Date: 19990819
Docket: 98-1809-IT-I
BETWEEN:
RAOUL DUBORD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] This is an appeal from an assessment for the
appellant's 1996 taxation year whereby the Minister of
National Revenue (the "Minister") included in the
appellant's income an amount of $54,590.00 as income from a
registered retirement savings plan ("RRSP").
[2] For the purposes of this assessment, the Minister assumed
the facts stated in subparagraphs 4(a) to (f) of the Reply
to the Notice of Appeal, which read as follows:
[TRANSLATION]
(a) on August 23, 1996, the appellant borrowed $98,000
from the Caisse Populaire Desjardins Domaine Saint-Sulpice
(hereinafter the "Caisse");
(b) the appellant gave the Caisse savings of $85,380.25 as
security for the loan;
(c) the security given was a personal property mortgage on
amounts accumulated in an RRSP and consisted of a certificate of
deposit of $85,380.25 bearing number 0016793;
(d) at one point in the taxation year in issue, the trust
governed by the RRSP permitted trust property to be used as
security;
(e) as a result, the Minister considered that the fair market
value—that is to say, $85,380.25—that the property
used as security had at the time it commenced to be so used had
to be included in computing the appellant's income for the
year;
(f) as the appellant had reported an amount of $30,769.23, the
Minister added to the appellant's income for the taxation
year in issue an amount of $54,590 as income from an RRSP.
[3] The appellant does not dispute the facts stated in
subparagraphs (a) to (d) but contends that the Minister
incorrectly included the additional amount of $54,590 in his
income since a new loan was taken out on
December 4, 1996 in order to repay that of
August 23, 1996 and that new loan was granted without
security.
[4] Until August 1996, the appellant had a $50,000 line of
credit at the Caisse Populaire Desjardins Domaine
St-Sulpice (the "Caisse"). In order to repay an
amount of $38,462.07 owed on this line of credit and repay or pay
certain amounts owed to the federal and provincial governments,
the appellant borrowed $98,000 under a loan agreement on
August 23, 1996 at an annual interest rate of 9%
(Exhibit A-1, document 1). As the appellant had
borrowed an additional amount of $48,000 on his previous line of
credit, the Caisse required that a term deposit of $85,380.25
accumulated in the appellant's RRSP be used as security. The
appellant also granted a personal property mortgage on these
amounts (Exhibits I-1 and I-2). The
appellant's RRSP was administered by the
Fiducie Desjardins inc. (the "Fiducie").
[5] On December 4, 1996, the outstanding balance on the
loan was $91,429.83. That same day, the appellant signed a
variable-rate loan agreement for an amount corresponding to the
outstanding balance on the loan of August 23, 1996.
This agreement was treated by the Caisse as an amendment to the
previous loan (Exhibit A-1, document 3). For
December 4, 1996, the loan statement did not show the
repayment of the previous loan, but simply the balance owing
after payment of an amount of $20,000
(Exhibit A-1, document 4). This amount in
fact came from the appellant's withdrawal of $30,769.23 from
his RRSP that same day. As the provincial tax withheld was
$6,153.84 and the federal tax withheld was $4,615.38, the balance
of $20,000 00 was used to reduce the loan balance.
[6] The appellant contends that the agreement he had with the
Caisse was that this payment of $20,000 out of the amount
accumulated in his RRSP meant that the Caisse would not require
any security for the new loan.
[7] In addition, the appellant claims that the loan of
December 4, 1996 was a new loan and that the security given
for the loan of August 23, 1996, consisting of the deposit
of $85,380.25 in his RRSP, was not given for the new loan.
Consequently, only the amount of $30,769.23 representing the
withdrawal from his RRSP on December 4, 1996 should be
included in his income.
[8] I disagree with the appellant and find that he did not
show on a balance of probabilities that the balance of the
accumulated amounts in his RRSP after the withdrawal of
December 4, 1996 was not given as security for the loan
taken out that same day. In my opinion, the documents which he
himself filed in evidence contradict his claims.
[9] In a letter dated May 1, 1997 to Guy Lussier,
the Caisse's general manager, the appellant described his
agreement with the Caisse as follows:
[TRANSLATION]
In addition, it was agreed with the Caisse Populaire du
Domaine St-Sulpice that, at the start of December 1996, I
would withdraw $20,000.00 plus the amounts owed to the two levels
of government from my registered retirement savings plan in order
to apply that amount to repay the loan, which was in fact done,
and all for the purpose of withdrawing the security so as not to
lose the registration of the RRSP.
My RRSP is now no longer registered as a result of an error by
one of your assistants. Consequently, I ask you to reinstate by
registered retirement savings plan so that it is still
registered. Should you fail to grant my request, I will hold the
Caisse Populaire du Domaine St-Sulpice fully liable for any
inconvenience this may cause me.[1]
[10] In the reply he sent to the appellant on May 21,
1997, Guy Lussier stated in particular the following:
[TRANSLATION]
The fact remains that, in early December, I personally
reminded you that the additional loan of $48,000 had to be
completely repaid in order to release your RRSP, which the
$20,000 from your RRSPs only partly accomplished.[2]
[11] Furthermore, paragraph 7 of the variable-rate loan
agreement of December 4, 1996 (Exhibit A-1,
document 3) states:
[TRANSLATION]
The borrower gives the Caisse, in acknowledgement of or as
security for his liability, the following item or document:
TD folio #21483
[12] It is hard to conclude that the term deposit indicated in
the folio corresponding to that of the appellant was not given as
security. The appellant's RRSP statements of account issued
by the Fiducie on October 31, 1997 and October 31, 1998
confirm that the amount was indeed that of the term deposit
accumulated in the appellant's account with the same folio
number (Exhibit A-1, documents 13 and 14).
[13] I also note that the document giving savings as security,
which refers to the certificate of deposit provided as security
at the time of the loan of August 23, 1996
(Exhibit I-1), states the following in
paragraph 1 in fine:
[TRANSLATION]
The Caisse may withhold the aforementioned amounts and, if
necessary, interest from the certificates of deposit until such
time as the total amounts owed under the finance contract or
contracts have been fully reimbursed
and . . . .
[14] Lastly, the T4RSP slips issued by the Fiducie for 1996
also suggest that the balance of the amounts accumulated by the
appellant in his RRSP after the withdrawal of December 4,
1996 was still being used as security for the loan granted by the
Caisse under the agreement of August 23, 1996 as amended by
that of December 4, 1996 (Exhibit A-1,
document 5).
[15] On the whole of the evidence, I find that the Minister
was correct in including the amount of $54,590.00 in the
appellant's income for the 1996 taxation year in accordance
with subsection 146(10) of the Income Tax Act (the
"Act"). I would simply add that, to the extent the loan
was repaid in subsequent years, the appellant may claim for those
years the deduction provided for in subsection 146(7) of the
Act.
[16] The appeal is accordingly dismissed.
Signed at Ottawa, Canada, this 19th day of August 1999.
"P.R. Dussault"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 20th day of July
2000.
Erich Klein, Revisor
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