Kempo
J.T.C.C.:-This
general
procedure
appeal
concerns
the
appellant’s
1986
taxation
year.
The
Minister
of
National
Revenue
(the
"Minister”)
reassessed
the
appellant
by
inter
alia
denying
of
the
rollover
provisions
and
effect
of
subsection
70(6)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act”)
in
respect
of
the
transfer
of
25.07
Class
A
shares
in
Husel
Management
Consultants
Ltd.
and
0.37758
Class
A
shares
in
318671
Alberta
Ltd.
(collectively
referred
to
as
the
"shares”)
to
Patricia
Gail
Husel,
the
deceased’s
surviving
spouse,
and
thereby
including
a
taxable
capital
gain
arising
therefrom
in
accordance
with
subsection
70(5)
of
the
Act.
The
other
matter
disallowed
by
the
Minister
was
abandoned
at
the
opening
of
the
hearing.
The
Facts
The
case
proceeded
on
an
agreed
statement
of
facts
as
filed
which
reads:
Agreed
Statement
of
Facts
The
parties
hereto,
through
their
respective
solicitors,
hereby
admit
the
following
facts,
provided
that
such
admission
is
made
for
the
purpose
of
this
appeal
only
and
may
not
be
used
against
either
party
on
any
other
occasion
or
by
any
other
party:
A.
Statement
of
Facts
1.
The
late
Thomas
Phyllips
Husel
died
intestate
on
December
17,
1986
and
was
survived
by
a
spouse,
Patricia
Gail
Husel,
and
a
daughter,
Holly-
Anne
Husel.
2.
The
appellant
is
the
administratrix
of
the
estate
of
Thomas
Phyllips
Husel.
3.
Attached
as
Exhibit
"A"
hereto
is
a
list
of
the
particular
assets
of
the
estate
of
Thomas
Phyllips
Husel.
[omitted]
4.
Attached
as
Exhibit
"B"
hereto
is
a
list
of
the
estate
assets
utilized
to
settle
liabilities,
[omitted]
5.
Patricia
Gail
Husel
was
the
spouse
of
Thomas
Phyllips
Husel,
both
at
the
time
of
and
immediately
before
the
death
of
Thomas
Phyllips
Husel.
6.
At
all
relevant
times
Patricia
Gail
Husel
was
resident
in
Canada.
7.
Among
the
assets
of
the
estate
of
the
late
Thomas
Phyllips
Husel
were
25.07
Class
A
shares
in
Husel
Management
Consultants
Ltd.
and
.37758
Class
A
shares
in
318671
Alberta
Ltd.
(collectively
the
"shares").
8.
On
the
date
of
the
death
of
Thomas
Phyllips
Husel
the
shares
had
a
declared
fair
market
value
(FMV)
and
an
adjusted
cost
base
(ACB)
as
follows:
|
Shares
|
|
ACB
|
|
FMV
|
|
|
25.07
Class
A
shares
in
|
|
|
Husel
Management
|
|
|
Consultants
Ltd.
|
$8,808
|
$7,641
|
|
.37758
Class
A
shares
in
|
|
|
318671
Alberta
Ltd.
|
$98,730
|
$34,530
|
9.
In
August
1987
the
shares
were
transferred
to
Patricia
Gail
Husel
in
her
capacity
of
administratrix.
[Erratum:
the
shares
were
transmitted]
10.
On
December
1,
1987
the
appellant
transferred
the
shares
to
Patricia
Gail
Husel
personally,
and
in
consideration
received
$10,260
and
extinguishment
of
the
appellant’s
indebtedness
to
Patricia
Gail
Husel
totalling
$97,280.
11.
Attached
as
Exhibit
"C"
hereto
is
a
copy
of
the
agreement
dated
December
1,
1987,
between
the
appellant
and
Patricia
Gail
Husel
personally
in
respect
of
the
sale
of
the
shares.
12.
The
shares
vested
in
Patricia
Gail
Husel,
personally,
on
December
1,
1987.
13.
Attached
as
Exhibit
"D"
hereto
is
a
copy
of
the
resolution
of
the
directors
of
Husel
Management
Consultants
Ltd.
in
respect
of
the
transfer
of
shares
from
the
appellant
to
Patricia
Gail
Husel.
[omitted]
14.
Attached
as
Exhibit
"E"
hereto
is
a
copy
of
the
resolution
of
the
directors
of
318671
Alberta
Ltd.
in
respect
of
the
transfer
of
shares
from
the
appellant
to
Patricia
Gail
Husel.
[omitted]
15.
The
purpose
of
the
sale
of
the
shares
by
the
appellant
to
Patricia
Gail
Husel
was
the
extinguishment
of
the
appellant’s
indebtedness
to
Patricia
Gail
Husel.
16.
The
$97,280
owing
by
the
appellant
to
Patricia
Gail
Husel
personally
was
made
up
of:
(a)
$50,000
in
respect
of
an
advance
to
the
appellant
towards
satisfaction
of
its
liabilities;
and
(b)
$47,280
owing
as
an
administratrix
fee.
Exhibit
"A"
appended
to
the
agreed
statement
of
facts
provides
particulars
concerning
the
gross
value
of
the
estate’s
assets
being
$1,792,680.
The
liabilities
were
$255,380
comprised
of
a
$168,100
loan
payable
to
a
third
party,
$40,000
for
legal
fees
and
$47,280
to
Gail
Husel
for
her
fees
as
administratrix
leaving
a
net
estate
before
tax
of
$1,537,300.
Income
tax
payable
was
$504,580
leaving
an
approximate
net
after-tax
estate
of
$1,032,720.
Exhibit
"B"
particularizes
the
estate
assets
employed
to
settle
the
$255,380
in
liabilities.
These
assets
included
an
after-tax
value
of
the
shares.
Exhibit
"C"
appended
to
the
agreed
facts
reads
thusly:
Exhibit
"C"
This
agreement
made
this
December
1,
1987
between:
P.
Gail
Husel,
of
the
City
of
Edmonton,
in
the
Province
of
Alberta
(hereinafter
referred
to
as
"Husel")
of
the
first
part
and
The
Estate
of
Thomas
Husel,
by
its
administratrix,
P.
Gail
Husel
(hereinafter
referred
to
as
the
"estate")
of
the
second
part
Agreement
Preamble:
Whereas:
A.
The
estate
is
the
owner
of
25.07
Class
"A"
shares
of
capital
stock
of
Husel
Management
Consultants
Ltd.,
as
represented
by
share
certificate
no.
4
(hereinafter
referred
to
as
the
"Husel
shares");
B.
The
estate
is
the
owner
of
.37758
Class
"A"
shares
in
the
capital
stock
of
318671
Alberta
Ltd.,
as
represented
by
share
certificate
no.
2-A
(hereinafter
referred
to
as
the
"318671
shares");
C.
The
estate
wishes
to
sell
and
Husel
wishes
to
purchase
from
the
estate,
at
fair
market
value,
the
Husel
shares
and
the
318671
shares
(hereinafter
referred
to
as
the
"shares");
D.
The
fair
market
value
of
the
shares
has
been
fixed
pursuant
to
the
valuation
and
subsequent
distribution
of
the
assets
of
the
estate,
in
respect
of
which
the
Husel
shares
were
agreed
to
have
a
value
of
$8,810
and
the
318671
shares
were
agreed
to
have
a
value
of
$98,730;
E.
The
estate
is
indebted
to
Husel
in
the
amount
of
$47,280,
being
the
amount
fixed
by
court
order
as
payable
to
Husel
in
her
capacity
as
administratrix
of
the
estate,
and
in
the
sum
of
$50,000,
in
respect
of
an
advance
to
the
estate
towards
satisfaction
of
its
liabilities;
Now
therefore
this
agreement
witnesseth
that
in
consideration
of
the
mutual
covenants
and
agreements
herein
contained,
the
parties
do
hereby
agree
as
follows:
1.
The
estate
hereby
sells
to
Husel
the
shares
for
a
purchase
price
equal
to
the
aggregate
fair
market
value
of
the
estate
shares
and
Husel
shares,
which
the
parties
have
agreed
to
be
the
sum
of
$107,540.
2.
The
purchase
price
for
the
shares
shall
be
paid
by
Husel
to
the
estate
as
follows:
(a)
By
delivery
of
the
sum
of
$10,260
to
the
estate
in
cash
upon
execution
of
this
agreement;
and
(b)
By
the
extinguishment
of
the
estate’s
indebtedness
to
Husel
in
the
aggregate
amount
of
$97,280,
representing
the
aggregate
of
the
sum
of
$50,000
owing
to
Husel
in
respect
of
an
advance
to
the
estate
and
the
sum
of
$47,280
owing
to
Husel
as
administratrix
of
the
estate.
3.
The
parties
hereby
expressly
agree
and
declare
that
it
is
their
sole
intention
that
the
purchase
price
for
the
shares
be
the
true
fair
market
value
of
the
shares
and
that,
to
the
best
of
their
knowledge,
the
amount
of
$107,540
is
the
fair
market
value
of
the
shares.
The
parties
agree
that
if
the
Minister
of
National
Revenue,
the
provincial
treasurer
for
the
province
of
Alberta,
their
authorized
representatives,
or
any
similar
authority
should
assess
or
reassess
either
of
the
parties
for
any
tax
or
propose
such
assessment
or
reassessment
on
the
basis
of
a
determination
or
assumption
that
the
true
fair
market
value
of
the
shares
was
not
the
amount
of
$107,540,
then
the
purchase
price
for
the
shares
shall
be
adjusted
and
shall
be
deemed
to
be:
(a)
Subject
to
subsection
(c)
hereof,
the
fair
market
value
of
the
shares
as
determined
by
the
authority
making
or
proposing
such
assessment
or
reassessment,
provided
that
the
parties
agree
that
such
determination
is
accurate;
or
(b)
Subject
to
subsection
(c)
hereof,
where
the
parties
do
not
agree
that
the
authority’s
determination
is
accurate,
the
fair
market
value
of
the
shares
as
determined
by
a
qualified
person
whom
the
parties
shall
appoint
to
make
that
determination
forthwith
following
the
making
or
proposing
of
such
an
assessment
or
reassessment;
or
(c)
Where
any
such
assessment
or
reassessment
is
the
subject
of
an
appeal
to
a
court
of
competent
jurisdiction,
the
fair
market
value
of
the
shares
as
determined
by
that
Court.
4.
In
the
event
of
a
redetermination
of
the
fair
market
value
of
the
shares
pursuant
to
paragraph
3
hereof:
(a)
If
the
amount
paid
by
Husel
to
the
estate
exceeds
the
fair
market
value
of
the
shares
determined
in
accordance
with
paragraph
3,
then
the
difference
shall
be
a
debt
due
and
owing
by
the
estate
to
Husel;
and
(b)
If
the
amount
paid
by
Husel
to
the
estate
is
less
than
the
fair
market
value
of
the
shares,
as
determined
in
accordance
with
paragraph
3,
then
the
difference
shall
be
a
debt
due
and
owing
from
Husel
to
the
estate.
5.
The
parties
hereby
confirm
and
ratify
the
matters
contained
and
referred
to
in
the
preamble
to
this
agreement
and
agree
that
same
are
expressly
incorporated
into
and
form
part
of
this
agreement.
6.
This
agreement
constitutes
the
entire
agreement
between
the
parties
hereto
relating
to
the
subject
matter
hereof
and
supersedes
all
prior
and
contemporaneous
agreements,
understandings,
negotiations
and
discussions,
whether
oral
or
written,
of
the
parties
and
there
are
no
general
or
specific
warranties,
representations
or
other
agreements
by
or
among
the
parties
in
connection
with
the
entering
into
of
this
agreement
or
the
subject
matter
hereof
except
as
specifically
set
forth
herein.
The
parties
hereto
and
each
of
them
do
hereby
covenant
and
agree
to
do
such
things
and
execute
such
further
documents,
agreements
and
assurances
as
may
be
necessary
or
advisable
from
time
to
time
in
order
to
carry
out
the
terms
and
conditions
of
this
agreement
in
accordance
with
their
true
intent.
7.
This
agreement
shall
be
governed
by
and
construed
in
accordance
with
the
laws
of
the
province
of
Alberta
and
the
parties
hereto
hereby
submit
to
the
jurisdiction
of
the
courts
in
the
province
of
Alberta.
8.
Time
shall
be
of
the
essence
of
this
agreement
and
of
every
part
hereof.
9.
This
agreement
shall
enure
to
the
benefit
of
and
be
binding
upon
the
parties
hereto
and
their
respective
successors
and
assigns.
In
addition
to
these
facts
it
was
common
ground
that
Thomas
Phyllips
Husel
was
resident
in
Canada
immediately
before
his
death,
that
the
shares
were
capital
property
to
which
subsection
70(5)
of
the
Act
would
otherwise
apply
and
that
they
had
vested
indefeasibly
in
some
manner
in
Mrs.
Husel
within
36
months
of
her
husband’s
death.
The
law
The
following
are
extracts
of
those
portions
of
relevant
legislation
applicable
to
those
issues
respecting
the
appellant’s
1986
taxation
year:
The
Income
Tax
Act
70(5)
Depreciable
and
other
capital
property
of
deceased
taxpayer.
Where
in
a
taxation
year
a
taxpayer
has
died,
the
following
rules
apply:
(a)
the
taxpayer
shall
be
deemed
to
have
disposed,
immediately
before
his
death,
of
each
property
owned
by
him
at
that
time
that
was
a
capital
property
of
the
taxpayer...and
to
have
received
proceeds
of
disposition
therefor
equal
to
the
fair
market
value
of
the
property
at
that
time;
(c)
any
person
who,
as
a
consequence
of
the
death
of
the
taxpayer,
has
acquired
any
particular
capital
property
of
the
taxpayer...that
is
deemed
by
paragraph
(a)
to
have
been
disposed
of
by
him
at
any
time
shall
be
deemed
to
have
acquired
it
immediately
after
that
time
at
a
cost
equal
to
its
fair
market
value
immediately
before
the
death
of
the
taxpayer;
70(6)
Where
transfer
or
distribution
to
spouse
or
trust.
Where
any
property
of
a
taxpayer
who
was
resident
in
Canada
immediately
before
his
death
that
is
a
property
to
which
paragraphs
(5)(a)
and
(c),
or
[...],
would
otherwise
apply
has,
on
or
after
his
death
and
as
a
consequence
thereof
been
transferred
or
distributed
to
(a)
his
spouse
who
was
resident
in
Canada
immediately
before
the
taxpayer’s
death,
or
if
it
can
be
shown,
within
the
period
ending
36
months
after
the
death
of
the
taxpayer...that
the
property
has
become
vested
indefeasibly
in
the
spouse...the
following
rules
apply:
(c)
paragraphs
(5)(a)
to
(d)
are
not
applicable
to
the
property;
(d)
the
taxpayer
shall
be
deemed
to
have
disposed
of
the
property
immediately
before
his
death
and
to
have
received
proceeds
of
disposition
therefor
equal
to,
(ii)...the
adjusted
cost
base
to
the
taxpayer
of
the
property
immediately
before
his
death,
and
the
spouse...shall
be
deemed
to
have
acquired
the
property
for
an
amount
equal
to
those
proceeds;
70(6.2)
Election.-Subsection
(6)
does
not
apply
to
any
property
of
a
deceased
taxpayer
in
respect
of
which
the
legal
representative
of
the
taxpayer
has
elected,
in
the
return
of
income
of
the
taxpayer
for
the
year
in
which
the
taxpayer
died,
to
have
subsection
(5)
apply.
248(8)
Occurrences
as
a
consequence
of
death
.-For
the
purposes
of
this
Act,
(a)
a
transfer,
distribution
or
acquisition
of
property
under
or
as
a
consequence
of
the
terms
of
the
will
or
other
testamentary
instrument
of
a
taxpayer...or
as
a
consequence
of
the
law
governing
the
intestacy
of
a
taxpayer...shall
be
considered
to
be
a
transfer,
distribution
or
acquisition
of
the
property
as
a
consequence
of
the
death
of
the
taxpayer....
The
Intestate
Succession
Act
(Alberta)
1.
In
this
Act,
(a)
"estate"
includes
both
real
and
personal
property;
(c)
"net
value"
means
the
value
of
the
estate
wherever
situated,
both
within
and
outside
Alberta,
after
payment
of
the
charges
thereon
and
the
debts,
funeral
expenses,
expenses
of
administration,
estate
tax
and
succession
duty.
3(1)
When
an
intestate
dies
on
or
after
January
1,
1976
leaving
a
surviving
spouse
and
issue,
(a)
if
the
net
value
of
that
estate
does
not
exceed
$40,000,
the
estate
goes
to
the
spouse,
and
(b)
if
the
net
value
of
the
estate
exceeds
$40,000,
the
spouse
is
entitled
to
$40,000
and
has
a
charge
on
the
estate
for
that
amount
with
interest
from
the
date
of
death.
(3)
After
payment
to
the
surviving
spouse
pursuant
to
subsection
(1)
or…
(a)
if
the
intestate
died
leaving
a
surviving
spouse
and
one
child,
1/2
of
the
residue
of
the
estate
goes
to
the
surviving
spouse;
4.
If
an
intestate
dies
leaving
issue,
the
estate
shall
be
distributed,
subject
to
the
rights
of
the
surviving
spouse,
per
stirpes
among
the
issue.
Position
of
the
parties
For
the
respondent.
The
surviving
spouse
("Mrs.
Husei")
received
these
shares
as
a
purchaser.
She
did
not
receive
them
as
a
beneficiary
recipient
under
Alberta’s
intestate
succession
legislation
nor
as
a
consequence
of
her
husband’s
death
as
provided
by
subsection
70(6)
of
the
Income
Tax
Act.
The
fiscal
rollover
provisions
apply,
and
are
intended
to
apply,
only
to
transfers
or
distributions
in
respect
of
Mrs.
Husei’s
intestate
succession
entitlements;
the
shares
she
received
were
not
part
of
that
entitlement
of
$40,000
plus
one-half
of
the
residue.
While
the
estate’s
indebtedness
respecting
her
administration
fees
and
advances
were
connected
to
her
husband’s
death
and
thereby
arose
as
a
consequence
of
his
death,
their
payment
to
her
by
way
of
transfer
of
the
shares
at
fair
market
value
was
not
effected
as
a
consequence
of
a
transfer
or
distribution
under
provincial
intestacy
legislation
within
the
fiscal
purview
of
subsection
70(6)
and
paragraph
248(8)(a)
of
the
Act.
The
provisions
of
paragraph
248(8)(a)
contemplate
that
the
estate
property
be
transferred,
distributed
or
acquired
qua
beneficiary
and
in
satisfaction
of
that
entitlement
or
claim.
It
was
added
by
S.C.
1985,
c.
45
applicable
after
1981
to
obviate
the
denial
of
a
rollover
in
situations
where
an
individual,
qua
beneficiary,
acquired
estate
property
upon
payment
of
consideration
to
satisfy
the
terms
of
a
testamentary
condition
or
instrument.
The
denial
of
the
rollover
in
these
kinds
of
circumstances
occurred
in
the
Montreal
Trust
Co.
v.
M.N.R.,
[1973]
C.T.C.
434,
73
D.T.C.
5354
(F.C.A.)
aff’d
without
reasons
[1976]
C.T.C.
415,
76
D.T.C.
6312,
9
N.R.
394
(S.C.C.)
and
in
Penner
v.
M.N.R.,
[1984]
C.T.C.
2502,
84
D.T.C.
1444
(T.C.C.).
Paragraph
248(8)(a)
now
overrides
the
denial
of
a
rollover
for
those
reasons
but
nonetheless
does
not
purport
to
eliminate
the
requirement
that
the
capacity
or
status
of
the
recipient
is
to
be
as
a
beneficiary.
Under
Alberta’s
intestacy
law,
Mrs.
Husei
was
entitled
to
$40,000
plus
one-half
of
the
residue
and
the
shares
were
not
received
as
part
of
that
inheritance.
Even
if
they
formed
part
of
the
residue
upon
Mr.
Husei’s
death,
she
received
them
as
a
purchaser
in
consequence
of
a
sale
to
her
and
not
pursuant
to
his
intestacy.
The
fact
that
she
was
a
beneficiary
does
not
mean
she
received
the
shares
as
a
beneficiary.
The
rollover
provisions
are
not
concerned
with
matters
of
fair
market
value,
transfer
price,
consideration
paid
and
price
adjustments
because
they
do
not
contemplate
payment
for
or
purchase
of
the
particular
estate
property
transferred
or
distributed
to
a
beneficiary
as
a
consequence
of
death.
For
the
appellant:
The
estate
did
not
contain
sufficient
cash
or
near
cash
items
to
pay
its
liabilities
so
the
shares
were
sold
to
Mrs.
Husel
to
provide
sufficient
cash
to
meet
its
liabilities
as
disclosed
on
Schedule
B
to
the
agreed
facts.
The
fundamental
proposition
of
the
appellant
is
that
there
are
six
constituent
parts
in
subsection
70(6)
of
the
Act.
They
are:
Where
property
1.
Of
a
taxpayer
who
was
resident
in
Canada
immediately
before
[his]
death;
2.
To
which
subsection
70(5)
would
otherwise
apply;
3.
Is,
as
a
consequence
of
the
death,
transferred
or
distributed;
4.
To
his
spouse;
5.
Who
was
resident
in
Canada
immediately
before
the
taxpayer’s
death;
6.
If
it
can
be
shown
that
the
property
has
become
vested
indefeasibly
in
the
spouse
within
36
months
(paraphrase);
Then
the
following
rules
apply....
Item
number
6
is
no
problem
here
as
the
shares
vested
indefeasibly
in
Mrs.
Husel
no
later
than
December
1,
1987
which
was
well
within
the
required
36-month
period.
Indeed,
she
was
vested
with
an
undivided
interest
of
her
intestacy
entitlements
at
the
moment
of
death
of
the
intestate;
Hillis
v.
R.,
[1983]
C.T.C.
