Tax Court of Canada Judgments

Date: 20020205

Dockets: 1999-3556-IT-G,

1999-3558-IT-G,

1999-3561-IT-G

BETWEEN:

FRANCIS DECK,

THERESA DECK WOOD,

ELLEN JANE ROSE,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Hershfield, J.T.C.C.

[1]      These appeals from assessments of tax with respect to the 1997 taxation year were heard on common evidence under the Tax Court of Canada Rules (General Procedure).

[2]      The sole issue is whether a business investment loss was properly claimable in the year by the Appellants in respect of amounts owed to them by Fran Restaurants Limited (the "Company"). This issue comes down to the question of whether the Appellants properly determined that such amounts owed to them had become uncollectible or bad debts, in the subject year. The facts have been partially agreed to pursuant to the following statement submitted by the parties to which I have made minor clarifying edits based on comments of counsel at the hearing.

Partial Agreed Statement of Facts:

The Appellants and the Respondent agree on the following Facts:

1.          The Appellants are individuals residing in the City of Toronto, in the Province of Ontario.

2.          The Appellants are brother and sisters.

3.          The Company was incorporated in 1940.

4.          The parents of the Appellants originally owned all the shares of the Company.

5.          The parents through the Company started a small ten stool restaurant in 1940.

6.          In May 1959 the Company had four restaurants.

7.          The Appellant Francis Deck joined the family restaurant business in 1959.

8.          After the parents' death the shares of the Company were inherited by the three Appellants in equal proportions.

9.          Historically, the restaurants had been funded by the family.

10.        The father would provide the capital to run the restaurant and would make advances to the Company as needed for capital expenditure, then he would draw the capital out or recover the money through loan repayment.

11.        The Company did not own the buildings used by the restaurants rather the parents owned them. The leasehold improvements, tables, chairs, kitchen equipment and other such items were owned by the Company.

12.        After the parents' death the Appellants owned the restaurant buildings first through a trust set up by their parents and then directly after being flowed through the trust. The Appellants continued to lease these buildings to the Company.

13.        These buildings were rolled over under section 85(1) of the Income Tax Act (the "Act") into the Company in 1994 for the value of buildings with the Appellants receiving common shares and a long term demand note in the amount of $1,926,532. There was no capital gains tax paid by the Appellants (on the transfer out of the trust or the transfer to the Company). The Company subsequently sold these buildings, realized capital gains and utilized these gains against its losses for the other years.

14        In 1994 the Company owed money to its creditors. The Appellants rolled the buildings to the Company as stated in paragraph 13 (plus made additional cash advances) in order to provide cash flow to the Company and to prevent the Company from declaring bankruptcy and thereby effectively advanced $1,934,525 as a long term interest free loan which was to be repaid at the rate of $15,000 per month.

15        At all relevant times, the Company was a Canadian Controlled Private Corporation that was a Qualifying Small Business Corporation as those terms are defined in the Income Tax Act.

16.        At all relevant times the Company was in the restaurant business in the Province of Ontario.

17.        In 1997 the Company owed money and was unable to pay its creditors. Most of the debt was owed to Revenue Canada and the Government of Ontario for various tax non-payments.

18.        After unsuccessful negotiations with it creditors, the Company filed a "Notice of Intention to make a Proposal" with the Official Receiver on October 9th, 1997. On or about December 31st, 1997, the Company made a proposal to its creditors, through Mintz & Partners Limited, Trustees and Bankruptcy, pursuant to subsection 50.4(1) of the Bankruptcy and Insolvency Act (the "Proposal").

19.        The Proposal is annexed hereto as Exhibit "A".

20.        The Company was not paying its debts and the Appellants did not want the Company to declare bankruptcy. They wanted it to carry on business. They wanted to get out of the financial difficulty by making the Proposal. In the Proposal they agreed that they would not ask for the repayment of their own long term loan at that time and their claims were to be subordinated and postponed and were not to be paid until the other creditors were paid in accordance with the Proposal by March 2002. The governments of Canada and Ontario and other small Creditors voted to accept the Proposal involving lower repayments in order to keep the Company viable. In addition to Revenue Canada and the Ontario Minister of Finance, there were small suppliers.

21.        This Proposal was accepted by the Creditors and later approved by the Court under subsection 62(2) of the Bankruptcy and Insolvency Act.

22.        Section L on page 14 of the summary of the Proposal in Exhibit "A" shows an estimated distribution to ordinary unsecured creditors per dollar of proven claim of 15.5 ¢ .

23.        Paragraph 23 of page 6 of the Proposal at Exhibit "A" provides as follows:

"Where this Proposal is accepted by the Debtor's creditors and approved by the Court, the claims of Francis Deck, Ellen Jane Rose, Theresa Wood and 747081 Ontario Limited (hereinafter referred to as the "Related Creditors" as at the date of filing of the Notice of Intention shall, be subordinated and postponed until the fulfilment of the terms and conditions of this Proposal by the Debtor. Upon the satisfaction of the terms and condition of this Proposal by the Debtor or in the event that the Debtor fails to comply with any of the terms of this Proposal and the Proposal is annulled pursuant to the provisions of the Act, the Related Creditors shall be entitled to pursue payment in full for such claims against the Debtor and receive payment for such claims."

24.        The Company has made payments to its creditors of $630,000 as provided for in the Proposal (which amount satisfied all secured and preferred claims).

25.        As at December 31st, 1997, the Company owed the Appellant Francis Deck the amount of $618,760.56, the Appellant Theresa Deck the amount of $643,673.61 and the Appellant Ellen Jane Rose the amount of $1,103,406.16 in respect of the long term advances made by the Appellants. These loans were not secured. According to the 1997 financial statements of the Company no amount of loan was due within one year.[1]

26.        In computing their income for the 1997 taxation year, the Appellant Francis Deck claimed a business investment loss of $16,500, the Appellant Ellen Jane Rose claimed a business investment loss of $275,000 and the Appellant Theresa Deck claimed no business investment loss. These loans were claimed under sections 50(1)(a) and 39(1)(c) of the Act.

27.        Subsequently the Appellants (sic) were advised by their accountants that the claims referred to in paragraph 26 would not be acceptable since the entire amount must be uncollectible in order to qualify under section 50 of the Act. Accordingly, all of the three Appellants filed Notices of Objection requesting a business investment loss in the full amount of their debts. The Canada Customs and Revenue Agency disallowed these claims on the basis that the debts had not become bad debts in the year under section 50(1)(a) of the Act and accordingly they did not have a business investment loss under section 39(1)(c) of the Act.

28.        On July 24, 2001 the Company made an Assignment in Bankruptcy under the Bankruptcy and Insolvency Act.

29.        As at the present time, the Company has made no repayment to the Appellants of the shareholder advances.

THE PARTIES DO NOT AGREE ON THE FOLLOWING FACTS:

30.      That the Appellants had determined at the time of filing this tax return that the whole of the Appellants' debts had become uncollectible in the 1997 taxation year.[2]

[3]      As noted in paragraph 19 of the Partial Agreed Statement of Facts, a copy of the Proposal was annexed to it. Included with the annexed Proposal was a report to the creditors of the Company prepared by Mintz & Partners Limited in January 1998. That report was prepared after the Notice of Intention to Make a Proposal was filed with the Official Receiver pursuant to the Bankruptcy and Insolvency Act in October 1997. The report and enclosures to it set out certain financial information as at particular times between October 9, 1997 and December 31, 1997. For example, the book value of the Company's assets as at December 1, 1997 was $1,199,900.00. Creditor claims as at October 9, 1997 were $4,655,278.00 and Mintz & Partners Limited reported that if the Proposal were not accepted, the Company would be bankrupt in January 1998 with an estimated realizable value of assets of between $179,700.00 and $240,200.00. Creditor claims were classified as follows:

                        Creditor Classification                                             Amount

                        Secured                                                             $    649,599.00

                        Preferred                                                                  55,586.00

                        Unsecured                                                         $3,950,093.00

                        Employee                                                                 Unknown

                                                                                                $4,655,278.00

Secured creditor claims consisted of a claim for $361,500.00 by a related entity and $288,099.00 by Revenue Canada. The related entity's claim was to be postponed until fulfilment of the terms of the Proposal. The Revenue Canada claim was, at least in part, a claim for unpaid source deductions and/or GST remittances and were to that extent trust obligations.[3]

[4]      The Proposal was ultimately accepted by creditors and it required that the Company make payments during 1998 through 2001 to the trustee totalling $630,000.00 plus 10% of excess profits (defined in the Proposal). Based on estimates of corporate earnings, secured (and preferred) creditors would receive 100 cents on the dollar while unsecured creditors would receive between 15.2 cents and 17.9 cents on the dollar, being the low and high range of the estimates. The amount of $630,000.00 was based on the lower estimate. Further payments to Revenue Canada of 70% of any excess profits were also provided for to ensure its cooperation. The directors and officers of the Company were released from any claims including any statutory claims and obligations pursuant to which directors might otherwise be liable by law as directors.

[5]      As noted in the Agreed Statement of Facts, the Company declared bankruptcy in 2001, after $630,000.00 was paid to creditors pursuant to the Proposal.

Further Evidence

[6]      Two witnesses testified at the trial, namely, the Appellant Francis Deck and the accountant who had represented the Company and the Appellants at all relevant times. On the critical issue relating to the determination actually made when the initial partial claim for a business investment loss was filed, the testimony of both witnesses was consistent and credible. Francis Deck and the accountant had discussed the shareholder receivable prior to filing shareholder personal tax returns for 1997 and, in light of the Proposal, which had by then been accepted by creditors and the Court, and the circumstances of the Company, it was acknowledged that repayment of the shareholder loans was remote. Mr. Deck testified that at the time he met with the accountant he thought it would be a "miracle" if anything were collected. The accountant testified that he agreed at that time that the whole debt was a bad debt. Put in perspective, it is clear that the Proposal advanced a new business plan refocusing efforts on more viable operations and reducing overhead. It afforded some chance to pay other creditors which chance immediate bankruptcy would preclude (at least at the corporate level in respect of certain funds owing to governments) and it was consistent with their (the Appellants) struggle to keep the business afloat. However, the ultimate survival of the shareholder receivable under the Proposal and the financial projections upon which it was framed were not, according to the testimony of the witnesses, sufficient to change the determination that the loans were bad. That was the express view of the accountant and Francis Deck when considering the filing position of the Appellants for 1997. That is, they determined that there was little if any chance of collecting any of these shareholder loan amounts in spite of the fact that they had been deferred and subordinated under the Proposal on terms that left them potentially collectable (see paragraph 23 of the Partial Agreed Statement of Facts).

[7]      In spite of this determination, the accountant advised the Appellants that the allowable investment loss was available to the extent needed in the year by each of them respectively and that is how the initial claims came about. The accountant only discovered his error when the loss claims were questioned. The testimony was clear that there was no intention in the initial filings to suggest that the determination was that only small portions of the loan accounts were bad or that the Appellants had each taken different positions as to the collectability of the accounts. Each Appellant had agreed with the determination that the accounts were bad and the disparate claims resulted from an error as to how the losses could be claimed. I accept the accountant's testimony on this point.

[8]      There was testimony as well that right up until July 1997, the shareholders were still advancing funds to the Company as they had done in 1994 and 1996. I draw no inference from this that the Appellants must thereby have believed that their loan accounts were collectible throughout 1997 or that such advances in any way cast doubt on the determination made in early 1998 as to the loans being bad by the end of 1997. I accept the testimony of Mr. Deck that the decision to seek bankruptcy protection was not made until August 1997 and that the determination made in or about April 1998, that the loans were uncollectible in 1997, was bone fide.

