Date: 20000518
Dockets: 97-3422-IT-G; 97-3423-IT-G
BETWEEN:
HÉLÈNE SIMARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Tardif, J.T.C.C.
[1] These are two appeals from notices of assessment issued under subsection 160(1) of the Income Tax Act (the “Act”). The relevant passage from subsection 160(1) is as follows:
160(1) Where a person has, on or after the 1st day of May, 1951, transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to
(a) his spouse or a person who has since become his spouse,
. . .
the following rules apply:
. . .
(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 aggregate 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,
. . .
[2] The parties agreed to proceed on common evidence.
[3] The amounts or the value of the transfers are not in dispute. Furthermore, the appellant acknowledged the existence of a non-arm's-length relationship between the transferor and her at the time of the transfers.
[4] The issue essentially concerns the nature of the consideration. The appellant submits that she received neither benefit nor enrichment from the transfers. According to her, she provided consideration of equivalent value for the amounts assigned and transferred to her.
[5] Only the appellant testified in support of her two appeals. She related the history of her emotional relationship with the transferor, Pierre A. Durand. She began by acknowledging that she had received $40,000 from her de facto spouse, but categorically denied that this was a gift or gratuitous benefit.
[6] She maintained that the $40,000 corresponded to the total of two loans made to her by Mr. Durand, one of $15,000 and the other of $25,000. According to her testimony, these were two separate loans, each for a specific purpose.
[7] The first loan of $15,000, made at the beginning of 1990 and deposited in her account on March 1, 1990, was used, according to her, to repay a loan obtained from a caisse populaire on June 8, 1989; she had borrowed this amount to consolidate her debts. After obtaining the money from Mr. Durand, the appellant said, she had repaid her loan from the caisse that same day, March 1, 1990. The balance owed to the caisse populaire was at the time $13,292,66. She maintained that she had repaid Mr. Durand in accordance with very specific terms and conditions.
[8] As for the second loan of $25,000, that amount was used as a down payment on the purchase of a condominium. The appellant said that out of the $25,000 advanced to her by Mr. Durand she had held back the money needed to pay the costs associated with purchasing the condominium, including search fees, mortgage fees, notary's fees and so on.
[9] This second loan of $25 000 was allegedly repaid to Mr. Durand by means of a non-monetary transaction: the appellant maintained that she had purchased an automobile on April 3, 1992, a 1992 Buick for which she paid $26,007. She said she personally assumed responsibility for payment, which was to be made through monthly instalments spread out over several years. She said she made all the car payments herself. The evidence also established that the automobile in question had been purchased for Mr. Durand's benefit and for his exclusive use. The appellant had an automobile for her own use, which validated her assertion. Those are the explanations provided to explain the non-monetary consideration for the $25,000 loan.
[10] In support of her submissions on this point, the appellant also produced the sales contract for the vehicle and copies of several bank statements showing the monthly payments debited to her personal bank account.
[11] The appellant maintained that she had repaid Mr. Durand as follows (Exhibit A-1(8) hereinafter reproduced) :
[TRANSLATION]
Repayment $25,000.00 loan
Withdrawal from account 7302474 2,880.00 Oct. 8,1992
Payment of 242.00 x 60 months 14,520.00 May92/April97
Payment of 300.00 x 22 months 6,600.00 May97/March99
1,000.00 April 99 25,000.00
[12] With regard to the $15,000 loan, the appellant stated that she had fully repaid Mr. Durand in a number of payments, all made between July 1990 and July 1994. It is appropriate to reproduce here the schedule of repayments:
[TRANSLATION]
from account 7302474
01-Feb-93 1,000
23-Aug-93 1,500
01-March-94 1,300 subtotal 3,800
from account 521-466-3
26-July-90 100 30-Apr-92 200
15-Aug 90 100 04-May-92 200 subtotal 1,000
16-Aug-90 100 08-May-92 100
23-Aug-90 100 20-May-92 100
10-Sept-90 300 06-July-92 200
20-Sept-90 100 17-Aug-92 100
28-Sept-90 100 200
15-Oct-90 100 subtotal 1,000 200
15-Nov-90 100 28-sept-92 100 subtotal 1,000
30-Nov-90 100 19-Oct-92 200
100 200
17-Dec-90 200 04-Jan-93 200
21-Dec-90 100 08-Feb-93 100
08-Feb-91 100 15-Feb-93 200 subtotal 900
29-July-91 100 25-May-93 200
01-Aug-91 100 21-June-93 200
23-Aug-91 100 subtotal 1,000 30-June-93 100
100 17-Sept-93 100
26-Aug-91 100 22-Nov-93 100
03-Sept-91 100 100
11-Sept-91 200 23-Nov-93 100
13-Sept-91 100 26-Nov-93 100 subtotal 1,000
04-Oct-91 100 29-Nov-93 100
07-Oct-91 100 30-Nov-93 100
23-Oct-91 100 07-Dec-93 100
05-Nov-91 100 subtotal 1,000 15-Dec-93 100
06-Nov-91 200 17-Dec-93 200
13-Nov-91 200 29-Dec-93 100
02-Dec-91 100 31-Jan-94 200
03-Dec-91 100 03-Feb-94 200 subtotal 1,100
16-Dec-91 100 10-Feb-94 100
23-Jan-92 100 11-Feb-94 100
16-Mar-92 100 18-Mar-94 100
200 subtotal 1,100 21-Mar-94 100
18-Mar-92 200 26-Mar-94 100
25-Mar-92 200 29-Apr-94 100
30-Mar-92 200 20-May-94 100
20-Apr-92 200 29-June-94 100
200 subtotal 1,000 30-June-94 100 subtotal 900
200 07-July-94 100
200 13-July -94 100
22-Apr-92 200
[13] The second appeal concerns the transfer of various amounts totalling $45,013.16 to the appellant's account. The appellant acknowedged receiving these amounts. She said that they basically represented Mr. Durand's financial contribution to household expenses and primarily consisted of all expenses related to their home and to their family, which included a young child.
[14] The transfers on which the assessment appealed from was based are as follows:
Amount Issued By: Deposited: Pages:
$3,247.15 01-11-94 Duralme Inc. 01-11-94 p. 50
$3,154.60 01-08-94 Duralme Inc. 01-09-94 p. 46
$2,747.12 31-01-95 Les Gicleurs de la Capitale Inc. 01-02-95 p. 27
$1,837.50 28-02-95 Les Gicleurs de la Capitale Inc. 01-03-95 p. 25
$3,157.96 30-03-95 Les Gicleurs de la Capitale Inc. 30-03-95 p. 23
$2,613.52 11-04-95 Duralme Inc. (312) 12-05-95 p. 21
$2,613.52 14-06-95 Duralme Inc. 16-06-95 p. 19
$1,800.00 01-08-95 Duralme Inc. 15-08-95 p. 15
$1,000.00 money order 06-11-95 p. 10
$2,000.00 31-10-95 Gicleurs F.F. (1981)Ltée 01-11-95 p. 10
$13,863.35 23-11-95 Construction Doverco Inc. 04-12-95 p. 7
$1,500.00 28-11-95 G. Lapalme (100) 28-11-95 p. 7
$4,364.79 29-12-95 Gicleurs F.F. (1981) Ltée 12-01-96 p. 5
$1,113.65 15-02-96 Construction Doverco Inc. 26-02-96 p. 1
Analysis
[15] On the whole, the appellant's testimony was clear, consistent and plausible.
[16] To be sure, the repeated withdrawals of small amounts in repayment of the $15,000 loan might well be consistent with the appellant's habits in terms of paying for her personal needs. Such an interpretation would however be basically inferential and there is moreover no evidence to support any such inference.
[17] Is this subjective interpretation a sufficient basis for discounting the appellant's testimony? I do not think so. Certainly, the burden of proof was on the appellant; in that respect, she had to demonstrate the soundness of her arguments on a preponderance of evidence. She did not have to meet a standard of proof beyond a reasonable doubt.
[18] She testified in an unaffected and spontaneous way; her explanations were reasonable and plausible. The only criticisms that could be levelled against her are not significant. Furthermore, they are unsupported and unsubstantiated; they basically arise from interpretations.
[19] In addition, the respondent's only witness, Marcel Martel, who was responsible for recovering the tax owed by Mr. Durand, was vague and even rather ambiguous with regard to the appellant's file. He was clearly better acquainted with the transferor's file than with that of the transferee.
[20] After identifying the transfers and noting the non-arm's-length relationship, he quickly concluded by inference that those transfers were gratuitous or made for no consideration.
[21] As he was clearly very familiar with the file of Pierre A. Durand, having devoted a great deal of time and energy to it, and given Mr. Durand's very large tax liability, he made an assumption rather than actually verifying whether there was in fact consideration corresponding to all or part of the amount of the transfers identified.
[22] The appellant had to show on a preponderance of evidence that she had neither benefited from nor been enriched by the transfers. In that respect, the appellant provided specific, clear, plausible and consistent explanations. Her testimony was neither contradicted nor discredited by the respondent's only witness.
[23] The appellant accordingly met the burden of proof on her by showing on a preponderance of evidence that there had not been a transfer within the meaning of section 160(1) of the Act. She proved to the Court's satisfaction that she had not received any benefit from the funds characterized as transfers within the meaning of the Act. With regard to the second appeal, the amount in question seems reasonable and appropriate for contributions to household expenses.
[24] Accordingly, the appeals are allowed and the assessments are vacated, the whole with costs.
Signed at Ottawa, Canada, this 18th day of May 2000.
"Alain Tardif"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 28th day of February 2001.
Erich Klein, Revisor