Vigneault v. The Queen, docket 1999-4804-IT-G

[OFFICIAL ENGLISH TRANSLATION]

1999-4804(IT)G

BETWEEN:

YVES VIGNEAULT,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on common evidence

with the appeal of Maryse Vigneault (2000-1439(IT)I)

on October 30, 2001, at Sherbrooke, Quebec, by

the Honourable Judge P.R. Dussault

Appearances

For the Appellant:                                The Appellant himself

Counsel for the Respondent:                Simon-Nicolas Crépin

JUDGMENT

          The appeal from the assessment made under section 160 of the Income Tax Act, notice of which is dated March 26, 1999, and bears number 13143, is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the amount of the assessment of $23,200 shall be reduced to $10,500.

Signed at Ottawa, Canada, this 7th day of November 2001.

"P.R. Dussault"

J.T.C.C.

Translation certified true

on this 12^th day of May 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Date: 20020301

Docket: 1999-4804(IT)G

BETWEEN:

YVES VIGNEAULT

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Dussault, J.T.C.C.

[1]     This is an appeal from an assessment made under section 160 of the Income Tax Act (the "Act").

[2]     In making that assessment, the Minister of National Revenue (the "Minister") made the assumptions of facts stated in subparagraphs 4(a) to (u) of the Reply to the Notice of Appeal, which read as follows:

[TRANSLATION]

(a)         on October 13, 1998, Robert Thibault became a tax debtor for the 1995 taxation year, owing the sum of $29,156.35;

(b)         on October 4, 1995, a notarial contract of sale was drawn up and registered under number 203 287 at Richmond on October 6, 1995;

(c)         by that contract, Robert Thibault sold the appellant an immovable located at 67 and 69 Rue Lavoie, Bromptonville, Quebec J0B 1H0 (hereinafter the "property") for the sum of $69,500;

(d)         in 1995, the municipal value of the property was $92,700;

(e)         the property is a rental property;

(f)          the vendor of the property, Robert Thibault, is the de facto spouse of Maryse Vigneault, the appellant's sister;

(g)         the appellant reported rental income from a property located at 67 and 69 Rue Lavoie in Bromptonville in his income tax returns for the 1996 and 1997 taxation years:

	1996	1997
Gross rental income	$11,220	$6,060
Rental expenses	$ 9,570	$5,800
Net rental income	$ 1,650	$    260

(h)         in 1997, Yves Vigneault sold the property for $70,000;

(i)          on March 26, 1999, a notice of assessment in the amount of $23,200 bearing number 13143 was issued to Yves Vigneault under subsection 160(1) of the Act;

(j)          under subsection 160(1) of the Act, the benefit was calculated as follows:

Municipal assessment of 67 and 69 Rue Lavoie	$92,700
Yves Vigneault's purchase price	$69,500
Benefit	$23,200

(k)         the total of all amounts that the transferor was required to pay under the Act, during or in respect of the taxation year during which the property was transferred or in any previous taxation year, amounted to $29,156.35 as of October 13, 1998;

(l)          the fair market value (hereinafter the "FMV") of the property sold being greater than the consideration paid by the appellant, and the difference between the FMV and the consideration paid by the appellant being at least equal to Robert Thibault's tax debt, the Minister considered the appellant jointly and severally liable for the tax debt of $23,200 of Robert Thibault, the transferor of the property;

(m)        Robert Thibault declared bankruptcy on October 30, 1998;

(n)         the transferee and transferor are jointly and severally liable to pay the tax owed by the transferor at the time of the transfer.

[3]     Counsel for the respondent acknowledged that the property's market value was $80,000 and not $92,700 at the time of the transfer in 1995, such that the amount assessed under section 160 of the Act must be reduced by $23,200 to $10,500 if the assessment proves to be well founded in other respects.

[4]     The appellant claims that he did not become the owner of the property in question in 1995 and that Robert Thibault is still the owner despite the notarial contract dated October 4, 1995. He referred on this point to a counter letter signed before the notary that same day.

[5]     The appellant stated that he had helped Mr. Thibault build that house and three others that were virtually identical and that he could thus assert that the municipal assessment was too high at the time.

[6]     The appellant filed a document (Exhibit A-1) concerning the assessment of a certain number of properties in Bromptonville, Quebec. However, the document contains no photo, description or any other details concerning the properties in question, as a result of which it appears to be of little use.

[7]     Maryse Vigneault, the appellant's sister, testified concerning the circumstances of the purchase and resale of the immovable.

[8]     Marcel Vaillancourt, a chartered appraiser, testified for the respondent. With the aid of comparables, he established the fair market value of the property at 67 and 69 Rue Lavoie in Bromptonville, Quebec, at $80,000. Apart from various adjustments of $3,000 and $5,000 to reflect the vendor's financial situation with respect to two transactions involving the same property¾adjustments Mr. Vaillancourt had some difficulty explaining¾his work in appraising the comparable properties is hard to dispute, particularly since the result is independent of the adjustments in question because the property was not used as a comparable.

[9]     Counsel for the respondent relied on article 1452 of the Civil Code of Québec to argue that the Minister could have disregarded the counter letter between the appellant and Mr. Thibault and assess on the basis of the apparent contract.

[10] On the matter of the property's market value, counsel for the respondent contended that the result of Mr. Vaillancourt's appraisal is faultless, particularly since the adjustments in question have no influence on that result.

[11] I agree with counsel for the respondent. The Minister relied on the notarial contract in assessing, as he was entitled to do, particularly since it was the appellant himself who reported the rental income from the immovable at issue.

[12] As to the market value established at $80,000 by Mr. Vaillancourt, I find little to reproach in the appraisal report filed, subject to the adjustments mentioned above, which had no impact on the final result. I do not believe the property at issue was worth $70,000.

[13] In addition, I myself raised the question of financing. I do not believe that the financial institutions in Bromptonville lent 100 percent of the value of a property. Insofar as financing of $69,500 was obtained, I believe the property must have been worth quite a bit more, since financial institutions generally do not lend 100 percent or even 90 percent of the market value, particularly in small municipalities where there is not a lot of turnover.

[14] In my view, it is completely unrealistic to claim that the property's value was only $70,000.

[15] Moreover, Mr. Vaillancourt did his work in a conscientious manner. He travelled in order to make his appraisal, he saw the properties and he contacted the persons concerned.

[16] Given that counsel for the respondent acknowledged that the market value at the time of the transfer was $80,000 and not $92,700, the appeal is allowed, without costs, and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the amount assessed shall be reduced by $23,200 to $10,500.

Signed at Ottawa, Canada, this 1st day of March 2002.

"Pierre Dussault"

J.T.C.C.

Translation certified true

on this 12^th day of May 2003.

Sophie Debbané, Revisor