BETWEEN:
DENISE DÉZIEL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
[1] These are appeals from assessments made under the Income Tax Act ("the Act") with respect to the 1997, 1998, 1999, 2000 and 2001 taxation years.
[2] By these assessments, the Minister of National Revenue ("the Minister") added to the Appellant's income, for the years 1997 to 2001, a part of the taxable capital gain realized on the disposition of her undivided portion of a property located at 1669 Ste-Catherine Street Eastin Montréal. The sale occurred on November 28, 1997, and the capital gain of $63,375 was spread out over a five-year period because of the permitted reserve.
[3] For the years 1998 and 1999, the Minister also added to the Appellant's income a taxable capital gain realized on the disposition of the undivided portion of a property located at 1661-1665 Ste-Catherine Street East in Montréal. The sale occurred on January 30, 1998, and the capital gain of $34,125 was allocated to the years 1998 and 1999 because of the permitted reserve.
[4] In making these assessments, the Minister relied on the assumptions and findings of fact set out in subparagraphs 10(a) through 10(l) of the Reply to the Notice of Appeal ("the Reply"). Those subparagraphs read:
[TRANSLATION]
(a) On September 18, 1979, the Appellant purchased a property bearing the civic addresses 1661, 1665 and 1669 Ste-Catherine Street Eastin Montréal ("the properties") for the sum of $115,000, which is broken down as follows:
|
1661-1665 Ste-Catherine East (45%) |
$51,750 |
|
1669 Ste-Catherine East (55%) |
$63,250 |
(b) On September 18, 1979, the Appellant and her common-law spouse Maurice Robinson signed a counter-letter stating that Mr. Robinson was a 50% co-owner of the propertys.
(c) In 1987, the Appellant and Maurice Robinson stopped living together.
(d) In 1988, Maurice Robinson commenced court proceedings to have his co-ownership of the propertys recognized.
(e) On October 31, 1990, the Quebec Superior Court issued a judgment recognizing that Maurice Robinson had 50% undivided co-ownership of the propertys.
(f) On November 28, 1995, the Quebec Court of Appeal dismissed the Appellant's appeal from the judgment rendered on October 31, 1990.
(g) On November 28, 1997, the Appellant sold her undivided half of the property having the civic address 1669 Ste-Catherine Street Eastfor the sum of $150,000.
(h) On January 30, 1998, the Appellant sold her undivided half of the property bearing the civic addresses 1661 and 1665 Ste-Catherine Street Eastfor the sum of $105,000.
(i) On March 6, 1998, the Quebec Superior Court awarded Maurice Robinson $152,540.26, representing damages payable by the Appellant following the recognition of Maurice Robinson's right of ownership in the properties.
(j) On December 14, 1998, the Quebec Court of Appeal reduced the amount of damages payable to Maurice Robinson to $145,040.26.
(k) On December 17, 1998, Maurice Robinson sold his undivided half of the property located at 1669 Ste-Catherine Street East.
(l) The Appellant did not report the sales of his undivided halves of the properties in 1997 and 1998.
[5] At the hearing, the respondent's counsel corrected subparagraphs (a) and (j) to read that the amounts of $152,540.26 and $145,040.26 payable by the Appellant to Maurice Robinson were not damages but rather, Mr. Robinson's share of the income from the properties in question for the years 1987 to 1996 following the recognition of his right of undivided co-ownership and a passing of accounts by the Appellant, who had managed the properties alone during those years.
[6] Schedule A to the Reply sets out the detailed calculations of the Appellant's taxable capital gain from the disposition of her undivided half of the two aforementioned properties. It should be noted that the initial allocation of the acquisition cost, i.e. 45% for the property located at 1661-1665 Ste-Catherine Street East and 55% for the property located at 1669 Ste-Catherine Street East, was established based on information in the property assessment roll. Since the Appellant claimed the $100,000 capital gains exemption in 1994, the new adjusted cost base of each property was determined using the same percentages.
[7] Here are the detailed calculations from Schedule A of the Reply:
[TRANSLATION]
|
I. CALCULATION OF ADJUSTED COST BASE
|
|
|
18/09/1979 Purchase of properties at 1661-1665 and 1669 Ste-Catherine Street East.
Allocation based on information in the roll: 1661-1665 Ste-Catherine Street East (45 %)
1669 Ste-Catherine Street East (55 %) |
$115,000
$51,750
$63,250 |
|
31/10/1990 The Court recognizes that Maurice Robinson has 50% undivided ownership in the properties 1661-1665 Ste-Catherine Street East
1669 Ste-Catherine Street East Adjusted cost base |
$25, 875
$31,625 $57,000 |
|
30/04/1994 Form T664: Election to Report a Capital Gain on Property ($100,000) 1661-1665 Ste-Catherine Street East
1669 Ste-Catherine Street East New adjusted cost base after election |
$70,875
$86,625 $157,500
|
|
II. CALCULATION OF CAPITAL GAINS
|
|
|
28/11/1997 Sale of undivided half of 1669 Ste-Catherine Street East minus adjusted cost base Capital gain Taxable capital gain (75% of $63,375) |
$150,000 -$86,625 $63,375 $45,531
|
|
Reserves 1997 - 80% of $63,375 = $50,700 1998 - 60% of $63,375 = $38,025 1999 - 40% of $63,375 = $25,350 2000 - 20% of $63,375 = $12,675 2001 - 0% of $63,375 = $0 |
$12,675 $12,675 $12,675 $12,675 $12,675
|
|
30/01/1998 Sale of 1661-1665 Ste-Catherine Street East Minus adjusted cost base Capital gain Taxable capital gain (75% of $34,125)
|
$105,000 -$70,875 $34,125 $25,594
|
|
1998: $40,000 / $105,000 x $34,125 1999: $65,000 / $105,000 x $34,125 |
$13,000 $21,125
|
[8] It should be noted that, for the 2001 taxation year, the $12,675 capital gain from the disposition of 1669 Ste-Catherine Street Eastwas included in the Appellant's income at a rate of 50% (not 75%), thereby reflecting the applicable change in the law (Exhibit I-21).
[9] In my view, the taxable capital gain resulting from the Appellant's disposition of her undivided portion of the two aforementioned properties in 1997 and 1998 was correctly calculated for the years 1997 to 2001.
[10] In addition, it is clear that the amount of $145,040.26 which the Appellant paid Mr. Robinson cannot be taken into account when calculating the capital gains resulting from her disposition, in 1997 and 1998, of her undivided portion of the two aforementioned properties. That amount represents Mr. Robinson's share of the income from the two properties for the years 1987 to 1996, resulting from the courts' recognition of his undivided portion of all the income generated by the two properties. Although the Appellant claims that she was taxed on all the income generated by the two properties starting in 1987 and even since 1979, when the properties were acquired, I unfortunately have no power to remedy this situation in any way, because the only years in issue are the years 1997 to 2001.
[11] Consequently, the appeals are dismissed.
Signed at Ottawa, Canada, this 25th day of July 2005.
"P. R. Dussault"
Dussault J.
Translation certified true
on this 8th day of February, 2006.
Garth McLeod, Translator
CITATION: 2005TCC410
COURT FILE NO.: 2003-2218(IT)I
STYLE OF CAUSE: Denise Déziel and
Her Majesty the Queen
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: March 17, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice
Pierre R. Dussault
DATE OF JUDGMENT AMENDED: April 5, 2005
DATE OF REASONS FOR JUDGMENT: July 25, 2005
APPEARANCES:
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For the Appellant: |
The Appellant herself
|
|
Counsel for the Respondent: |
Marielle Thériault |
COUNSEL OF RECORD:
For the Appellant:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada