Docket: 2001-1358(IT)G

BETWEEN:

RADA PAROSKI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeal of Vidosava Paroski (2001-1361(IT)G) on November 18 and 19, 2002, at London, Ontario

by the Honourable Justice M.A. Mogan
Appearances:
Counsel for the Appellant:	Nicholas E. Gehl
Counsel for the Respondent:	Daniel Bougeois and Jade Boucher

____________________________________________________________________

JUDGMENT

          The appeal from the assessment made under section 160 of the Income Tax Act, notice of which is dated January 15, 2001 and bears number 00648, is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant's liability under section 160 is reduced to $421,500.

Signed at Ottawa, Canada, this 8th day of January, 2004.

"M.A. Mogan"

Mogan J.

Docket: 2001-1361(IT)G

BETWEEN:

VIDOSAVA PAROSKI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeal of Rada Paroski (2001-1358(IT)G) on November 18 and 19, 2002, at London, Ontario

by the Honourable Justice M.A. Mogan
Appearances:
Counsel for the Appellant:	Nicholas E. Gehl
Counsel for the Respondent:	Daniel Bougeois and Jade Boucher

____________________________________________________________________

JUDGMENT

          The appeal from the assessment made under section 160 of the Income Tax Act, notice of which is dated February 28, 1996 and bears number 07374, is allowed and the assessment is vacated.

Signed at Ottawa, Canada, this 8th day of January, 2004.

"M.A.Mogan"

Mogan J.

Citation: 2004TCC8

Date: 20040108

Docket: 2001-1358(IT)G 2001-1361(IT)G

BETWEEN:

RADA PAROSKI and VIDOSAVA PAROSKI,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Mogan J.

[1]      The appeal of Rada Paroski v. The Queen (Court file 2001-1358(IT)G) was heard on common evidence with the appeal of Vidosava Paroski v. The Queen, (Court file 2001-1361(IT)G). Rada Paroski is the husband of Vidosava Paroski. Because the word "Appellant" could apply in either case and therefore be confusing, I will use the first name "Rada" to refer to the husband Appellant and the first name "Vidosava" to refer to the wife Appellant. Rada and Vidosava have one son, Michael, who was born in 1962. During 1990, Michael transferred a particular property to both of his parents, and he transferred three other properties to his father alone. At the time of the transfers, Michael owed a significant amount of tax and interest to the Minister of National Revenue with respect to unpaid taxes under the Income Tax Act. Relying on section 160 of the Act, and attempting to collect at least part of the tax and interest owing by Michael, the Minister issued assessments to Rada and Vidosava as transferees of one or more of the properties referred to above. Rada and Vidosava have appealed from those assessments.

[2]      The principal issue in these two appeals is whether the Appellants have any liability under subsection 160(1) of the Act. The relevant words of subsection 160(1) are:

160(1) Where a person has ... transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to

(a)         the person's spouse or common-law partner or a person who has since become the person's spouse or common-law partner,

(b)         a person who was under 18 years of age, or

(c)         a person with whom the person was not dealing at arm's length,

the following rules apply:

(d)         ..., and

(e)         the transferee and transferor are jointly and severally liable to pay under this Act an amount equal to the lesser of

(i)          the amount, if any, by which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property, and

(ii)         the total of all amounts each of which is an amount that the transferor is liable to pay under this Act in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

but nothing in this subsection shall be deemed to limit the liability of the transferor under any other provision of this Act.

[3]      Recent decisions in this Court and in the Federal Court of Appeal have concluded that there are four conditions to be met if paragraph 160(1)(c) is to apply.

(i)       there must be a transfer of property;

(ii)       the transferor and transferee do not deal at arm's length;

(iii)      there is no consideration (or inadequate consideration) flowing from the transferee to the transferor; and

(iv)      the transferor is liable to pay an amount under the Act in or in respect of the year when the property was transferred or any preceding year.

Having regard to the above conditions, the Appellants admit that, during 1990, Michael transferred one property to both Appellants and three other properties to Rada alone. The Appellants admit that they and their son Michael do not deal at arm's length. And the Appellants admit that Michael had a significant liability under the Act in respect of 1990 or a preceding taxation year. In other words, the Appellants admit that the above conditions (i), (ii) and (iv) are satisfied for the purposes of these two appeals. The real dispute is on condition (iii). The Appellants rely on the words of subparagraph 160(1)(e)(i) to claim that the fair market value of the consideration which they gave to Michael for any particular property was equal to (or greater than) the fair market value of that property at the time of the transfer. The hearing of these appeals proceeded on the following questions:

1.        What was the fair market value of each of the four properties at the time when each was transferred?

2.        Did the Appellants together or did Rada alone give consideration to Michael for any one or more of the four transferred properties?

3.        If consideration was given for one or more of the transferred properties, what was the fair market value of that consideration at the time of a particular transfer?

[4]      Rada and Vidosava were the only witnesses for the Appellants. Rada testified for approximately 4½ hours and Vidosava testified for 25 minutes. Counsel for the Appellants entered many documents as exhibits. Some of those documents were entered by consent. Others were the subject of strong objections by counsel for the Respondent. I will consider the objected documents later in these reasons. What follows is a summary of Rada's evidence and many of the documents to which he referred.

Rada's Evidence

[5]      At all relevant times, the Appellants and Michael resided in Waterloo, Ontario; and the four transferred properties were located in Waterloo. The four transfers of property which are at the heart of these two appeals may be summarized as follows:

Date	Description	Transferor	Transferee	Exhibit
Jan. 5, 1990	594 Stonebury Cres., Lot 23, Plan 1695	Michael	Rada and Vidosava	A-1, Tab 2 R-1, Tab 11
Oct. 12, 1990	606 Stonebury Cres., Lot 29, Plan 1695	Michael	Rada	A-1, Tab 5 R-1, Tab 21
Oct. 12, 1990	590 Stonebury Cres., Lot 21, Plan 1695	Michael	Rada	A-1, Tab 3 R-1, Tab 16
Oct. 12, 1990	610 Stonebury Cres., Lot 31, Plan 1695	Michael	Rada	A-1, Tab 4 R-1, Tab 18

[6]      The Appellants claim that they together, or Rada alone, purchased the above four properties from Michael at the following prices:

594 Stonebury Cres., purchased by Rada and Vidosava for $305,000;

606 Stonebury Cres. purchased by Rada for $305,000;

590 Stonebury Cres. purchased by Rada for $77,000; and

610 Stonebury Cres. purchased by Rada for $77,000.

The properties at 590 and 610 were unimproved lots but each of the properties at 594 and 606 had a new house constructed thereon. The Respondent claims that the total consideration paid for each property was $2.00 plus "natural love and affection".

[7]      By consent, the Appellants entered as Exhibit A-3 the appraisal report of Harry DeGroot, AACI, an accredited appraiser retained by the Appellants to express his opinion on the fair market value of 590 and 610, respectively, as at October 12, 1990. In Mr. DeGroot's opinion, the fair market value of 590 Stonebury was $74,000 and the fair market value of 610 Stonebury was $77,500. Also by consent, the Appellants entered as Exhibit A-4 the appraisal report of Ron Duda, AACI, an accredited appraiser retained by the Respondent to express his opinion on the fair market value of "594" as at January 2, 1990 and "606" as at October 12, 1990. In Mr. Duda's opinion, the fair market value of 594 Stonebury was $315,000 as at January 2, 1990; and the fair market value of 606 Stonebury was $305,000 as at October 12, 1990. According to the Respondent's pleadings, when issuing the assessments under appeal, the Minister of National Revenue assumed that the fair market value of the respective properties was as follows:

594 Stonebury Cres.         $350,000 at January 5, 1990

606 Stonebury Cres.         $330,000 at October 12, 1990

590 Stonebury Cres.         $74,000 at October 12, 1990

610 Stonebury Cres.         $77,500 at October 12, 1990

[8]      By letter dated November 7, 2000 from Revenue Canada ("CCRA") to Michael Paroski (Exhibit A-2), the Respondent accepted the fair market values of "590" and "610" as determined by Mr. DeGroot. I therefore conclude that, on October 12, 1990, the fair market value of 590 Stonebury Cres. was $74,000; and the fair market value of 610 Stonebury Cres. was $77,500. The Respondent's appraiser (Mr. Duda) in Exhibit A-4 expressed his opinion that the fair market values of "594" and "606" were lower than the values assumed by the Minister for assessing purposes. I therefore conclude that the fair market value of 594 Stonebury Cres. on January 5, 1990 was $315,000; and the fair market value of 606 Stonebury on October 12, 1990 was $305,000. Having regard to the first question concerning fair market value listed in paragraph 3 above, I find that the fair market value of each property on its respective transfer date was as follows:

594 Stonebury Cres.         $315, 000      January 5, 1990

606 Stonebury Cres.         $305,000       October 12, 1990

590 Stonebury Cres.         $ 74,000       October 12, 1990

610 Stonebury Cres.         $ 77,500       October 12, 1990

[9]      The documents proving the actual transfers of property are all deeds of land describing each property by reference to a lot number on Plan 1695 but, for convenience, I will refer to each property by reference to its municipal address and transfer date:

Exhibit	Property	Transfer Date
A-1, Tab 2 R-1, Tab 11	594 Stonebury Cres.	January 5, 1990
A-1, Tab 5 R-1, Tab 21	606 Stonebury Cres.	October 12, 1990
A-1, Tab 3 R-1, Tab 16	590 Stonebury Cres.	October 12, 1990
A-1, Tab 4 R-1, Tab 18	610 Stonebury Cres.	October 12, 1990

Each deed of land in the above exhibits is a standard form to record information and, in box 4 under the heading "Consideration", the following information is provided: "natural love and affection - $2.00". Each deed also has an affidavit for Ontario Land Transfer Tax. The affidavits are all completed and signed with the notations that the money consideration is nil or nominal ($2.00), and that the conveyance is from a son to a parent. Looking at the deeds and affidavits for Land Transfer Tax, one would have to conclude that Michael transferred 594 Stonebury Cres. to his parents for no consideration; and that he transferred the other three properties (606, 590 and 610) to his father alone for no consideration. At first blush, the documents filed in the Ontario Land Registration Office support the Minister's assessments based on no consideration paid by the transferees for any of the four transfers.

[10]     The Appellants (or Rada as the case may be) claim that they actually paid real consideration for each transfer. In Rada's Notice of Appeal, the following allegations appear in these respective paragraphs:

10)        At all relevant times Michael lived with his parents.

11)        When Michael turned 18 he was told by his parents that he could continue to reside with them however he would have to pay his own way. It was agreed that Michael would pay a proportionate share of costs.

12)        Michael did not at that time have a significant source of funds, but he agreed that he would keep track of the expenses incurred on his behalf by his parents, and that he would pay them back for his share of the living expenses.

13)        In time, Michael became involved in the building and selling of personal residences.

14)        Michael operated a home construction business under the name Westview Homes, an unincorporated proprietorship.

15)        Westview Homes engaged in the purchase of building lots, the construction of single-family residences, and the sale of those residences in Kitchener and Waterloo, Ontario.

16)        The business operations of Westview Homes were funded from time to time by loans and advances from the Appellant and the Spouse.

...

18)        The consideration paid by the Appellant and the Spouse for 594 Stonebury Crescent was the sum of $220,000 given to Michael on January 2, 1990, together with a credit for other outstanding debts owing by Michael to the Appellant and the Spouse.

...

22)        The consideration paid by the Appellant for the properties described as 606, 610, and 590 Stonebury Crescent included a credit for monies due from Michael to the Appellant and the Spouse in respect of personal living expenses of incurred on behalf of, and cash advances made by the Appellant and the Spouse to, Michael.

23)        The balance due to Michael from the Appellant and the Spouse in respect of all of the properties acquired from Michael was satisfied by subsequent payments of money, and payments of living expenses on behalf of Michael.

24)        The Appellant states that the Appellant paid to Michael, or received credit for amounts due from Michael in full satisfaction of the fair market value of the property acquired from Michael.

[11]     The Respondent does not admit any of the above allegations and some are denied. To support many of the above allegations, the Appellants introduced 13 exhibits in which Michael purports to acknowledge that one or both of his parents paid certain of his living expenses for the years 1981 through to 1993 inclusive. The 13 exhibits are the same with respect to form and content but the amount of claimed living expenses changes for each year. By way of example, Exhibit A-5 is set out in full:

January 31, 1982

I Michael Paroski, acknowledge that Rada Paroski has paid Twenty One Thousand and Twenty Three Canadian Dollars ($21,023.00) of my living expenses for the year of 1981 which include but are not limited to apartment rentals, property taxes, gas, hydro, water, house insurance, cable T.V., clothing, food, linen and cleaning supplies.

"Michael Paroski"

The other 12 exhibits contain the same wording and they differ in only three areas (i) they are dated on the 31st day of January in successive years; (ii) the amount of claimed living expenses changes from year to year; and (iii) the amount is claimed for each preceding calendar year. Having regard to the content of Exhibit A-5 set out above, all 13 exhibits are the same except for the items shown in the table below:

Exhibit No.	Date on Exhibit	Amount of Living Expenses	Year When Expenses Were Paid
A-5	January 31, 1982	$21,023	1981
A-6	January 31, 1983	20,492	1982
A-7	January 31, 1984	20,600	1983
A-8	January 31, 1985	20,729	1984
A-9	January 31, 1986	21,127	1985
A-10	January 31, 1987	21,320	1986
A-11	January 31, 1988	20,473	1987
A-12	January 31, 1989	17,925	1988
A-13	January 31, 1990	18,498	1989
A-14	January 31 ,1991	17,017	1990
A-15	January 31, 1992	19,976	1991
A-30	January 31, 1993	22,516	1992
A-17	January 31, 1994	19,164	1993

[12]     Counsel for the Respondent objected to the above 13 documents being entered as exhibits because the original documents were not in Court (all 13 exhibits are only photocopies); and the only person who signed the documents (Michael, son of the two Appellants) did not come to Court to prove his signature or testify with respect to the contents. Notwithstanding the Respondent's well-founded objections, and having regard to his later consent, I permitted the documents to be entered as exhibits. Rada identified his son's signature on the documents and said that they represented an agreement which the Appellants made with Michael in 1982 when he was 20 years of age. Rada said that he could not recall when he photocopied the originals. Rada further stated, by way of explanation, that when the Appellants moved to 594 Stonebury Crescent in 1990, the grading was not completed; there was heavy rain and flooding in the basement; many documents got wet and were thrown out; and the original of Exhibit A-5 may have been thrown out.

[13]     Having permitted the above 13 documents to be entered as exhibits, and having heard both counsel in argument, I have certain observations, questions and conclusions with respect to those 13 documents. They are all handwritten. Although they are photocopies, they appear to have been written on lined paper; like a pad 8½" x 11". The writing is in the same place on each page. Because they are all dated January 31 in 13 consecutive years, the author must have been well-disciplined to sit down on the same precise date each year to write that memo to himself. If they were not actually written on the same precise date each year, why were they given the same date? They are not addressed to a second party but Rada said that he (Rada) could not recall when he photocopied the originals. A person who was well-organized and disciplined to write the same kind of memo each year on or about the same date would not likely lose the originals or permit them to be water-damaged and thrown out. If there was flooding in the basement of 594 Stonebury Crescent in 1990, what happened to the originals of Exhibits A-14, A-15, A-30 and A-17 which are dated January 31, 1991, 1992, 1993 and 1994, respectively? Rada could not explain how the amounts in the 13 exhibits were determined. He did not maintain any ledger, memo or other document in which he recorded household expenses. There is no evidence as to how the amounts in the 13 exhibits were or could have been determined. Why did the Appellants not call their son, Michael, to verify and explain all 13 documents?

[14]     The 13 exhibits described in paragraphs 11, 12 and 13 have a sameness which is disturbing. They do not have a true ring. Not many parents would enter into such an articulated financial arrangement with their only child. In the absence of the originals, and in the absence of any explanation by the author (Michael) to the contrary, I conclude that the 13 exhibits were written by one person at one sitting on a particular day using a pad of lined paper 8½" x 11". I infer that they were written after Revenue Canada began its audit of Michael's business transactions, and probably after Revenue Canada decided to use section 160 of the Act to assess Michael's parents. The 13 exhibits were intended to prove that Michael had a significant financial obligation to his parents (the Appellants) but, without Michael's testimony, those 13 exhibits have no evidentiary value. I do not regard Michael as having any financial obligation to his parents with respect to his living expenses for the period 1981 to 1993 inclusive.

[15]     Even apart from Michael's failure to testify, there was no documentary evidence from Rada or Vidosava indicating that they could afford to pay living expenses of approximately $20,000 each year for Michael in the period 1981 to 1993. Rada's evidence is that he worked as a butcher after coming to Canada in 1965 but that he was injured in 1978 and again in 1983. Exhibit R-1, Tabs 1 and 3 are Rada's income tax returns for 1989 and 1990, respectively. In each of those years, Rada's net income is shown as less than $5,000. Exhibit R-1, Tab 2 is Vidosava's income tax return for 1989 showing her net income as nil. Those three income tax returns reinforce my impression that the 13 documents listed in paragraph 11 above contain 13 bald lies with respect to payments of Michael's alleged living expenses.

[16]     Rada testified that Michael wanted to become a house builder. Michael had attended Conestoga Community College and was 25 years old in 1987. Rada wanted to help Michael and did so by providing money to purchase lots and building materials. Rada said that he kept track of the money which he loaned to Michael. Exhibit A-18 contains a list of 17 amounts which Rada loaned to Michael from April 8 to December 24, 1987. The total is shown as $97,698 but, according to my addition, the total should be $97,335. The list is supported by copies of 17 documents bearing a "Canada Trust" logo or ID and each one showing the corresponding loan amount on the corresponding date. Having regard to the fact that Michael was only 24 through most of 1987 (his birthday is in November), and most of the supporting Canada Trust documents refer to his business name "Westview Construction", I accept Rada's testimony that he loaned about $97,000 to Michael in 1987.

[17]     From 1981, Rada and Vidosava had owned their family home at 482 Anndale Road, Waterloo. On May 15, 1987, they obtained a loan of $70,000 and granted a mortgage to Montreal Trust Company (on 482 Anndale Road) to secure the loan. Exhibit A-20 contains a copy of the mortgage. Rada and Vidosava used the proceeds from the mortgage to finance many of the loans made to Michael in 1987. The $70,000 mortgage on the family home was discharged on March 24, 1989. The discharge is shown in Exhibit A-1, the first page of Tab 1. The existence of the mortgage satisfies me that there were funds after May 15, 1987 for the Appellants (or Rada alone) to lend to Michael. The $70,000 mortgage may have been the primary source of funds for the $97,000 loaned to Michael in 1987 as described in paragraph 16 above.

[18]     On January 2, 1990, Rada and Vidosava sold the family home at 482 Anndale Road for $229,500. See Exhibit A-1, Tab 1. On January 3, 1990, Rada and Vidosava agreed to purchase from Michael 594 Stonebury Crescent at a price of $305,000. The handwritten purchase agreement is Exhibit A-22. Although Exhibit A-22 is written as if it were signed on January 3, 1990, it contains the following provision:

3.          Both purchaser and vendor agree that any of Michael Paroski's living expenses paid by Rada Paroski or Vidosava Paroski prior to the closing date shall be a credit toward the purchase price.

Having regard to my statements concerning Michael's alleged "living expenses" (see paragraphs 11 to 15 above), I doubt that Exhibit A-22 was signed or even in existence on January 3, 1990. Exhibit A-22 does, however, contain the following provision:

5.          Both purchaser and vendor agree that the Two Hundred and Twenty Thousand Canadian Dollars ($220,000.00) given to Michael Paroski by Rada and Vidosava Paroski on January 2, 1990 shall be a credit toward the purchase price.

It appears that Rada and Vidosava used their net proceeds ($220,000) from the sale of 482 Anndale Road to pay part of the purchase price for 594 Stonebury Crescent.

