Citation: 2011 TCC 412
Date: 20110901
Docket: 2009-2462(IT)G
BETWEEN:
CAROL MILLER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Little J.
A. FACTS
[1]
The Appellant resides
in the City of St. John’s, in the Province of
Newfoundland and Labrador.
[2]
The Appellant was
married to Dr. James Miller in 1968.
[3]
Dr. Miller was a
dentist who specialized in oral surgery. The Appellant testified that her
husband pioneered implant dentistry in Newfoundland. The Appellant also said that her husband held a fellowship in implant
dentistry.
[4]
Dr. Miller operated his
own dental clinic at 253
LeMarchant Road, in St. John’s, Newfoundland.
[5]
Dr. Miller encountered
serious financial problems because of an investment that he made in a tax
shelter that was not accepted by officials of the Canada Revenue Agency (the
“CRA”).
[6]
Dr. Miller filed for
personal bankruptcy on July 7, 2000.
[7]
Dr. Miller suffered a heart
attack in 1997. Counsel for the Appellant said that Dr. Miller was unable to
work for the better part of one year. (See Appellant’s Brief of Argument,
paragraph 4)
[8]
Dr. Miller was
discharged from bankruptcy on April 26, 2007.
Note:
In his written submissions, Counsel for the Respondent said that Dr. Miller
still had an outstanding liability to the Minister of National Revenue (the
“Minister”) at the time of his discharge. (See Respondent’s Written
Submissions, dated July 14, 2011, page 4, paragraph 8)
[9]
Dr. Miller died from
lung cancer on the 10th day of September, 2008.
[10]
The evidence indicated
that, at the time that Dr. Miller filed for bankruptcy, he had outstanding
income tax liabilities from his 1990, 1991, 1994, 1995, 1996, 1997, 1999 and
2000 taxation years of not less than $453,801.22.
[11]
The Appellant opened a
personal bank account at the Churchill Square Branch of the CIBC, St. John’s, Newfoundland, on June 13, 1997 (the “Bank Account”).
[12]
The Appellant was the
only person who had signing authority on the Bank Account.
[13]
The Respondent
maintains that Dr. Miller deposited the following amounts into the Bank Account
between June 1997 and August 2000:
|
Year
|
Amount Deposited
|
|
1997
|
$ 21,144.67
|
|
1998
|
$ 80,595.87
|
|
1999
|
$149,641.76
|
|
2000
|
$109,203.77
|
|
Total
|
$360,586.07
|
[14]
The Respondent admits
that, between June 1997 and August 2000, the Appellant withdrew $59,435.63 from
the Bank Account to pay for expenses associated with Dr. Miller’s dental
practice.
[15]
On May 6, 2009, the CRA
reassessed the Appellant pursuant to subsection 160(1) of the Income Tax Act
(the “Act”) in respect of the funds deposited in the Appellant’s Bank Account
and reduced the amount to $301,150.44.
B. ISSUE
[16]
The issue is whether
the Minister properly reassessed the Appellant in the amount of $301,150.44,
pursuant to section 160 of the Act.
C. ANALYSIS AND DECISION
[17]
At the commencement of
the hearing, Counsel for the Appellant requested that the Notice of Appeal be
amended. Counsel for the Respondent opposed the request to amend the Notice of
Appeal.
[18]
In support of his
position to amend the Notice of Appeal, Counsel for the Appellant said:
Q. Certainly, your honour. Thank
you. Your honour, the Notice of Motion to amend has three aspects to it, that
is the amendment to reflect three aspects, and I presume, sir, that you would
have a copy of the proposed amended [N]otice of [A]ppeal in front of you?
JUSTICE:
Q. Yes, I have.
RUSSELL, Q.C.:
Q. Very well. Your honour, the
first of the three aspects is, and the major one, the most significant one, is
the matter of referring to consideration and we – that is the legal concept of
consideration, and in that regard, as you perhaps have noted, that involves
changes, slight changes to paragraph 8, the issue of paragraph 10 where we most
particularly which [sic] to add the statement “the expenses Mrs. Miller
has paid on behalf of Dr. Miller constituted consideration for Dr. Miller’s
transfer to her of funds in equivalent amount.” Your honour, I understand that
my friend opposes this and I wish to respectfully – I wish to point out,
respectfully of course, that if one looks at the Reply to the Notice of Appeal,
this is hardly a new concept in terms of this litigation. Looking at the Reply,
if you look first at the assumptions of fact which are set out in paragraph 12
and you look at the notice, subparagraphs J and K, the assumption in J is that
Dr. Miller deposited 360,000 odd dollars during the relevant years into Mrs.
Miller’s account and K is that Mrs. Miller withdrew almost [$]60,000 of it,
leaving a total of about [$]301,000 and the [$]301,000 comes together, your
honour, in paragraph 15 of the Reply which itself refers to consideration, and
I might just read, it’s the second sentence. “Dr. Miller transferred money in
the amount of [$]360,000 between the years 1997 and 2000 to the appellant of
which the amount of [$]301,150 was transferred for no consideration.” So,
reading this logically, what the Crown is saying, I would submit, is that the
other [$]60,000 was for consideration because the [$]301 is reached from [$]360
by subtracting the aforementioned amount of [$]60 odd, [$]59,435, and those are
the amounts that are identified in K as being used to pay for expenses
associated with Dr. Miller’s dental practice. So, there’s definitely a clear
reading of the Reply to understand that the Crown itself has taken the position
in its pleadings in this Court that the [$]59,000 odd is consideration.
So essentially what I’m doing is I’m
challenging K. I’m doing two things, I guess. One is I’m completing the legal
thought in my own pleading by referring to consideration as well, and secondly,
and in any event, I’m challenging, as of course the appellant is able to do,
one of the assumptions that the Crown has relied upon, and that is K, which is
that the appellant withdrew [$]59,435 to pay for expenses associated with the
practice. Our evidence would be that there is a significantly higher amount
withdrawn to pay for the expenses and that that is consideration, just as is
contemplated in paragraph 15 of the Reply. So, this is hardly a new concept
that’s coming up, and indeed, I rely on the fact that the Crown itself has
accepted the concept of consideration, both as it’s recited in this reply, both
in its audit and [N]otice of [A]ppeal – sorry, audit and [N]otice of [O]bjection
exercises and also as far as pleading in this honourable court. There’s no
indication in this pleading that the Court or the Crown rejects the concept of
consideration. So, I see no harm whatsoever with, as well with respect, with my
submission in including that reference in my pleading as well.
The second of the three points, sir, and I can be briefer with those,
sir.
JUSTICE:
Q. Go ahead.
RUSSELL, Q.C.:
Q. Thank you, sir. I wish to, in
paragraph six, I wish to add the words, as I’ve underlined them, “variously to
the business and to him.” Basically – and those are double underlined, of
course, sir. Basically, those words are to open this up. If there is
consideration, it’s not – there’s no reason to restrict the consideration to
payment for business assets. If there was payment for Dr. Miller’s personal
needs then that would constitute consideration too, or at least that would be
our submission. The fact that the expenses involved may be deductible or may
not be, that is whether they’re business or not, is really irrelevant to
whether consideration flows.
Now, you may, of course, quite fairly, wonder well, am I not opening
up a whole new factual matter. Your honour, I wish to assure the Court, as I’ve
assured my friend, that this submission is based entirely on documentation that
is already in the materials that are to be filed on consent with the Court and
basically, for the most part, they are a series of Dominion store and Costco
receipts for food, et cetera, Brookfield Ice Cream for milk, and all that, and
the argument, as my friend knows and I will just say to the Court, is simply
that Dr. Miller, as one of four and later one of three residents in the
particular family dwelling, was receiving one-fourth benefit of these
expenditures and later on, one-third, and that’s really what the submission
will be. It won’t be anything fancier than that and quite straightforward. I
would seek to apply that to a limited – there’s some limited evidence in here
as well with respect to oil expenses for the house and I would likewise say one
quarter, one-third for those.
The last of the three, your honour, is in paragraph six, I’m striking
out the words “Unaware of any liability of Dr. Miller to the Minister.” That’s
not an admission, but I don’t think it’s accurate. I’d rather rely on the
evidence of the Crown and so, I’m just asking that that come out. I don’t know
if that’s a particular issue with my friend.
There is one, perhaps a fourth one, or three and a half, and that is
also in paragraph six. Rather than use the words “agent for Dr. Miller”, I say
“on behalf of Dr. Miller” and the reason for that is simply that after this was
drafted, there was a Federal Court of Appeal decision which takes a narrow and
technical view of the meaning of agent. I don’t want to get caught up in – that
wasn’t the intention of using the term in this pleading.
Your honour, those are our submissions. We do hope that we can proceed
on that basis and I do not – I think I hopefully have explained why I do not
think my friend is prejudiced in any way in these changes, most of which were
with the Crown in late February incidentally, as the motion record indicates,
with the sole exception of that single additional sentence in paragraph 10. Subject
to questions, your honour, those are
my submissions.
(Transcript, page 3, line 4 to page 9, line 19)
[19]
Counsel for the
Respondent opposed the Motion and said:
Well, in terms of the prejudice, without knowing the full bounds of
relevancy for discovery, it’s difficult to fully discover someone and it would
also be difficult for the respondent and the Tax Court today to say well,
what’s – if I stand up and say “how is this relevant?” then I have to assume
it’s relevant because it may be somewhere in the document that came to us.
Now, we didn’t know my friend’s full position. He called it completing
the legal file that was there in the Minister’s Reply. However, I mean, it
starts – the originating document is the Notice of Appeal. The thought should
have been completed there in the original Notice of Appeal.
Now, ideally that thought would have been completed, you know, when
the Notice of Appeal first came in June 2009 or even better, before discovery,
but it did not.
(Transcript, page 19, lines 3 to 23)
[20]
After considering the
request of Counsel for the Appellant to amend the Notice of Appeal, I concluded
as follows:
In my view, the comments of Merck are correct. In viewing this
question, I have considered that the amendment proposed by the Appellant in the
Notice of Appeal should be allowed because the amendment will facilitate the
Court’s understanding of the true nature of the question before the Court.
I would also like to briefly comment on some of the points made by the
counsel for the Respondent. He said the amendments sought do not clarify the
issue. I disagree. I say again that the amendment may facilitate the Court’s
understanding of the true nature of the question. I say this because
consideration goes to the very heart of the question as to whether Section 160
applies. However, I wish to note that counsel for the Appellant must clearly
establish consideration. It is not sufficient to merely allege that
consideration was paid.
The respondent also said neither the respondent or the Court will know
what is relevant at the hearing. I disagree. It will depend on the evidence
produced.
And I also, in conclusion, I would like to say that while the comments
are very helpful, in my view, this amendment should be allowed because it will
help me understand the case. So that is my decision with respect to the motion.
I accept the motion. The Amended Notice of Appeal is allowed. Please go ahead.
(Transcript,
page 25, line 6 to page 26, line 14)
[21]
I must therefore
determine if subsection 160(1) of the Act applies in this situation.
[22]
Subsection 160(1) reads
as follows:
160. (1) Where a
person has, on or after May 1, 1951, 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) the
transferee and transferor are jointly and severally liable to pay a part of the
transferor’s tax under this Part for each taxation year equal to the amount by
which the tax for the year is greater than it would have been if it were not
for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised
Statutes of Canada, 1952, in respect of any income from, or gain from the
disposition of, the property so transferred or property substituted therefor,
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.
[23]
In his argument,
Counsel for the Appellant said that the vigorous collection activity of the CRA
throughout the mid 1990s and until Dr. Miller declared bankruptcy in July, 2000
restricted his ability to assess proceeds from his dental practice.
[24]
In his argument, Counsel
for the Appellant said:
9. Ultimately,
Dr. Miller concluded that he had to operate his dental practice utilizing cash.
Cash was required for him to utilize proceeds from his practice with which to
pay his employees and dental suppliers and to pay household bills. Dr. Miller
and Mrs. Miller agreed that he would provide to her funds from his dental
practice that she would put in a bank account of hers, and she would then use
those funds to pay expenses of Dr. Miller’s dental practice and necessary
household expenses.
(Appellant’s
Brief of Argument, dated June 16, 2011, page 2, paragraph 9)
[25]
During the hearing, Mr.
John Morgan, Chartered Accountant, testified. Mr. Morgan said that he had
acted as Dr. Miller’s accountant for many years. Mr. Morgan said that, in
the relevant years, there were ongoing substantial cash withdrawals from the
Bank Account to pay the salary of certain employees of the dental practice and
to pay the Implant Dentistry Centre (the “IDC”). (Transcript, page 72, line 22
to page 73, line 8)
[26]
Counsel for the
Appellant also called Dr. Larry Bursey as a witness. Dr. Bursey is a
dentist in St. John’s, Newfoundland.
[27]
Dr. Bursey testified
that he had worked with Dr. Miller on a complicated dentistry case in
1999/2000. Dr. Bursey confirmed payments that were made to him by, or on behalf
of, Dr. Miller in the latter part of 1999 in the amounts of $2,000.00 plus
$12,000.00 (total $14,000.00). Counsel for the Appellant noted that such
amounts had been withdrawn from the Bank Account.
[28]
In his Brief of
Argument, Counsel for the Appellant said:
29. Mrs. Miller submits that the appealed reassessment is bad
because:
1) she gave consideration to Dr. Miller
for the funds deposited in her CIBC bank account by utilizing the funds for
Dr. Miller’s purposes; and alternatively
2) the funds were deposited on resulting
trust for Dr. Miller, who retained beneficial use of and title to the funds.
Consideration:
30. One of the four requirements for application of
subsection 160(1) is that there must be no consideration or inadequate
consideration flowing from the transferee to the transferor.
Gambino v Her Majesty the Queen,
2008 TCC 601, para. 19
31. Mrs. Miller submits that in this case there was
adequate consideration flowing back to Dr. Miller.
32. She gave consideration in return for the subject
funds, being her commitment to Dr. Miller, which she honoured, to utilize the
funds to pay expenses of Dr. Miller’s own dental practice and also to pay
expenses relating to Dr. Miller’s own residential accommodation and board.
33. This commitment, notwithstanding it was between
spouses, was legally binding. It concerned very practical and explicitly “necessary”
expenses, which if not paid would have blocked Dr. Miller from being able to
gain a livelihood from his dentistry practice. Mrs. Miller herself testified
that payment of the expenses was “necessary”. This was a serious commitment.
This indicates that the agreement between the spouses was considered binding.
There was no evidence that Mrs. Miller considered herself not fully bound by
her commitment to Dr. Miller to make the dentistry business payments as he
directed.
(Appellant’s Brief of Argument,
dated June 16, 2011, pages 8 to 9, paragraphs 29 to 33)
[29]
I have reviewed the
evidence very carefully, especially the uncontradicted testimony of the Appellant
and I have concluded that the argument made by Counsel for the Appellant
regarding “consideration” should be accepted. In my opinion, the
Appellant gave consideration in return for the receipt of the subject
funds from her husband. The consideration was her commitment to Dr.
Miller to utilize the funds to pay expenses of Dr. Miller’s dental practice and
also to pay certain expenses relating to Dr. Miller’s own residential
accommodation.
[30]
I have also concluded
on the evidence that was before me that the Appellant had a legal obligation,
not just a moral obligation, to make the payments described above from the Bank
Account.
[31]
I believe that the
decision of the Federal Court of Appeal in Livingston v The Queen, 2008
FCA 89, [2008]
F.C.J. No. 360, is applicable in this
situation because the amount of the expenses that were paid by the Appellant
would be equivalent to the value of the funds used by the Appellant to make
such payments.
[32]
I also cite with
approval the decision of Justice Boyle in Maria Gambino v The Queen,
2008 TCC 601, [2008] T.C.J. No. 538, which is applicable in this situation.
[33]
In my opinion, the
following expenses should be deducted from the amounts that are now included in
the income of the Appellant:
1997
|
Expense
|
Exhibit
|
Amount
|
|
Newtel
|
R2, tab 19, pp.
52, 56 (bill for office tel number)
|
$ 859.90
|
|
Diner’s Club
total $1,790.50 paymt
|
R2, tab 19, pp.
69, 72 (ticket purchased for Dr. Miller’s business travel March 2008 for
implant dentistry training in San
Diego)
|
1,069.06
|
|
“253” payment (Note:
The dental office was located at 253 LeMarchant Road)
|
R2, tab 19, pp.
41, 42 (CRA writing)
|
239.47
|
|
Telegram
employee ad
|
R2, tab 19, p.
53
|
55.06
|
|
|
TOTAL:
|
$2,223.49
|
1998
|
Expense
|
Exhibit
|
Amount
|
|
Jack Hill (Note:
snow removal at office)
|
R2, tab 20, p.
27
|
$103.50
|
|
NL Power
|
R2, tab 20, pp.
28, 34
|
120.00
|
|
Sears (“refrigerator”)
(Note: at office)
|
R2, tab 20, p.
27
|
877.85
|
|
Harvey’s Oil (Note: to office)
|
R2, tab 20, pp.
29, 33
|
735.29
|
|
Cdn Dental
Service
|
R2, tab 20, p.
29 (1245.89 + 1905.90)
|
3,151.79
|
|
Newtel
|
R2, tab 20, pp.
48, 56
|
439.42
|
|
NF Power
|
R2, tab 20, p.
77 (Dr. Miller wrote the cheque)
|
135.55
|
|
Sears
|
R2, tab 20, p.
77 (Dr. Miller wrote the cheque)
|
688.59
|
|
Cable Atlantic
|
R2, tab 20, p.
77 (Dr. Miller wrote the cheque)
|
77.39
|
|
Zellers
|
R2, tab 20, p.
78 (Dr. Miller wrote the cheque)
|
226.06
|
|
Harvey’s Oil (Note: to office)
|
R2, tab 20, p.
84
|
960.38
|
|
Staples
|
R2, tab 20, p.
97 – “253”
|
45.99
|
|
Business Depot
|
R2, tab 20, p.
96
|
46.10
|
|
Sprint, office
line
|
R2, tab 20, pp.
98, 101
|
86.15
|
|
NL Tel, business
lines
|
R2, tab 20, p.
98 - $103.99 is for residence (p. 87) so this is for business lines
|
681.35
|
|
Visa to Business
Depot
|
R2, tab 20, p.
107
|
144.69
|
|
Sprint, business
line
|
R2, tab 20, p.
121
|
38.78
|
|
Ultramar, office
|
R2, tab 20, pp.
130, 137
|
350.00
|
|
Camera, office
|
R2, tab 20, pp.
140, 154
|
430.20
|
|
Staples, office
|
R2, tab 20, pp.
156, 155
|
135.05
|
|
Sprint
|
R2, tab 20, pp.
140, 147
|
41.33
|
|
Jack Hill (Note:
snow removal at office)
|
R2, tab 20, p.
156
|
310.50
|
|
Sprint
|
R2, tab 20, pp.
163, 167
|
58.31
|
|
Sprint
|
R2, tab 20, pp. 182,
188
|
29.91
|
|
Telegram full
page ad (Note: The Appellant’s evidence is that this was the amount
paid for a full page advertisement in the Telegram re dental implants)
|
R2, tab 20, p.
216
|
2,470.59
|
|
Sprint
|
R2, tab 20, pp.
198, 203
|
50.17
|
|
Sprint
|
R2, tab 20, pp.
216, 222
|
54.77
|
|
Sprint
|
R2, tab 20, pp.
227, 246
|
41.41
|
|
Newtel
|
R2, tab 20, pp.
244, 251
|
733.66
|
|
|
TOTAL:
|
$13,264.78
|
1999
|
Expense
|
Exhibit
|
Amount
|
|
NL Power, “253”
|
R3, tab 21, p.
32
|
$128.16
|
|
Arcona (Arcona
Dental Equipment) for IDC
|
R3, tab 21, p.
32
|
608.76
|
|
Jack Hill (Note:
snow removal)
|
R3, tab 21, p.
33
|
276.00
|
|
“CaL”, re 253
LeMarchant Rd
|
R3, tab 21, p.
32
|
92.20
|
|
Paper Plus, re
“Dr. J.A. Miller”
|
R3, tab 21, p.
33
|
34.00
|
|
Costco, “253”
|
R3, tab 21, p. 37
|
534.73
|
|
NF Exchequer Account, Dr.
Miller’s driving license # in “memo” line, license need for travel to/from
hospitals and office
|
R3, tab 21, p. 43
|
770.00
|
|
Jack Hill (Note:
snow removal)
|
R3, tab 21, p. 46
|
379.50
|
|
NF Power
|
R3, tab 21, pp. 45, 47
|
96.42
|
|
Health Care Corp.
|
R3, tab 21, p. 52
|
120.00
|
|
Cable Atlantic “253 IDC”
|
R3, tab 21, p. 82
|
250.00
|
|
Dr. Larry Bursey
|
R3, tab 21, pp. 91, 117
|
2,000.00
|
|
Giltens & Assoc. law
firm
|
R3, tab 21, p. 102
|
402.50
|
|
Dr. Larry Bursey
|
R3, tab 22, p. 4, R3, tab
21, p. 117
|
12,000.00
|
|
NF Power “253”
|
R3, tab 21, p. 97
|
200.00
|
|
Nobel Biocare for dental
implant materials.
Nobel Biocare statement.
Payment dates of November
25, 1999 closely follow transfer to Mrs. Miller’s Visa account
|
R3, tab 21, p. 4;
R3, tab 21, p. 91
|
9,018.29 2,981.71 12,000.00
|
|
Ardent Labs
|
R3, tab 21, p. 117, R3, tab
22, pp. 3, 4
|
2,120.00
|
|
|
TOTAL:
|
$32,012.27
|
2000
|
Expense
|
Exhibit
|
Amount
|
|
Dick’s & Co.
office stationary supplies
|
R3, tab 22, p. 7
|
$218.48
|
|
Business Depot
|
R3, tab 22, pp.
7, 14
|
37.18
|
|
Health Care
Corporation
|
R3, tab 22, p.
11
|
75.00
|
|
Jack Hill
|
R3, tab 22, p.
16
|
414.00
|
|
Cable Atlantic
(note separate cheque 163 to Cable Atlantic for $80, for the home)
|
R3, tab 22, p.
16
|
250.00
|
|
Newtel, business
number
|
R3, tab 22, pp.
18, 21
|
183.65
|
|
Long’s Printing,
“IDC”
|
R3, tab 22, p.
42
|
201.25
|
|
Pack’s Plumbing,
“Marker”
|
R3, tab 22, p.
59
|
632.29
|
|
John Morgan,
accounting services
|
R3, tab 22, p.
58
|
2,000.00
|
|
John Morgan,
accounting services
|
R3, tab 22, p.
58
|
3,000.00
|
|
Jack Hill – (Note:
snow removal)
|
R3, tab 22, p.
47
|
241.50
|
|
Newtel, office
line
|
R3, tab 22, pp. 51,
55
|
184.61
|
|
NF Dental Assoc.
|
R3, tab 22, p.
69
|
205.00
|
|
Newtel, business
line
|
R3, tab 22, p.
71
|
294.98
|
|
Thompson
Insurance, Dr. Miller’s car
|
R3, tab 22, pp. 69,
75
|
2,577.15
|
|
Jack Hill (Note :
snow removal)
|
R3, tab 22, p. 69
|
69.00
|
|
Newtel, office
line
|
R3, tab 22, pp. 83, 86
|
241.72
|
|
NF Power, business
|
R3, tab 22, p. 87
|
200.00
|
|
Cable Atlantic, business
|
R3, tab 22, p. 87
|
250.00
|
|
Guaranteed Satellite, “IDC”
|
R3, tab 22, p. 90
|
86.25
|
|
Lorne Brothers, “253”
|
R3, tab 22, p. 105
|
12.75
|
|
Telegram subscription for
office, see Visa statements
|
|
593.18 (38 months @$51.31 (1998 price))
|
|
|
TOTAL:
|
$11,967.99
|
[34]
In reviewing the above
numbers, I have attempted to keep the following points in mind:
(1)
Based upon the
evidence, I am not convinced that any expenses related to the Deer Park
Property (i.e., the cottage) should be recognized as business expenses.
(2)
In the Appellant’s
Brief of Argument, Counsel for the Appellant said:
27. Mrs. Miller also testified that Costco
cheques represented expenses divided between the business and the home, and
Dominion and Sobeys cheques and Brookfield Ice Cream cheques were basically for
food for the family. These aforementioned cheques are all copied within the
evidentiary record.
(Appellant’s Brief of
Argument, dated June 16, 2011, page 8, paragraph 27)
Comment: I have tried to determine the acceptance of the specific business
expenses that are referred to above. I am not prepared to make a general
allowance for cheques payable to Costco, Dominion, Sobeys or Brookfield Ice
Cream.
(3)
During the hearing,
there was some discussion concerning certain expenses that were being claimed
by the Appellant. However, Mr. Jensen, Counsel for the Respondent, noted
that the specific expenses being claimed had already been allowed. Mr. Jensen
noted that the amount of $3,888.62 had already been allowed by CRA officials
and Mr. Russell agreed.
(Transcript, page
273, lines 7 to 25)
I have not allowed a claim of CDSPI
payments in the amount of $12,212.68 for 1999 because I was not satisfied on
the evidence that was before me that this amount had been paid by the Appellant.
If Counsel for the Appellant can produce evidence acceptable to CRA officials
and the Department of Justice, then the amount of $12,212.68 should also be
allowed in 1999.
(4)
I also wish to note
that Mr. Morgan testified that there were ongoing substantial cash withdrawals
from the Bank Account to pay the salary of certain employees of the dental
practice and to pay the IDC.
(See paragraph [25] above)
If Counsel for the Appellant can produce
evidence related to these payments acceptable to the CRA officials and the
Department of Justice, then these payments should be allowed as business
expenses for the relevant years.
(5)
Finally, I wish to note
that, at the beginning of the hearing, Counsel for the Respondent confirmed
that the amount of $2,417.88 is to be deducted from the reassessment amount.
The Appellant’s Alternative Argument
[35]
If I am not correct in
my conclusion that the Appellant provided consideration, then I believe that the
amounts that were transferred by Dr. Miller to the Appellant and that were
used to pay the expenses referred to above, were transfers pursuant to a
resulting trust on the understanding that Dr. Miller retained a beneficial
interest in the use of the funds. On this point, Counsel for the Appellant said
in his Brief of Argument:
43. In
Rose, the Federal Court of Appeal held that the argument that the person
assessed per subsection 160(1) held property on resulting trust for her husband
failed largely because the husband’s professed intention of seeking to defeat,
hinder or delay a creditor was inconsistent with his claim of only transferring
legal title to his wife.
Rose
v. Canada, 2009 FCA 93,
para. 22
44.
However, this is distinguished from the case at bar. Here, Mrs. Miller
testified clearly that the deposit of funds to her account was for the purpose
of continuing the family’s source of livelihood being the continuation of the
dental practice. She did not accede to the Crown’s insistent cross-examination
seeking that she state that the intent was to defeat CRA.
45. There is a distinction
between intent and effect.
(Appellant’s
Brief of Argument, dated June 16, 2011, page 12, paragraphs 43 to 45)
[36]
The appeal is allowed
and the Minister is to make the adjustments referred to above. Since success
has been divided between the parties I am not prepared to award costs.
Signed at Vancouver, British Columbia, this 1st day of September 2011.
“L.M. Little”
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