Citation: 2009TCC479
Date: 20090925
Docket: 2009-652(GST)I
BETWEEN:
KELLY DOBIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
This is an appeal from
an assessment which was made pursuant to section 325 of the Excise Tax Act
(ETA). The Appellant was assessed the amount of $18,955.42 in respect of land
which was gifted to him by his father, Albert Dobia. The issues to be decided
are the date of delivery of the gift of land and the fair market value of the
land on that date.
[2]
Section 325 of the ETA
allows the Minister of National Revenue to assess a person for a transfer of
property made to him by a non-arm’s length transferor when that transferor is a
tax debtor. A portion of that section reads as follows:
325. (1) Tax liability re transfers not at arm's length -- Where at any time a person transfers
property, either directly or indirectly, by means of a trust or by any other
means, to
(a) the transferor's spouse or
common-law partner or an individual who has since become the transferor's spouse
or common-law partner,
(b) an
individual who was under eighteen years of age, or
(c) another person with whom the
transferor was not dealing at arm's length,
the transferee and transferor are
jointly and severally liable to pay under this Part an amount equal to the
lesser of
(d) the
amount determined by the formula
A - B
where
A is the amount, if any, by which
the fair market value of the property at that time exceeds the fair market
value at that time of the consideration given by the transferee for the
transfer of the property, and
B is the amount, if any, by which
the amount assessed the transferee under subsection 160(2) of the Income Tax
Act in respect of the property exceeds the amount paid by the transferor in
respect of the amount so assessed, and
(e) the total
of all amounts each of which is
(i) an amount that the transferor
is liable to pay or remit under this Part for the reporting period of the
transferor that includes that time or any preceding reporting period of the
transferor, or
(ii) interest
or penalty for which the transferor is liable as of that time,
but nothing in
this subsection limits the liability of the transferor under any provision of
this Part.
[3]
The only witnesses at
the hearing were the Appellant and his father, Albert Dobia. They both
described the events that led to Albert Dobia transferring a parcel of land to
the Appellant.
[4]
Albert Dobia owned
approximately 97.69 acres of land in the County of Grand Prairie, Alberta.
During Thanksgiving weekend in October 2005, the Appellant expressed the desire
to move closer to his family. Albert Dobia agreed to give the Appellant the
smallest acreage that the county said was necessary in order to build a house.
The Appellant and his father walked the land and agreed on a parcel of land (the
“Property”) which the Appellant could have.
[5]
Before the Property
could be transferred, the Appellant was required to have the subdivision
approved and to pay all necessary costs for the subdivision. A portion of the
Property was located on a muskeg and the Appellant had soil hauled to the
Property to build it up so that it would be approved for subdivision.
[6]
The Appellant had a
road built so that the Property had access to the municipal road. He had the
Property surveyed. He had a well dug and he had the Property serviced with gas
and electricity. Between November 2005 and February 2007, the Appellant spent a
total of $118,893.43 on the Property.
[7]
On February 2, 2007,
the land was subdivided into two parcels with the Property being the smaller
parcel. It contained 5.69 acres and was registered in the names of Albert Dobia
and Tahanita Dobia (the Appellant’s mother). On February 23, 2007, the
Appellant’s parents signed a document entitled “Transfer of Land” wherein they
transferred the Property to the Appellant and his spouse. Attached to the
“Transfer of Land” was an affidavit re: the value of the land. In the
affidavit, the Appellant swore that the true consideration paid by him for the
transfer was $10 and that the current value of the land, in his opinion, was
$120,000. I note that both the terms “value” and “land” are defined in the
affidavit as follows:
“value” - means the dollar amount that the land might be expected
to realize if it were sold on the open market by a willing seller to a willing
buyer;
“land” – includes buildings and all other improvements affixed to
the land
[8]
On April 25, 2007, the
Transfer of Land was registered with the Land Titles office.
[9]
The first question that
must be determined is: when was the gift of the Property perfected in law?
[10]
According to Professor
Bruce Ziff, three elements are necessary to perfect a gift. They are: (i) an
intention to donate; (ii) an acceptance; and (iii) a sufficient act of delivery[1].
[11]
In October 2005, Albert
Dobia expressed the intention to donate a parcel of his land and the Appellant
accepted that offer. However, merely walking the land and pointing to the
parcel of land was not a sufficient act to deliver the land to the Appellant.
In order for there to be delivery of the Property, Albert Dobia had to divest
himself of the title to the Property.
[12]
Sections 53 and 54 of
the Land Titles Act[2]
of Alberta read as follows:
Necessity of registration
53 After a certificate of
title has been granted for any land, no instrument is effectual to pass any
estate or interest in that land (except a leasehold interest for 3 years or for
a less period) or to render that land liable as security for the payment of
money, unless the instrument is executed in accordance with this Act and is
registered under this Act, but on the registration of any such instrument in the manner hereinbefore
prescribed the estate or interest specified in the instrument passes or, as the
case may be, the land becomes liable as security in manner and subject to the
covenants, conditions and contingencies set out and specified in the instrument
or by this Act declared to be implied in instruments of a like nature.
Effect of registration
54 So soon as registered every
instrument becomes operative according to its tenor and intent, and on
registration creates, transfers, surrenders, charges or discharges, as the case
may be, the land or the estate or interest in the land or estate mentioned in
the instrument
[13]
In Alberta a transfer of the legal title to land can be
accomplished only by registration of title[3].
This was confirmed by the Alberta Court of Appeal in its decision in MacLeod
v. Montgomery’s Estate[4]
where Justice Morrow stated:
16 In
jurisdictions where land registration requirements make provision for passing
title upon registration, as in s. 56[5]
(supra) the courts have in general laid it down as principle that no transfer
or ownership passes the estate unless the registration has already taken place:
Macedo v. Stroud, (supra).
…
31 In my view,
the decision in this case is sound. To complete a gift effectively, the donor
is obliged to do what can be done. In Alberta, in order for a transfer to be
registered, that transfer has to be accompanied by a Duplicate Certificate
[*page359] of Title, unless the Title is already lodged at the Land Titles
Office; or, alternatively, unless there is proof that the Duplicate Certificate
of Title has been lost or destroyed. In my opinion, the delivery of the
transfer, as well as the duplicate Certificate of Title, was required to
complete the gift in this case. The Duplicate Certificate of Title was not
delivered. It lay in the would-be donor's power, by instructions to her
solicitors, to complete the gift. There is no evidence that she gave such
instructions. Equity will not force a volunteer to complete that which is
incomplete. Had the Duplicate Certificate of Title been lodged at the Land
Titles Office, as in the case of mortgaged lands, the delivery of the transfer
would have completed the gift, as the donor would have done everything that
could be done to perfect the gift. This is not so in the case at Bar. The gift
was not completed.
[14]
The title to the
Property was passed to the Appellant when the Transfer of Land was registered
on April 25, 2007.
[15]
The Appellant stated
that the value of the Property was $120,000. The Minister of National Revenue
assumed that the value of the Property was $120,000. Neither party had the
Property appraised. Neither party had an expert witness at the hearing who
could speak to the fair market value of the land.
[16]
I realize that in the
Affidavit which accompanied the Transfer of Land, the Appellant swore that the
consideration which he paid for the Property was $10. However, it was because
of his efforts and the money which he spent that he assumed the value of the
Property was $120,000.
[17]
In reality, the
consideration given by the Appellant was $118,903.43. In accordance with
section 325 of the ETA, the Appellant is liable for the lesser of the
difference between the value of the Property and the consideration given and
Albert Dobia’s tax liability at that time or any preceding reporting period.
The result is that the Appellant is liable to pay the amount of $1,096.57.
[18]
The appeal is allowed.
In accordance with section 18.3009 of the Tax Court of Canada Act, there
will not be an award of costs.
Signed at Ottawa,
Canada, this 25th day of September 2009.
“V.A. Miller”
Email this Content