Federal Court of Appeal Decisions

Date: 19990514

Docket: A-376-96

CORAM:          DESJARDINS J.A.

LÉTOURNEAU J.A.

NOËL J.A.

BETWEEN:

     M.C.B. DEVELOPMENT INC.

     Appellant

     - and -

     HER MAJESTY THE QUEEN

     Respondent

A-377-96

BETWEEN:

     ALBERT KORMAN

     Appellant

     - and -

     HER MAJESTY THE QUEEN

     Respondent

Heard at Montreal, Quebec, on Friday, May 14, 1999.

Delivered from the Bench at Montreal, Quebec, on Friday May 14, 1999.

REASONS FOR JUDGMENT BY:      DESJARDINS J.A.c

Date: 19990514

Docket: A-376-96

CORAM:          DESJARDINS J.A.

LÉTOURNEAU J.A.

NOËL J.A.

BETWEEN:

     M.C.B. DEVELOPMENT INC.

     Appellant

     - and -

     HER MAJESTY THE QUEEN

     Respondent

A-377-96

BETWEEN:

     ALBERT KORMAN

     Appellant

     - and -

     HER MAJESTY THE QUEEN

     Respondent

     REASONS FOR JUDGMENT

     (Delivered from the Bench on Friday, May 14, 1999)

DESJARDINS J.A.

[1]      We are of the view that these appeals must fail.

[2]      The appellants have not convinced us that the agreement signed on November 18, 1980, by Albert Korman and M.C.B. Development Inc. is in the nature of a counter-letter according to which M.C.B. Development would have acted as a nominee for Albert Korman.

[3]      The terms of the agreement certainly do not convey this interpretation. But more importantly, the parties have acted in a manner which is inconsistent with this thesis. We have in mind, in particular, the fact that M.C.B. Development Inc. declared, in 1989, a capital gain on the resale of the property, and that M.C.B. Development Inc. declared the full amount of the interests paid to the Bank on the $60,000 loan it had assumed.

[4]      With regard to the appellant's alternative argument that Albert Korman retained beneficial ownership of the property, as provided in subparagraph 54(c)(v) of the Income Tax Act ("the Act"),¹ we are of the view that the only right which was retained by Albert Korman was a personal right to use the cottage with an option to purchase subject to certain conditions.

[5]      These rights do not come within the terms of the definition contained in subsection 248(3)² of the Act.

[6]      These appeals, therefore, will be dismissed with costs.

[7]      Copies of these reasons for judgment will be filed in both appeals A-376-96 and A-377-96.

"Alice Desjardins"

     J.A.

__________________

     ¹S.C. 1970-71-72, c. 63, as amended.

54(c) "Disposition" of property. - "disposition" of any property, except as expressly otherwise provided, includes...but, for greater certainty, does not include...(v) any transfer of property by virtue of which there is a change in the legal ownership of the property without any change in the beneficial ownership thereof, other than a transfer by a trust resident in Canada to a trust not resident in Canada or a transfer to a trust governed by...      [Our emphasis]

54c) "disposition de biens" - "disposition de biens" comprend, sauf dispositions contraires expresses,... mais, pour plus de précision, ne comprend pas...(v) tout transfert de biens, à la suite duquel il y a un changement dans le legal ownership du bien sans changement dans le beneficial ownership de ce bien, autre qu'un transfert par une fiducie résidant au Canada à une fiducie ne résidant pas au Canada et un transfert à une fiducie régie par...      [Nous soulignons]

     ²

248(3) In its application in relation to the Province of Quebec, a reference in this Act to any property that is or was beneficially owned by any person shall be read as including a reference to property in relation to which any person has or had the full ownership whether or not the property is or was subject to a servitude, or has or had a right as a usufructuary, a lessee in a emphyteutic lease, an institute in a substitution or a beneficiary in a trust; and a reference in this Act to the beneficial owner of any property shall be read as including a reference to a person who has or had, accordingly as the context requires, such ownership as a right in relation to that property.      [Our emphasis]

248(3) Aux fins de l'application de la présente loi dans la province de Québec, l'expression "droit de jouissance" à l'égard d'un bien signifie le droit de la personne qui a ou avait la pleine propriété d'un bien, même si ce bien est grevé d'une servitude, le droit détenu par un usufruitier, un preneur dans un bail emphytéotique, un grevé dans une substitution ou un bénéficiaire dans une fiducie.      [Nous soulignons]