Latendresse v. R., [1996] 1 CTC 2489

Christie J.T.C.C.: — These appeals are governed by the Informal Procedure prescribed by section 18 and following sections of the Tax Court of Canada Act.

In 1989, the appellant lost $1,030 in the commodities futures market and in 1990 he lost $25,708 in the same way. According to the Notice of Appeal, he got involved in that market in this way:

When my wife and I settled our estate at the time of our divorce in 1988 I was determined to invest my share of the estate into something that would enable me to regain my financial net worth.

A visit with a stock broker who was advertising in the Globe and Mail resulted in me becoming involved in the New York futures market.

Although I had no knowledge of this business I was confident that the individual I had employed to manage this activity for me was highly skilled and knowledgeable in this business and could surely make me significant business profits far above anything I could expect to earn through normal investments.

Paragraphs 4 to 8 of the Reply to the Notice of Appeal read:

4. In computing income for the 1989 and 1990 taxation years, the appellant reported total income of $54,795 and $58,101, respectively.

5. The Minister of National Revenue (the “Minister”) assessed the appellant, as filed, for the 1989 and 1990 taxation years by Notices of Assessment mailed on April 6, 1990 and April 22, 1991, respectively.

6. Subsequently, the appellant submitted a request to adjust the income tax returns for the 1989 and 1990 taxation years to allow business losses incurred in the trading of commodity futures in the amounts of $1,030 and $25,708, respectively (the “Losses”). After consideration, the Minister issued concurrent Notices of Reassessment mailed on March 17, 1994 which had the effect of allowing capital losses in the amounts of $1,030 and $25,708, respectively.

7. In so reassessing the appellant, the Minister made the following assumptions of fact:

(a) the appellant advanced funds (the “Advances”) to the brokerage firm of Walwyn Stodgell Cochran Murray Limited (the “Broker”) for the purpose of investing in the commodity futures market (the “Market”);

(b) the appellant did not direct or otherwise instruct the Broker with respect to how the Advances in the Market were to be invested;

(c) the appellant relied entirely on the Broker to invest the advances in the Market;

(d) the appellant has no special knowledge or experience in the trading of commodity futures;

(e) the trading of commodity futures does not form part of the appellant’s ordinary course of business;

(f) the appellant has not held himself out, or advertised himself to the public as a trader in commodity futures;

(g) the commodity futures were not purchased on margin, or through other financing arrangements;

(h) the Losses realized from the sale of the commodity futures were on capital account.

8. The issue is whether the appellant’s Losses are on income or capital account.

The onus is on the appellant to show that the reassessments are in error. This can be established on a balance of probability. Where the onus lies has been settled by numerous authorities binding on this Court. It is sufficient to refer to two judgments of the Supreme Court of Canada in this regard: Anderson Logging Co. v. The King, [1925] S.C.R. 45, [1917-27] C.T.C. 198, 25 D.T.C. 1209; and Johnston v. Minister of National Revenue, [1948] S.C.R. 486, [1948] C.T.C. 195, 3 D.T.C. 1182.

In my opinion, the appellant has failed to discharge the onus and in this regard I observe that in the course of cross-examination the appellant’s testimony underscored the validity of the assumptions of fact set out in paragraphs (b), (c), (d), and (e) of the Reply to the Notice of Appeal.

One of the cases cited in argument was Anderson v. Minister of National Revenue, 66 D.T.C. 166, a decision of the Tax Appeal Board. The description of the appellant and his activities in that case has much in common with the appellant in the case at hand.

Exhibit A-2 in these proceedings is a letter dated October 4, 1993, to the appellant from Revenue Canada. It reads:

This acknowledges receipt of your request for an adjustment to the above noted income tax returns. [The returns referred to are for 1990 and 1991.] Based on the information submitted, the business losses claimed are allowed as follows: 1989, $1,030; 1990, $25,708.26. A notice of reassessment reflecting such changes will be issued in due course.

In this regard I refer to Les Entreprises Ludco Ltée v. Canada, [1994] 1 C.T.C. 368, 94 D.T.C. 6221 (F.C.T.D.). This is a judgment of the Federal Court Trial Division. The headnote reads in part as follows:

Despite the imaginative and seductively attractive arguments put forward by counsel for the taxpayers, the Minister (in accordance with a well- established line of cases) is simply not bound by his previous assessments, by his previous policy statements, by the representations of his officers and employees, [and I have to underscore those words] nor by the treatment which he may have accorded other taxpayers.

In the course of testifying the appellant said he relied on Interpretation Bulletin 346R which is dated November 20, 1978. He made special reference to paragraphs 7 and 8. In Wallenberg v. Minister of National Revenue, [1984] C.T.C. 2043, 84 D.T.C. 1055 (T.C.C.), a decision of this Court, this is said at page 2045 (D.T.C. 1057):

What Parliament has decreed shall be the rules applicable in determining what is payable by way of tax under the provisions of the Act is paramount and cannot be repealed or amended in any manner by whatever Revenue Canada may choose to publish by way of Tax Guides, Interpretation Bulletins or otherwise. This is not to say that publications of the kind just mentioned are totally void of potential legal impact. They can have limited legal consequences in the sense that if a particular provision of the Act is ambiguous, or is ambiguous in a specific context, thereby giving rise to doubt about its meaning, administrative policy and interpretation as reflected in the Revenue Canada publications such as Tax Guides and Interpretation Bulletins are “entitled to weight” and can be an “important factor” in the process of proper interpretation.

That passage is followed by reference to two judgments of the Supreme Court of Canada. It concludes:

No such doubt exists in this case and therefore, I do not regard the (publication) as germane.

The same applies to this case.

For these reasons these appeals cannot succeed and judgment shall issue accordingly.

Appeals dismissed.