Date: 19991203
Docket: 98-791-IT-I
BETWEEN:
GERALD WISLA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(Delivered orally from the bench at Edmonton,Alberta, on Monday, April 12th, 1999 and edited for greater clarity)
Archambault, J.T.C.C.
[1] This is an appeal by Mr. Wisla from an income tax assessment respecting the 1993 taxation year. The Minister of National Revenue (Minister) has included in computing Mr. Wisla’s income a sum of $562, representing the value of a gold ring that Mr. Wisla received from his employer. A similar ring was given to all employees who had achieved 15 years of employment with that employer, Cardinal River Coal Ltd.
[2] An evaluation of the ring prepared by Mr. Steve Davies of Birk's Corporate Sales was introduced as evidence. Because the company logo and other features on the ring are not of a nature to be of any value to a third party, Mr. Davies came to the conclusion that should an employee wish to sell his or her ring, that person should not expect to receive more than the scrap value of the ring, which he estimated at $76.16. A similar valuation was given by Mrs. Kicia, a jeweler in the community where Mr. Wisla resided, who concluded that the ring had no retail value due to the presence of the corporate logo and estimated its scrap value at $73.
Analysis
[3] Mr. Wisla took the position that the receipt of the ring did not confer on him a taxable benefit pursuant to paragraph 6(1)(a) of the Income Tax Act. He contended that the ring was given by the employer company for no consideration, that is, without any expectation of receiving a benefit from him.
[4] I cannot share this point of view. In my opinion, in giving such a ring to all of its employees who had accumulated 15 years of long service, the company's purpose was to create an incentive for its employees. In my view, the ring was a benefit that was received by Mr. Wisla in respect of, in the course of or by virtue of his office or employment with Cardinal River Coal Ltd.
[5] The remaining issue to be decided is the value of the ring. I believe that we have here a very unusual and exceptional case. The ring given to Mr. Wisla is not only a gold ring but a gold ring that is stamped with the corporate logos of Cardinal River Coal Ltd., Consol of Canada Inc. and Luscar Ltd. The words “Cardinal River Coal Ltd.” are displayed in a circular fashion around the three logos. The presence of these logos and these words on the ring results, in my view, in a substantial reduction in the value of the ring.
[6] Counsel for the Minister drew the Court’s attention to the decision in The Queen v. Phillips, 94 DTC 6177 at 6183, where Mr. Justice Robertson refers to the decision in Lor-Wes Contracting Ltd. v The Queen, [1986] 1 F.C. 346, and more particularly to the dicta of MacGuigan, J.A. at page 352. MacGuigan, J.A. there states that section 6 of the Act seeks to limit tax avoidance relating to monetary and non-monetary compensation not reflected in wages or salaries. He adds that employees who receive their compensation in cash should be treated on the same footing as those who receive compensation in some combination of cash and payment in kind.
[7] I believe that the value of the ring in this particular case should basically be equal to its scrap value, that is the economic value of the ring at the time of receipt. I am convinced that this case is not one where the employer was trying to implement a tax avoidance arrangement to lower the impact of conferring a benefit on its employees.
[8] For all these reasons, Mr. Wisla's appeal is allowed with costs and the Notice of Assessment is referred back to the Minister for reconsideration and reassessment on the basis that the ring that he received in 1993 from his employer was worth $73.
Signed at Montréal, Quebec, this 3rd day of December 1999.
"Pierre Archambault"
J.T.C.C.