Citation: 2004TCC8
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Date: 20040108
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Docket: 2001-1358(IT)G
2001-1361(IT)G
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BETWEEN:
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RADA PAROSKI and VIDOSAVA PAROSKI,
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Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Mogan J.
[1] The appeal of Rada Paroski v.
The Queen (Court file 2001-1358(IT)G) was heard on common
evidence with the appeal of Vidosava Paroski v. The Queen,
(Court file 2001-1361(IT)G). Rada Paroski is the husband of
Vidosava Paroski. Because the word "Appellant" could
apply in either case and therefore be confusing, I will use the
first name "Rada" to refer to the husband Appellant and
the first name "Vidosava" to refer to the wife
Appellant. Rada and Vidosava have one son, Michael, who was born
in 1962. During 1990, Michael transferred a particular property
to both of his parents, and he transferred three other properties
to his father alone. At the time of the transfers, Michael owed a
significant amount of tax and interest to the Minister of
National Revenue with respect to unpaid taxes under the Income
Tax Act. Relying on section 160 of the Act, and
attempting to collect at least part of the tax and interest owing
by Michael, the Minister issued assessments to Rada and Vidosava
as transferees of one or more of the properties referred to
above. Rada and Vidosava have appealed from those
assessments.
[2] The principal issue in these two
appeals is whether the Appellants have any liability under
subsection 160(1) of the Act. The relevant words of
subsection 160(1) are:
160(1) Where a person has ... transferred property,
either directly or indirectly, by means of a trust or by any
other means whatever, to
(a) the
person's spouse or common-law partner or a person who has
since become the person's spouse or common-law partner,
(b) a person
who was under 18 years of age, or
(c) a person
with whom the person was not dealing at arm's length,
the following rules apply:
(d) ...,
and
(e) the
transferee and transferor are jointly and severally liable to pay
under this Act an amount equal to the lesser of
(i) the
amount, if any, by which the fair market value of the property at
the time it was transferred exceeds the fair market value at that
time of the consideration given for the property, and
(ii) the total of
all amounts each of which is an amount that the transferor is
liable to pay under this Act in or in respect of the
taxation year in which the property was transferred or any
preceding taxation year,
but nothing in this subsection shall be deemed to limit the
liability of the transferor under any other provision of this
Act.
[3] Recent decisions in this Court and
in the Federal Court of Appeal have concluded that there are four
conditions to be met if paragraph 160(1)(c) is to
apply.
(i) there must be a transfer of
property;
(ii) the transferor and
transferee do not deal at arm's length;
(iii) there is no consideration (or
inadequate consideration) flowing from the transferee to the
transferor; and
(iv) the transferor is liable to pay
an amount under the Act in or in respect of the year when
the property was transferred or any preceding year.
Having regard to the above conditions, the Appellants admit
that, during 1990, Michael transferred one property to both
Appellants and three other properties to Rada alone. The
Appellants admit that they and their son Michael do not deal at
arm's length. And the Appellants admit that Michael had a
significant liability under the Act in respect of 1990 or
a preceding taxation year. In other words, the Appellants admit
that the above conditions (i), (ii) and (iv) are satisfied for
the purposes of these two appeals. The real dispute is on
condition (iii). The Appellants rely on the words of subparagraph
160(1)(e)(i) to claim that the fair market value of the
consideration which they gave to Michael for any particular
property was equal to (or greater than) the fair market value of
that property at the time of the transfer. The hearing of these
appeals proceeded on the following questions:
1. What was the fair
market value of each of the four properties at the time when each
was transferred?
2. Did the Appellants
together or did Rada alone give consideration to Michael for any
one or more of the four transferred properties?
3. If consideration was
given for one or more of the transferred properties, what was the
fair market value of that consideration at the time of a
particular transfer?
[4] Rada and Vidosava were the only
witnesses for the Appellants. Rada testified for approximately
4½ hours and Vidosava testified for 25 minutes. Counsel
for the Appellants entered many documents as exhibits. Some of
those documents were entered by consent. Others were the subject
of strong objections by counsel for the Respondent. I will
consider the objected documents later in these reasons. What
follows is a summary of Rada's evidence and many of the
documents to which he referred.
