BETWEEN:
and
Hearing held in Montréal, Quebec, on May 3, 2006.
Judgment delivered from the bench at Montréal, Quebec, on May 3, 2006.
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 20060503
Docket: A-294-05
Citation: 2006 FCA 165
CORAM: DÉCARY J.A.
LÉTOURNEAU J.A.
PELLETIER J.A.
BETWEEN:
CARLO VENNERI
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec, on May 3, 2006)
[1] This is an appeal challenging two conclusions reached by Mr. Justice Dussault of the Tax Court of Canada (“judge”).
[2] First of all, in detailed and meticulous reasons in support of the impugned conclusions, the judge ruled that the loss claimed by the appellant could not be considered a business investment loss within the meaning of paragraph 39(1)(c) of the Income Tax Act (“Act”). According to him, the company to which the appellant had advanced funds, 2959-5451 Québec Inc., was not a Canadian-controlled private corporation that is an active small business corporation. The company’s only asset was a vacant lot, which it sold in 1998.
[3] On this first point, the judge concluded that the evidence did not disclose any concrete activity between 1992, the year in which the lot was purchased, and 1998, the year in which it was sold, allowing him to conclude that the company was carrying on an active business. It is not necessary to review each one of the factors the judge took into consideration to reach his conclusion. It is sufficient to say that he properly directed himself on the law with respect to the interpretation of the concept of an active small business corporation and its application to the facts in this case. On the basis of the evidence on record, it was open to the judge to conclude that the intent to carry on a residential development business never actually materialized as an active business within the meaning of the Act.
[4] In spite of Mr. Fournier’s skilled pleadings, we are of the opinion that the challenge to the judge’s decision on this first point is not well founded.
[5] The second ground of appeal concerns the amount of the terminal loss and the capital loss in connection with the appellant’s disposition of a building. This amount was calculated on the basis of the proceeds of disposition of the property.
[6] Once again, the judge made a detailed analysis of the transaction and the circumstances in which it was made.
[7] The appellant and his spouse had acquired the building on July 31, 1998, for $473,600, which corresponded to the price of the municipal assessment. He said he sold it less than one year later, on July 14, 1999, for $300,000. In support of his claim, he submitted a counter-letter for this amount, also dated July 14, 1999, which contradicts the selling price of $456,000 entered in the deed of sale dated July 14, 1999. It should be noted that the amount of $456,000 mentioned in the deed of sale exactly matches the amount entered in the offer to purchase made by the purchaser on May 3, 1999.
[8] But this is not all. The evidence also discloses the existence of a first counter-letter—dated May 19, 1999, and therefore subsequent to the offer to purchase for $456,000—which mentioned a selling price of $272,000. The second counter-letter— in the amount of $300,000, which was stated to be the real price of the transaction— specified that this price was the one to be used for tax purposes.
[9] The judge was properly surprised to note that in less than one year the value of the land had depreciated by $173,600 (purchase price of $473,000, selling price of $300,000), while the offer to purchase, which came only two months before the sale, was for $456,000. The purchaser stated that he wanted to make renovations estimated at $40,000 or $50,000 and made an inflated offer to purchase, in the amount of $456,000, to obtain a higher hypothecary loan from the bank to finance those renovations. Once again, nothing explains or justifies the difference of $123,600 that remains after all of these explanations.
[10] At paragraph 67 of his decision, the judge concluded as follows about the plausibility of the sale for an alleged amount of $300,000 and concerning the sufficiency of the evidence submitted in such circumstances:
[translation]
When individuals engage in simulation, they must expect that they will have to provide sound evidence in support of their claim that the secret deed should take precedence over the apparent deed. The Appellant's interest in seeing the counter letter of July 14, 1999, take precedence is clear. Moreover, it is expressed in the last sentence of that counter letter, which reads: "The parties agree that the actual price of the transaction is $300,000 and that this amount will be used for any tax return." (Exhibit I 1, Tab 32) However, selling at $300,000 appears suspect and implausible in the circumstances. I must therefore conclude that the evidence adduced is insufficient to satisfy me, on a balance of probabilities, that the amount of $456,000 stated in the notarial deed and accepted by the Minister was not the true amount of the transaction.
[11] We agree with this conclusion.
[12] For these reasons, the appeal will be dismissed with costs.
Certified true translation
Michael Palles
FEDERAL COURT OF APPEAL
SOLICITORS OF RECORD
DOCKET: A-294-05
APPEAL FROM A DECISION OF MR. JUSTICE PIERRE R. DUSSAULT OF THE TAX COURT OF CANADA DATED MAY 20, 2005.
STYLE OF CAUSE: CARLO VENNERI v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Montréal, Quebec
REASONS FOR JUDGMENT OF THE COURT BY: DÉCARY J.A.
LÉTOURNEAU J.A.
PELLETIER J.A.
DELIVERED FROM THE BENCH BY: LÉTOURNEAU J.A.
APPEARANCES:
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FOR THE APPELLANT
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FOR THE RESPONDENT |
SOLICITORS OF RECORD
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Montréal, Quebec
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FOR THE APPELLANT
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Deputy Attorney General of Canada |
FOR THE RESPONDENT
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