2000-626(IT)I
BETWEEN:
PETER GERMAINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on June 16, 2000 at Vancouver, British Columbia, by
the Honourable Judge D.W. Beaubier
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Susan Wong
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1993, 1994, 1995, 1996 and 1997 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Saskatoon, Saskatchewan this 26th day of June 2000.
|
"D.W. Beaubier" |
J.T.C.C.
Date: 20000626
Docket: 2000-626(IT)I
BETWEEN:
PETER GERMAINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.T.C.C.
[1] These appeals pursuant to the Informal Procedure were heard at Vancouver, British Columbia on June 16, 2000. The Appellant testified. The Respondent called the appeals officer on the file, Rebecca Mular.
[2] The Appellant has appealed respecting his 1993 - 1997, inclusive, taxation years. Paragraphs 6 to 14, inclusive, of the Reply to the Notice of Appeal read:
6. The Minister of National Revenue (the "Minister") initially assessed the Appellant for the 1993, 1994, 1995, 1996 and 1997 years by Notices dated May 16, 1994, May 30, 1995, May 9, 1996, June 9, 1997 and April 30, 1998.
7. In computing income for the 1996 taxation year the Appellant claimed a business investment loss in the amount of $166,000.00 (the "BIL").
8. By Notice dated July 2, 1997 the Minister reassessed the 1993, 1994 and 1995 taxation years to allow the application of non capital loss from the 1996 taxation years in the amount of $10,482.00, $11,420.00 and $13,587.00, respectively (the "NCL Carryback").
9. In computing income for the 1997 taxation year the Appellant claimed non capital loss carried forward from the 1996 taxation year in the amount of $45,678.00 (the "NCL Carryforward).
10. By Notices dated October 26, 1998 the Minister reassessed the 1993, 1994, 1995, 1996 and 1997 taxation years to disallow the claims for the BIL, NCL Carryback and NCL Carryforward.
11. By Notice dated November 1, 1999 the Minister reassessed the 1996 taxation year to allow an allowable business investment loss in the amount of $46,252.50 and apply $27,509.00, thereof as detailed on Schedule "A".
12. By Notice dated November 1, 1999 the Minister reassessed the 1997 taxation year to allow a non capital loss in the amount of $18,743.50 as detailed on Schedule "A".
13. In so reassessing the Appellant, the Minister relied on the following assumptions of fact:
a) the facts stated and admitted above;
b) the Appellant claimed the BIL in respect of the Company;
c) the Appellant was a director and officer of the Company;
d) the Appellant owned 100 Class "B" Common Voting shares in the Company;
e) the Company was indebted to the Appellant in the amount of $176,000.00 for outstanding shareholder's loan (the "Original Loan");
f) the Appellant sold his shares in the Company for $10.00;
g) the Appellant sold $100,000.00 of the Original Loan for $100,000.00 (the "Proceeds");
h) the Appellant loaned $90,000.00 of the Proceeds to the Company (the "New Loan");
i) the Appellant was not a shareholder of the Company when the New Loan was lent;
j) the New Loan did not earn interest;
k) the New Loan was not lent to the Company for the purpose of producing income;
l) the Company became bankrupt on October 7, 1996;
m) on October 7, 1996 the Company was indebted to the Appellant in the amounts of $76,000.00 of the Original Loan and $90,000.00 of the New Loan, totaling $166,000.00;
n) the Appellant did not incur an allowable business investment loss in excess of $46,252.50 in the 1996 taxation year;
o) the Appellant did not have non capital losses in excess of $18,743.50 from the 1996 taxation year to carry forward to the 1997 taxation year; and
p) the Appellant did not have non capital losses available from other years at the end of the 1997 taxation years to carry back to the 1993, 1994 and 1995 taxation years.
B. ISSUES TO BE DECIDED
14. The issues are whether the:
(i) Appellant is entitled to an allowable business investment loss in excess of $45,252.50 in the 1996 taxation year;
(ii) Appellant had non capital losses from other years at the end of the 1997 taxation year to carry back to the 1993, 1994 and 1995 taxation years; and
(iii) Appellant had non capital losses available to carry forward to the 1997 taxation year in excess of $18,743.50.
[3] Assumptions 13(a) to (m) inclusive are true.
[4] Paragraphs 9, 9.1 and 9.5 of the Appellant's agreement to sell his shares, $100,000 of his loan and subsequently to lend $90,000 to Augusta Enterprises Ltd. read:
9. The Vendor covenants to loan to the Company from the monies received from the Purchaser the sum of $90,000.00 for the general purposes of the Company.
9.1 The said $90,000.00 together with the sum of $76,000.00 (the "Vendor's Loan"), being the balance owing by the Company to the Vendor after the aforesaid assignment of $100,000.00 to the Purchaser, shall be repayable by the Company on demand anytime after the expiry of Ten (10) Years from the date of this Agreement, and in addition, in consideration of the said $90,000.00 and forbearance of the Vendor in demanding immediate payment of the said $76,000.00, the Company agrees to pay to the Vendor the sum of $500.00 per month commencing February 1, 1991 and ending April 1, 1996. PROVIDED ALWAYS that the said payment of $500.00 per month shall cease immediately upon the principal being reduced from $166,000.00 to $121,000.00.
...
9.5 The Company, Gary Germaine and the Purchaser, jointly and severally, agree that commencing January 1, 1991 if in any year the Company pays in any proportion a total amount of $50,000.00 plus 7% per year, compounded annually, after the year 1991, inclusive of salary or dividends, to Gary Germaine and the Purchaser, any remaining profits in such year earned by the Company shall be distributed pro-rata in reduction of any outstanding shareholders' Loan and the balance if any of the Vendors Loan and Ray Germaine's loan.
The payments of $500.00 per month described in paragraph 9.1 were reductions of the principal of $90,000.00. There was no other agreement with the purchaser or the Company respecting the loan. The Appellant alleged that he had a deal with his son to share in the proceeds of his son's shares, but no written agreement was submitted and, if it was a legal agreement, it was not part of the loan agreement. Nor did it relate to the Appellant's former shareholdings. From the nature of the Appellant's testimony, the agreement with the son was offered after the Appellant left his loan or loans in the Company.
[5] As a result, assumptions (n), (o) and (p) are also correct.
[6] For these reasons, the appeals are dismissed.
Signed at Saskatoon, Saskatchewan this 26th day of June 2000.
|
"D.W. Beaubier" |
J.T.C.C.
COURT FILE NO.: 2000-626(IT)I
STYLE OF CAUSE: Peter Germaine and The Queen
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: June 16, 2000
REASONS FOR JUDGMENT BY: The Honourable Judge D.W. Beaubier
DATE OF JUDGMENT: June 26, 2000
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Susan Wong
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada