Moses Greenstone Estate v. Minister of National Revenue, [1990] 1 CTC 2112, 90 DTC 1001

Tremblay, T.C.J.: —This appeal was heard on November 22 and 24, 1988 at the City of Montréal, Québec.

1. The Point at Issue

Pursuant to the notice of appeal and the reply to the notice of appeal, the point at issue is whether the appellant is correct in the computation of its income with respect to the 1985 taxation year to deduct the amount of $12,500 as administrative fees paid to Mr. Brian Greenstone, son of the decedent. Pursuant to the testament, indeed, Mr. Brian Greenstone was named as the executor of the estate and also as the administrator of the estate.

Mr. Brian Greenstone charged the said $12,500 as compensation for his services as administrator and included it in his own income return.

The appellant contends that the deduction of the administrator's fees is provided in subsection 150(4) of the Income Tax Act (the Act).

The respondent disallowed the deduction of $12,500 on the basis that it was not provided in the testament that any remuneration be paid to the executors, and that Mr. Brian Greenstone perform the usual functions of an executor. Moreover, even if remuneration were provided on the testament the said amount of $12,500 was not reasonable in the circumstances pursuant to section 67 of the Act.

2. The Burden of Proof

2.01 The burden of proof is on the appellant to show that the respondent's reassessment is incorrect. This burden of proof results particularly from several judicial decisions, including the judgment delivered by the Supreme Court of Canada in Johnston v. M.N.R., [1948] S.C.R. 486; [1948] C.T.C. 195; 3 D.T.C. 1182.

2.02 In the same judgment, the Court decided that the assumed facts on which the respondent based his reassessment were also deemed to be correct. In the present case, the assumed facts are described in paragraphs 9(a) to (j) of the reply to notice of appeal as they follow. Representative for the appellant admitted or denied the facts as hereinafter:

9. In reassessing the Appellant for its 1985 taxation year, the Minister of National Revenue relied, inter alia, upon the following assumptions of facts:

a) The late Moses Greenstone died on the second day of April 1984 [admitted] ; b) Mr Brian Greenstone is the son of the deceased [admitted by adding "one of the sons of"];

c) Mr Brian Greenstone was appointed one of the executors of the Appellant by virtue of Article 6 of the last will and testament of the deceased [admitted with the addition that he was also administrator of the estate];

d) Mr Brian Greenstone was the executor of a testamentary trust, created following the death of the late Moses Greenstone [admitted by adding “.. . . was one of the executors . . . they were three"];

e) The testator, the late Moses Greenstone, has not provided, in his last will, that any remuneration be paid to the executors of his estate for the duties performed [admitted];

f) Mr Brian Greenstone received [corrected at trial to "pretended that he received"] $12,500.00, as trustee fee, only for the administration and settlement of the said estate;

g) Mr Brian Greenstone performed the usual functions of an executor for the Appellant, such as settling the estate, and those functions were not performed for the purpose of gaining or producing income from any business or property of the Appellant [denied];

h) The fees paid to Mr Brian Greenstone [corrected at trial to "The fees Mr.

Brian Greenstone pretended he received"] were of capital nature [denied];

i) During the period he was acting as an executor for the appellant, Mr Brian Greenstone was not performing any duties as an investment counsel, nor generating any revenue as investment counsel [admitted];

j) [This paragraph was added at trial.]

This amount of $12,500.00 was not paid by the appellant to Mr. Brian Greenstone [denied].

3. The Facts

The facts can be summarized as they follow:

3.01 Mr. Moses Greenstone died on April 2, 1984. His last will and testament is dated August 31, 1982 (Exhibit R-1(K)). Pursuant to article 6 of this document Mrs. Dora Reinblatt Greenstone (his wife), Mr. Brian Greenstone (his son) and Mr. Allan Greenstone (his son) were appointed as executors adding

”. . . and I also constitute them Administrators of my Estate and give them the seizin and control of all my property, moveable and immoveable wheresoever situate [sic]”.

3.02 The statement of charge and discharge of the estate prepared by Richard Venor & Co. was filed on May 10, 1985 with the 1985 income tax return of the estate (Exhibit R-1(F)). It reads as follows:

ESTATE MOSES GREENSTONE

DORA GREENSTONE, BRIAN GREENSTONE, ALLAN GREENSTONE, EXECUTORS STATEMENT OF CHARGE AND DISCHARGE FOR THE PERIOD 3rd APRIL 1984 TO 31st MARCH 1985

FIRST, AS TO ESTATE CAPITAL

We charge ourselves as follows:

Assets per inventory		$387,558.10
Less: Debts of decedent	52,713.62
Income Averaging Annuity Contract with
Manufacturers Life Insurance Co.
(taxable as income only when actually received)	127,841.59	180,555.21
		207,002.89

We credit ourselves as follows:

Distributed to legatees	20,000.00
Distributed to testamentary heir (spouse)	192,784.25	212,784.25
		(5,781.36)
SECOND, AS TO ESTATE INCOME
We charge ourselves as follows:
Estate income for the period ended 31st March 1985		5,781.36
		NIL

3.03 From the said return (Exhibit R-1(F)), it appears that in the year involved the total income was $24,943.15 divided out as follows:

3.04 On September 19, 1986, a notice of reassessment (Exhibit R-1(H)) was issued by the respondent disallowing $12,500 of trustee fees to Mr. Brian Greenstone and arriving at a revised taxable income of $12,500 (Form T7W-C which is part of Exhibit R-1(H)).

3.05 The assets per inventory of $387,558.10 as they appear above on the statement of charge and discharge (paragraph 3.02) and the debts of the decedent of $52,713.62 are detailed in the Declaration Concerning Succession Duties (Exhibit R-1 (J)) filed on September 24, 1984 to Revenu Québec as follows:

3

3.06 A "Certificat autorisant la distribution des biens" was issued by Revenu Québec (form TPX-21) on June 18, 1985 (Exhibit A-3). The amount of $334,844.48 was divided between the ten beneficiaries pursuant to article 4 of the will and testament. Mrs. Dora Reinblatt Greenstone (wife of the decedent) received $314,844.48, the two sons $5,000 each and seven other persons (daughters-in-law, grandchildren) received $10,000 altogether.

3.07 During his testimony, Mr. Brian Greenstone admitted he was not an investment counsel and that the $12,500 he received was not a commission paid to an investment counsel.

He charged the estate $12,500 as compensation for his services as administrator upon the amount of time which he spent on the estate business.

3.08 The Guide to the 1986 T3 Trust Return issued by Revenue Canada Taxation was filed as Exhibit A-2. Reference was made to section 19 of the Guide of which the first two paragraphs read as follows:

19 Portion Of Trustee Fees Applicable To Income (line 13)

Executor and trustee fees are deductible from the income of the trust when paid to a person for advice regarding purchasing, selling, administration or management of shares and securities, provided that person's principal business includes such activities.

(20(1)(bb) [of the Act].

Other than the above trustee fees, executor and trustee fees may be deductible in determining the taxpayer's profit from a business or property for the year.

(9(1)) [of the Act]

3.09 Memoranda and letters concerning the present estate were filed as follows:

Exhibit A-1: A memorandum dated October 17, 1985, sent by Mr. H. Parsekian of the Estate and Trust Section, Revenue Canada Taxation, Montreal District Office, to the Head Office of Specialized Audit Division;

Exhibit A-5: A memorandum dated January 14, 1986, sent by Mr. D.L. Cumming to the Montreal District Office, Revenue Canada Taxation. This memorandum is an answer to the one filed as Exhibit A-1;

Exhibit A-6: A letter dated November 6, 1987. This letter was sent by Mr. D.I. Wyse, Chief of Trust and Other Returns Section, Revenue Canada Taxation, to Richard Venor & Co.;

Exhibit A-7: A letter dated May 20, 1987. This letter was sent by Mr. Réal Joly, Chief of Appeals, to Mr. R. Venor.

All those exhibits explain the respondent's position with regard to the refusal of the $12,500 as an expense in the computation of the income of the estate which shall be given in the submissions.

Messrs. Henri Parsekian, Donald Cumming and Réal Joly testified for the appellant to explain the circumstances of the letters and their making the decision refusing the fees of $12,500.

3.10 Mr. Brian Greenstone testified that his father was an independent real estate administrator. He was buying, selling real estates, obtaining mortgages, financing, renting, etc.

However, in 1984, he also worked for Montréal Professional Building (M.P.B.) (office address: 2015 Drummond Street, #200, Montréal) from which he received $7,080 (Exhibit R-1(G)). M.P.B. is not a corporation. It is a business owned by Mr. Ben H. Lechter.

3.10.1 The decedent also owned an immovable property located on Monk Boulevard in Ville Emard which was sold in 1980. However, as the regular payments were not made, the building was repossessed on February 23, 1983. The same day, it was sold to 120715 Canada Inc. (office address: 2015 Drummond Street, Suite 200, Montréal), Mr. Greenstone keeping the second hypothec of $64,000 (at the interest rate of 11 /2 per cent) which appears in the assets of the estate as notes receivable in the amount of $63,797.39 (Exhibit R-1(J), pages 2 and 7). One of the shareholders of 120715 Canada Inc. was Mr. John Lechter, the son of Mr. Ben H. Lechter. According to the witness, they had trouble collecting this second hypothec.

3.10.2 On November 25, 1982 his father gave him a general power of attorney (Exhibit A-9) which can be summarized as follows:

1. To represent me in all matters, . . .

2. To draw and endorse any cheque or cheques, . . .

3. To ask, demand and receive any and all sums of money . . .

4. To borrow . . . such sums of money . . .

5. I hereby give and grant . . . full power . . . to do and perform every act necessary, . . . or proper . . ., with full power of substitution and revocation, . . .

8. I hereby ratify and confirm . . . all that my said attorney may do to give effect to the foregoing.

3.10.3 With such power of attorney, he was looking after his father's affairs. Many times he had to attend the “Régie des loyers” concerning the tenants of the building located on Monk Boulevard (16 apartments rented and two stores: a fruit store (Mr. Lapomme) and a hardware store (Mr. Larry Iglio)). Among the tenants there were always two or three who did not pay the rent, or who disappeared with some furniture, etc. When he appeared before the "Régie des loyers”, it was always on his father’s behalf.

Moreover, after the death of his father, concerning the same building, the witness also had to sue insurance companies (broken pipes with water damage) and there was a lot of postponements). The case was on the roll during over three years. He appeared as a witness.

3.10.4 There was also another building located on Lavallée Street in Long- ueuil and owned by Trinal Investments Ltd. (office address: 2015 Drummond Street, Suite 202, Montréal) in which his father had a 10 per cent interest equal to $100,000 ($1,000,000 x 10 per cent) less mortgages and loans of $90,294 ($902,944 x 10 per cent) $9,706 (Exhibit R-1(J), page 9 and Exhibit A-17: working copy of decedent's 1984 income tax return). The market value at the date of the death was $12,381 (paragraph 3.05). It was an investment Multiple Unit Residential Building (M.U.R.B.). The witness said there were also financial difficulties with that building. He had to meet Mr. Gilles Laforest who was the administrator. No income for the estate originated from that building.

3.10.5 In short, the witness said he spent 10 to 15 hours per week on the activities of the estate, including financial activities (deposits at the bank, payments, etc.).

3.11 Two bank accounts (numbers 158 5125-320 DIS and 158 3096-42) were opened at the Bank of Montréal under the name of the Estate of Moses Greenstone. Bank account number 158 5125-320 DIS (Daily Interest Savings) was opened on May 2, 1984 and it was closed on March 29, 1985 (Exhibit A-10).

From the cheque stubs of bank account number 158 3096-482 (Exhibit A-11), it appears that the 11 cheques were issued from that bank account as follows: 6 to the heirs, 3 to the Montréal City and District Savings Bank, one to A.M. Liben Monuments Inc. and one to Chevra Kadisha B’nai Jacob.

The deposit book of bank account number 158 3096-482 (Exhibit A-12) shows that the 11 deposits were signed by Brian Greenstone. However, Exhibit A-13 (statement of the bank account number 158 3096-482, 11 cheques and 13 transfers of funds from the 3096-482 bank account to the 5125-320 bank account) shows that the 11 cheques and 5 out of the 13 transfers of funds were signed by Mrs. Dora Greenstone. Mr. Brian Greenstone signed the eight other transfers of funds to the 5125-320 bank account. The 13 transfers of funds total $5,695.60.

3.11.1 Mrs. Dora Greenstone had a personal bank account number 158 3096-378 at the Bank of Montréal as it appears from the two bank statements of that bank account. One is dated November 16, 1984, to which seven cheques are attached (Exhibit A-14). Sixteen cheques are attached to the second bank statement, the personal bank account of Mrs. Dora Greenstone (Exhibit A-16).

Needless to say that all those 23 cheques from the bank account number 3096-378 were signed by Mrs. Dora Greenstone. One of them to the amount of $15,000 dated October 26, 1984, is to the order of the Toronto Dominion Bank. It was made to pay an account on a debt of the decedent totalling $44,925.62 due to the Bank of Toronto Dominion, 4158 St. Lawrence Boulevard, Montréal, as it appeared above in paragraph 3.05 from the description of the debts given in the Declaration Concerning Succession Duties (Exhibit R-1(J)). Mr. Brian Greenstone said that the estate had not enough funds and the Toronto Dominion Bank was "getting after us for money". . ."because we were not paying anything”. On the back of the said cheque in the amount of $15,000, one can read “to reduce loan #92 13241-01" and see the stamp of the Toronto Dominion Bank, 4158 St. Lawrence Boulevard, Montréal.

3.11.2 Mrs. Dora Greenstone had received from the Mony Life Insurance Company of Canada a cheque of $100,965.68 dated May 9, 1984 (Exhibit A-15). On that cheque, one can read "Death Benefit plus return of refundable premium on policy 1039938 re M. Greenstone". Mrs. Dora Greenstone was the beneficiary of the insurance policy.

3.11.3 From the personal bank account of Mrs. Dora Greenstone, other cheques were issued to pay some debts or part of debts of the estate as they appear in paragraph 3.05 above quoting Exhibit R-1(J). They are described as follows:

1. A cheque of $5,428 dated April 26, 1984 (Exhibit A-16) was paid to Paperman & Sons Inc., the funeral undertaker.

2. A.M. Liben Monuments Inc. for the tombstone, a cheque of $480 dated May 4, 1984.

3. Richard Venor & Co., a cheque issued on April 26, 1984 for $300.

3.11.4 The balance of the debt to the Toronto Dominion Bank was paid when the property situated on Monk Boulevard was finally sold by the numbered company in 1985 and a part of the balance of the notes receivable originally to the amount of $64,000 was paid to the estate.

3.12 Concerning the $12,500 of fees, Mr. Brian Greenstone testified that his mother paid him the said amount. However, no cheque was issued for such a payment. His mother died on August 25, 1986. Mr. Greenstone stated:

I was paid on a weekly and bi-monthly. She would give me a cheque or cash or pension cheque or I would cash a cheque for her for pocket expenses for her and she would give me two hundred dollars ($200). And she would keep a record, she had a sheet of paper and every time she gave me some money, she would mark it down. She was a very meticulous person and she kept her own records.

BY HIS LORDSHIP:

Do you have that document?

BY THE WITNESS:

She had the paper and after the year she threw it away when we were through.

MAITRE VENOR:

Were you ever paid as an executor?

No.

Why weren't you paid as an executor?

I was paid as an administrator. After my father passed away, you can well imagine how my mother was, not being in good health, and my brother had no time to look after what had to be looked after. We had a family meeting and it was decided that I would do the best job possible, seeing that I did it before he passed away. I was involved in his work, with the property, etc., etc. And they figured that they would remunerate me as an administrator instead of giving it to a company to do (Ts, p. 141-142).

Returning to the second mortgage of the building located on Monk Boulevard, the witness testified as follows:

MAITRE VENOR:

Mr. Greenstone, did you ever take a transportation des loyers, an assignment of rentals, on that thing that forced collection?

Yes.

Am I correct that that's what led to the additional administrative charges?

Yes.

So, just to summarize, were you collecting rents, in effect, to apply on the mortgage?

Yes.

So, basically, did you collect twelve thousand five hundred dollars ($12,500) as an administrator?

Yes.

Did you report it on your income tax return?

Yes.

Did you set the fee or was it the other two people who set the fee to determine how much to remunerate you?

It was agreed between the three parties (Ts, p.144).

3.13 The appellant filed as Exhibit A-4 a letter dated September 19, 1985, sent to Mr. Parsekian concerning the deduction of $12,500 and Mr. Brian Greenstone. Part of this letter reads as follows:

As executor, his duties amongst others consisted of:

a) determining the names and addresses of those persons beneficially entitled to the estate and notifying them of their interest;

b) determining the full nature and value of the assets of the deceased and compiling a list of them; banking, (deposits and making cheques)

c) employing an accountant to advise in the administration of the estate and assisting wherever necessary; (investment of Estate assets)

d) determining the debts owing to and by deceased and arranging for payment of them;

e) contesting/settling debts, if any are in doubt;

f) determining the income tax liability of the deceased; and of the estate; paying any tax owing; obtaining an income tax clearance in respect of the estate in compliance with income tax law;

g) distributing assets of the estate “in specie”, as the will directs, or, alternatively, if there is discretion, to convert into money and distribute them among those beneficially entitled thereto;

h) accounting to the beneficiaries, and the court, if required to do so, for all actions in connection with the administration of the estate;

He charged the Estate $12,500 as compensation for his services based upon the amount of time which he spent on Estate business; during this period, the Estate had $24,943 of taxable revenue. He duly reported this sum received (i.e. $12,500) on his 1984 income tax return as revenue.

3.14 In cross-examination, counsel for the respondent required that Mr. Brian Greenstone file his 1984 income tax return. Counsel contended that on the one hand the witness then claimed rental losses and on the other hand after including the $12,500 of fees, there was no taxable income. Counsel wanted to know which building was owned by the witness. The witness could not remember and representative for the appellant made objection on the contention that it was irrelevant. The Court then ordered that the said 1984 income tax return be filed.

Finally, it was admitted that the witness owned a building in 1984, that he incurred a rental loss from it in that year and that after the application of the loss to his income, there was no tax payable.

3.15 Mr. Brian Greenstone said that the cash money to the amount of $12,500 he received in 1984 from his mother was not deposited in a bank account but was used for out-of-pocket expenses.

4. Law-Doctrine and Cases at Law-Analysis

4.01 Law

The main provisions of the Income Tax Act relied on by the parties in the present appeal are found in paragraphs 3(a), 18(1)(a) and 20(1)(bb) and in subsections 9(1) and 245(1).

Sections 905 to 924 and paragraphs 981(a) to 981 (v) of the Civil Code of Lower Canada are also involved in the present case. They shall be quoted in the analysis if necessary.

4.02 Doctrine and Cases at Law

The following doctrine and cases at law were referred to the Court by the parties:

A. Civil Law

1. La saisine de l'exécuteur testamentaire, Roger Comtois, La Revue du Notariat, vol. 69, Nos 1-2, août-septembre 1966, page 241;

2. L'exécution testamentaire, C. Taylor et R. Doucet, La Revue du Notariat, vol. 78, No 6, janvier 1976, page 261 ;

3. Les libéralités, Germain Brière, Editions de ('Université d'Ottawa, 8e éd.;

4. Les pouvoirs de l'exécuteur testamentaire : étendue maximale et durée, Mireille D. Castelli, Les Cahiers de Droit, mars 1978, page 177;

B. Representative's independence and objectivity

5. Tanaka v. M.N.R., [1985] 1 C.T.C. 2333; 85 D.T.C. 305 (T.C.C.)

6. Adam v. M.N.R., [1985] 2 C.T.C. 2383; 85 D.T.C. 667 (T.C.C.);

C. Capital nature -vs- Business expense

7. Henderson Estate v. M.N.R., [1973] C.T.C. 636; 73 D.T.C. 5471 (F.C.T.D.); [1975] C.T.C. 485 (F.C.A.);

8. No. 579 v. M.N.R., 21 Tax A.B.C. 24; 58 D.T.C. 734;

9. Bardsley, Trust v. M.N.R., [1982] C.T.C. 2642; 82 D.T.C. 1659 (T.R.B.);

10. Cedar Ridge Construction Ltd. v. M.N.R., [1983] C.T.C. 2616; 83 D.T.C. 551 (T.R.B.);

11. BP Petroles Limitée v. The Queen, [1980] C.T.C. 408; 80 D.T.C. 6252 (F.C.A.);

12. Kellogg Co. of Canada Ltd. v. M.N.R., [1943] S.C.R. 58; [1943] C.T.C. 1; 2 D.T.C. 601;

D. Reasonableness

13. Ramsay v. M.N.R., 10 Tax A.B.C. 386; 54 D.T.C. 261;

14. Otto Roofing Ltd. v. M.N.R., 63 D.T.C. 174;

15. Nakoma Developments Ltd. v. M.N.R., 70 D.T.C. 1719;

16. Clarke et al. v. M.N.R., [1984] C.T.C. 2944; 84 D.T.C. 1839 (T.C.C.);

17. Valeriote Electronics Ltd. v. M.N.R., [1988] 1 C.T.C. 2091; 88 D.T.C. 1034 (T.C.C.);

E. Administrative practice of Tax Department

18. Gauvreau, Beaudry Limitée v. M.N.R., [1981] C.T.C. 2475; 81 D.T.C. 392 (T.R.B.);

F. Confirmation of verbal evidence

19. Decker Contracting Ltd. v. The Queen, [1978] C.T.C. 838; 79 D.T.C. 5001 (F.C.A.).

4.03 Analysis

4.03.1 The main points disputed by the parties are :

1. whether in accordance with the provisions of the Act, administration fees are a deductible item in computing income from property of an estate;

2. whether the administration fees in the amount of $12,500 incurred by the Estate of the late Moses Greenstone are deductible;

3. whether, according to the Civil Code of Lower Canada and the testament, Mr. Brian Greenstone had the right to receive the said fees of $12,500;

4. whether the said fees of $12,500 were actually paid by the appellant to Mr. Brian Greenstone.

4.03.2 Commencing by the fourth point, whether the fees were actually paid by the appellant to Mr. Brian Greenstone, the evidence adduced is clear: no document and no entry concerning whatever bank accounts were filed to confirm the verbal testimony of Mr. Brian Greenstone that he received, from April to December 1984, the amount of $12,500 of fees (paragraph 3.12).

Is verbal evidence sufficient in Court to prove a juridical fact? In a case of this nature, where an amount of $12,500 is claimed in deduction from an estate, the answer is no, even if the Court would be convinced that the witness said the truth. The best evidence indeed is required and the best evidence requires that the verbal evidence be confirmed by an objective evidence: cheque, etc.

In the Decker Contracting Ltd. case, supra, (paragraph 4.02(19)), Mr. Justice MacKay of the Federal Court of Appeal, commenting on the credibility of the witness involved, wrote at pages 848-49 (D.T.C. 5007-008) :

The trial Judge’s conclusions are based on the inferences which he drew from the uncontested facts and his view as to the credibility of the witnesses and should not be lightly interfered with by an appellate Court. In doing so in this case I rely on the statement of Lord Wright in Powell and Wife v. Streatham Manor Nursing Home 1935 A.C. 243 at page 267 where he said:

. . . Many, perhaps most cases, turn on inferences from facts which are not in doubt, or on documents: in all such cases the appellate Court is in as good a position to decide as the trial judge.

and the observations of O'Halloran, J.A., in the case of Faryna v. Chorney 1952 D.L.R. 354 at pages 357 and 358, he said:

If a trial Judge's finding of credibility is to depend solely on which person he thinks made the better appearance of sincerity in the witness box, we are left with a purely arbitrary finding and justice would then depend upon the best actors in the witness box. On reflection it becomes almost axiomatic that the appearance of telling the truth is but one of the elements that enter into the credibility of the evidence of a witness . . .

. . . A witness by his manner may create a very unfavourable impression of his truthfulness upon the trial Judge, and yet the surrounding circumstances in the case may point decisively to the conclusion that he is actually telling the truth . . .

The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal de- meanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions . . .

There is high authority to support the foregoing, namely, a case in the House of Lords in 1935 to which Lord Greene M.R. referred in Yuill v. Yuill, [1945] P. 15, and described it as inadequately reported. The case was Hvalfangerselskapet Polaris A/S v. Unilever Ltd. (1933), 46 L1 .L.Rep. 29. In that case the trial Judge had disbelieved material witnesses and found that their evidence was invented on the spur of the moment.

4.03.3 In the present case, the taxpayer is an estate and as such, the evidence of a payment claimed as a deduction must be, in a sense, more strongly adduced. Executors and administrators, indeed nominated by the testator, must be more careful especially when they are experienced businessmen and when they have experienced accountants to counsel them as in the present case.

Moreover, some facts in evidence tend to prove on the one hand that it is not very possible that the whole amount of $12,500 was paid. According to Mr. Brian Greenstone, indeed, he was paid by his mother $200 on weekly and bimonthly basis (paragraph 3.12). From April to December 1984, there are nine months. Assuming that he received $200 per week, this means a maximum amount of $7,200 (9 x 4 x $200).

On the other hand, on leading questions from Mr. Venor, the representative for the appellant, Mr. Brian Greenstone admitted having collected rents basically to the amount of $12,500 "to apply on the mortgage” (paragraph 3.12) (as I understand it, it is the second mortgage of the Monk Boulevard building owned since 1983 by 120715 Canada Inc. (paragraph 3.10.1)) and having included it as income on his tax return. Therefore, he kept for himself, with the permission of his mother, the whole amount that he received from April to December 1984 from 120715 Canada Inc.

It seems odd that Mr. Brian Greenstone kept this money when the estate had a debt of $44,925.62 to the Toronto Dominion Bank which was "getting after us for money" . . . “because we were not paying anything". Mrs. Dora Greenstone had even to give $15,000 on account to reduce the debt (paragraph 3.11.1).

Another fact seems odd. It is the affirmation made by Mr. Brian Greenstone that he spent 10 to 15 hours per week on the activities of the estate (paragraph 3.10.5) when the main problem was the building located on Monk Boulevard (paragraphs 3.10.1, 3.10.3). In April 1984, when his father died, the said building was not owned by the estate but by 120715 Canada Inc. and the estate had no share in that company. All the problems concerning the tenants and the insurance companies (paragraph 3.10.3) did not concern the estate.

Moreover, in the present case, the evidence to the effect that Mr. Brian Greenstone made rental losses in 1984 and had no taxable income even after including the fees of $12,500 (paragraph 3.14) confirms the principle that the best evidence be adduced, i.e. that the payment of fees be confirmed by documents. Mr. Greenstone indeed, at first glance, had nothing to lose by including $12,500 in his income and the estate had a substantial advantage by claiming the same amount as expense.

Legally, there is no evidence that the payment of $12,500 was made by the estate. Having come to this conclusion, it is sufficient to dismiss the appeal.

However, it is useful to see briefly the other points.

4.03.4 One of the main arguments of the appellant concerning the third point whether Mr. Brian Greenstone had the right to receive the fees, is article six of the will and testament (Exhibit R1-K) which specifically provides ”. . . and I also constitute them administrators of my estate and give them the seizin and control of all my property moveable and immoveable wheresoever situate [sic]” (paragraph 3.01). As Mr. Brian Greenstone was also an administrator, therefore he had the right to require fees, according to the representative for the appellant.

However, article six of the will and testament is in substance provided in section 921 of the Civil Code of Lower Canada (which is part of the section that concerns the testamentary executors) and by paragraph 981(b) (which is part of section which concerns trust). Those provisions read as follows:

921. The testator may modify, restrict or extend the powers, the obligations and the seizin of the testamentary executor, and the duration of his functions. He may constitute the testamentary executor an administrator of his property, in whole or in part, and may even give him the power to alienate it with or without the intervention of the heir or legatee, in the manner and for the purposes determined by himself.

981b Trustees, for the purposes of their trust, are seized as depositaries and administrators for the benefit of the donees or legatees of the property, moveable or immoveable, conveyed to them in trust, and may claim possession of it, even against the donees or legatees for whose benefit the trust was created.

This seizin lasts only for the time stipulated for the duration of the trust; and while it lasts, the trustees may sue and be sued and take all judicial proceedings for the affairs of the trust.

In the section concerning the testamentary executor, it is said that “its duties are performed gratuitously unless the testator has provided for their remuneration” (section 910).

And in the section concerning trusts one can read in paragraph 981(g):

981g Trustees act gratuitously, unless it be otherwise provided in the document creating the trust.

All expenses incurred by trustees, in the fulfilment of their duties, are borne by the trust.

In the present estate, the administrators are the same persons as the trustees or as the testamentary executors.

There is nothing in the will and testament of the decedent providing remuneration for the administrator or trustees or testamentary executors.

4.03.5 Concerning the first two points whether, pursuant to the Income Tax Act, administration fees are deductible in computing income from property of an estate and especially of the appellant's estate.

It seems to me that subsection 9(1) of the Act is broad enough to include the deduction of such expense in the computation of the income. It reads as follows:

9.(1) Subject to this Part (Part 1), a taxpayer's income for a taxation year from a business or property is his profit therefrom for the year.

Moreover, in computing the profit of the estate in the present case, the accounting fees were deducted (paragraph 3.05).

In my opinion, all the expenses incurred by the testamentary executors or administrators in the fulfilment of their duties are normally borne by the estate subject to the requirements that administrators or testamentary executors of an estate must act gratuitously; that the expenses, including fees, be proven as actually done and that they be reasonable.

4.03.6 The burden of the evidence was heavy for the appellant. Its preponderance favours the respondent's thesis. The reassessment issued by the Minister of National Revenue must be maintained.

5. Conclusion

For these reasons, the appeal is dismissed.

Appeal dismissed.