[19]     Rada stated that he obtained an additional $80,000 to pay toward the purchase of 594 Stonebury Crescent by borrowing $40,000 from each of Vidosava's two sisters who lived in Kitchener, Ontario in 1990. Exhibit A-23 contains documents showing $40,000 borrowed from Milena Djurakov and $40,000 from Nada Djurakov on January 2 and 3, 1990, respectively. Exhibit A-23 also shows $80,000 deposited in the bank account of Westview Homes (Michael's business name) on January 3, 1990. I accept Rada's evidence that he and Vidosava paid $300,000 in cash toward the purchase price ($305,000) for 594 Stonebury Crescent on January 5, 1990 because they had just received $220,000 from the sale of 482 Anndale Road, and they had just borrowed $80,000 from Vidosava's two sisters.

Analysis

[20]     The property at 594 Stonebury Crescent is different from the other three transferred properties (606, 590 and 610) in the sense that 594 became the family home for Rada and Vidosava until they sold it in February 1992 for $310,000 in an arm's length transaction. There are handwritten agreements of purchase and sale for the other three properties (606, 590 and 610) which were all transferred on October 12, 1990. See Exhibit A-25 for 606; Exhibit A-24 for 590; and Exhibit A-26 for 610. All three agreements contain the provision for Michael's "living expenses" like No. 3 quoted in paragraph 18 above. Again having regard to my statements concerning Michael's alleged "living expenses" (see paragraphs 11 to 15 above), I doubt that Exhibits A-24, A-25 and A-26 were signed in October 1990. They were more likely written and signed after Revenue Canada commenced its audit of Michael or after its decision to use section 160 of the Act to assess Michael's parents. Although Exhibits A-22, A-24, A-25 and A-26 are all photocopies, they appear to be written on the same kind of lined paper (8½" x 11") as the 13 exhibits listed in paragraph 11 above.

[21]     In my opinion, there is good reason to doubt the credibility of the four handwritten agreements of purchase and sale for the four transferred properties (Exhibits A-22, A-24, A-25 and A-26). Each agreement contains the following provision:

4.          Both purchaser and vendor agree that all costs and legal fees for arranging, extending, and discharging as well as all monthly payments for the Seventy Thousand Canadian Dollar ($70,000.00) first mortgage to Montreal Trust on the property known as Lot # 1, Registered Plan 1422 in the City of Waterloo which Michael Paroski has agreed to pay, but which have in fact been paid by Rada Paroski or Vidosava Paroski prior to the closing date, shall be a credit toward the purchase price.

How could all costs, legal fees and monthly payments for the $70,000 Montreal Trust mortgage be credited to the purchase price of four very different properties? Why would those costs, legal fees and monthly payments need to be credited to the purchase price ($305,000) of 594 Stonebury Crescent when Rada's testimony is that he and Vidosava paid for 594 with the net proceeds ($220,000) from the sale of 482 Anndale Road plus the two loans (total $80,000) from Vidosava's two sisters? Exhibit A-28 is a photocopy of a cheque for $69,090 issued by Michael on January 12, 1989 to Montreal Trust to pay off the mortgage on 482 Anndale Road. The provision in paragraph No. 4 quoted above was totally unnecessary because the Montreal Trust mortgage had been paid off in 1989, long before any of the transfers in 1990 which are the subject of these two appeals.

[22]     In paragraph 16 above, I accepted Rada's testimony (supported by Exhibit A-18) that he had loaned about $97,000 to Michael in 1987. Exhibit A-19 and Rada's testimony show that Rada loaned $90,000 to Michael on October 3, 1987 and that Michael repaid the $90,000 in five payments from October 27 to December 28, 1987. I regard the $90,000 loan on October 3, 1987 and the five repayments as a wash transaction. I accept the documents in Exhibit A-27 as evidence that Rada loaned $12,000 to Michael in 1988. And lastly, it appears from Exhibit A-28 that Michael repaid most of the Montreal Trust mortgage on 482 Anndale Road. On January 12, 1989, Michael issued a cheque to Montreal Trust for $69,090.16 and it was cashed on January 16, 1989. Exhibit A-1, Tab 1 shows that the mortgage was actually discharged on March 24, 1989. Summarizing the above transactions, I conclude that Rada's net loans to Michael in the period 1987-1989 were as follows:

Loans in 1987	$97,335
Two loans in 1988	12,000
Subtotal	$109,335
Michael paid Montreal Trust	$69,090
Rada's net loans to Michael	$40,245

[23]     There was some evidence of other smaller transactions but, without Michael's testimony, I give little weight to Rada's imprecise recollection of events which occurred 12 years before the hearing of these appeals. In order to give the Appellants the benefit of any doubt concerning the smaller transactions, I will take the amount $40,245 from the preceding paragraph and round it up to $50,000 holding that Michael owed $50,000 to Rada at the opening of business on October 12, 1990.

[24]     I can now summarize my conclusions with respect to the four transfers of property.

594 Stonebury Crescent

Transferred by Michael to Rada and Vidosava on January 5, 1990.

Fair market value on January 5, 1990 was $315,000.

Consideration paid in cash by Rada and Vidosava was $300,000 being net proceeds ($220,000) from sale of 482 Anndale Road, plus $80,000 borrowed from Vidosava's two sisters.

Fair market value exceeded cash consideration by $15,000 ($315,000 less $300,000).

Excess ($15,000) will reduce amount ($50,000) otherwise owing by Michael to Rada leaving a balance of $35,000.

The result is that the Appellants paid full fair market value for 594 Stonebury Crescent; and there can be no assessment under section 160 of the Act with respect to that transfer. I do not place any weight on the Affidavit of Land Transfer Tax with respect to this property.

606 Stonebury Crescent

590 Stonebury Crescent

610 Stonebury Crescent

Transferred by Michael to Rada alone on October 12, 1990.

Fair market values on that date were:

606	$305,000
590	74,000
610	77,500
Total values	$456,500

There is no documentary evidence of cash consideration changing hands on October 12, 1990. In the purchase agreement for 606 Stonebury Crescent, there is reference to a promissory note for $229,314 delivered by Rada to Michael but no documentary evidence of any payments on that note. Therefore, I conclude that Rada made no direct payments for any of the three properties transferred to him on October 12, 1990 but he did have a credit running in his favour in the amount of $35,000 ($50,000 less $15,000). The Affidavits of Land Transfer Tax with respect to these three properties are probably true.

[25]     The maximum amount of Rada's liability under section 160 of the Act cannot exceed $456,500 being the aggregate fair market values of the three properties on October 12, 1990. Applying his $35,000 credit, his liability is reduced as follows:

Maximum fair market values	$456,500
Less amount owing by Michael to Rada	35,000
Net liability of Rada under section 160	$421,500

[26]     The only property transferred to Vidosava was "594". She and Rada paid the full fair market value for that property. Accordingly, Vidosava's appeal will be allowed and the assessment against her under section 160 will be vacated.

[27]     According to Exhibit R-1, Tab 8, the assessment against Rada under section 160 is in the amount of $656,493. Having regard to my finding that Rada and Vidosava paid full fair market value for 594 Stonebury Crescent, that amount will have to be reduced. Referring to paragraph 25 above, I would allow Rada's appeal in part, and reduce his liability under section 160 to $421,500. I am willing to hear submissions (if any) from counsel with respect to costs.

Signed at Ottawa, Canada, this 8th day of January, 2004.

"M.A. Mogan"

Mogan J.

CITATION:

2004TCC8

COURT FILE NOS.:

2001-1358(IT)G and 2001-1361(IT)G

STYLE OF CAUSE:

Rada Paroski and Vidosava Paroski and Her Majesty the Queen

PLACE OF HEARING:

London, Ontario

DATE OF HEARING:

November 18 and 19, 2002

REASONS FOR JUDGMENT BY:

The Honourable Justice M.A. Mogan

DATE OF JUDGMENT:

January 8, 2004

APPEARANCES:

Counsel for the Appellant:

Nicholas E. Gehl

Counsel for the Respondent:

Daniel Bougeois and Jade Boucher

COUNSEL OF RECORD:

For the Appellant:

Name:

Nicholas E. Gehl

Firm:

Gehl and Gehl

For the Respondent:

Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada