Date: 20020304
Docket: 2000-1394-IT-I
BETWEEN:
NORMAND BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Angers, J.T.C.C.
[1] These are appeals which Normand Bérubé has instituted under the informal procedure from assessments for the 1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years. For those years, Mr. Bérubé claimed tax credits in respect of gifts of works of art to charities. The Minister of National Revenue (the "Minister") disallowed the credits on the grounds that Mr. Bérubé did not actually make any gifts and that the receipts were not in accordance with the Income Tax Act (the "Act"). Furthermore, the receipts issued did not correspond to the fair market value of the works.
[2] Mr. Bérubé is a retired teacher. He has training in art and holds a bachelor's degree in plastic arts. He has always been interested in art works, to the point of becoming an enthusiast. He says he collected numerous paintings between 1976 and 1989, frequenting various establishments to obtain them. In 1989, he was approached by a certain Émile Amireault while visiting such an establishment.
[3] Mr. Amireault informed Mr. Bérubé that, if he gave some of his paintings to organizations recognized by the government, he could receive a tax deduction. Mr. Amireault agreed to go to Mr. Bérubé's home to examine his paintings in order to determine whether they were suitable and to give him advice concerning them.
[4] Also in 1989, Mr. Bérubé made inquiries of Revenue Canada regarding what Mr. Amireault had told him. That same year, he agreed to have Mr. Amireault come to his home. For that year—and the same scenario was repeated until 1993—Mr. Amireault went to Mr. Bérubé's home, selected some art works and made a list of them; he subsequently prepared a receipt and returned to pick up the works. According to the evidence, Mr. Amireault was also a mandatary for the charity to which the gifts were made.
[5] In 1993, an incident occurred: Mr. Bérubé observed when Mr. Amireault returned with the receipt that, on the receipt, Mr. Amireault had substituted works belonging to him for those that had been donated. Mr. Bérubé says he was offended at the time, but, since the works substituted were of equivalent value, he did nothing. It was not until September 9, 1996, that he revealed the incident in a letter to Revenue Canada auditor, Claude Potvin.
[6] In 1994, Mr. Bérubé kept his distance from Mr. Amireault. While taking courses at La Maison d'Art Fra Angelico, he met Father Michel Jacques and, in the following two years, donated art works to La Maison Fra Angelico.
[7] Mr. Bérubé admitted in cross-examination that Mr. Amireault was a mandatary of two of the charities to which he had made gifts: the Fondation Collège de l'Assomption and the Fondation Don des Arts. Furthermore, he knew that Mr. Amireault organized the auctions of the Fondation Don des Arts. Mr. Bérubé concluded by saying that the assistance he had received from Mr. Amireault had been useful to him and that everything appeared to him to have been above board. In the last three years in which he dealt with Mr. Amireault, Mr. Bérubé paid him a commission of three percent of the established value of the art works. When questioned about the contradictions in the documentation filed, that is to say, contradictions concerning the works to which the receipts refer, he answered that he had acted in a confused stated of mind but in good faith, particularly in writing his letter dated September 9, 1996, in which he declared that the works described on the appraisal certificates were not those he had given to the charities through Mr. Amireault.
[8] Mr. Bérubé's interest in and passion for art were confirmed by three witnesses, all of whom had known Mr. Bérubé for more than 20 years. He was described as an artist, a collector of paintings and an art lover. Over the years, he has become a connoisseur and many people go to consult him. Some have accompanied him to flea markets and auctions. However, no one could identify or comment on the art works in issue in this case.
[9] Mr. Bérubé chose not to call any expert witnesses and therefore adduced no evidence concerning the fair market value of the gifts made in the relevant years.
[10] Counsel for the respondent produced two witnesses: Claude Potvin, the auditor for the relevant period, and Denis Lemieux, an investigator. Both spoke of the exhaustive research conducted in the course of the investigation into Mr. Bérubé's transactions, the charities linked to Mr. Amireault and the value of the works given to those charities and resold by them.