Rada's Evidence
[5] At all relevant times, the
Appellants and Michael resided in Waterloo, Ontario; and the four
transferred properties were located in Waterloo. The four
transfers of property which are at the heart of these two appeals
may be summarized as follows:
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Date
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Description
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Transferor
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Transferee
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Exhibit
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Jan. 5, 1990
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594 Stonebury Cres., Lot 23, Plan 1695
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Michael
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Rada and Vidosava
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A-1, Tab 2
R-1, Tab 11
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Oct. 12, 1990
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606 Stonebury Cres.,
Lot 29, Plan 1695
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Michael
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Rada
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A-1, Tab 5
R-1, Tab 21
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Oct. 12, 1990
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590 Stonebury Cres.,
Lot 21, Plan 1695
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Michael
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Rada
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A-1, Tab 3
R-1, Tab 16
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Oct. 12, 1990
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610 Stonebury Cres.,
Lot 31, Plan 1695
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Michael
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Rada
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A-1, Tab 4
R-1, Tab 18
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[6] The Appellants claim that they
together, or Rada alone, purchased the above four properties from
Michael at the following prices:
594 Stonebury Cres., purchased by Rada and Vidosava for
$305,000;
606 Stonebury Cres. purchased by Rada for $305,000;
590 Stonebury Cres. purchased by Rada for $77,000; and
610 Stonebury Cres. purchased by Rada for $77,000.
The properties at 590 and 610 were unimproved lots but each of
the properties at 594 and 606 had a new house constructed
thereon. The Respondent claims that the total consideration paid
for each property was $2.00 plus "natural love and
affection".
[7] By consent, the Appellants entered
as Exhibit A-3 the appraisal report of Harry DeGroot, AACI, an
accredited appraiser retained by the Appellants to express his
opinion on the fair market value of 590 and 610, respectively, as
at October 12, 1990. In Mr. DeGroot's opinion, the fair
market value of 590 Stonebury was $74,000 and the fair
market value of 610 Stonebury was $77,500. Also by consent, the
Appellants entered as Exhibit A-4 the appraisal report of Ron
Duda, AACI, an accredited appraiser retained by the Respondent to
express his opinion on the fair market value of "594"
as at January 2, 1990 and "606" as at October 12, 1990.
In Mr. Duda's opinion, the fair market value of 594 Stonebury
was $315,000 as at January 2, 1990; and the fair market value of
606 Stonebury was $305,000 as at October 12, 1990. According to
the Respondent's pleadings, when issuing the assessments
under appeal, the Minister of National Revenue assumed that the
fair market value of the respective properties was as
follows:
594 Stonebury Cres.
$350,000 at January 5, 1990
606 Stonebury Cres.
$330,000 at October 12, 1990
590 Stonebury Cres.
$74,000 at October 12, 1990
610 Stonebury Cres.
$77,500 at October 12, 1990
[8] By letter dated November 7, 2000
from Revenue Canada ("CCRA") to Michael Paroski
(Exhibit A-2), the Respondent accepted the fair market values of
"590" and "610" as determined by Mr. DeGroot.
I therefore conclude that, on October 12, 1990, the fair market
value of 590 Stonebury Cres. was $74,000; and the fair market
value of 610 Stonebury Cres. was $77,500. The Respondent's
appraiser (Mr. Duda) in Exhibit A-4 expressed his opinion that
the fair market values of "594" and "606"
were lower than the values assumed by the Minister for assessing
purposes. I therefore conclude that the fair market value of
594 Stonebury Cres. on January 5, 1990 was $315,000; and the
fair market value of 606 Stonebury on October 12, 1990 was
$305,000. Having regard to the first question concerning fair
market value listed in paragraph 3 above, I find that the
fair market value of each property on its respective
transfer date was as follows:
594 Stonebury Cres.
$315, 000 January 5, 1990
606 Stonebury Cres.
$305,000 October 12, 1990
590 Stonebury Cres.
$ 74,000 October 12, 1990
610 Stonebury Cres.
$ 77,500 October 12, 1990
[9] The documents proving the actual
transfers of property are all deeds of land describing each
property by reference to a lot number on Plan 1695 but, for
convenience, I will refer to each property by reference to its
municipal address and transfer date:
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Exhibit
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Property
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Transfer Date
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A-1, Tab 2
R-1, Tab 11
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594 Stonebury Cres.
