COMMON
REASONS FOR JUDGMENT
Bocock J.
I. Introduction
[1]
These two appeals involve the transfer of two
items of property by a son and husband to his mother, Roseann, and to his spouse,
Desiree, respectively. The Minister of National Revenue (the “Minister”) raised
an assessment against the mother and the spouse because in each relevant tax
year (stretching from 2005 to 2011), the son owed outstanding income taxes. Generally,
in such cases, Appellants challenge components of the statutory framework of subsection
160(1) of the Income Tax Act (the “Act”). In this present case,
that would otherwise be: the underlying validity of the son’s tax liability,
the nature of the relationship between the son and his mother or his spouse
and, most usually, the fair market value of the property transferred or the
amount of value (or consideration) paid by the recipient for the transferred
asset.
[2]
Specifically, in these two matters before the
Court, the basis of the appeals as tendered by the Appellant’s agent is a singular
legal argument of general application: the Act fails to describe a
taxpayer as a person who gains her livelihood in the private sector.
II.
Some Additional Facts
[3]
As mentioned, there are no facts in dispute.
Roseann and Desiree Bekkerus are the wife and mother, respectively, of Rick
Bekkerus. In 2005, Rick transferred his 2002 Harley-Davidson motorcycle (the
“Harley”) to Desiree for no consideration. At that time he owed approximately
$206,000 to the Minister for income taxes assessed. In 2011, Rick transferred
his 2011 Lexus RX450H (the “Lexus”) to Roseann for no consideration. At that
time he owed the Minister in excess of $3,000,000 for income taxes assessed. At
the respective time of transfer, the Harley had an assumed fair market value of
$19,000 and the Lexus had an assumed fair market value of $51,500. The Minister
raised assessments equal to the fair market values of the Harley and the Lexus,
respectively, against Desiree and Roseann, again respectively, as transferees
under section 160 of the Act.
III. Preliminary Issues
[4]
The Appellants did not appear at the hearing,
but were represented by an agent. In open court at the outset of the hearing
and in response to the Court’s direct questions, the agent, Mr. Chris Shannon,
confirmed by representation several things: his authority granted by both
Appellants to act on their behalf, Roseann Bekkerus’ election to proceed under
the Court’s Informal Procedure and her concurrent waiver of appeal
rights in excess of the $25,000 jurisdiction limited under the Tax Court of Canada Rules (Informal
Procedure) ( SOR /90-688b), and his receipt,
as agent, of the Appellants’ instructions to proceed in both their absences. These
reasons are delivered in writing in light of the Appellants’ absences.
[5]
The agent, Mr. Shannon, also advised the Court
at the outset that the Appellants would call no evidence to dispute the
underlying assessments, relationship of transferor and transferees, the fair
market value of the transferred property or the absence of consideration.
IV. Legal
argument of the Appellants
[6]
No evidence was called by the Appellants and
affidavits of an appeals officer, nonetheless present in Court should cross
examination be sought, had been filed in advance of the hearing describing the
underlying assessments, relationship, transfers, fair market value and lack of
consideration. Accordingly, the Court proceeded to hear legal submissions since
no facts or assumption made or adduced by the Respondent were disputed.
[7]
The Appellants’ agent raised the following
succinct, and to this Court at least, novel legal argument as the basis for the
appeal. The Tax Court of Canada is not a Court of inherent jurisdiction, but a
statutory Court created by Parliament. The Court has statutory authority to
decide the validity of assessments raised by the Minister against taxpayers.
Taxpayers, throughout the Act, are never defined or described as persons
who “gain their livelihood in the private sector”. The conclusion proffered is
that on such basis, the Respondent has failed to prove, “beyond a reasonable
doubt”, that Roseann or Desiree are taxpayers and therefore owe the assessed
section 160 taxes.
[8]
While strictly speaking, submissions contained
within a notice of appeal do not constitute per se submissions in Court,
in this matter, they do assist in providing some additional needed flesh to the
skeletal argument above. The Court notes the following excerpts from the identical
legal argument contained in the notice of appeal for both Appellants:
a.
To have a liability under the Income Tax Act
R.S.C. 1985, 5th Suppl, two essential elements must attach to a
person.
b.
Resident: One must be a resident within the meaning
of the Act i.e. one must reside on the lands that her Majesty the Queen
in Right of Canada either owns, or has a right to dispose of OR falls within
the meaning of section 250(1), (2), (3).
c.
Taxable Income: To have taxable income, one must
have a taxable profit or gain or be employed within the meaning of section 248,
“employed”.
d.
If the Income Tax Act R.S.C. 1985, 5th
Suppl spoke uniformly to every man, woman and person (i.e. Corporations) there
would be no need to identify civil servants and their positions as office or
employment.
e.
There is no mention of any private man or woman
gaining a livelihood in the private sector.
f.
The Appellants have no obligation or are
compelled to any performance pursuant to the Income Tax Act R.S.C. 1985,
5th Suppl as evidenced in case law and legislation.
g.
Canadian custom and convention has only made provisions
for the abrogation of private sector human and civil rights in the presence of
war. Because of the excessive abuse in the past, the Parliament of Canada
repealed the War Measures Act and currently has no legislative
instrument to unilaterally compel any performance of the private sector to the Income
War Tax Act, 1917 as amended.
[9]
The submissions additionally contend, within the
above context, that the Appellants have never “resided” on federal lands or
been governmental employees and have never performed a function for government
or held office or employment for profit.
V. Decision
[10]
For two different reasons, the appeals cannot
succeed and are dismissed: firstly, section 160 does not require Desiree or
Roseann to be a taxpayer and, secondly, the Constitution Act, 1867, 1867
(UK) 30 & 31 Victoria, c. 3 ascribes to Parliament clear, broad and
enumerated powers of taxation of all Canadians and in conjunction with the Act
itself, does not limit the assessment of such taxes to government employees,
office holders or residents of federal lands.
VI. Analysis
[11]
The relevant provisions of section 160 provides as
follows:
160. (1) Where a person has, […], transferred property, […] to
(a) the person’s
spouse […],
(b) […] or
(c) a person with
whom the person was not dealing at arm’s length, the following rules apply:
(d) the transferee
and transferor are jointly and severally, or solidarily, liable to pay a part
of the transferor’s tax under this Part […] equal to the amount by which the
tax for the year is greater […]
(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, […], 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, […]
(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,
[…]
[12]
Contained within section 160 is the notion that
the transferor, Rick Bekkerus, must owe the tax in the first instance. The
Appellants do not challenge this. Just as the Appellants’ agent said he can
detect no reference to a “person who gains their livelihood in the private
sector” as a taxpayer, nowhere within subsection 160(1), which creates joint
and several liability for the transferees, Roseann and Desiree, is there a
reference, requirement or condition that a transferee be a taxpayer or, for
that matter, a resident or earner of income from any source. Since the expressed
legal and factual criteria for raising the subsection 160(1) assessments have
not been challenged by the advanced argument, but have been admitted, the
assessments stand on the basis of what the Federal Court of Appeal has called
“the clear meaning of the words of subsection 160(1)” defining such criteria”: Livington
v R, 2008 FCA 89 at paragraph 17.
VII. Scope
of Taxation under the Act
[13]
While the Court recognizes that determination of
the second issue is unneeded in light of its determination above, the legal argument
was prominently central to the Appellants’ appeals and therefore it will be addressed
despite being moot.
[14]
Subsection 91(3) of the Constitution Act
, 1867 provides as follows:
Legislative
Authority of Parliament of Canada
91. It shall be
lawful for the Queen, by and with the Advice and Consent of the Senate and
House of Commons, to make Laws for the Peace, Order, and good Government of
Canada, in relation to all Matters not coming within the Classes of Subjects by
this Act assigned exclusively to the Legislatures of the Provinces; and for
greater Certainty, but not so as to restrict the Generality of the foregoing
Terms of this Section, it is hereby declared that (notwithstanding anything in
this Act) the exclusive Legislative Authority of the Parliament of Canada extends
to all Matters coming within the Classes of Subjects next hereinafter
enumerated; that is to say,
[…]
3. The raising of
Money by any Mode or System of Taxation.
[15]
These are broad, far-reaching and manifest
powers of taxation and include what historically are described as direct and
indirect powers to tax.
[16]
The Act, itself, is arguably the pre-eminent
and paramount taxing legislation in Canada. In direct challenge to the
assertion of the agent for the Appellants that neither Desiree nor Roseann are
taxpayers stands the very definition of “taxpayer” within the interpretation
and definition of subsection 248(1) of the Act. That definition states:
“taxpayer includes any person whether or not liable to pay tax”
(emphasis added). “Person” is not defined within the Act, is to be given
its ordinary meaning and, in any event, it was not contended in argument that
the Appellants were not persons.
[17]
Therefore, even if subsection 160(1) referred to
a “taxpayer” rather than a “transferee”, the argument that the Appellants are
not taxpayers because they are not defined as such is untenable. Whatever
reasons, exemptions or statutory omissions may exonerate the Appellants from
other liability for tax, the constitutional powers afforded by Parliament and
the clear and plainly obvious definition of “taxpayer” within the Act (which
includes any person irrespective of liability to pay tax) renders the
Appellants “taxpayers” under the Act.
[18]
As stated, for these reasons, the appeals are
dismissed.
Signed at Ottawa, Ontario, this 20th day of October 2014.
“R.S. Bocock”
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