Date: 20060503
Docket: A-294-05
Citation: 2006 FCA 165
CORAM: DÉCARY
J.A.
LÉTOURNEAU
J.A.
PELLETIER
J.A.
BETWEEN:
CARLO VENNERI
Appellant
and
HER MAJESTY
THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE
COURT
(Delivered from the bench at Montréal, Quebec, on May 3, 2006)
LÉTOURNEAU J.A.
[1]
This is an
appeal challenging two conclusions reached by Mr. Justice Dussault of the Tax
Court of Canada (“judge”).
[2]
First of
all, in detailed and meticulous reasons in support of the impugned conclusions,
the judge ruled that the loss claimed by the appellant could not be considered
a business investment loss within the meaning of paragraph 39(1)(c) of
the Income Tax Act (“Act”). According to him, the company to which the
appellant had advanced funds, 2959-5451 Québec Inc., was not a Canadian-controlled private corporation that is an active small business corporation. The
company’s only asset was a vacant lot, which it sold in 1998.
[3]
On this
first point, the judge concluded that the evidence did not disclose any
concrete activity between 1992, the year in which the lot was purchased, and
1998, the year in which it was sold, allowing him to conclude that the company
was carrying on an active business. It is not necessary to review each one of
the factors the judge took into consideration to reach his conclusion. It is
sufficient to say that he properly directed himself on the law with respect to
the interpretation of the concept of an active small business corporation and
its application to the facts in this case. On the basis of the evidence on
record, it was open to the judge to conclude that the intent to carry on a
residential development business never actually materialized as an active
business within the meaning of the Act.
[4]
In spite
of Mr. Fournier’s skilled pleadings, we are of the opinion that the challenge
to the judge’s decision on this first point is not well founded.
[5]
The second
ground of appeal concerns the amount of the terminal loss and the capital loss
in connection with the appellant’s disposition of a building. This amount was
calculated on the basis of the proceeds of disposition of the property.
[6]
Once
again, the judge made a detailed analysis of the transaction and the
circumstances in which it was made.
[7]
The
appellant and his spouse had acquired the building on July 31, 1998, for
$473,600, which corresponded to the price of the municipal assessment. He said
he sold it less than one year later, on July 14, 1999, for $300,000. In support
of his claim, he submitted a counter-letter for this amount, also dated July
14, 1999, which contradicts the selling price of $456,000 entered in the deed
of sale dated July 14, 1999. It should be noted that the amount of $456,000
mentioned in the deed of sale exactly matches the amount entered in the offer
to purchase made by the purchaser on May 3, 1999.
[8]
But this
is not all. The evidence also discloses the existence of a first
counter-letter—dated May 19, 1999, and therefore subsequent to the offer to
purchase for $456,000—which mentioned a selling price of $272,000. The second
counter-letter— in the amount of $300,000, which was stated to be the real
price of the transaction— specified that this price was the one to be used for
tax purposes.
[9]
The judge
was properly surprised to note that in less than one year the value of the land
had depreciated by $173,600 (purchase price of $473,000, selling price of
$300,000), while the offer to purchase, which came only two months before the
sale, was for $456,000. The purchaser stated that he wanted to make renovations
estimated at $40,000 or $50,000 and made an inflated offer to purchase, in the
amount of $456,000, to obtain a higher hypothecary loan from the bank to finance
those renovations. Once again, nothing explains or justifies the difference of
$123,600 that remains after all of these explanations.
[10]
At
paragraph 67 of his decision, the judge concluded as follows about the
plausibility of the sale for an alleged amount of $300,000 and concerning the
sufficiency of the evidence submitted in such circumstances:
[translation]
When individuals engage in simulation,
they must expect that they will have to provide sound evidence in support of
their claim that the secret deed should take precedence over the apparent deed.
The Appellant's interest in seeing the counter letter of July 14, 1999, take
precedence is clear. Moreover, it is expressed in the last sentence of that
counter letter, which reads: "The parties agree that the actual price of
the transaction is $300,000 and that this amount will be used for any tax
return." (Exhibit I 1, Tab 32) However, selling at $300,000 appears
suspect and implausible in the circumstances. I must therefore conclude that
the evidence adduced is insufficient to satisfy me, on a balance of
probabilities, that the amount of $456,000 stated in the notarial deed and
accepted by the Minister was not the true amount of the transaction.
[11]
We agree
with this conclusion.
[12]
For these
reasons, the appeal will be dismissed with costs.
“Gilles
Létourneau”
Certified
true translation
Michael
Palles
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