[OFFICIAL ENGLISH TRANSLATION]
Date:
20010925
Docket:
2000-2101(IT)I, 2000-2097(IT)I, 2000-2098(IT)I,
2000-2099(IT)I,
2000-2102(IT)I, 2000-2103(IT)I
BETWEEN:
RENAUD
BÉLAND, SERGE BÉLAND, JOÉ BÉLAND,
JOËL
BÉLAND, CHANTALE BÉLAND, RENÉ BÉLAND,
Appellants,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
P. R.
Dussault, J.T.C.C.
[1] These
appeals from assessments made under section 160 of the Income Tax Act
("the Act") were heard on common evidence under this Court's
informal procedure. Counsel for the parties chose to adduce evidence with
regard to Renaud Béland's appeal (2000-2101(IT)I), and that
evidence is to apply to the other five appeals.
[2] In making the assessment against the appellant Renaud Béland, the
Minister of National Revenue ("the Minister") assumed the facts set
out in subparagraphs (a) to (t) of paragraph 7 of the Reply to the Notice of
Appeal. Those subparagraphs read as follows:
[TRANSLATION]
7. In making and
confirming the reassessment at issue, the Minister assumed the following facts,
inter alia:
(a) on August 27,
1979, Gaétan Béland, the appellant's father, opened an account in his own name,
but with a reference to the name of his minor son Renaud, at the Caisse
populaire de Cacouna, and he did the same thing for each of his other five
children;
(b) the bank
account referred to in the previous paragraph had the folio number 2447;
(c) when the
account was opened, the appellant was four years old;
(d) on November
30, 1979, Gaétan Béland deposited $3,100 in the account of each of his six
children, for a total of $18,600;
(e) according to
the Caisse, to conduct transactions in an account, a member has to be the
holder of the account or have a power of attorney with respect thereto;
(f) on November
20, 1990, Gaétan Béland signed a debit slip for the withdrawal of $6,500 from
each of the accounts referred to in subparagraph (a) and transferred those
amounts to Les Transports Jumelés Inc., of which he was the sole shareholder
and director;
(g) the same day,
November 20, 1990, after the events described in (f), Gaétan Béland wrote the
following on the membership card for account number 2447 at the Caisse
populaire de Cacouna: "I hereby assign this account to my child
Renaud Béland";
(h) on December
30, 1992, the appellant signed an application for membership and for the
opening of a personal account, with the same number, however;
(i) in December
1992, the appellant signed a power of attorney giving his father full authority
to conduct all necessary banking transactions, including closing the account;
(j) it should be
noted that, from the time the account was opened on August 27, 1979, until
December 30, 1992, the father had no power of attorney giving him
authority to conduct transactions in the account;
(k) the by-laws
of the Confédération des caisses populaires et d'économie Desjardins du Québec
concerning ownership of an account in a parent's name for a child state the
following: [TRANSLATION] "The holder of the account is the parent who
opened it, and that parent is the only person with whom the credit union is
authorized to do business. In principle, the only person who can debit the
account or even close it remains the parent who opened it";
(l) the same
source states: [TRANSLATION] "when the parent
wishes to give the savings to his or her child, the parent can do so by:
(i) closing
the account,
(ii) modifying
the account and, where one of the parties insists on keeping the same account,
the parent shall personally write the following on the account opening form: 'I
waive my rights to this account in favour of my child'." This is the
solution that the appellant's father chose on December 30, 1992;
(m) on March 5,
1993, Les Transports Jumelés Inc. transferred $6,500 to each of the
children, including the appellant;
(n) that $6,500
was deposited in the appellant's account, number 2447, without any
consideration;
(o) Les
Transports Jumelés Inc. made an assignment of its property on November 6,
1995;
(p) on the date
notice of assessment 13339 was issued, Les Transports Jumelés Inc.,
the transferor of the funds, owed the Minister $30,644.87 for the 1986 to 1991
taxation years;
(q) Gaétan Béland
made an assignment of his property on February 10, 1998;
(r) the appellant
was related within the meaning of subsection 251(2) of the Income Tax Act
(hereinafter "the Act") to the transferor, Les Transports
Jumelés Inc., with which he was not dealing at arm's length pursuant to
subsection 251(1) of the Act;
(s) the
appellant, who is the transferee of the funds, and the company, which is the
transferor, are jointly and severally liable to pay under
subsection 160(1) of the Act an amount equal to the lesser of:
(i) Amount
by which (A) exceeds (B)
(A) FMV
of property at time
of
transfer $6,500.00
(B)
Consideration $0.00
(ii) Amount
owed $30,802.26;
(t) the amount
of the assessment made against the appellant is $6,500, being the lesser of the
amounts calculated in subparagraphs (s)(i) and (ii).
[3] Subparagraphs (a), (c), (d), (h), (i), (m), (o), (p), (r) and (t)
were admitted.
[4] Testimony was given by Céline Létourneau, a general clerk at the
Caisse populaire de Cacouna ("the credit union"), Gaétan Béland,
the appellants' father, Denise Pelletier, the appellants' mother, and the
appellant Renaud Béland.
[5] Ms. Létourneau has been working at the credit union only since
1985. She was therefore not there in 1979, the year Gaétan Béland opened the
accounts for his children. She explained the procedure for admitting members to
the credit union by referring to procedure EP-022-2 of the Confédération des
caisses populaires et d'économie Desjardins du Québec, which is dated
April 1995 and which is found in the SOC manual (Exhibit A‑1). She
said that, when a parent opens an account for a minor child, it involves the
parent remaining the account holder as long as the child does not become a
member by signing a membership application. The parent's waiver is necessary if
the child wishes to keep the same account and if the parent wishes to transfer
the amounts already saved to the child. This is the procedure referred to in
subparagraphs 7(k) and (l) of the Reply to the Notice of Appeal.
[6] Moreover, the credit union's transactions journal (Exhibit I‑1)
indicates that the accounts opened for the children were in their names from
1979 to 1990. Starting in 1991, a code indicated that the accounts were under
the name of the parent who opened them and that they had been opened for
children. However, the membership application cards (Exhibit A‑2) dated
August 27, 1979, are in fact signed by Gaétan Béland, the appellants' father,
as a member. The card in Renaud Béland's name for account number 2447 will
serve as an example. On the card, Renaud Béland's name is written in the
appropriate boxes. Above his name are the words [translation] "Gaétan Béland for:", and below
Gaétan Béland's signature appear the words [translation] "for Renaud". Finally, the card is
also signed by a representative of the credit union as a witness.
[7] The following statement dated November 20, 1990, also appears on
the card:
[TRANSLATION]
I hereby
assign this account to my child Renaud Béland
Gaétan Béland's signature appears again under that statement.
[8] A second card stapled to the
first and signed by Renaud Béland as a member is a new membership application
dated December 30, 1992.
[9] The back of that second card
shows that the appellant Renaud Béland gave Gaétan Béland a power of attorney
on December 30, 1992. Their signatures appear under the printed text of the
power of attorney, which is very broadly worded and which, inter alia,
authorizes the mandatary, Gaétan Béland, to withdraw, by payment order, receipt
or otherwise, any or all of the amounts that are or will be in any of the
savings accounts of the member, that is, Renaud Béland.
[10] The same words, statements and
signatures are on the two credit union membership application cards for the
other five appellants.
[11] In his testimony, Gaétan Béland
explained that he opened the accounts for his children in 1979 so that they
could carry on with their studies later. It was the sale of a home that enabled
him to deposit an initial amount of $3,100 in the account opened for each of
his six children, who were then from four to eleven years old. He said that
other smaller amounts, including family allowances and the proceeds of a life
insurance policy, were subsequently deposited.
[12] Gaétan Béland stated that things
were not explained to him when the accounts were opened in 1979 and that he did
not know he was the only holder of the accounts. According to him, it was not
until November 20, 1990, that the manager of the credit union told him he was
the account holder. It was on the same date that the words "Gaétan Béland
for:" were added above each child's name on the membership application
card. Mr. Béland said that he then signed the waiver in favour of each of his
children, which was drafted by the manager himself. Mr. Béland also said
that the waiver for each account was signed before he himself transferred, on
the same date, $6,500 from each account to the account of Les Transports
Jumelés Inc. ("the company"). Mr. Béland explained that his
beer trucking contract with Molson had ended and that he therefore had to
obtain new transportation equipment, this time to transport wood for a pulp
mill. Since the equipment that the company intended to purchase was used, he
could not obtain financing from the credit union. It was the manager who
suggested that he use the money in the accounts opened for his children, and
then pay the money back later. Mr. Béland therefore authorized the six money
transfers from the accounts in his children's names at the Caisse populaire de
Cacouna to the company's account at the Caisse populaire de Rivière‑du‑Loup.
[13] Gaétan Béland explained
that, in doing some follow‑up, the credit union requested that new
membership applications be signed this time by the children themselves, on
December 30, 1992, and that the power of attorney in his favour also be signed
by the children on the same date. The purpose was to confirm what had been done
on November 20, 1990. According to Gaétan Béland, it was therefore the children themselves who transferred the $6,500 from
their respective accounts to the company on November 20, 1990. Thus, the
transfer by the company to their respective accounts on March 5, 1993, was
merely a repayment of their money.
[14] Denise Pelletier's
testimony does not really add anything important that would help decide this
case. Ms. Pelletier simply confirmed that she was the one who authorized and
made the money transfers from the company's account to each of the children's
accounts in 1993 in order to repay the amounts that the company had needed.
[15] Renaud Béland's testimony does
not really add anything new. He said that he was aware of the existence of the
accounts opened by his parents but that he did not remember the 1990 transfer
or even having himself signed a credit union membership card in 1992. Although
he said that he used the money later for his college or university studies, it
is clear that he did not authorize the 1990 or 1993 transactions and that he
did not agree thereto or participate therein in any way whatsoever. All in all,
what can be concluded from his testimony is that the transfers were made
without his knowledge.
[16] Counsel for the appellants
contended that in 1990 each appellant loaned the company $6,500, which amount
was simply repaid to each of them in 1993. According to counsel, section 160 of
the Act cannot apply to a situation that involves merely a loan and a
repayment.
[17] Counsel for the respondent
argued that on November 20, 1990 Gaétan Béland transferred amounts that
belonged to him. According to her, the transfers made by the company in 1993
into the account that each appellant had held since December 30, 1992, the date
they signed and were admitted as members, are therefore transfers without
consideration which give rise to the application of section 160 of the Act.
[18] In support of her argument that
the amounts transferred still belonged to Gaétan Béland on November 20, 1990,
when he transferred them to the company, counsel for the respondent referred to
the Court of Quebec's decision in Mathieu c. Tardif, C.Q. No. 235‑02‑000130-946
(1997), which was based on the Superior Court's decision in Matte v. Caisse
populaire de Donnacona, [1965] C.S. 535. In the latter decision, it was
stated in particular, at page 539:
[TRANSLATION]
a . . .
reference to the name of one of a person's children in a bank account opened by
the person in his or her own name would at most be merely a reminder for the
person if he or she were later to see fit to give some or all of the money
deposited in the account to the child whose name was so added to the account.
[19] Counsel for the appellants argued that those two decisions are
not applicable here because the issue therein concerned only the ownership of
money deposited by a person who opened an account in the person's own name with
a reference to the account being "for" one of the person's children.
He noted that, in the case at bar, the evidence shows that Gaétan Béland was
not told that the accounts were his until 1990 and that he thereupon gave them
up in favour of his children.
[20] In this case, no evidence was adduced indicating that the rights
and obligations of credit union members were different in 1979 than they were
in 1990, 1993 or 1995 as regards ownership of accounts opened by a parent for a
minor child. On August 27, 1979, Gaétan Béland was the only person who
signed, as a member of the credit union, the application for membership and
application for the opening of an account cards. Below his signature on each
card is the name of one of his six children "for" whom the account
was being opened. In this regard, the facts are not so different from those
found in the two decisions referred to above, except that in this case
Mr. Béland is claiming that he was not told of his rights when he opened
the accounts and that he did not learn until 1990 that he was the sole holder
of the accounts. I will simply add here that ignorance of a legal situation
does not mean that the situation does not exist. Moreover, this is not the
point on which this case turns.
[21] On November 20, 1990, Gaétan Béland signed an assignment of
account in favour of each of his children. The same day, however, he also
signed a form authorizing the transfer of the amount in each child's account to
the company's account. None of the children participated in any way in the
assignment of the accounts to them. What is more, on that date, none of the
children signed an application for membership card. Thus, none of them was a
member of the credit union. They did not apply until December 30, 1992, more
than two years later. Similarly, on November 20, 1990, none of the children
signed a power of attorney in favour of Gaétan Béland. It was again not until
December 30, 1992, when each of them became a member of the credit union, that
such a power of attorney was signed.
[22] Based on these facts, the only possible conclusion is that Gaétan
Béland was the only member of the credit union and thus the only holder of the
accounts in question until December 30, 1992, when each of the children became
a member of the credit union and the holder of one of the accounts by signing
the application for membership and for the opening of an account having the
same number as the account previously opened by the child's father. The
assignment signed by the father on November 20, 1990, could not take effect
until December 30, 1992. Moreover, on November 20, 1990, Gaétan Béland had
no power of attorney from any of his children authorizing him to make a
transfer to the company, since the children were not members of the credit
union, were not the real account holders and had not given him a power of
attorney.
[23] Since the amounts transferred to the company on November 20,
1990, belonged to Gaétan Béland, the transfer made by the company to the
accounts belonging solely to each of the appellants since December 30, 1992,
cannot be considered merely the repayment of a loan. The transfers were made
for no consideration, since the money obtained by the company in 1990 came from
Gaétan Béland.
[24] To conclude, I will take the liberty of referring to the
following comments made by Linden J.A. of the Federal Court of Appeal in Friedberg
v. Canada, [1991] F.C.J. No. 1255:
In tax law,
form matters. A mere
subjective intention, here as elsewhere in the tax field, is not by itself
sufficient to alter the characterization of a transaction for tax purposes. If
a taxpayer arranges his affairs in certain formal ways, enormous tax advantages
can be obtained, even though the main reason for these arrangements may be to
save tax (see The Queen v. Irving Oil 91 D.T.C. 5106, per
Mahoney J.A..) If a taxpayer fails to take the correct formal steps, however,
tax may have to be paid. If this were not so, Revenue Canada and the courts
would be engaged in endless exercises to determine the true intentions behind
certain transactions. Taxpayers and the Crown would seek to restructure
dealings after the fact so as to take advantage of the tax law or to make
taxpayers pay tax that they might otherwise not have to pay. While evidence of
intention may be used by the Courts on occasion to clarify dealings, it is
rarely determinative. In sum, evidence of subjective intention cannot be used to
'correct' documents which clearly point in a particular direction.
[25] As a result of the foregoing, the appeals
are dismissed.
Signed at Ottawa, Canada, this 25th day of September 2001.
J.T.C.C.
Translation
certified true
on this 17th day of
February 2003.
Erich Klein,
Revisor
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