[9]      There was testimony that no demand for payment had ever been made in respect of the long term demand note or any other part of the shareholders' loans. This raises a question as to whether the debt was due and payable and how that impacts on the claim for a business investment loss.

Analysis

[10]     The Appellants submit that there are four elements that must be met in order to claim a business investment loss in the case of a shareholder loan[4]. These are:

1.         The Company must have been indebted to the Appellants (subparagraph (39(1)(c)(iv));

2.        The debt must have become bad in the year (subsection 50(a));

3.        The Company must have been a small business corporation (clause 39(1)(c)(iv)(A)); and

4.        The debt must have been acquired by the Appellants for the purpose of gaining or producing income from business or property (subparagraph 40(2)(g)(ii)).

The Appellants cite Gamus v. The Queen, [2001] 3 C.T.C. 2342 at paragraph 10 (TCC) as authority for these tests. While these elements do not seem to be exhaustive of potential elements that may be of issue in other cases, they are sufficient in the context of the case at hand. Indeed, as stated, the parties agreed that the only test or element in dispute in this matter was whether the debt had become bad in the subject year. Accordingly my analysis will be so limited.

[11]     The Respondent's position in these appeals is based on the argument that it was not reasonable to determine that the debt had become bad at the end of 1997. Since the debt was never paid and the debtor is bankrupt, the Respondent's position is, necessarily, that the debt became bad either before or after 1997. Counsel for the Respondent points to the following as supporting the Respondent's position:

                  

(a)               the required determination as to the whole debt being bad was not made or if made was not timely made. Factors the Respondent relies on to support this position include the following: (i) the shareholders had not acted in respect of the year (1997) in a manner consistent with the position ultimately taken by them. In 1997 they were, like in earlier years, advancing funds on the basis that such funds so advanced were recoverable; (ii) the first determination of collectability of the loans was that they were partially collectable. The attempt to amend such determination as initially filed was not reasonable or timely in respect of the 1997 year; and (iii) the Respondent asserts that the Proposal which subordinated the advances was insufficient reason to change their classification of them from presumably recoverable in July 1997 when further advances were made, into unrecoverable advances particularly given that projections used in the Proposal suggested that the planned repayment schedule might reasonably be back on track within 4 years;

(b)              the receivable was not due in the year; and

(c)               the Federal Court of Appeal decision in Flexi-Coil Ltd. v. The Queen, 96 DTC 6350 (F.C.A.).

[12]     As to (a) above, the Appellants assert that they made a timely determination that the debt was a bad debt and that their acts were not inconsistent with having done so. I have accepted that the determination that the whole debt was bad, was the first and only determination made by the shareholders and that it was made prior to the filing of returns for the 1997 year. As such, I have accepted that the determination of the debt being bad was made on a timely basis. This is not a case of a creditor changing a prior determination as to the collectability of a debt which was the case in Anjalie Enterprises Ltd. v. The Queen, 95 DTC 216 (TCC)[5]. However this finding still assumes that 1997 was the right year to claim the debt as a bad debt.

[13]     Respondent's counsel has suggested that the determination might just as readily have been made in an earlier year (say 1996) or that the determination, if properly postponed until after the creditors approved the Proposal, might as appropriately have been further postponed until there was some evidence that the business plan advanced by the Proposal would not work. To respond to these suggestions requires confirmation that the determination of when a debt becomes a bad debt is a subjective one to be made by the debtor. Such confirmation is found in Hogan v. M.N.R., 56 DTC 183 (T.A.B.) where a bad debt was defined at page 193 as follows:

For the purposes of the Income Tax Act, therefore, a bad debt may be designated as the whole or a portion of a debt which the creditor, after having personally considered the relevant factors mentioned above in so far as they are applicable to each particular debt, honestly and reasonably determines to be uncollectable at the end of the fiscal year when the determination is required to be made, notwithstanding that subsequent events may transpire under which the debt, or any portion of it, may in fact be collected. The person making the determination should be the creditor himself (or his or its employee), who is personally thoroughly conversant with the facts and circumstances surrounding not only each particular debt but also, where possible, each individual debtor . . .