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January 5, 1990
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A-1, Tab 5
R-1, Tab 21
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606 Stonebury Cres.
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October 12, 1990
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A-1, Tab 3
R-1, Tab 16
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590 Stonebury Cres.
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October 12, 1990
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A-1, Tab 4
R-1, Tab 18
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610 Stonebury Cres.
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October 12, 1990
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Each deed of land in the above exhibits is a standard form to
record information and, in box 4 under the heading
"Consideration", the following information is provided:
"natural love and affection - $2.00". Each deed also
has an affidavit for Ontario Land Transfer Tax. The affidavits
are all completed and signed with the notations that the money
consideration is nil or nominal ($2.00), and that the conveyance
is from a son to a parent. Looking at the deeds and affidavits
for Land Transfer Tax, one would have to conclude that Michael
transferred 594 Stonebury Cres. to his parents for no
consideration; and that he transferred the other three properties
(606, 590 and 610) to his father alone for no consideration. At
first blush, the documents filed in the Ontario Land Registration
Office support the Minister's assessments based on no
consideration paid by the transferees for any of the four
transfers.
[10] The Appellants (or Rada as the case may
be) claim that they actually paid real consideration for each
transfer. In Rada's Notice of Appeal, the following
allegations appear in these respective paragraphs:
10) At all relevant times
Michael lived with his parents.
11) When Michael turned 18
he was told by his parents that he could continue to reside with
them however he would have to pay his own way. It was agreed that
Michael would pay a proportionate share of costs.
12) Michael did not at
that time have a significant source of funds, but he agreed that
he would keep track of the expenses incurred on his behalf by his
parents, and that he would pay them back for his share of the
living expenses.
13) In time, Michael
became involved in the building and selling of personal
residences.
14) Michael operated a
home construction business under the name Westview Homes, an
unincorporated proprietorship.
15) Westview Homes engaged
in the purchase of building lots, the construction of
single-family residences, and the sale of those residences in
Kitchener and Waterloo, Ontario.
16) The business
operations of Westview Homes were funded from time to time by
loans and advances from the Appellant and the Spouse.
...
18) The consideration paid
by the Appellant and the Spouse for 594 Stonebury Crescent was
the sum of $220,000 given to Michael on January 2, 1990, together
with a credit for other outstanding debts owing by Michael to the
Appellant and the Spouse.
...
22) The consideration paid
by the Appellant for the properties described as 606, 610, and
590 Stonebury Crescent included a credit for monies due from
Michael to the Appellant and the Spouse in respect of personal
living expenses of incurred on behalf of, and cash advances made
by the Appellant and the Spouse to, Michael.
23) The balance due to
Michael from the Appellant and the Spouse in respect of all of
the properties acquired from Michael was satisfied by subsequent
payments of money, and payments of living expenses on behalf of
Michael.
24) The Appellant states
that the Appellant paid to Michael, or received credit for
amounts due from Michael in full satisfaction of the fair market
value of the property acquired from Michael.
[11] The Respondent does not admit any of
the above allegations and some are denied. To support many of the
above allegations, the Appellants introduced 13 exhibits in
which Michael purports to acknowledge that one or both of his
parents paid certain of his living expenses for the years 1981
through to 1993 inclusive. The 13 exhibits are the same with
respect to form and content but the amount of claimed living
expenses changes for each year. By way of example, Exhibit A-5 is
set out in full:
January 31, 1982
I Michael Paroski, acknowledge that Rada Paroski has paid
Twenty One Thousand and Twenty Three Canadian Dollars
($21,023.00) of my living expenses for the year of 1981 which
include but are not limited to apartment rentals, property taxes,
gas, hydro, water, house insurance, cable T.V., clothing, food,
linen and cleaning supplies.
"Michael Paroski"
The other 12 exhibits contain the same wording and they differ
in only three areas (i) they are dated on the 31st day of January
in successive years; (ii) the amount of claimed living expenses
changes from year to year; and (iii) the amount is claimed for
each preceding calendar year. Having regard to the content of
Exhibit A-5 set out above, all 13 exhibits are the same except
for the items shown in the table below:
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Exhibit No.
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Date on Exhibit
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Amount of Living Expenses
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Year When Expenses
Were Paid
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A-5
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January 31, 1982
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$21,023
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1981
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A-6
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January 31, 1983
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20,492
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1982
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A-7
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January 31, 1984
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20,600
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1983
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A-8
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January 31, 1985
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20,729
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1984
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A-9
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January 31, 1986
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21,127
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1985
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A-10
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January 31, 1987
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21,320
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1986
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A-11
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January 31, 1988
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20,473
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1987
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A-12
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January 31, 1989
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17,925
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1988
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A-13
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January 31, 1990
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18,498
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1989
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A-14
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January 31 ,1991
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17,017
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1990
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A-15
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January 31, 1992
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19,976
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1991
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A-30
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January 31, 1993
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22,516
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1992
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A-17
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January 31, 1994
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19,164
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1993
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[12] Counsel for the Respondent objected to
the above 13 documents being entered as exhibits because the
original documents were not in Court (all 13 exhibits are only
photocopies); and the only person who signed the documents
(Michael, son of the two Appellants) did not come to Court to
prove his signature or testify with respect to the contents.
Notwithstanding the Respondent's well-founded
objections, and having regard to his later consent, I permitted
the documents to be entered as exhibits. Rada identified his
son's signature on the documents and said that they
represented an agreement which the Appellants made with Michael
in 1982 when he was 20 years of age. Rada said that he could
not recall when he photocopied the originals. Rada further
stated, by way of explanation, that when the Appellants moved to
594 Stonebury Crescent in 1990, the grading was not completed;
there was heavy rain and flooding in the basement; many documents
got wet and were thrown out; and the original of Exhibit A-5 may
have been thrown out.
[13] Having permitted the above 13 documents
to be entered as exhibits, and having heard both counsel in
argument, I have certain observations, questions and conclusions
with respect to those 13 documents. They are all handwritten.
Although they are photocopies, they appear to have been written
on lined paper; like a pad 8½" x 11". The
writing is in the same place on each page. Because they are all
dated January 31 in 13 consecutive years, the author must have
been well-disciplined to sit down on the same precise date each
year to write that memo to himself. If they were not actually
written on the same precise date each year, why were they given
the same date? They are not addressed to a second party but Rada
said that he (Rada) could not recall when he photocopied the
originals. A person who was well-organized and disciplined to
write the same kind of memo each year on or about the same date
would not likely lose the originals or permit them to be
water-damaged and thrown out. If there was flooding in the
basement of 594 Stonebury Crescent in 1990, what happened to the
originals of Exhibits A-14, A-15, A-30 and A-17 which are dated
January 31, 1991, 1992, 1993 and 1994, respectively? Rada could
not explain how the amounts in the 13 exhibits were determined.
He did not maintain any ledger, memo or other document in which
he recorded household expenses. There is no evidence as to how
the amounts in the 13 exhibits were or could have been
determined. Why did the Appellants not call their son, Michael,
to verify and explain all 13 documents?
[14] The 13 exhibits described in paragraphs
11, 12 and 13 have a sameness which is disturbing. They do not
have a true ring. Not many parents would enter into such an
articulated financial arrangement with their only child. In the
absence of the originals, and in the absence of any explanation
by the author (Michael) to the contrary, I conclude that the 13
exhibits were written by one person at one sitting on a
particular day using a pad of lined paper 8½" x
11". I infer that they were written after Revenue
Canada began its audit of Michael's business transactions,
and probably after Revenue Canada decided to use section 160
of the Act to assess Michael's parents. The 13
exhibits were intended to prove that Michael had a significant
financial obligation to his parents (the Appellants) but, without
Michael's testimony, those 13 exhibits have no evidentiary
value. I do not regard Michael as having any financial obligation
to his parents with respect to his living expenses for the period
1981 to 1993 inclusive.
[15] Even apart from Michael's failure
to testify, there was no documentary evidence from Rada or
Vidosava indicating that they could afford to pay living expenses
of approximately $20,000 each year for Michael in the period 1981
to 1993. Rada's evidence is that he worked as a butcher after
coming to Canada in 1965 but that he was injured in 1978 and
again in 1983. Exhibit R-1, Tabs 1 and 3 are Rada's income
tax returns for 1989 and 1990, respectively. In each of those
years, Rada's net income is shown as less than $5,000.
Exhibit R-1, Tab 2 is Vidosava's income tax return for 1989
showing her net income as nil. Those three income tax returns
reinforce my impression that the 13 documents listed in paragraph
11 above contain 13 bald lies with respect to payments of
Michael's alleged living expenses.
[16] Rada testified that Michael wanted to
become a house builder. Michael had attended Conestoga Community
College and was 25 years old in 1987. Rada wanted to help Michael
and did so by providing money to purchase lots and building
materials. Rada said that he kept track of the money which he
loaned to Michael. Exhibit A-18 contains a list of 17 amounts
which Rada loaned to Michael from April 8 to December 24, 1987.
The total is shown as $97,698 but, according to my addition, the
total should be $97,335. The list is supported by copies of 17
documents bearing a "Canada Trust" logo or ID and each
one showing the corresponding loan amount on the corresponding
date. Having regard to the fact that Michael was only 24 through
most of 1987 (his birthday is in November), and most of the
supporting Canada Trust documents refer to his business name
"Westview Construction", I accept Rada's testimony
that he loaned about $97,000 to Michael in 1987.
[17] From 1981, Rada and Vidosava had owned
their family home at 482 Anndale Road, Waterloo. On May 15,
1987, they obtained a loan of $70,000 and granted a mortgage to
Montreal Trust Company (on 482 Anndale Road) to secure the loan.
Exhibit A-20 contains a copy of the mortgage. Rada and Vidosava
used the proceeds from the mortgage to finance many of the loans
made to Michael in 1987. The $70,000 mortgage on the family home
was discharged on March 24, 1989. The discharge is shown in
Exhibit A-1, the first page of Tab 1. The existence of the
mortgage satisfies me that there were funds after May 15, 1987
for the Appellants (or Rada alone) to lend to Michael. The
$70,000 mortgage may have been the primary source of funds for
the $97,000 loaned to Michael in 1987 as described in paragraph
16 above.
[18] On January 2, 1990, Rada and Vidosava
sold the family home at 482 Anndale Road for $229,500. See
Exhibit A-1, Tab 1. On January 3, 1990, Rada and Vidosava agreed
to purchase from Michael 594 Stonebury Crescent at a price of
$305,000. The handwritten purchase agreement is Exhibit A-22.
Although Exhibit A-22 is written as if it were signed on January
3, 1990, it contains the following provision:
3. Both
purchaser and vendor agree that any of Michael Paroski's
living expenses paid by Rada Paroski or Vidosava Paroski prior to
the closing date shall be a credit toward the purchase price.
Having regard to my statements concerning Michael's
alleged "living expenses" (see paragraphs 11 to 15
above), I doubt that Exhibit A-22 was signed or even in existence
on January 3, 1990. Exhibit A-22 does, however, contain the
following provision:
5. Both
purchaser and vendor agree that the Two Hundred and Twenty
Thousand Canadian Dollars ($220,000.00) given to Michael Paroski
by Rada and Vidosava Paroski on January 2, 1990 shall be a credit
toward the purchase price.
It appears that Rada and Vidosava used their net proceeds
($220,000) from the sale of 482 Anndale Road to pay part of the
purchase price for 594 Stonebury Crescent.
[19] Rada stated that he obtained an
additional $80,000 to pay toward the purchase of 594 Stonebury
Crescent by borrowing $40,000 from each of Vidosava's two
sisters who lived in Kitchener, Ontario in 1990. Exhibit A-23
contains documents showing $40,000 borrowed from Milena Djurakov
and $40,000 from Nada Djurakov on January 2 and 3, 1990,
respectively. Exhibit A-23 also shows $80,000
deposited in the bank account of Westview Homes (Michael's
business name) on January 3, 1990. I accept Rada's evidence
that he and Vidosava paid $300,000 in cash toward the purchase
price ($305,000) for 594 Stonebury Crescent on January 5, 1990
because they had just received $220,000 from the sale of 482
Anndale Road, and they had just borrowed $80,000 from
Vidosava's two sisters.
Analysis
[20] The property at 594 Stonebury Crescent
is different from the other three transferred properties (606,
590 and 610) in the sense that 594 became the family home for
Rada and Vidosava until they sold it in February 1992 for
$310,000 in an arm's length transaction. There are
handwritten agreements of purchase and sale for the other three
properties (606, 590 and 610) which were all transferred on
October 12, 1990. See Exhibit A-25 for 606; Exhibit A-24 for 590;
and Exhibit A-26 for 610. All three agreements contain the
provision for Michael's "living expenses" like No.
3 quoted in paragraph 18 above. Again having regard to my
statements concerning Michael's alleged "living
expenses" (see paragraphs 11 to 15 above), I doubt that
Exhibits A-24, A-25 and A-26 were signed in October 1990. They
were more likely written and signed after Revenue Canada
commenced its audit of Michael or after its decision to use
section 160 of the Act to assess Michael's parents.
Although Exhibits A-22, A-24, A-25 and A-26 are all
photocopies, they appear to be written on the same kind of lined
paper (8½" x 11") as the 13 exhibits listed in
paragraph 11 above.
[21] In my opinion, there is good reason to
doubt the credibility of the four handwritten agreements of
purchase and sale for the four transferred properties (Exhibits
A-22, A-24, A-25 and A-26). Each agreement contains the following
provision:
4. Both
purchaser and vendor agree that all costs and legal fees for
arranging, extending, and discharging as well as all monthly
payments for the Seventy Thousand Canadian Dollar ($70,000.00)
first mortgage to Montreal Trust on the property known as Lot #
1, Registered Plan 1422 in the City of Waterloo which
Michael Paroski has agreed to pay, but which have in fact been
paid by Rada Paroski or Vidosava Paroski prior to the closing
date, shall be a credit toward the purchase price.
How could all costs, legal fees and monthly payments for the
$70,000 Montreal Trust mortgage be credited to the purchase price
of four very different properties? Why would those costs, legal
fees and monthly payments need to be credited to the purchase
price ($305,000) of 594 Stonebury Crescent when Rada's
testimony is that he and Vidosava paid for 594 with the net
proceeds ($220,000) from the sale of 482 Anndale Road plus the
two loans (total $80,000) from Vidosava's two sisters?
Exhibit A-28 is a photocopy of a cheque for $69,090 issued by
Michael on January 12, 1989 to Montreal Trust to pay off the
mortgage on 482 Anndale Road. The provision in paragraph No. 4
quoted above was totally unnecessary because the Montreal Trust
mortgage had been paid off in 1989, long before any of the
transfers in 1990 which are the subject of these two appeals.
[22] In paragraph 16 above, I accepted
Rada's testimony (supported by Exhibit A-18) that he had
loaned about $97,000 to Michael in 1987. Exhibit A-19 and
Rada's testimony show that Rada loaned $90,000 to Michael on
October 3, 1987 and that Michael repaid the $90,000 in five
payments from October 27 to December 28, 1987. I regard the
$90,000 loan on October 3, 1987 and the five repayments as a wash
transaction. I accept the documents in Exhibit A-27 as evidence
that Rada loaned $12,000 to Michael in 1988. And lastly, it
appears from Exhibit A-28 that Michael repaid most of the
Montreal Trust mortgage on 482 Anndale Road. On January 12, 1989,
Michael issued a cheque to Montreal Trust for $69,090.16 and it
was cashed on January 16, 1989. Exhibit A-1, Tab 1 shows that the
mortgage was actually discharged on March 24, 1989. Summarizing
the above transactions, I conclude that Rada's net loans to
Michael in the period 1987-1989 were as follows:
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Loans in 1987
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$97,335
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|
Two loans in 1988
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12,000
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Subtotal
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$109,335
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Michael paid Montreal Trust
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$69,090
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Rada's net loans to Michael
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$40,245
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[23] There was some evidence of other
smaller transactions but, without Michael's testimony, I give
little weight to Rada's imprecise recollection of events
which occurred 12 years before the hearing of these appeals. In
order to give the Appellants the benefit of any doubt concerning
the smaller transactions, I will take the amount $40,245 from the
preceding paragraph and round it up to $50,000 holding that
Michael owed $50,000 to Rada at the opening of business on
October 12, 1990.
[24] I can now summarize my conclusions with
respect to the four transfers of property.
594 Stonebury Crescent
Transferred by Michael to Rada and Vidosava on January 5,
1990.
Fair market value on January 5, 1990 was $315,000.
Consideration paid in cash by Rada and Vidosava was $300,000
being net proceeds ($220,000) from sale of 482 Anndale Road, plus
$80,000 borrowed from Vidosava's two sisters.
Fair market value exceeded cash consideration by $15,000
($315,000 less $300,000).
Excess ($15,000) will reduce amount ($50,000) otherwise owing
by Michael to Rada leaving a balance of $35,000.
The result is that the Appellants paid full fair market value
for 594 Stonebury Crescent; and there can be no assessment under
section 160 of the Act with respect to that transfer. I do
not place any weight on the Affidavit of Land Transfer Tax with
respect to this property.
606 Stonebury Crescent
590 Stonebury Crescent
610 Stonebury Crescent
Transferred by Michael to Rada alone on October 12, 1990.
Fair market values on that date were:
|
606
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$305,000
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590
|
74,000
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|
610
|
77,500
|
|
Total values
|
$456,500
|
There is no documentary evidence of cash consideration
changing hands on October 12, 1990. In the purchase
agreement for 606 Stonebury Crescent, there is reference to a
promissory note for $229,314 delivered by Rada to Michael but no
documentary evidence of any payments on that note. Therefore, I
conclude that Rada made no direct payments for any of the three
properties transferred to him on October 12, 1990 but he did have
a credit running in his favour in the amount of $35,000 ($50,000
less $15,000). The Affidavits of Land Transfer Tax with respect
to these three properties are probably true.
[25] The maximum amount of Rada's
liability under section 160 of the Act cannot exceed
$456,500 being the aggregate fair market values of the three
properties on October 12, 1990. Applying his $35,000 credit, his
liability is reduced as follows:
|
Maximum fair market values
|
$456,500
|
|
Less amount owing by Michael to Rada
|
35,000
|
|
Net liability of Rada under section 160
|
$421,500
|
[26] The only property transferred to
Vidosava was "594". She and Rada paid the full fair
market value for that property. Accordingly, Vidosava's
appeal will be allowed and the assessment against her under
section 160 will be vacated.
[27] According to Exhibit R-1, Tab 8, the
assessment against Rada under section 160 is in the amount of
$656,493. Having regard to my finding that Rada and Vidosava paid
full fair market value for 594 Stonebury Crescent, that amount
will have to be reduced. Referring to paragraph 25 above, I would
allow Rada's appeal in part, and reduce his liability under
section 160 to $421,500. I am willing to hear submissions (if
any) from counsel with respect to costs.
Signed at Ottawa, Canada, this 8th day of January, 2004.
Mogan J.
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