Date: 20010214
Docket: 2000-2977-IT-I; 2000-3566-GST-I
BETWEEN:
MARGO ERDMANN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(delivered orally from the Bench at Calgary, Alberta, British Columbia on January 19, 2001)
Beaubier, J.T.C.C.
[1] These appeals pursuant to the Informal Procedure were heard jointly and on common evidence by consent of the parties at Calgary, Alberta on January 8, 2001. John Swift and Margaret Popp, who qualified as an expert appraiser, testified for the Appellant. Paul St. Clair, who qualified as an expert appraiser, testified for the Respondent.
[2] The Appellant has appealed assessments pursuant to section 160 of the Income Tax Act and s. 325 of the Excise Tax Act respecting the levying of taxes on account of a transfer to her from John Swift (who was then her husband) of a townhouse known as 6619 Huntsbay Road N.W., Calgary, Alberta.
[3] The assumptions in the Income Tax appeal, file number 2000-2977(IT)I read:
11. In so assessing the Appellant, the Minister made the following assumptions of fact:
(a) the facts admitted or stated above;
(b) the Property is located at 6619 Huntsbay Road N.W., Calgary Alberta and is legally described as Plan 7510612, Block 41, Lot 2A;
(c) John Swift acquired the Property on or about May 13, 1997;
(d) John Swift acquired the property from his stepson;
(e) John Swift valued the Property at $72,000 when he acquired it;
(f) John Swift was the sole owner of the Property from May 13, 1997 until April 21, 1998;
(g) on or about April 21, 1998, John Swift transferred his interest in the Property to the Appellant;
(h) on April 21, 1998, both the legal and beneficial ownership of the Property was transferred to the Appellant;
(i) at all material times John Swift was the Appellant's spouse;
(j) at all material times John Swift was not dealing with the Appellant at arm's length;
(k) at the time of the transfer the fair market value of the Property was not less than $116,000.00;
(l) the transfer documents indicate that the consideration the Appellant paid for the property was $72,000, comprised of the assumption of the existing mortgage and cash;
(m) the amount owing on the mortgage assumed by the Appellant was $51,457.43;
(n) net cash proceeds in the amount of $20,542.57 were paid to John Swift in April 1998;
(o) on April 29, 1998, the $20,542.57 referred to in the previous subparagraph was deposited into a joint bank account that was in the Appellant's and John Swift's names (the "Joint Account");
(p) the balance in the Joint Account immediately before the $20,542.57 was deposited into it was $2,500.00;
(q) the funds in the Joint Account were used to buy real property located at 25 Westland Road, Okotoks, Alberta, which was registered solely in the Appellant's name;
(r) John Swift continued to reside at the Property until he and the Appellant moved into the house at 25 Westland Road, Okotoks, Alberta; and
(s) the aggregate of all amounts that John Swift was liable to pay under the Act in respect of the taxation year in which he property was transferred or in any preceding taxation year was at least $15,982.06.
[4] Assumption (k) is in dispute. The remainder were either established by the evidence or were not refuted.
[5] In appeal number 2000-3566 (GST)I, the assumptions are very similar. Assumption 11(h) respecting the value of 6619 ("6619") Huntsbay Road was disputed. The remaining assumptions were either established by the evidence or were not refuted.
[6] Therefore, the question comes down to the value of the property which Mr. Swift transferred to the Appellant on or about April 21, 1998. The transfer was executed on April 16, 1998 and then was sent for registration, which occurred on April 21.
[7] Ms Popp values 6619 at $90,000 as at April 21, 1998. Mr. St. Clair values 6619 at $114,000 as of April 21, 1998. The Court finds that for the purposes of determining the value of 6619 there is no measurable difference in its value as between the dates April 16 and April 21, 1998.
[8] Both appraisers used two identical properties in arriving at their valuations on a fair market value basis. The Court will use them for the purpose of critiquing the appraisals in order to ultimately arrive at a valuation of 6619. The Appellant's appraiser arrived at a value of $90,000. The Respondent's appraisal arrived at a value of $114,000. The mortgage assumed by the Appellant was $51,457.43, leaving a difference from her appraiser's valuation of $38,542.57.
[9] The unrefuted assumptions in each appeal are that:
1. Ms Erdmann paid $20,542.78 to Mr. Swift on account of the transfer of 6619.
2. That $20,542.78 was deposited to their joint account.
3. Those funds were used by Ms Erdmann to purchase 25 Westland Road in her own name which Mr. Swift and Ms Erdmann ultimately moved into.
On this evidence, the $20,542.78 never left Ms Erdmann's title or control. In fact, she never lost the benefit of the $20,542.78. For this reason, even on the Appellant's appraiser's (Ms Popp) valuation, the value transferred by Mr. Swift to Ms Erdmann was $38,542.57 which exceeds the total of the sums at issue in both appeals. For this reason, the appeal is dismissed.
[10] The two identical properties used by both appraisers were 6517 and 6519 Huntsbay Road N.W., which were, like the subject property, townhouses in north-west Calgary. Respecting them, the appraisers found:
|
6617 |
6619 |
|
|
Sale date |
7 Apr 98 |
13 Mar 98 |
|
Price |
$108,000 |
$105,000 |
|
Bldg square feet |
1,205 |
1,205 |
|
Site area |
17.03' x 109.98' |
17' x 110.04' |
|
Storeys |
2 |
2 |
|
Basement |
Part devpt |
Full or part devpt |
|
Popp adjustment |
- $13,000 |
- $15,000 |
|
St. Clair adjustmetn |
+$6,500 |
+$8,762.50 |
About 50 percent of Mr. St. Clair's positive adjustment is for a garage respecting inferior parking compared to 6619. $15,000 of Ms Popp's inferior adjustment is for age-condition, although she never inspected any of the interiors of any property, including the subject property. Nor did she adjust for a garage. What she did was rely excessively upon hearsay she received from Mr. Swift. Thus her adjustments are not accepted respecting the comparables.
[11] The Court finds Mr. St. Clair's comparable #4 at 6645 Huntsbay Road N.W. to be a suitable comparable for the following reasons:
1. Like 6619 it is an outside two storey townhouse.
2. Like 6619 it has a view.
3. Like 6619, it has parking on site.
4. No condition adjustment was made or required.
5. Mr. St. Clair adjusted the value downward by 1.25% which the Court accepts because it is favourable to the Appellant.
6. 6645 is smaller than 6619 by about 50 square feet in the two storeys which was not adjusted for, whereas Mr. St. Clair did adjust $4,500 for better parking at 6619 where there was a partly unfinished garage. The Court finds that as between the 60 square feet and the garage no adjustment is appropriate and that the adjustment for a deck and skylights of $500 is negligible.
[12] Therefore, using 6645 as a comparable, the Court finds the value of 6619 to be:
$110,000
Less 1.25% - 1,375
$108,625
on both April 16 and 21, 1998.
[13] Thus, in any circumstances, the value of property transferred by John Swift to the Appellant exceeds the amounts assessed against the Appellant.
[14] Therefore, the appeals are dismissed.
Signed at Ottawa, Canada, this 14th day of February, 2001.
"D.W. Beaubier"
J.T.C.C.