Citation: 2010 TCC 337
Date: 20100621
Docket: 2008-2456(IT)I
BETWEEN:
SUSAN BJORNSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Little J.
A. Facts
[1] The Appellant is married to
Darrell Schacher (the “Spouse”).
[2] On August 20, 1998, the
Appellant and her Spouse purchased a 1998 GMC Savana Starcraft Travel Van (the
“1998 GMC Van”) at a price of $67,970.57.
[3] The Minister of National
Revenue (the “Minister”) maintains that, on or about August 16, 2000, the
Spouse transferred his interest in the 1998 GMC Van to the Appellant. (Note:
The Appellant and the Spouse do not agree that this transfer occurred.)
[4] The Minister determined
that, at the time of the transfer of the Spouse’s interest in the 1998 GMC Van to
the Appellant, the fair market value of the 1998 GMC Van was $43,000.00 and the
amount owing on the 1998 GMC Van was $23,831.90. The Minister therefore
concluded that the equity of the Appellant and her Spouse in the 1998 GMC Van
in August, 2000 was $19,168.10.
[5] The Minister also concluded
that the Appellant did not make any payment to her Spouse when she acquired his
interest in the 1998 GMC Van in August, 2000.
[6] The Minister determined
that, when the Spouse transferred his interest in the 1998 GMC Van to the
Appellant, the Spouse owed unpaid personal income taxes to the Canada Revenue
Agency (the “CRA”) in the amount of $27,585.61.
[7] By Notice of Assessment
dated February 9, 2007, the Minister assessed the Appellant to include the
amount of $15,584.05 in the Appellant’s income pursuant to section 160 of the Income
Tax Act (the “Act”).
[8] On March 7, 2007, the
Appellant filed a Notice of Objection.
[9] By Notice of Reassessment
dated February 11, 2008, the Minister varied the original Assessment by
reducing the amount owing by the Appellant by $6000.00 to $9,584.05.
[10] The Appellant filed a
Notice of Objection and when the Reassessment was confirmed, the Appellant
filed a Notice of Appeal to the Tax Court.
B. Issue
[11] Does subsection 160(1) of
the Act apply in this situation to require the Appellant to include the
amount of $9,584.05 in her income?
C. Analysis and Decision
[12] During cross-examination,
the following exchange took place between counsel for the Respondent and the
Appellant:
Mr. Neilson: So I
understand that you disagree with the fact that there has been a transfer [of
the 1998 GMC Van].
Ms. Bjornson: That’s
right, yeah.
(Transcript, page 66,
lines 23-25)
[13] During the
trial, Mr. Schacher said that, in his opinion:
…the whole view of this whole proceeding,
it seems to be like a total overkill on Revenue Canada’s part.
(Transcript,
page 97, lines 8-10).
[14] Mr. Schacher said that:
They [CRA] just – they just finished
getting – you know, throwing us out of our house of twenty years. …[T]hey
fought Susan in court for her half of the house. They got – they ended up
getting three-or-four hundred thousand dollars, and now they are coming after
her for what? Another $9,000? It’s – it’s crazy. It’s ridiculous. It’s overkill
to the max…
(Transcript, page 97,
lines 11-18)
Justice Little: Have you
declared bankruptcy?
Mr. Schachter: Yes, I have. [December 5,
2009]
(Transcript, page 98,
lines 16-17)
(Note: The Spouse said that
he owed the CRA $620,000.00 (Transcript, page 99, line 15).
[15] During the hearing, the
Spouse said that the agreement was that, if he forfeited assets of $467,000.00,
he would not be required to go to jail. The Spouse also said that two weeks
after the settlement, he was reassessed for another $249,000.00 in tax
(Transcript, page 101, lines 14-21).
[16] It is apparent from the
above comments that the Appellant and her Spouse have had a series of major tax
disputes with CRA officials prior to the transaction under review. Relations
between the Appellant, her spouse and CRA officials were, obviously, very
strained.
[17] As noted above, the
Appellant does not agree that her Spouse transferred his interest in the 1998 GMC
Van to her in the year 2000. The Appellant said that she understood that she
always owned the 1998 GMC Van.
[18] Exhibit R-1 shows that the
Appellant and her Spouse purchased the 1998 GMC Van jointly on August 20, 1998
for $67,970.57.
[19] Exhibit R-2 is a Bill of
Sale, dated August 16, 2000, which provides that Mr. Schacher transfers his
interest in the 1998 GMC Van to the Appellant. Mr. Schacher’s signature on
the Bill of Sale is witnessed by Tom Henderson.
[20] In cross-examination, Mr.
Schacher said that the Appellant did not give him cash for his interest in the 1998
GMC Van (Transcript, page 103).
[21] Based on the evidence before
me (Exhibit R-2), I have concluded that Mr. Schacher transferred his
interest in the 1998 GMC Van to the Appellant on August 16, 2000.
[22] I must now determine the fair
market value of the 1998 GMC Van on August 16, 2000.
[23] The Appellant and her Spouse
filed a document headed “Used Car Appraisal” (Exhibit A-1). This document was
prepared by Little Lot (Appraisals) Ltd. The document was signed by Donald E.
Danyluk, President of Little Lot (Appraisals) Ltd. In Exhibit A-1, Mr. Danyluk
states that, in his opinion, the value of the 1998 GMC Van as of August 16,
2000 was $21,658.00.
[24] In his appraisal report,
Mr. Danyluk makes some important and valuable comments. I cite the following:
Purchased brand new, February 25, 98.
Exact price (new) difficult to determine as trade in was involved. Trade valued
at $15,000 in real money, with appx $37,000 difference paid. New price estimate
around $52,000 and prices haven’t changed much, up to present.
[25] Under “Appraisers comments”
in Exhibit A-1, Mr. Danyluk states:
Chartered accountants, when preparing tax
returns and calculating “depreciation”, often use a guideline deemed to be
acceptable to the government.
15% depreciation in the first calendar
year (12 months) no matter what month of the year the purchase was made.
(aver=6mo)
30% depreciation in the second calendar
year and 30% each year thereafter.
Using a 100% to 0% scale, we have 100% =
new, 85% = ½ yr old, 59.50% from ½ to 1½ years old, and 41.65% from 1½ to 2½
years old.
Whether one bases the depreciates amounts
on the number of months old the vehicle was, or simply states the value to be
85% at the end of 1998, 59.50% at the end of 1999, 41.65% during 2000 and up to
the end of 2000, the end result is the same.
41.65% x $52,000 (estimated NEW price)
works out to $21,658.
[26] Counsel for the Respondent
called Diane Major as a witness. Ms. Major is an Appeals Officer at the CRA in the
Edmonton District Office. Ms. Major prepared a letter dated July 24, 2007
(Exhibit R-7). In her letter, Ms. Major determined that the 1998 GMC Van
had a value on August 16, 2000 of $43,000.00.
[27] However, Ms. Major does not
properly deal with the fact that the original purchase of the 1998 GMC Van
included a trade-in of a 1993 Ford. In his report, Mr. Danyluk reduced the
value of the 1998 GMC Van based on the fact that the sale included a trade-in
of a 1993 Ford. Furthermore, there is no evidence that Ms. Major has any
appraisal experience, whereas Mr. Danyluk carries on business as an
automobile appraiser.
[28] I accept the appraisal
prepared by Mr. Danyluk and I conclude that the 1998 GMC Van had a fair market
value of $21,658.00 on August 16, 2000 and not the $43,000.00 value as
determined by the Minister.
[29] The evidence indicated that
the amount owing to GMAC Financial on the 1998 GMC Van was $23,831.90 (Exhibit
R-8). It follows that at the time that the Spouse transferred his interest in
the 1998 GMC Van to the Appellant, there was no equity owned by the Spouse on
the 1998 GMC Van. It therefore follows that section 160 of the Act does
not apply in this situation.
[30] The appeal is allowed,
without costs.
Signed at Vancouver, British Columbia, this 21st day of June 2010.
“L.M. Little”
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