Date: 20020626
Docket:
95-2554-IT-I
BETWEEN:
ROMEO
KRAKOWEC,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Little, J.
FACTS
[1]
The Appellant was a member of a limited partnership called
Inter-Teck Oil Limited Partnership ("ITOLP"). The
Appellant acquired seven units in ITOLP. The Appellant stated
during the hearing that he paid a total of approximately
$11,000.00 for the seven units of ITOLP.
[2]
In 1982, a corporation by the name of International Resource
Recovery Inc. ("Inc.") transferred equipment to ITOLP
for the sum of $6,850,000.00.
[3]
ITOLP included the equipment acquired from Inc. in Class 29 of
Schedule II of the Income Tax Regulations and claimed
maximum capital cost allowance. The claim by ITOLP of capital
cost allowance created a loss. ITOLP allocated a loss to the
Appellant of $44,814.00 for the fiscal period ending in
1982.
[4]
The Appellant deducted the loss of $44,814.00 in computing his
income for the 1982 taxation year.
[5]
By Notice of Reassessment dated December 8, 1988 the
Appellant's income for the 1982 taxation year was reassessed
by the Minister of National Revenue (the "Minister").
In the said reassessment, the Minister determined that the
Appellant was entitled to claim a loss from ITOLP of $1,834.00
rather than the loss of $44,814.00 that was claimed. The
reduction of the loss occurred because the Minister concluded
that the fair market value of the equipment acquired by ITOLP
from Inc. was $422,000.00 instead of $6,850,000.00.
[6]
The Appellant filed a Notice of Objection to the Notice of
Reassessment. Counsel for the Crown indicated that consideration
of the Appellant's Notice of Objection was held in abeyance
with the Appellant's consent pending the outcome of appeals
filed by other members of ITOLP. After the reassessment was
confirmed the Appellant filed a Notice of Appeal to this
Court.
ISSUE
[7]
The Appellant maintains that he is entitled to deduct the loss of
$44,814.00 that was allocated to him by ITOLP in determining his
income for the 1982 taxation year.
ANALYSIS
[8]
The facts and issues in this appeal are essentially the same as
the facts and issues in Chutka et al. v. The Queen, 2001
DTC 5093 ("Chutka") (Note - Chutka
was an appeal filed to the Federal Court of Appeal by Messrs.
Chutka, Madsen and six other members of ITOLP. The original
appeal filed by the investors was heard by Associate Chief
Judge Christie of the Tax Court of Canada and was reported
as Madsen et al. v. The Queen, 98 DTC 1668.
[9]
In the Chutka case Mr. Justice Linden of the Federal Court
of Appeal said at page 5099:
... paragraph
69(1)(a) [of the Act] was properly invoked by the Minister
to deem the purchase price to be the fair market value of the
processing equipment by virtue of the parties being "related
persons" within the meaning of section 251. In the absence
of expert evidence to rebut the Minister's assessment of the
equipment's fair market value, the deemed acquisition price
of $422,000 must stand and the capital cost allowance deducted
accordingly.
The Chutka
appeal was dismissed by the Federal Court of Appeal.
[10]
I have also had the opportunity to review the Reasons for
Judgment issued by the Honourable Judge Terrence O'Connor in
Don Deptuck v. Her Majesty The Queen (unreported). In the
Reasons for Judgment in Deptuck, O'Connor J. said
"Subject to certain exceptions, discussed later the facts
and issues in this appeal are essentially the same as those in
Chutka and are succinctly analysed in the decision of the
Federal Court of Appeal in that case." (Note: The
'exceptions' referred to by Judge O'Connor were
not present in the Appellant's appeal.)
[11]
Since the Appellant did not present any evidence as to the fair
market value of the equipment and since there was no further
evidence presented to distinguish the Appellant's appeal from
the appeals of Chutka and Deptuck, I have concluded
that the appeal should be dismissed for the reasons outlined by
the Federal Court of Appeal in Chutka.
[12]
During the hearing the Appellant said that he had been unable to
determine the date when the Minister reassessed his 1981 taxation
year. Counsel for the Respondent was unable to locate the
information requested by the Appellant. I have reviewed the
records of the Tax Court and I have discovered that in a hearing
held in Victoria on April 17, 1990 in connection with an
extension of time within which a Notice of Objection might be
filed by the Appellant for the 1981 and 1982 taxation years, the
Honourable Judge Rowe noted that the Appellant's 1981
taxation year had been reassessed in 1984. In other words the
Appellant's 1981 taxation year was not statute barred when
the Notice of Reassessment was issued by the Minister in
1984.
[13]
The appeal is dismissed.
Signed at Ottawa, Canada, this 26th day
of June 2002.
"L.M. Little"
J.T.C.C.
COURT FILE
NO.:
95-2554(IT)I
STYLE OF
CAUSE:
Romeo Krakowec and
Her Majesty the Queen
PLACE OF
HEARING:
Victoria, British Columbia
DATE OF
HEARING:
April 11, 2002
REASONS FOR JUDGMENT
BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
June 26, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Margaret E.T. Clare
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
95-2554(IT)I
BETWEEN:
ROMEO KRAKOWEC,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on April 11, 2002 at Victoria,
British Columbia, by
the Honourable Judge L.M. Little
Appearances
For the
Appellant:
The Appellant himself
Counsel for the Respondent:
Margaret E.T. Clare
JUDGMENT
The appeal from the assessment made under the Income Tax
Act for the 1982 taxation year is dismissed in
accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada,
this 26th day of June 2002.
J.T.C.C.
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