Date: 20050429
Docket: A-346-04
A-435-04
Citation: 2005 FCA 137
CORAM: DESJARDINS J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
JOANNE DUCHARME
Respondent
Heard at Vancouver, British Columbia, on April 13, 2005.
Judgment delivered at Ottawa, Ontario, on April 29, 2005.
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
CONCURRED IN BY: DESJARDINS J.A.
PELLETIER J.A.
Date: 20050429
Docket: A-346-04
A-435-04
Citation: 2005 FCA 137
CORAM: DESJARDINS J.A.
ROTHSTEIN J.A.
PELLETIER J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
JOANNE DUCHARME
Respondent
REASONS FOR JUDGMENT
ROTHSTEIN J.A.
[1] These are two appeals by the Crown from decisions of the Tax Court that allowed the respondent Joanne Ducharme's appeal from a reassessment under subsection 160(1) of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) as am. and that awarded costs to her. Under subsection 160(1), where a taxpayer transfers property to his common-law partner, both common-law partners are jointly and severally liable to pay amounts for which the transferor is liable to pay under the Act, to the extent to which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property. Subsection 160(1) provides in relevant part:
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160. (1) Where a person has ... transferred property, either directly or indirectly ... to
(a) the person's spouse or common-law partner or a person who has since become the person's spouse or common- law partner, ... (e) the transferee and transferor are jointly and severally liable to pay under this Act an amount equal to the lesser of (i) the amount, if any, by which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property, and (ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act in or in respect of the taxation year in which the property was transferred or any preceding taxation year; ...
[emphasis added]
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160. (1) Lorsqu'une personne a ... transféré des biens, directement ou indirectement, ... à l'une des personnes suivantes: a) son époux ou conjoint de fait ou une personne devenue depuis son époux ou conjoint de fait; ...
e) le bénéficiaire et l'auteur du transfert sont solidairement responsables du paiement en vertu de la présente loi d'un montant égal au moins élevé des montants suivants: (i) l'excédent éventuel de la juste valeur marchande des biens au moment du transfert sur la juste valeur marchande à ce moment de la contrepartie donnée pour le bien, (ii) le total des montants dont chacun représente un montant que l'auteur du transfert doit payer en vertu de la présente loi au cours de l'année d'imposition dans laquelle les biens ont été transférés ou d'une année d'imposition antérieure ou pour une de ces années; ...
[non souligné dans l'original]
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[2] Donald Vienneau was Ms. Ducharme's common-law partner. He was liable under the Act for over $500,000. The Minister of National Revenue assessed Ms. Ducharme as a result of payments by Mr. Vienneau on a mortgage on a house she owned. In his reply to Ms. Ducharme's Notice of Appeal in the Tax Court, the Minister assumed that Mr. Vienneau transferred $61,878.94 to Ms. Ducharme, as he made all the mortgage payments on Ms. Ducharme's property from January 2, 1992, to September 2, 1997. At the hearing of this appeal, counsel for the Crown conceded that $25,452.94 should be excluded from the Minister's claim under subsection 160(1), as that amount represented a payout of the prior mortgage on the property from funds originating from a new mortgage on the property and not from Mr. Vienneau.
[3] The Tax Court judge found that "Ms. Ducharme gave more consideration than she got" and he allowed her appeal. While I agree with the judge that the appeal to the Tax Court should have been allowed, I do so for different reasons and I should not be taken as agreeing with his approach to the matter.
[4] Almost all of the amount in issue involved five and a half years of mortgage payments of approximately $500 per month. I will assume, without deciding, that the entirety of the mortgage payments were transferred to Ms. Ducharme by Mr. Vienneau as that assumption is most favourable to the Minister. Over the relevant period of time, Mr. Vienneau was either living in the mortgaged premises or, when he was away at work, had access to the premises at any time he wanted. The Tax Court judge found as a fact that at the time of the subject mortgage payments "rent for an equivalent (and apparently, average) house for the family in Fort St. John ranged between $1,200 and $1,500 per month" (at paragraph 6). The amounts paid by Mr. Vienneau were less than half of these monthly rentals.
[5] It is a reasonable inference to draw from these facts that Ms. Ducharme gave to Mr. Vienneau the availability and use of her house in consideration for his payments on the mortgage. The amounts paid by Mr. Vienneau were tantamount to rent. The amounts paid were well under what appeared to be the fair market rental value of Ms. Ducharme's house and it cannot reasonably be said that the "rent" paid by Mr. Vienneau by way of making monthly mortgage payments on Ms. Ducharme's mortgage exceeded the fair market value of the consideration given by Ms. Ducharme to Mr. Vienneau.
[6] Identifying the amounts paid by Mr. Vienneau as rent is not a re-characterization of the legal effect of transactions. It is simply a way of explaining that Mr. Vienneau received consideration equivalent to or greater than the amounts he transferred to Ms. Ducharme.
[7] In view of this conclusion, it is not necessary to address Ms. Ducharme's other arguments based on valuing domestic services or "domestic obligations" of spouses.
[8] The Crown also appeals the Tax Court judge's award of costs to Ms. Ducharme. I can see no basis for interfering with the exercise of his discretion in his award of costs.
[9] The appeals should be dismissed with costs.
"Marshall Rothstein"
"I agree J.A.
Alice Desjardins J.A."
"I agree
J.D. Denis Pelletier J.A."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-346-04
A-435-04
(Appeal from a Judgment of the Tax Court of Canada dated May 28, 2004, Docket No. 2002-2058(IT)G)
(Appeal from an Order and Reasons for Order of the Tax Court of Canada dated July 23, 2004, Docket No. 2002-2058(IT)G)
STYLE OF CAUSE: Her Majesty the Queen v. Joanne Ducharme
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: April 13, 2005
REASONS FOR JUDGMENT BY: ROTHSTEIN J.A.
CONCURRED IN BY: DESJARDINS J.A.
PELLETIER J.A.
DATED: April 29, 2005
APPEARANCES:
| Karen A. Truscott |
FOR THE APPELLANT
|
| R. Glen Nicholson |
FOR THE RESPONDENT
|
SOLICITORS OF RECORD:
| John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Ontario
|
FOR THE APPELLANT
|
| Traxler Haines Barristers & Solicitors Prince George, British Columbia |
FOR THE RESPONDENT
|