348,
83
D.T.C.
5365
(F.C.A.)
per
Clement
D.J.
at
page
353
(D.T.C.
5369)
and
Heald
J.
at
page
361
(D.T.C.
5376),
and
Boger
Estate
v.
M.N.R.,
[1993]
2
C.T.C.
81,
93
D.T.C.
5276
(F.C.A.)
per
Heald
J.
at
page
87
(D.T.C.
5280).
The
property
as
contemplated
by
subsection
70(6)
includes
the
residue;
its
specific
identification
occurs
at
the
time
of
distribution
to
the
beneficiaries
and
need
not
be
the
subject
of
an
actual
transfer;
the
Boger
Estate
at
page
87
(D.T.C.
5280).
The
critical
issue
here
arises
out
of
item
number
3
which
is
whether
the
shares
were
transferred
to
Mrs.
Husel
as
a
consequence
of
her
husband’s
death.
The
existing
jurisprudence,
i.e.,
the
Montreal
Trust
Co.
and
the
Penner
cases,
supra,
relied
upon
by
the
respondent
represent
decisions
made
prior
to
the
enactment
of
paragraph
248(8)(a)
of
the
Act.
Because
the
sale
of
the
shares
was
motivated
by
the
need
to
pay
the
estate’s
debts
which
took
priority
over
any
distribution
to
Mrs.
Husel,
their
transfer
to
her
fell
within
the
purview
of
paragraph
248(8)(a)
as
having
been
made
"as
a
consequence
of
the
law
governing
the
intestacy"
of
Mr.
Husel.
What
she
did
was
to
pay
or
give
consideration
for
the
gaining
of
her
intestacy
entitlements
arising
from
the
"net
value"
of
the
estate
which
is
the
estate
after
payment
of
its
debts.
This
is
analogous
to
the
funding
of
a
testamentary
bequest
by
a
beneficiary
which
paragraph
248(8)(a)
was
purposefully
designed
to
overcome.
It
also
means
that
the
method
by
which
she
gains
any
of
the
estate
property
and
her
status
as
recipient
are
now
irrelevant;
prior
to
the
enactment
of
paragraph
248(8)(a)
each
would
have
precluded
the
subsection
70(6)
rollover
as
per
the
Montreal
Trust
Co.
and
the
Penner
decisions
and
as
per
Pratte
J.
in
Hillis
at
page
359
(D.T.C.
5374).
Now,
with
paragraph
248(8)(a),
the
rollover
is
available
irrespective
of
whether
the
transfer
of
the
shares
resulted
qua
creditor
or
qua
residual
beneficiary
as
it
is
a
relieving
provision
intended
to
ensure
availability
of
rollovers
under
these
circumstances.
The
wording
of
subsection
70(6)
of
the
Act
disregards
matters
of
intent
or
purpose
and
requires
only
that
property
was
transferred
or
distributed
as
a
consequence
of
death
to
the
spouse.
As
noted,
the
crucial
part
of
subsection
70(6)
of
the
Act
is
within
item
number
3
of
its
six
parts,
being
property
transferred
or
distributed
as
a
consequence
of
death.
This
aspect
is
distinct;
it
must
be
read
apart
from
items
4,
5
and
6
because
the
intestacy
law
does
not
contemplate
these
latter
requirements.
If
items
3,
4,
5
and
6
were
to
read
in
a
conjunctive
fashion,
no
rollover
would
apply
because
items
4,
5
and
6
are
not
included
in
intestacy
requirements.
Intestacy
law
is
not
concerned
with
matters
of
residency
of
the
beneficiaries
or
of
vesting
limitations;
it
is
concerned
with
item
number
3
in
relation
to
payment
of
debts
to
arrive
at
a
‘net
estate"
to
be
distributed.
Paragraph
248(8)(a)
of
the
Act
is
estate-focused
in
that
the
consequential
characterization
of
the
transfer,
or
of
the
distribution,
flows
from
the
estate
and
does
not
purport
to
identify
the
recipient;
it
applies
solely
to
the
extent
that
the
transfer
or
distribution
be
as
a
consequence
of
the
governing
intestacy
law
which
in
this
case
mandates
debts
be
paid
prior
to
distribution.
It
is
conceded
the
rollover
would
not
apply
if
the
sale
of
the
shares
had
been
to
a
creditor
who
was
not
a
beneficiary.
However
the
choice
of
the
spouse
as
a
creditor
and
purchaser
of
the
shares
in
payment
thereof
enabled
the
estate
to
take
the
rollover
which
is
automatic,
no
election-out
having
been
made
pursuant
to
subsection
70(6.2)
of
the
Act.
Analysis
Paragraph
248(8)(a)
is
repeated
for
convenience
and
ease
of
reference.
It
was
enacted
by
S.C.
1985
c.
45,
subsection
122(5)
applicable
with
respect
to
transfers,
distributions
and
acquisitions
occurring
after
1981.
248(8)
Occurrences
as
a
consequence
of
death
-For
the
purposes
of
this
Act,
(a)
a
transfer,
distribution
or
acquisition
of
property
under
or
as
a
con-
sequence
of
the
terms
of
the
will
or
other
testamentary
instrument
of
a
taxpayer...or
as
a
consequence
of
the
law
governing
the
intestacy
of
a
taxpay
er...shall
be
considered
to
be
a
transfer,
distribution
or
acquisition
of
the
property
as
a
consequence
of
the
death
of
the
taxpayer....
[Emphasis
added.]
The
statutory
language
employed
is
very
broad
and
on
its
face
is
not
limited
to
the
situation
referenced
in
the
technical
note
issued
from
the
department
of
Finance
dated
September
1985
(to
which
both
counsel
referred)
thusly:
Sept.
1985
TN-
New
subsection
248(8)
provides
an
expanded
definition
for
purposes
of
the
Act
of
transfers
of
property
"as
a
consequence
of
the
death"
of
a
taxpayer.
This
is
relevant
for
the
various
special
provisions
for
transfers
of
property
as
provided
in
section
70....
Certain
amendments
recently
enacted...effective
for
transfers
of
farm
property
and
shares
of
a
small
business
corporation
occurring
after
1983,
were
designed
to
allow
testamentary
intergenerational
rollovers
of
such
property
to
be
made
at
an
elected
value
at
any
point
between
the
cost
and
the
fair
market
value
of
the
property
at
the
time
of
the
transfer.
Concern
has
been
expressed
that
these
rules
would
not
apply
where
consideration
has
been
paid
by
the
beneficiary
to
the
deceased’s
estate
in
satisfaction
of
the
terms
of
a
testamentary
instrument.
This
could
occur,
for
example,
where
a
farmer
has
more
than
one
child
and
in
his
will
leaves
the
family
farm
to
one
of
them
provided
that
child
pays
sufficient
consideration
to
the
estate
to
fund
bequests
to
the
other
beneficiaries.
In
such
circumstances
it
is
not
clear
that
the
transfer
is
made
"as
a
consequence
of
the
death"
of
the
testator
since
it
may
instead
result
from
the
payment
of
the
consideration.
The
rollovers
under
section
70,
however,
apply
only
to
transfers
made
as
a
consequence
of
the
death
of
a
taxpayer.
New
paragraph
248(8)(a)
ensures
that
the
rollovers
will
be
available
in
these
circumstances.
Counsel
for
the
appellant
submitted
the
technical
note
confirms
a
substantive
expansive
change
was
intended
respecting
the
phrase
"as
a
consequence
of
death"
which
does
include
the
appellant’s
situation,
whereas
counsel
for
the
respondent
submitted
the
change
related
only
to
an
obligation
imposed
upon
a
beneficiary
to
pay
qua
beneficiary.
In
my
view
technical
notes
are
merely
expressions
of
opinion
or
intent
by
its
authors
and
are
not
always
right,
however
respondent’s
counsel
did
not
quarrel
with
its
contents
and
both
counsel
referred
to
it
as
supportive
of
their
own
positions.
Counsels’
divergent
approaches
signify
ambiguity
within
paragraph
248(8)(a)
which
ought
to
be
resolved
in
the
taxpayer’s
favour
if
it
is
not
resolvable
after
having
due
regard
to
its
object
and
purpose
when
read
in
context
with
subsection
70(6)
and
the
Act
as
a
whole.
Indeed,
the
approach
should
be
remedial
as
best
ensures
the
attainment
of
its
objects
as
proscribed
by
section
12
of
the
Interpretation
Act,
R.S.,
c.
I-23,
section
1.
The
interpretative
approach
called
for
here
does
not
arise
in
a
vacuum.
There
is
some
pre-enactment
jurisprudence
which
paragraph
248(8)(a)
purports
to
be
addressing;
however,
a
close
examination
of
their
facts
indicates
their
issues
related
to
estate
transfers
or
distributions
in
favour
of
its
beneficiary
qua
beneficiary
and
not
to
estate
transfers
made
to
a
creditor
qua
ordinary
creditor
who
is
also
a
beneficiary.
The
appellant’s
counsel
urged
that
a
named
beneficiary
paying
to
obtain
his
or
her
legacy
pursuant
to
the
terms
of
a
testamentary
document
is
the
same
as
Mrs.
Husel
paying
the
estate’s
debts
as
a
consequence
of
intestacy
law
to
obtain
her
intestacy
entitlements.
This
analysis,
in
my
view,
ignores
what
actually
transpired
in
this
case
which
was
that
an
agreement
was
entered
into
for
the
purpose
of
a
sale
and
purchase
of
shares
to
pay
the
debts
owing
to
her
solely
qua
debts.
The
agreement
speaks
for
what
was
done
and
what
was
intended
to
be
done,
and
the
matter
at
bar
is
to
be
resolved
accordingly
rather
than
what
might
or
could
have
been
done.
It
is
also
my
view
paragraph
248(8)(a)
portrays
no
intention
to
obviate
what
was
said
by
Bastin
D.J.
speaking
for
the
Federal
Court
of
Appeal
in
the
Montreal
Trust
Co.
case,
supra,
at
page
436
(D.T.C.
5356)
wherein
he
opined
that
the
words
"transferred"
and
"distributed"
took
their
meaning
from
each
other,
that
they
also
were
identified
with
and
took
their
colour
from
the
recipient
being
a
beneficiary,
that
"distributed"
covered
situations
where
a
conveyance
was
made
to
several
beneficiaries,
that
"transfer"
pertained
to
a
conveyance
to
a
single
beneficiary.
In
the
Boger
Estate
case,
supra,
at
page
182
(D.T.C.
5517)
the
trial
judge
accepted
that
the
words
"transfer
or
distribute"
included
property
passing
under
a
will
to
the
named
beneficiaries;
so
too
would
this
terminology
now
encompass
property
transferred
or
distributed
or
passing
as
a
consequence
of
intestacy
to
the
statutory
beneficiaries.
In
this
respect
respondent’s
counsel
was
correct
in
his
submission
that
the
subsection
70(6)
rollover
would
have
applied
only
if
Mrs.
Husel
had
received
the
shares
qua
beneficiary
and
that
paragraph
248(8)(a)
has
not
changed
that.
The
estate
was
legally
obligated
to
Mrs.
Husel
in
three
distinctive
ways
which,
in
my
view,
are
not
conflated
by
the
words
used
in
paragraph
248(8)(a)
of
the
Act.
She
was
its
administratrix
with
the
concomitant
duties
and
obligations
associated
therewith,
one
of
which
was
to
pay
the
debts;
she
became
a
creditor
for
her
monetary
advances
and
for
her
court
ordered
administratrix’s
fees;
and
she
was
a
beneficiary
as
a
consequence
of
intestacy
law.
The
shares
were
purchased
to
pay
her
debt;
it
was
not
a
"transfer,
distribution
or
acquisition
of
property
under
or
as
a
consequence
of
the
[intestacy]
law"
so
as
to
fall
within
the
words
of
subsection
70(6)
"where
property...on
or
after...death
and
as
a
consequence
thereof
[has]
been
transferred
or
distributed
to...".
In
the
Hillis
case,
supra,
at
page
355
(D.T.C.
5371)
Clement
D.J.
(albeit
speaking
in
the
context
of
time
limitations)
observed:
The
purpose
of
subsection
70(6)
is
to
give
a
measure
of
tax
relief
to
the
surviving
spouse
of
a
family
unit.
This
is
laudable.
One
can
well
understand
the
reason
and
motives
that
moved
Parliament
to
its
enactment.
They
set
the
spouse
apart
from
the
commercial
aspects
of
the
tax.
What
is
enacted
is
a
remission
of
tax
burdens
arising
on
the
death
of
a
taxpayer
that
would
otherwise
fall
upon
a
surviving
spouse.
She
(or
he)
is
to
be
helped.
Hillis
involved
an
intestacy
situation
which
makes
these
comments
equally
applicable
here.
However
it
cannot
be
ignored
that
Mrs.
Husel
entered
into
a
commercial
contractual
agreement
with
the
estate
whereby
the
shares
were
received
by
her
through
a
purchase
of
estate
assets
at
fair
market
value
qua
creditor.
This
commercial
transaction
was
the
quid
pro
quo
between
them,
and
subsection
70(6)
of
the
Act
does
not
apply.
Conclusion
The
appeal
fails
and
is
dismissed,
with
costs
to
the
respondent
on
a
party-to-party
basis.
Appeal
dismissed.
Email this Content