While this often quoted passage does not expressly identify the year in which the bad debt determination is required to be made, I think the inference is clear that it is the particular year in which the creditor has honestly and reasonably established the debt "to have become" bad. This is consistent with the requirement in paragraph 50(1)(a) which deems a bad debt to have been disposed of at the end of the year where the debt (still owing at the end of the year) is established by the taxpayer "to have become" a bad debt in the year. While the expression "to have become" might suggest that there is a burden on the taxpayer to prove that the debt had not become bad in an earlier year, I do not think that is a proper inference to be drawn from either the legislation in this instance or the jurisprudence. A debt is only bad when it has been proved uncollectible[6]. If a debt has not been "proved" uncollectible in a prior year (presumably by the respondent where the appellant has prima facie evidenced that a determination was made in respect of a later year), it is open for the debt to be "proved" (by the appellant) to have become uncollectible in a later year even if circumstances, objectively considered, might suggest that the debt had become uncollectible in an earlier year. A creditor acting reasonably and honestly, must be given some latitude in determining the year in which a debt should first be considered to be a bad debt. That is, recognition of a bad debt should not be too lightly refused by an assertion that it was claimed too late where a creditor has only been too optimistic or unaggressive in terms of seeking a write-off of the bad debt.

[14]     This being the case, I find that this appeal cannot fail because the subject debt might have been determinable as bad in an earlier year. The creditors have not demonstrated any bad faith in not considering the write-off earlier. There is no suggestion that the Appellants inappropriately delayed for some mischievous purpose proving the debt as having become bad.[7]

[15]     The issue of accelerating the bad debt claim is more squarely dealt with by the factors considered in Hogan and subsequent cases since in such cases the issue is whether the debt is uncollectible, not whether it was uncollectible in an earlier year. In such cases the onus of establishing that it is not too soon to treat a debt as bad, i.e. not too soon to claim a loss for tax purposes, is squarely on the creditor making the determination. However even in this case the test is a subjective one if the creditor acts reasonably and honestly. The prudence of the creditor as a reasonable businessperson in making the determination might be considered as a means of objectifying a determination that might otherwise inappropriately accelerate a loss claim. In the context of an attempted change of a prior determination by a creditor for loss utilization purposes (i.e. where the bone fideness of the person making the determination was suspect) Judge Lamarre addressed the question in Anjalie at page 218 as follows:

In general the question of when a debt becomes bad is a question of fact to be determined according to the circumstances of each case. Primarily a debt is recognized to be bad when it has been proved uncollectible in the year. The question of when a debt is to be considered uncollectible is a matter of the taxpayer's own judgment as a prudent businessman. (Emphasis mine)

Similarly in Flexi-Coil the trial Judge stated that the Court must be satisfied that the taxpayer acted reasonably and in a pragmatic business-like manner applying the proper factors in making the determination that a debt was a bad debt.[8]

[16]     In the case at hand, it is hard not to accept that the Appellants acted reasonably and honestly and that they made a prudent and pragmatic business-like decision in determining that the advances had become uncollectible in 1997 having proceeded in that year to make a proposal under the Bankruptcy Act.

[17]     In Houle v M.N.R., 90 DTC 1247 (TCC), Judge Tremblay remarked at page 1252 that in the life of an account different circumstances and factors may arise that will establish the account as uncollectible "...but the bankruptcy of the debtor is undoubtedly the simplest case". In the spectrum of possible cases, the Appellant's counsel argues that a proposal under the Bankruptcy Act is the next simplest case. I see no circumstances in this case that would cause me to take exception with this argument. That there was some chance for recovery of the debt (or at least a resumption of the planned repayment schedule of $180,000.00 per year) after the four-year payout period covered by the Proposal does not bar the determination that the debts had become bad. As stated by Judge Sarchuk in the case of Berretti v. M.N.R., 86 DTC 1719 (TCC) at page 1722:

...Certain principles can be excerpted from these decisions. There is for example no necessity that a debt be absolutely irrecoverable ... and that possible recovery in the future is not per se a bar to a determination of uncollectability... These judgments also confirm the proposition that the determination of uncollectability is to be made by the appellant and not by an official of the respondent or some other person.

