Picard v. Lagotte Succession, 2017 QCCS 330 (Quebec Superior Court)

Under the will of his deceased wife, the plaintiff (Picard) was a legatee by particular title of her principal residence as well as of an apartment building on which there was a substantial accrued gain – but was not one of the residuary beneficiaries under her will. Picard accepted these legacies approximately two months after her death. The transfer of the apartment building (which the will required to occur subject to an hypothec thereon) was treated by the liquidator of the succession (who did not elect under s. 70(6.2) for non-rollover treatment) as occurring on a rollover basis under ITA s. 70(6) and the Quebec equivalent.

Picard referenced s. 739 of the Quebec Civil Code, which stated that “A legatee by particular title who accepts the legacy… is not liable for the debts of the deceased on the property of the legacy unless the other property of the succession is insufficient to pay the debts,” and Laforest v. Boudreault, 2015 QCCA 162, which found in light of s. 739 that the income tax respecting a legacy by particular title of an RRSP to a child should be borne by the succession of the deceased and not by the child. He submitted that, consistently with s. 739, he was not responsible for the obligations of the deceased respecting the apartment building (including respecting the accrued gain), so that the building should not have been transferred to him on a rollover basis.

Bisson JCS noted that, in addition to the legacies under clause 3 thereof, clause 10 of the will provided that the liquidator “can make any election permitted by tax or other legislation, where he considers this to be advantageous for one or more of my legatees or for my general succession” (TaxInterpretations translation, para. 27) and rejected this submission, stating (at para. 28):

Thus, the combination of clauses 3 and 10 of the Will is completely clear and does not call for any other interpretation: the legacies by particular title of the real estate were made to Mr. Picard, on condition that he assume the hypothec, and it is the liquidator who has the power to choose such tax option as he considers advantageous for one or more of the legatees or for the succession in general. Thus, the tax impact is to be such as the liquidator determines.

In light of this finding, Picard’s further argument, that s. 70(6) should not be interpreted so as to not trench on his rights under the will and s. 739, was unfounded; and Bisson JCS also noted (at para. 41) that under s. 70(6.2), the choice as to whether the rollover applied was that of the liquidator rather than the legatee.

Picard also argued that the indefeasible vesting requirement in s. 70(6) was not satisfied given that clause 5 of the Will provided (para. 44):

Any right of any legatee or heir provided by this will is conditional on him or her surviving me by at least thirty (30) days.

In rejecting this submission, Bisson JCS stated (at para. 45):

At the expiration of the 30-day period…the right of Mr. Picard to the 4790 Property as legacy by particular title irrevocably vested in him. Subsection 70(6) thus applied without restriction.

He concluded (at para. 47):

The Court thus orders that the transfer of the 4790 Property occurred, for tax purposes, at an amount equal to its adjusted cost base [sic, cost amount], being $385,679.

A surviving spouse (Picard – who was not one of the residuary beneficiaries of the estate of his wife) argued that it was improper for the executor of the estate to choose for the devise to him pursuant to her will of an apartment building with a low tax basis to occur on a rollover basis under s. 70(6), as this imposed the property’s accrued tax liability on him. In rejecting this submission, Bisson JCS noted that the will specifically accorded the executor with the discretion to make tax elections for the benefit of any one or more legatees or for that of the general estate – so that the executor clearly was within his rights in not making a s. 70(6.2) election.

He also rejected an argument that a standard 30-day survivor clause in the will meant that the indefeasible vesting requirement in s. 70(6) was not satisfied. He concluded (at para. 47):

The Court thus orders that the transfer of the 4790 Property occurred, for tax purposes, at an amount equal to its adjusted cost base [sic, cost amount], being $385,679.