to file in evidence the notices that he had served on the Attorney General of Canada and the attorney general of each province under section 57 of the Federal Court Act. The constitutional question was not, however, raised before the Tax Court Judge. There is thus no evidence at all on this point, even assuming section 15 of the Charter were applicable, on which point I express no opinion.
[19] I would dismiss the appeal with costs.
[20] I would add, as did the Tax Court Judge, that I appreciate the appellant's initiative and accomplishments in an area as important as tree planting. I recognize that the scope and consequences of section 31 of the Act are not completely above reproach (see Watt v. Canada, [2001] F.C.J. No. 517, para. 15). I am, however, bound by its terms and by the Supreme Court of Canada's interpretation of it.
"Alice Desjardins"
J.A.
"I concur.
Gilles Létourneau J.A."
"I concur.
Marc Nadon J.A."
Certified true translation
Peter Douglas
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-597-02
STYLE OF CAUSE: RAYNALD GRENIER v. HER MAJESTY THE QUEEN
PLACE OF HEARING: QUÉBEC, QUEBEC
DATE OF HEARING: MARCH 30, 2004
REASONS FOR JUDGMENT: DESJARDINS J.A.
CONCURRED IN BY: LÉTOURNEAU J.A.
NADON J.A.
DATE OF REASONS: APRIL 01, 2004
APPEARANCES:
Raynald Grenier FOR HIMSELF
Michel Lamarre FOR THE RESPONDENT
SOLICITORS OF RECORD:
Department of Justice Canada FOR THE RESPONDENT
Montreal, Quebec