REASONS FOR AMENDED JUDGMENT
Favreau
J.
[1]
The appellant is appealing from an assessment made
against him by the Minister of Revenue of Quebec, as agent for the Minister of
National Revenue, under subsection 325(2) of the Excise Tax Act, R.S.C., 1985, c. E‑15, as amended (the ETA), notice of
which is dated January 31, 2011, and bears number F-030486.
[2]
The amount of the assessment is $21,160.83 in
duties and arises from a transfer of land which occurred on April 16, 2010,
between the appellant and his son, Roch Sarrazin.
[3]
In assessing the appellant, the Minister of
Revenue of Quebec relied on, inter alia, the following findings and
assumptions of fact:
[Translation]
(a) The facts admitted above;
(b) In 2010, Roch Sarrazin, the appellant’s son, was liable to pay more
than $100,000 under the E.T.A.;
(c) On November 25, 2009, Roch Sarrazin acquired from the appellant,
by way of gift, an immovable located in Rivière-Rouge identified as being Lot
36, Category A, in the Township of Marchand in the District of Labelle (hereinafter
“the property”);
(d) On April 16, 2010, Roch Sarrazin resold said
property to the appellant;
(e) The selling price of the property was $2,000;
(f) On April 16, 2010, the property’s fair
market value was $60,144;
(g) Roch Sarrazin sold to the appellant, his
father, the property for consideration of less than the fair market value of
the property in question;
(h) The appellant is therefore jointly and severally liable for the
tax debt for which Roch Sarrazin is liable under the E.T.A. up to the amount by
which the fair market value of the property exceeds the fair market value of
the consideration paid.
[4]
At the outset of the hearing, counsel for
the appellant who replaced Michel Gauthier as a result of illness, filed an appraisal
report that was disclosed to the respondent on December 9, 2013, that is, 3 days
prior to the hearing date for the appellant’s appeal. Counsel for the
respondent objected to the filing of the appraisal report by relying on the non-compliance
with the requirements of section 7 of the Tax Court of Canada Rules (Informal
Procedure) (the Rules). Since the appellant and the appraiser
were not present, counsel for appellant made a request for an adjournment.
Counsel for the respondent objected to the request for an adjournment because
the respondent was ready to proceed and her witness was present at the hearing.
[5]
After hearing the parties,
the Court refused to admit the appraisal report because the requirements of section 7 of the Rules were
not complied with when the appellant had more than 13 months to file his appraisal
report, that is, since November 7, 2012, date on which
the first adjournment was granted by the Court to allow the appellant to
adequately prepare for his appeal. The request for an adjournment was also
denied because it was the second request for an adjournment and the appellant did
not even deign to attend the hearing to explain the reasons for the delay in
filing the appraisal report.
[6]
Under a notarized deed of gift dated November 25, 2009, the appellant gratuitously
transferred to his son an undeveloped parcel of land located in the town of
Rivière-Rouge, known and described as forming part of lot numbers THIRTY-SIX and
THIRTY-SEVEN, Category “A”, in the official cadastre of the Township of MARCHAND,
in the registration division of Labelle (“the property”).
The amount constituting the basis
of imposition for transfer duties was $57,996 but the transaction was not subject to the payment of
the transfer duties as it was entered into between persons who are related by
blood.
[7]
Pursuant to a sale
agreement under private writing dated December 2, 2009, Roch Sarrazin transferred
ownership of the property back to the appellant for a selling price of $2,000,
which, under the terms of the deed, was paid by the appellant on the day of the
transfer and in respect of which a release was provided. The amount
constituting the basis of
imposition for transfer duties was
$60,144 but the transaction was not subject to the payment of the transfer
duties as it was entered into between persons who are related by blood.
[8]
According to the property assessment roll of the
Municipality of Rivière-Rouge effective for the 2011, 2012 and 2013, fiscal
years, the value of the property as of the market reference date, that is, July
1, 2009, was $51,000, whereas the value was $53,700 according to the previous
assessment roll, that is, that applicable to years from 2008 to 2010. The
standardized assessment value for transfer purposes as of April 16, 2010, was
$60,144.
[9]
Michel Ethier testified for the respondent at
the hearing and explained that Roch Sarrazin had, as of November 25, 2009,
the following tax debts:
|
- Goods and services tax
(for reporting periods from 2002 to 2009)
|
= $21.160.83
|
|
- Quebec sales tax
|
= $26,072.86
|
|
- Quebec income taxes
|
= $13,133.79
|
|
Total
|
= $60,167.48
|
[10]
A certificate for the amount of goods and
services tax owed by Roch Sarrazin was registered in the Federal Court on September
8, 2010. Roch Sarrazin made an assignment in bankruptcy on February 22, 2012,
and was discharged from bankruptcy on July 20, 2013.
Analysis
[11]
For subsection 325(1) of the ETA to apply, the
following four conditions must be met:
(i) a transfer of property occurred;
(ii) the transferor and the transferee are not dealing at arm’s
length;
(iii) there was not adequate consideration flowing from
the transferee to the transferor; and
(iv) the transferor has an outstanding tax liability at the time of the transfer.
[12]
Only the third condition was raised by the
appellant in his Notice of Appeal. According to him, the land has no market
value because it is mostly marsh land and is not suitable for development or
farming. The appellant’s family uses it for hunting purposes.
[13]
In this appeal, the property was transferred
twice:
(a) on November 25, 2009 pursuant to a deed
of gift, Roch Sarrazin acquired the property for no consideration;
(b) on December 2, 2009, pursuant
to a sale agreement, the appellant acquired the property from Roch Sarrazin for
$2,000. The sale agreement was under private writing and
the titles of the appellant’s property were validly published as evidenced by
the attestation statement from Notary Louise Cyr dated March 25, 2010.
[14]
A deed of gift is a notarial act that is authentic
and makes complete proof against
all persons of the juridical act which it sets forth and of those declarations
of the parties which directly relate to the act. A duly registered deed of gift constitutes a valid transfer.
[15]
Since the sale agreement is not notarized, it
cannot constitute an authentic act. However, the sale agreement is nevertheless
a valid transfer for tax purposes on the basis on the following attestation statement
recorded in the minutes of the Notary of April 16, 2010, filed as Exhibit
17083431:
[Translation]
1. The content of this deed is accurate;
2. I have verified the identity, quality and capacity of the parties
to this summary document;
3. The summary document accurately reflects the parties’ intent;
4. The deed is valid as to form;
5. The title of
the owner has already been validly published.
[16]
There is no doubt that Roch Sarrazin and the
appellant were not dealing with each other at arm’s length when the property
was transferred pursuant to the sale agreement as they were related by blood.
[17]
The respondent’s witness showed that Roch Sarrazin
had an outstanding tax liability when the property was transferred pursuant to the
sale agreement.
[18]
To establish the fair market value of the
property at the time of the transfer, the Minister of Revenue of Quebec relied
on the municipal assessment dated April 16, 2010, that is, the date of
entry on the property assessment roll of the transfer of ownership of the
property. According to the document, the standardized assessment value of the
property for the 2008-2010 triennial roll was $53,700, whereas the standardized
assessment value for transfer purposes was $60,144. These values were established
based on the date of contract to July 1, 2006.
[19]
In Eric St-Denis v. The Queen, 2013 TCC
179, Chief Justice Rip of this Court summarized the relevance of the municipal
assessment to establish the fair market value of a property as follows:
[44] It is well established that the municipal assessment, while
relevant in determining the fair market value of a property, is not by itself
representative of the fair market value of that property. This was the
conclusion reached by Campbell J. in Truong v. Canada, 2011 DTC 1275, at para. 27 and Webb J. in Somers v. Canada, [2008] T.C.J. No. 217 (QL), at para. 38.
However, the assessment of property taxes may be accepted as one of a number of
indicators of the fair market value of a property (Truong, supra,
at para. 27).
[20]
Under section 2 of An Act respecting duties on transfers of immovables,
Chapter D-15.1 of the Statutes of Quebec, the basis of imposition for transfer duties shall be the
greatest of the following amounts:
(1) the
amount of the consideration furnished for the transfer of the immovable;
(2) the
amount of the consideration stipulated for the transfer of the immovable;
(3) the amount of the market value of the immovable
at the time of its transfer.
[21]
In this case, the amount constituting the basis of imposition for transfer duties established
in the sale agreement was $60,144, which represents the
fair market value of the property at the time of the transfer.
[22]
Or, the appellant did not provide any evidence
to discharge his burden of proving that the assessment of the fair market value
of the property by the respondent was erroneous and to rebut the presumption of
validity of the assessment.
[23]
The appraisal report that the appellant intended
to file at the hearing could not be admitted because the author of the report was
not present to be cross‑examined.
[24]
In these circumstances, I must accept the determination
of the Minister of Revenue of Quebec that the fair market value of the property
at the time of the transfer was $60,144.
[25]
For all these reasons, the appeal is dismissed
and the assessment is maintained.
Signed at Ottawa,
Canada, this 17th day of June 2014.
“Réal Favreau”
Translation certified true
on this 31st day of July 2014
Margarita
Gorbounova, Translator
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