[18]     Further, I note that the extent of the insolvency of the Company in 1997 supports Mr. Deck's testimony that the chances of a business recovery sufficient to permit any repayment of the debt was remote. The Company was reorganizing under the Proposal but there no longer appeared to be any means to continue on a scale that afforded the Company any realistic chance of repaying shareholders. The objective of the Proposal was to facilitate repayment of preferred creditors with minimal repayment opportunities for the unsecured creditors. At the end of 1997 the debt to asset value of the Company would seem to overwhelmingly support a determination that the debt was bad and that determination was in fact made before filing returns for that year.

[19]     Accordingly, having considered all the factors that the Respondent raised in respect of its position (as set out in paragraph 11(a) of these Reasons), I find that they do not dissuade me from accepting that the determination that the debt had become bad in 1997 meets the requirements in the Act for establishing a business investment loss.

[20]     As to the Respondent's reliance (as set out in paragraph 11(b) of these Reasons) on the fact that the shareholder advances were not a current liability due in the year, I would concur that the advances, although on a demand basis, were not a current liability in 1997. No demand had been made and the financial statements did not show any part of these advances as being current. However, this is not fatal to a determination that the debt is bad in the year. I refer again to Houle at page 1252. There, it is acknowledged that circumstances may arise at any time during the life of the account, "even if not yet payable", that might make it uncollectible. In the case at bar the annual repayment amount was not paid. Normally that would constitute a default and an acceleration of the entire indebtedness. Even accepting that that was not the result here and even if it is not appropriate to infer a notional demand having been made, the whole of the indebtedness can according to the principles set out in the Houle decision still be considered to have become a bad debt in a particular year, as circumstances permit or dictate, notwithstanding that it is not due in that year. That is, that only $180,000.00 was due according to the repayment schedule accepted by the shareholders and that that repayment schedule might have been resumed in four years, is not a bar to finding that the entire indebtedness is bad. In this case there was virtually no chance of getting the $180,000.00 per year for at least four years and only the remotest chance (described as a miracle) of getting paid anything, even then, on account of the advances. The repayment terms of the loan were infringed upon by the Proposal requirements. The Proposal came about by virtue of the insolvency of the debtor Company which had depended on advances from shareholders that were no longer forthcoming. These circumstances justify the determination that the advances had become, at that point, uncollectible whether or not they were then due.

[21]     Lastly, I will consider whether, as asserted by the Respondent (see paragraph 11(c) of these Reasons), the decision of the Federal Court of Appeal in Flexi-Coil supports the Respondent's position that the shareholder's advances in this case should not be regarded as uncollectible in 1997. There are similarities between the facts of that case and the facts of the case at hand. In Flexi-Coil a parent Company as shareholder advanced funds to two subsidiaries. As in the case at bar the shareholder creditor was not at arms-length with the debtor and the debtor relied on advances from its shareholder to be at least solvent if not viable. In Flex-Coil the financial statements of one subsidiary creditor did not show the debt as being a current obligation. The subsidiaries were not going out of business. In Flexi-Coil the Court of Appeal found that the partial write-off of advances was not appropriate. There was a long-term goal to keep operating. The similarities of that case and the case at bar however end here. In Flexi-Coil there was a finding that the parent was committed to keep funding the subsidiaries. The financial statements of one of the subsidiaries included a statement that the parent had undertaken to provide additional working capital for another year. In the case at bar the commitment of the shareholders to provide additional funds ended in August 1997. In Flexi-Coil, the subsidiary with a current liability to the parent had sufficient current assets to pay all of its current accounts. That was not the case in the case at bar. To the contrary in the case at bar the corporate debtor was virtually insolvent as described in the Proposal and would, but for the Proposal, be bankrupt by January 1998. The Proposal in giving a breath of air to the Company did not thereby give it access to further funds or assurances of the sort present in Flexi-Coil. The historical support of the shareholders and the non-currency of the loans are not sufficient to bring the case at bar within the presidential scope of Flexi-Coil in my view. The decision of the Appellants in August 1997 to cause the Company to seek protection from bankruptcy and the Company having filed a Notice of Intention to make a Proposal with the Official Receiver in October 1997, set this case apart. The commitment of the Appellants (as distinct from the Company) to continue operating under the Proposal on the chance of a business recovery in the Company are not sufficient to dissuade me from a finding that the Appellants acted reasonably from a business perspective in determining that the debts had become bad in 1997. As such it is not open for me to second-guess their judgment which has proven, albeit four years later, to be correct.