[11] Claude Potvin's investigation began in August 1996 and ended in October of that year. On August 9, 1996, he wrote to Mr. Bérubé asking him, with respect to the art works given in the relevant years, for proof of the purchases, of the prices and of the payment of those prices, and for any additional documentation.
[12] In a conversation with Mr. Potvin, the accountant François Robert Lemire, who represented Mr. Bérubé, stressed his client's good faith and said that neither Mr. Bérubé nor Émile Amireault had any proof of purchase. Mr. Potvin subsequently received from the appellant certain invoices pertaining to the purchase of works given in the relevant years.
Statute-barred years
[13] The onus is on the respondent to adduce evidence justifying notices of reassessment for 1989, 1990, 1991 and 1992. Those notices must satisfy the Court on a balance of probabilities that Mr. Bérubé made a misrepresentation attributable to neglect, carelessness or wilful default, or that he committed some fraud in filing the return or in supplying any information, as contemplated in subparagraph 152(4)(a)(i) of the Act.
[14] In Venne v. Canada, [1984] F.C.J. No. 314 (F.C.T.D.) (Q.L.), 84 DTC 6247, Strayer J. described the burden of proof as follows:
I am satisfied that it is sufficient for the Minister, in order to invoke the power under sub-paragraph 152(4)(a)(i) of the Act to show that, with respect to any one or more aspects of his income tax return for a given year, a taxpayer has been negligent. Such negligence is established if it is shown that the taxpayer has not exercised reasonable care. This is surely what the words "misrepresentation that is attributable to neglect" must mean, particularly when combined with other grounds such as "carelessness" or "wilful default" which refer to a higher degree of negligence or to intentional misconduct. Unless these words are superfluous in the section, which I am not able to assume, the term "neglect" involves a lesser standard of deficiency akin to that used in other fields of law such as the law of tort.
[15] Did Mr. Bérubé exercise reasonable care? He tells us that he met Émile Amireault in 1989 and was informed by him that he could obtain tax deductions by donating some of his art works to charities recognized by the government. Now, getting tax deductions is not bad in itself, but the deduction must be permitted under the applicable statutory provisions. Mr. Bérubé failed to exercise reasonable care when he left it to Mr. Amireault to handle everything, that is to say: to find the charities, establish the market value of the works, obtain receipts and even deliver the works. What should stand out particularly in all of this is that Mr. Bérubé never questioned Mr. Amireault's appraisals. And yet Mr. Bérubé represents himself as a connoisseur and collector who has been active in the field for more than 20 years. He disclosed the prices he had paid for his paintings. Could he really think their value had increased that much?
[16] Mr. Bérubé took the step of contacting Revenue Canada to obtain information regarding Mr. Amireault's statements. That should have been sufficient to make him aware of the requirements of the Act, particularly as regards the determination of the market value of gifts to charities.
[17] The documents Mr. Bérubé provided, namely his proofs of purchase for all the relevant years, raise some doubt as to the authenticity of the information they contain and even as to Mr. Bérubé's intentions. The evidence showed that some of those invoices were issued following the auditor's request in order to satisfy the auditor, regardless whether they were accurate or not. So it is that one of the invoices indicates a purchase of two paintings on November 9, 1979. By sheer coincidence, a gift was made of those same two paintings in 1990. Mr. Bérubé admits that the invoices were made at his request. To that must be added the contradictions between those invoices and the acquisition prices shown in the amended income tax returns.
[18] In light of these facts, I am satisfied that the respondent has discharged the burden of furnishing the proof necessary to justify the reassessments for the statute-barred years.
1989
[19] In 1989, Mr. Bérubé donated 14 works of art, the stated total value of which was $9,290, to the Fondation Collège de l'Assomption. He filed in evidence a receipt he had obtained from that organization. The respondent contends that the receipt is not in compliance with section 3500 of the Income Tax Regulations ("Regulations") and that Mr. Bérubé did not make genuine donations or prove that he owned the works at the time the donations were made. Lastly, the fair market value was not shown on the receipts, and there were no appraisals by an independent expert.
