Citation: 2007TCC471
Date: 20070925
Docket: 2007-1251(IT)I
BETWEEN:
CLAUDE BOUCHARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from an assessment under the Income Tax Act. The assessment resulted
from a benefit that was conferred on a shareholder in a 2001 transaction involving
an automobile.
[2] In
making and confirming the assessment concerning the 2001 taxation year, the
Minister of National Revenue ("the Minister") relied on several
assumptions of fact. Those assumptions are as follows:
[TRANSLATION]
(a) The Appellant
is a shareholder and director of Soprema Inc. ("the Corporation")
as well as its Vice-President.
(b) During the
taxation year, the Corporation acquired a Cadillac automobile from a dealership
called B. Dupont Auto Inc.
(c) In his
capacity as an officer of the Corporation, the Appellant negotiated the terms
of the transaction.
(d) The Corporation
traded in a 1996 Cadillac having a fair market value of $24,400 upon purchasing
this vehicle.
(e) In the transaction,
the Appellant personally purchased the vehicle traded in by the Corporation. He
did this by means of a sale of convenience in which the car dealership sold him
the vehicle for $10,000.
(f) The
Appellant paid Québec sales tax on a value of $24,400.
[3] The Appellant is the
representative of Soprema S.A. in Canada. In the course of his employment, and on behalf of Soprema
S.A., he purchased a vehicle
described in the contract that was produced as Exhibit I‑1.
[4] The effect of the
transaction was to dispose of a 1996 Cadillac STS, which the corporation owned until
the new vehicle was purchased.
[5] The Appellant expressed
his interest in purchasing the used vehicle, which had a fair market value of approximately
$24,400, and was traded in upon the purchase of the new vehicle.
[6] The fair market value
(FMV) was simply determined based on the guide that the Société de l'assurance
automobile du Québec uses to determine the value of a car for sales tax
purposes.
[7] This amount can be
reduced if the true FMV is not the value used in computing the tax. In such
cases, the overpaid tax can be recovered through an administrative process that
is subject to certain conditions.
[8] The Appellant made no
request for such recovery. He explained that the assessment made based on the
guide used by the Société de l'assurance automobile is final and without appeal,
an assertion that I consider baseless.
[9] After entering into the
contract, the Appellant undertook no effort to recover the tax that he overpaid
due to the fact that it was based on an amount greater than the fair market
value of the vehicle. His excuse for this lack of effort was that the expenses
incurred would have cancelled out any amount recovered.
[10] In support of his allegations,
the Appellant filed a copy of the guide entitled [TRANSLATION] Used Car Valuations,
May 1, 2007, edition, where he highlighted the following at page 48:
[TRANSLATION]
|
Year
|
Model
|
Extra Clean
|
Clean
|
Average
|
Rough
|
|
2000
|
Cadillac Seville
|
$10,300
|
$8,600
|
$6,100
|
$4,100
|
However, he did not mention the
note at the back of the cover page, which states: [TRANSLATION] "Canadian
Black Book is published semi-monthly. Please discard this issue upon
receipt of the most current edition." The note that follows this reads: [TRANSLATION]
"IMPORTANT – Classification determines price to offer."
[11] It should be understood that the "Black
Book" is a tool for mechanics who purchase used cars. The prices indicated
are intended as a guide only. Users must take the costs of repairing a car
before it is resold, and the seller's profit, into consideration, and the FMV
of an automobile is, in fact, the selling price, not the price that a dealer will
pay.
[12] In addition, the fact that the Appellant used the
May 1, 2007, edition, as opposed to the issue published for the month
in 2001 in which the transaction took place, shows how little concern the Appellant
had about the quality of the evidence that he needed to submit.
[13] I have no doubt that the guide that was current at the
time that the 2001 transaction took place would have stated a completely
different value from the Appellant's estimate.
[14] In fact, these guides
are not completely reliable as references. Moreover, the "Black Book"
guides are published for mechanics to serve as guidance with respect to prices
to offer a seller.
[15] Other guides on the
subject are much more useful and, above all, more realistic in determining the
FMV of an automobile. They are guides that consumers can use, because the
amounts listed in them correspond to the price that a consumer should pay,
including the cost of overhauling the car and the seller's profit.
[16] The Appellant, who bore
the burden of proof, chose to submit completely inadequate evidence. In fact, his
inability to provide real evidence in support of his allegations was
undoubtedly behind his failure to object to the tax overpayment that occurred
in the transaction.
[17] His explanation that it
would have cost him as much money in legal fees is simply preposterous: the
process is straightforward and easy. The real explanation is undoubtedly that
such efforts would have resulted in his having to provide embarrassing
explanations to the owner of the new car, since the partial tax refund would
have been followed by a claim for an equal amount from the new vehicle's purchaser.
[18] In his judgment dated September 12, 2006, the Honourable Justice
G.‑André Gobeil of the Court of Québec showed a very firm grasp of
the Appellant's scheme, and I not only agree with his assessment unreservedly,
but would actually adopt the passage in which he states:
[TRANSLATION]
14. Soprema S.A. holds the vast majority of the
shares of its subsidiary Soprema Inc., which was founded and then managed
by Mr. Bouchard, its Vice‑President and Chief Executive Officer.
15. The relationship of subordination between
Mr. Bouchard and Soprema Inc. and/or Soprema S.A. is well-established, and, in fact, is not denied.
16. It was Mr. Bouchard who, on behalf of his
employer, orchestrated the purchase of a new vehicle and the trade-in of the
used vehicle in 2001. It was he who negotiated the loan on behalf of his
employer, and it was through him that a trade-in price of $10,000 for the old
vehicle was arrived at.
17. Mr. Bouchard is unlikely to have been
unaware that he would be buying back the traded-in vehicle for a price well
below fair market value.
18. The vehicle trade-in and buyback were done
on the same day and for the same price, so it seems clear that there was planning
on the part of Mr. Bouchard and his employer, and collusion on the part of
an accommodating dealer.
19. Based on the evidence as a whole, the Court
must draw the logical conclusion that it was because of the employer-employee
relationship that the vehicle could be purchased for such a low price.
[19] For these reasons, the
appeal is dismissed and the assessment is confirmed on its merits.
Signed at Ottawa, Canada, this
25th day of September 2007.
"Alain Tardif"
Translation certified true
on this 8th day of November 2007.
Brian McCordick, Translator
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