[22]     Accordingly, the appeals are allowed with costs. The assessment in respect of each Appellant is referred back to the Minister for reconsideration and reassessment on the basis that the full amount of their respective advances as agreed to in paragraph 25 of the Partial Agreed Statement of Facts were business investment losses in 1997.

Signed at Ottawa, Canada this 5th day of February 2002.

"J.E. Hershfield"

J.T.C.C.

COURT FILES NO.:                          1999-3556(IT)G

1999-3558(IT)G

1999-3561(IT)G

STYLE OF CAUSE:                           Francis Deck,

Theresa Deck Wood,

Ellen Jane Rose and

                                                          Her Majesty the Queen

PLACE OF HEARING:                      Toronto, Ontario

DATE OF HEARING:                        November 27, 2001

REASONS FOR JUDGMENT BY:     The Honourable Judge J.E. Hershfield

DATE OF JUDGMENT:                     February 5, 2002

APPEARANCES:

Counsel for the Appellant:          David J. Rotfleisch

Counsel for the Respondent:      Shatru Ghan

COUNSEL OF RECORD:

For the Appellant:

Name:                 David J. Rotfleisch

Firm:                  Rotfleisch & Samulovitch

Toronto, Ontario

For the Respondent:                  Morris Rosenberg

                                                Deputy Attorney General of Canada

                                                          Ottawa, Canada

1999-3556(IT)G

BETWEEN:

FRANCIS DECK,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on common evidence with the appeals of Theresa Deck Wood (1999-3558(IT)G) and Ellen Jane Rose (1999-3561(IT)G) on November 27, 2001 at Toronto, Ontario, by

the Honourable Judge J.E. Hershfield

Appearances

Counsel for the Appellant:                    David J. Rotfleisch

Counsel for the Respondent:                Shatru Ghan

JUDGMENT

The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is allowed, with costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 5th day of February 2002.

"J.E. Hershfield"

J.T.C.C.

1999-3558(IT)G

BETWEEN:

THERESA DECK WOOD,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on common evidence with the appeals of Francis Deck (1999-3556(IT)G) and Ellen Jane Rose (1999-3561(IT)G) on November 27, 2001 at Toronto, Ontario, by

the Honourable Judge J.E. Hershfield

Appearances

Counsel for the Appellant:                    David J. Rotfleisch

Counsel for the Respondent:                Shatru Ghan

JUDGMENT

The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is allowed, with costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 5th day of February 2002.

"J.E. Hershfield"

J.T.C.C.

1999-3561(IT)G

BETWEEN:

ELLEN JANE ROSE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on common evidence with the appeals of Francis Deck (1999-3556(IT)G) and Theresa Deck Wood (1999-3558(IT)G)

on November 27, 2001 at Toronto, Ontario, by

the Honourable Judge J.E. Hershfield

Appearances

Counsel for the Appellant:                    David J. Rotfleisch

Counsel for the Respondent:                Shatru Ghan

JUDGMENT

The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is allowed, with costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 5th day of February 2002.

"J.E. Hershfield"

J.T.C.C.

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