[20] The first point concerns the validity of the receipt filed by Mr. Bérubé. The relevant parts of section 3500 and subsections 3501(1) and (1.1) of the Regulations provided as follows:
3500. In this Part,
"official receipt" means a receipt for the purpose of paragraph 110(1)(a), (b), (b.1) or subsection 110(2.2) of the Act, containing information as required by section 3501 or 3502.
. . .
"other recipient of a gift" means a person referred to in any of subparagraphs 110(1)(a)(iii) to (vii), paragraph 110(1)(b) or (b.1) or subparagraph 110(2.2)(a)(ii) of the Act to whom a gift is made by a taxpayer;
. . .
3501. (1) Every official receipt issued by a registered organization shall contain a statement that it is an official receipt for income tax purposes and shall show clearly in such a manner that it cannot readily be altered,
(a) the name and address in Canada of the organization as recorded with the Minister;
(b) the registration number assigned by the Minister to the organization;
(c) the serial number of the receipt;
(d) the place or locality where the receipt was issued;
(e) where the donation is a cash donation, the day on which or the year during which the donation was received;
(e.1) where the donation is a gift of property other than cash
(i) the day on which the donation was received,
(ii) a brief description of the property, and
(iii) the name and address of the appraiser of the property if an appraisal is done;
(f) the day on which the receipt was issued where that day differs from the day referred to in paragraph (e) or (e.1);
(g) the name and address of the donor including, in the case of an individual, his first name and initial;
(h) the amount that is
(i) the amount of a cash donation, or
(ii) where the donation is a gift of property other than cash, the amount that is the fair market value of the property at the time that the gift was made; and
(i) the signature, as provided in subsection (2) or (3), of a responsible individual who has been authorized by the organization to acknowledge donations.
(1.1) Every official receipt issued by another recipient of a gift shall contain a statement that it is an official receipt for income tax purposes and shall show clearly in such a manner that it cannot readily be altered,
(a) the name and address of the other recipient of the gift;
(b) the serial number of the receipt;
(c) the place or locality where the receipt was issued;
(d) where the donation is a cash donation, the day on which or the year during which the donation was received;
(e) where the donation is a gift of property other than cash,
(i) the day on which the donation was received,
(ii) a brief description of the property, and
(iii) the name and address of the appraiser of the property if an appraisal is done;
(f) the day on which the receipt was issued where that day differs from the day referred to in paragraph (d) or (e);
(g) the name and address of the donor including, in the case of an individual, his first name and initial;
(h) the amount that is
(i) the amount of a cash donation, or
(ii) where the donation is a gift of property other than cash, the amount that is the fair market value of the property at the time that the gift was made; and
(i) the signature, as provided in subsection (2) or (3.1), of a responsible individual who has been authorized by the other recipient of the gift to acknowledge donations.
[21] It should be borne in mind that subsection 118.1(2) of the Act provides that a gift shall not be included in the total charitable gifts, among other gifts, unless the gift is proven by a receipt therefor that contains prescribed information.
[22] The receipt dated December 16, 1989, from the Fondation Collège de l'Assomption does not meet the requirements of the Regulations. It contains neither the day on which the gift was received nor a brief description of the property given. The name and address of the appraiser of the property are not shown either. Furthermore, the receipt shows a cash donation made to the organization in question, not a gift of art works.
[23] I agree with the comments made by the Honourable Judge Tardif of this Court in ruling in Plante v. Canada, [1999] T.C.J. No. 51 (Q.L.), on the importance of the requirements prescribed by the Regulations. Judge Tardif states the following in this regard in paragraphs 46 and 47:
46. The requirements in question are not frivolous or unimportant; on the contrary, the information required is fundamental, and absolutely necessary for checking both that the indicated value is accurate and that the gift was actually made.
47. The purpose of such requirements is to prevent abuses of any kind. They are the minimum requirements for defining the kind of gift that can qualify the taxpayer making it for a tax deduction.
[24] In light of this conclusion, Mr. Bérubé did not prove that his receipt meets the requirements and he may not in this instance receive a tax credit for 1989.
[25] It is therefore unnecessary to consider the other questions raised by the respondent for that year.
1990
[26] In his income tax return for 1990, Mr. Bérubé claimed tax credits in respect of an amount of $1,350 and an additional amount of $660 representing the value of gifts of art works made to the Fondation Collège de l'Assomption. He also claimed a credit in respect of a gift purportedly worth $6,700 to Entraide-cancer du Québec inc.
[27] The receipt for $1,350 issued by Fondation Collège de l'Assomption does not meet the requirements of the Regulations as set out in the preceding paragraphs. The receipt from Entraide-cancer does not show the day on which the donation was received and does not contain a description of the property or indicate either the name or address of the appraiser. No receipt was filed for the gift of $660 to the Fondation Collège de l'Assomption. For the same reasons as those stated concerning the 1989 taxation year, I find that Mr. Bérubé may not receive the tax credit for 1990.
1991
[28] For 1991, according to his income tax return, Mr. Bérubé claimed a credit for charitable donations totalling $9,457.97. He appended to his return a receipt from the Fondation Don des Arts dated December 16, 1991, for a total amount of $10,975. The total of the respective values of the works of art shown on the receipt should come to $10,475, not $10,975. However, the letter accompanying the donation states the value of each painting and indicates a total of $10,975. This error is immaterial to the resolution of this case. With respect to the 1991 taxation year, Mr. Bérubé admits that he paid Émile Amireault, the owner of Galerie d'Art Annie-Claude enr., a commission equal to three percent of the amount determined by the appraisal, that is, $329.25 plus GST. Mr. Bérubé acknowledges that Mr. Amireault insisted on these conditions for the last three years in which Mr. Bérubé did business with him.
[29] This time, the receipt filed in evidence meets the requirements of the Regulations. However, the onus is on the appellant to show that a donation of property or objects was indeed made and that the amount indicated on the receipt represents the fair market value of that property.
[30] This Court has, on a number of occasions, considered the matter of the factors that are essential to the existence of a donation. See Paradis v. Canada, [1996] T.C.J. No. 1638 (Q.L.), [1997] 2 C.T.C. 2557, and Côté v. Canada, [1998] T.C.J. No. 1046, 99 DTC 72. Without repeating the entire analysis of that matter, I find that, in 1991, the appellant made a gift of the paintings in question to the charity Fondation Don des Arts. Although Mr. Bérubé could not produce all his invoices relating to the purchase of the paintings in question, I am able to find on the whole of the evidence that he had had a collection of paintings for a number of years, that he made a gift of the paintings described in the exhibits filed in evidence concerning 1991 and that the charity named in fact received the paintings.
[31] It is the question of market value that presents the greatest difficulty, and the appellant adduced no evidence on that aspect.
[32] In Côté, supra, Chief Judge Garon reiterated what fair market value is, namely: that which is obtained in an open and unrestricted market in which the price is hammered out between willing and informed buyers and sellers on the anvil of supply and demand.
[33] In 1991, the appellant made a gift of five 11" x 16" paintings by Michel St-Amour, five 16" x 20" paintings by the same artist and one 28" x 22" painting by Niska. He filed a few invoices relating to the purchase of the Michel St-Amour paintings, but there is no evidence to satisfy me that the paintings shown on those invoices are in fact the same as those given to the Fondation Don des Arts. It is the same artist, but are they the same paintings?
[34] Moreover, the appellant admitted that some of his proofs of purchase had been reconstituted by a certain Ms. Gagnon of Équipements Longueuil Enr., at whose business there had been a fire. She made the invoices on the basis of what she thought had been the value of a particular painting at the time of purchase, not on the basis of the actual price paid.
[35] The respondent called as a witness Denis Lemieux, who has been an investigator with the Canada Customs and Revenue Agency for 22 years. Mr. Lemieux conducted an investigation by making inquiries of donors of art works and certain charities. His investigation took place over several years, and the information gathered provided him with the prices received by the charities on the subsequent disposition of the works. This enabled him to compare those prices with the value stated in the appraisals provided when the receipts were prepared. His investigation showed that the paintings sold by the Fondation Don des Arts fetched on average only 10 percent of the amounts determined in the appraisals. I am therefore prepared to allow the appellant a market value of $1,097 for the paintings indicated on the receipt issued by the Fondation Don des Arts for the 1991 taxation year.
1992
[36] For 1992, Mr. Bérubé claims a charitable donations credit with respect to an amount of $11,000. The receipt provided by Les Centres d'accueil du Chemin du Roy Inc. does not meet the requirements of the Regulations as set out above in that it does not describe the property given or identify any appraiser.
[37] In a letter dated September 9, 1996, to Revenue Canada auditor Claude Potvin, the appellant admitted that the paintings shown on the receipt issued for 1992 had been substituted for those of the appellant by Émile Amireault. The effect of that substitution is thus that the charity never received the paintings belonging to the appellant.
[38] For these reasons, the appellant may not receive a tax credit for 1992.
1993
[39] The appellant filed four receipts for charitable donations for 1993. The first, issued by the ensemble Musica Nova on August 27, 1993, is a receipt for $4,125 for a gift of art works made by the appellant. For reasons set out in the preceding paragraphs, that receipt does not meet the requirements of the Regulations: the works are not described and the appraiser's name and address are not indicated, nor is the day on which the donation was received. The appellant therefore may not receive a credit for 1993.
[40] The second receipt, for $3,875, was issued by the Fondation Don des Arts on September 4, 1993. The third receipt, for $500, was issued on December 14, 1993, also by the Fondation. Both receipts are for gifts of paintings and art works and are expressly mentioned in the letter of September 9, 1996, to Claude Potvin, in which the appellant admitted that the paintings he had given had been the object of a substitution by Émile Amireault. As the charities did not receive the property in question, there was no donation within the meaning of the Act, as explained above. The appellant therefore may not receive a credit.
[41] The last receipt, for $1,200, was issued by the Fondation Don des Arts on December 28, 1993, and complies with section 3500 of the Regulations. However, was there a gift that met the requirements of the Act? The appellant testified that he realized during the 1993 taxation year that Émile Amireault was substituting his works for the appellant's for the purposes of the donations to the charities. Although offended by the practice, the appellant accepted it because Mr. Amireault had substituted works of equivalent value. But how could the appellant come to this conclusion without having seen the works given? I cannot conceive that he could have permitted such a substitution without realizing that he was also casting doubt on his own integrity and good faith. The authenticity of the entire transaction is thus seriously undermined, to the point where I cannot conclude that the paintings described in the receipt issued by the charity in question were actually donated. The appellant therefore may not receive the credit in this instance.
1994
[42] For 1994, the appellant filed three receipts from charities. La Maison d'Art Fra Angelico issued one for $980 on November 25, 1994. That receipt does not describe the property or state its market value; the receipt is thus not in compliance with section 3500 of the Regulations and the appellant may not make use of it.
[43] The other two receipts, dated December 28, 1993, and January 27, 1994, were issued by the Fondation Don des Arts for amounts of $3,375 and $3,975 respectively. The appraiser shown is the Galerie d'art Annie-Claude, which was owned and operated by Émile Amireault. For the reasons stated with regard to the 1993 taxation year in the case of the same charity, I cannot come to a different conclusion from that concerning the 1993 transactions. I am not satisfied on the evidence that the appellant's paintings described on the receipts were in fact given to the donee. The appellant therefore may not make use of those receipts.
1995
[44] The appellant filed two receipts from charities for the 1995 taxation year. The first, dated February 28, 1995, is from La Maison d'Art Fra Angelico, and the other, dated June 30, 1995, from the Musée des Beaux-Arts de Sherbrooke. They are for $25,455 and $5,750 respectively. The respondent informed the Court that she accepted the receipt from the Musée des Beaux-Arts de Sherbrooke.
[45] However, the respondent does not accept the receipt from La Maison d'Art Fra Angelico, again for the same reasons. That receipt does not comply with section 3500 of the Regulations based on what is stated above. It does not describe the property or give the appraiser's name. The appellant confirmed that the receipt was for a gift of art works. He therefore may not receive the credit in respect of such a gift.
Penalties
[46] The Minister assessed the appellant a penalty for each of the taxation years in issue under subsection 163(2) of the Act, which provided as follows:
(2) False statements or omissions. Every person who, knowingly, or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in a return, form, certificate, statement or answer (in this section referred to as a "return") filed or made in respect of a taxation year as required by or under this Act or a regulation, is liable to a penalty of the greater of $100 and 50% of the total of
(a) the amount, if any, by which
(i) the amount, if any, by which
(A) the tax for the year that would be payable by the person under this Act
exceeds
(B) the amount that would be deemed by subsection 120(2) to have been paid on account of the person's tax for the year
if the person's taxable income for the year were computed by adding to the taxable income reported by the person in the person's return for the year that portion of the person's understatement of income for the year that is reasonably attributable to the false statement or omission and if the person's tax payable for the year were computed by subtracting from the deductions from the tax otherwise payable by the person for the year such portion of any such deduction as may reasonably be attributable to the false statement or omission
exceeds
(ii) the amount, if any, by which
(A) the tax for the year that would have been payable by the person under this Act
exceeds
(B) the amount that would have been deemed by subsection 120(2) to have been paid on account of the person's tax for the year
had the person's tax payable for the year been assessed on the basis of the information provided in the person's return for the year,
. . .
[47] The onus is thus on the respondent to show on a balance of probabilities that the appellant made a false statement in his income tax returns for the years in question and that that statement was made knowingly or under circumstances amounting to gross negligence.
[48] I am in agreement with Strayer J.'s remarks in Venne, supra, concerning the notion of gross negligence:
"Gross negligence" must be taken to involve greater neglect than simply a failure to use reasonable care. It must involve a high degree of negligence tantamount to intentional acting, an indifference as to whether the law is complied with or not.
[49] In my view, the respondent has discharged her burden and shown on a balance of probabilities that the appellant knowingly, or under circumstances amounting to gross negligence, made a false statement in his income tax returns for the years in question.
[50] In paragraphs 13 to 17 of these reasons, I have already discussed the appellant's conduct as it relates to the statute-barred taxation years. The same findings of fact apply to the analysis of the evidence concerning the penalties and extend beyond the statute-barred years to include all the taxation years in issue.
[51] The most important facts for the purposes of the present analysis are revealed by the investigator's testimony and that of the auditor. It may be concluded from their analyses of the prices obtained by the various donees on reselling the paintings they had received as donations that the appraisals provided were four to ten times higher than the market value of the paintings. Auctions are perhaps not the best way to establish fair market value, but they do nevertheless give a good indication. In the instant case, the difference is after all considerable, and a reasonable person could not conclude otherwise than that the appraisals provided were unrealistic, not to say totally lacking in credibility.
[52] This discrepancy in the prices becomes all the more striking when the taxpayer concerned is an art enthusiast. The difference between the purchase prices he was able to document and the appraisals, or the amounts of the receipts obtained from the donees, is enormous. The appraisals or receipts are on average three to four times higher than the purchase prices. This in itself is sufficient for me to be able to conclude that the appellant was looking for tax shelters, that he knew it was a good arrangement for him and that the higher the appraisal was, the greater the tax credit claimed would be as well.
[53] The appellant did not question Émile Amireault's way of doing things. He chose to let Mr. Amireault organize and take care of everything because the result would be advantageous for him. Even after learning in 1993 that Mr. Amireault was substituting his own paintings for his, the appellant took more than a year to distance himself.
[54] The evidence also shows that, once he was under investigation by Revenue Canada, the appellant requested receipts from the persons from whom he had purchased certain paintings. To help him out, those persons established the values of the paintings based on what they remembered the price to have been at the time they were purchased.
[55] In cross-examination, the respondent brought out obvious contradictions between the purchase prices shown on the receipts and the purchase prices reported in the income tax returns; she also brought out the fact that it was impossible for the appellant to explain the expenses reported in the amended returns. Those same amended returns also show the difference between the adjusted cost base and the proceeds of disposition.
[56] For example, the amended return for 1992 (Exhibit I-4) shows an adjusted cost base of $75 for a canvas by Lise Gervais and proceeds of disposition of $3,200. The discrepancy is also apparent for the other two canvasses reported in the amended return. There is no mention in that return of the other two works which the appellant says he gave in 1992, one by Ben Houstie and another by Anne Noeh. Nor could the appellant explain the expenditures and expenses reported in the 1992 amended return.
[57] The appellant's amended income tax return for 1993 (Exhibit I-6) indicates a total acquisition cost for four paintings of $855. Those paintings had been purchased in the two previous years. The total proceeds of disposition were $5,675. In addition, two out of four canvasses indicated in that return do not correspond to those shown on the receipts issued for that year. Receipt number 536 (Exhibit A-6) shows a painting by Daniel Lavoie, which is not mentioned in the amended return. A canvas by René Després shown on receipt number 118 (Exhibit A-6) does not appear in that return either. And yet the receipts indicate that those canvasses were given during the year. The appellant admitted these facts in cross-examination.
[58] For the same year, the appellant filed a proof of purchase (Exhibit A-6) for an untitled 14" x 18" painting by Niska. That receipt, bearing number 305702, shows March 25, 1982, as being the date of purchase and the cost as being $850. The amended income tax return indicates a canvas by Niska for which the year of acquisition was 1992, the acquisition cost $85 and the selling price $1,050. The appellant admitted in cross-examination that it was the same painting. He was unable to assure the Court that the paintings on his list of works for 1993, which are shown as being by René Després, were the same as those indicated in his amended return, nor was he able to provide any explanations.
[59] The appellant filed an amended income tax return for 1994 (Exhibit I-9). In Schedule 3, he reports a canvas by Gilles Gingras acquired in 1994 for $325. That canvas corresponds to the one shown on receipt number 1222 (Exhibit A-7) issued by the donee for the same year. The appellant was unable to produce any proof of acquisition. The situation was the same for a canvas by Colette Cloutier.
[60] In the same amended return, the appellant reports a canvas by Gilles Jacques, which he indicates having acquired in 1994 for $75. For the same canvas, he also produced a proof of purchase dated January 23, 1981, showing a cost of $925. That canvas is the one shown on receipt number 1242 issued by the charity (Exhibit A-7). The appellant was unable to provide any explanation of this contradiction.
[61] It is clear that the appellant knew this entire tax credit affair could benefit him and that he chose to close his eyes, hoping that the credit claims would be allowed. Even after his efforts to distance himself from Mr. Amireault after six years, he once again filed receipts showing inflated values.
[62] The appellant displayed surprising indifference as to his obligations. He knew the value of his paintings and that it had not risen so dramatically.
[63] This conduct is consistent with that described by Strayer J. in Venne, supra. I therefore conclude that the penalties were rightly assessed by the respondent. However, the amount of the penalty for the 1991 taxation year will have to be adjusted in light of these reasons.
[64] For these reasons, the appeal from the assessment made for the 1991 taxation year is allowed, and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the appellant is entitled to a credit for charitable donations in respect of an amount of $1,097, and the penalty assessed under subsection 163(2) of the Act shall be adjusted accordingly. The appeals from the assessments made for the 1989, 1990, 1992, 1993, 1994 and 1995 taxation years are dismissed.
Signed at Ottawa, Canada, this 4th day of March 2002.
"François Angers"
J.T.C.C.
Translation certified true on this 18th day of June 2002.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-1394(IT)I
BETWEEN:
NORMAND BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on November 5, 2001, at Montréal, Quebec, by
the Honourable Judge François Angers
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Chantal Jacquier
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1991 taxation year is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the appellant is entitled to a credit for charitable donations in respect of an amount of $1,097 and that the penalty assessed under subsection 163(2) of the Act shall be adjusted accordingly.
The appeals from the assessments made under the Income Tax Act for the 1989, 1990, 1992, 1993, 1994 and 1995 taxation years are dismissed.
Signed at Ottawa, Canada, this 4th day of March 2002.
|
"François Angers" |
J.T.C.C.
Translation certified true
on this 18th day of June 2002.
Erich Klein, Revisor