Sarchuck,
T.C.J.:—The
appeal
of
Barbara
Kostiuk
is
from
Assessment
Number
516319
dated
April
2,
1986
issued
pursuant
to
the
provisions
of
subsection
160(2)
of
the
Income
Tax
Act
(the
Act)
and
is
made
in
respect
of
a
transfer
from
Peter
Bodnarchuk
to
Barbara
Zadorozniak
(the
appellant)
of
certain
farm
property
made
on
March
17,
1982.
In
confirming
the
assessment
the
Minister
set
out
the
following
reasons:
Subsection
160(2)
of
the
Act
provides
that
the
Minister
may
at
any
time
assess
a
transferee
in
respect
of
any
amount
payable
by
virtue
of
section
160
of
the
Act;
accordingly
Peter
Bodnarchuk
having
transferred
property
described
as
Firstly:
all
that
portion
of
the
South
East
Quarter
of
Section
Twenty-One
(21),
in
Township
forty-one
(41),
in
Range
Twenty-eight
(28),
West
of
the
Second
Meridian,
in
the
Province
of
Saskatchewan,
in
the
Dominion
of
Canada,
not
covered
by
the
Waters
of
Lake
No.
1
and
containing
One
Hundred
and
Twenty-two
and
Four
Tenths
(122.4)
acres,
more
or
less.
Survey
dated
April
2,
1908.
Secondly:
The
South
West
Quarter
of
Section
Twenty-one
(21),
in
said
Township
and
Range,
containing
One
Hundred
and
Sixty
(160)
acres,
more
or
less
to
you,
and
the
transferor
having
been
liable
to
pay
an
amount
under
the
Act
on
the
day
of
transfer,
the
Minister
has
assessed
you
in
respect
thereof
in
the
amount
of
$65,168.38
in
accordance
with
the
provisions
of
subsection
160(1)
and
(2)
of
the
Act.
The
relevant
provisions
of
the
Act
pursuant
to
which
the
Minister
assessed
read
as
follows:
160(1)
Where
a
person
has,
on
or
after
the
1st
day
of
May,
1951,
transferred
property,
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatever,
to
(a)
his
spouse
or
a
person
who
has
since
become
his
spouse,
(b)
a
person
who
was
under
18
years
of
age,
or
(c)
a
person
with
whom
he
was
not
dealing
at
arm's
length,
the
following
rules
apply:
(d)
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
a
part
of
the
transferor's
tax
under
this
Part
for
each
taxation
year
equal
to
the
amount
by
which
the
tax
for
the
year
is
greater
than
it
would
have
been
if
it
were
not
for
the
operation
of
section
74,
75
or
75.1,
as
the
case
may
be,
in
respect
of
any
income
from,
or
gain
from
the
disposition
of,
the
property
so
transferred
or
property
substituted
therefor;
and
(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,
if
any,
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,
and
(ii)
the
aggregate
of
all
amounts
each
of
which
is
an
amount
that
the
transferor
is
liable
to
pay
under
this
Act
in
respect
of
the
taxation
year
in
which
the
property
was
transferred
or
of
any
preceding
taxation
year,
but
nothing
in
this
subsection
shall
be
deemed
to
limit
the
liability
of
the
transferor
under
any
other
provision
of
this
Act.
(2)
The
Minister
may
at
any
time
assess
a
transferee
in
respect
of
any
amount
payable
by
virtue
of
this
section
and
the
provisions
of
this
Division
are
applicable
mutatis
mutandis
in
respect
of
an
assessment
made
under
this
section
as
though
it
had
been
made
under
section
152.
By
consent
of
all
parties
the
evidence
adduced
on
behalf
of
Barbara
Kostiuk
in
her
appeal
from
a
reassessment
of
income
tax
for
the
1981
taxation
year
(86-964(IT))
is
to
be
applied
in
this
case
to
the
extent
that
it
is
relevant.
A
summary
of
the
evidence
of
the
appellant
and
of
Peter
and
Olga
Bodnarchuk
follows.
The
appellant
is
the
daughter
of
Peter
and
Olga
Bodnarchuk.
She
was
born
in
1957
and
was
an
adult
at
the
time
of
the
impugned
transfer.
Her
father
personally
or
through
P.G.B.
Holdings
Ltd.
was
the
owner
of
nine
quarter
sections
of
farmland.
In
1980,
as
a
result
of
continuing
marital
difficulties,
Olga
Bodnarchuk
commenced
an
action
against
Peter
Bodnarchuk
in
the
Unified
Family
Court
of
Saskatchewan
claiming
a
division
of
property
and
interim
support.
In
the
course
of
these
proceedings
they
entered
into
a
separation
agreement
dated
September
8,
1981.
A
portion
of
the
preamble
to
this
agreement
provides:
AND
WHEREAS
the
parties
hereto
are
desirous
of
gifting
a
half
section
of
their
farmland
to
each
of
their
daughters,
as
well
as
selling
another
quarter
section
of
land
to
their
daughter
and
son-in-law,
Shirley
and
Roland
Siba,
for
a
sale
price
of
$100,000.00
AND
WHEREAS
the
Husband
agrees
to
execute
registerable
Transfers
thus
transferring
to
Shirley
Siba
the
West
Half
of
Section
33,
Township
41,
Range
28,
West
of
the
2nd
Meridian
and
to
Barbara
Zadorozniak
the
South
Half
of
Section
21,
Township
41,
Range
28,
West
of
the
2nd
Meridian,
and
thereby
placing
the
daughters
in
a
position
where
Barbara
Zadorozniak
can
execute
a
registerable
first
mortgage
in
the
amount
of
$50,000.00
and
Shirley
Siba
can
execute
a
registerable
second
mortgage
in
the
amount
of
$50,000.00,
each
mortgage
to
be
in
favour
of
their
mother;
Pursuant
to
this
agreement
Peter
Bodnarchuk
transferred
his
interest
in
the
South
East
and
South
West
quarters
therein
described
to
the
appellant,
and
a
certificate
of
Title
issued
to
her
on
March
23,
1982.
At
the
same
time,
the
appellant,
although
not
a
party
thereto,
in
keeping
with
the
terms
of
the
separation
agreement,
caused
to
be
registered
a
mortgage
in
the
amount
of
$50,000
in
favour
of
her
mother.
In
another
concurrent
transaction
the
appellant
leased
these
two
quarter
sections
to
her
father
by
way
of
indenture
executed
on
February
18,
1982.
With
respect
to
the
transfer
of
the
farm
properties
to
the
appellant
the
Minister,
in
his
pleadings,
concedes
that
in
his
1981
[sic]
tax
return
Peter
Bodnarchuk
properly
reported
this
transaction
as
a
subsection
73(3)
rollover.
In
reassessing
the
appellant
as
he
did,
the
respondent
assumed
that:
(a)
on
March
17,
1982
Peter
Bodnarchuk,
the
father
of
the
appellant,
transferred
the
S
/2
21-41-28-W2,
which
was
land
held
by
him
personally,
to
the
appellant
for
consideration
of
$1.00
and
natural
love
and
affection;
(b)
at
the
time
of
the
transfer
the
S
/z
21-41-28-W2
had
a
fair
market
value
of
$180,000;
(c)
Peter
Bodnarchuk's
1978
to
1981
income
tax
returns
were
reassessed
on
November
7,
1984,
and
subsequently
reassessed
on
December
13,
1985;
(d)
as
a
result
of
these
reassessments
from
which
there
has
been
no
appeal,
Peter
Bodnarchuk
is
liable
to
pay
Part
1
tax
of
$65,168.38;
(e)
Peter
Bodnarchuk
and
the
appellant
are
jointly
and
severally
liable
for
the
aggregate
of
all
amounts
each
of
which
is
an
amount
that
Peter
Bodnarchuk
is
liable
to
pay
under
this
Act
in
respect
of
the
taxation
year
in
which
the
property
was
transferred
or
of
any
preceding
taxation
year.
During
the
hearing
of
the
appeal
the
respondent
through
counsel
also
conceded
that
at
the
time
of
the
transfer
the
property
had
a
fair
market
value
of
$150,000
and
for
the
purposes
of
this
assessment
the
equity
of
the
appellant
in
this
property
at
the
relevant
time
was
no
more
than
$100,000.
The
position
of
the
appellant
is
that
the
assessment
should
be
set
aside
because
notwithstanding
the
transfer
of
land
the
real
consideration
proceeded
from
the
Separation
Agreement
and
that
this
consideration
was
for
the
full
market
value
of
the
said
one-half
section
of
land.
More
specifically,
the
consideration
received
was
the
settlement
of
the
matrimonial
property
action;
the
withdrawal
of
a
lis
pendens
filed
by
Olga
Bodnarchuk;
the
removal
of
Olga
Bodnarchuk's
homestead
rights;
her
relinquishment
of
any
interest
in
all
matrimonial
property
not
transferred
to
her
and
the
relinquishment
of
her
share
in
P.G.B.
Holdings
Ltd.
(as
well
as
the
proposed
relinquishment
of
shares
by
the
appellant
and
her
sister)
said
shares
being
of
considerable
value.
In
addition,
further
consideration
resulted
from
the
requirement
in
the
Separation
Agreement
that
the
land
transferred
to
the
appellant
be
made
subject
to
a
mortgage
in
the
amount
of
$50,000
in
favour
of
her
mother.
Counsel
for
the
appellant
further
argued:
The
other
matter
that's
important
is
that
we
have
to
remember
that
this
property,
this
land
that
was
transferred
to
the
daughters
was
not
the
father's
to
transfer
in
the
first
place.
That
land,
although
registered
in
his
name,
did
not
mean
that
he
had
a
full
equitable
interest
in
that
land.
In
support
of
this
proposition
he
relied
on
the
provisions
of
the
Matrimonial
Property
Act,
S.S.
1979,
c.
M-6.1,
and
the
fact
that
Olga
Bodnarchuk
had,
following
commencement
of
her
action
against
Peter
Bodnarchuk
in
the
Unified
Family
Court,
filed
a
lis
pendens
which
encumbered
all
of
her
husband's
properties.
Counsel
for
the
respondent
argued
that
both
submissions
were
not
tenable.
In
the
first
place
legal
title
and
beneficial
title
as
indicated
by
the
Certificate
of
Title
to
the
subject
lands
dated
January
17,
1982
(Exhibit
R-2)
established
that
Peter
Bodnarchuk
was
the
owner
of
an
estate
in
fee
simple
of
that
property.
Secondly,
counsel
submitted
that
the
answer
to
the
respondent's
submissions
is
to
be
found
in
a
consideration
of
the
nature
of
Olga
Bodnarchuk's
rights
in
the
property
and
particularly
her
rights
thereto
under
the
Matrimonial
Property
Act.
As
counsel
put
it,
the
issue
is
what
rights
if
any,
did
Olga
Bodnarchuk
acquire
by
commencing
an
action
under
the
Matrimonial
Property
Act.
Counsel
cited
Lawrick
v.
the
M.N.R.,
[1989]
1
C.T.C.
2028;
89
D.T.C.
14.
In
this
case,
the
taxpayer,
separated
from
her
spouse
who
then
sold
the
matrimonial
property
for
a
substantial
capital
gain.
The
Minister
assessed
her
for
one-half
of
the
gain
on
the
basis
that
the
Separation
Agreement
provided
that
both
spouses
would
share
the
tax
liability
equally
on
the
disposition
of
any
matrimonial
property.
The
taxpayer
appealed,
claiming
that
she
did
not
dispose
of
the
property
and
hence
was
not
liable
for
the
capital
gains
tax.
In
allowing
the
appeal
the
Court
held
that
the
property
was
owned
exclusively
by
the
taxpayer's
husband.
His
was
the
only
name
which
appeared
on
the
certificate
of
title
and
it
was
he
who
effected
the
sale,
with
the
appellant’s
role
being
restricted
solely
to
making
the
declaration
required
by
section
3
of
the
Homestead
Act.
With
respect
to
marital
property
rights
the
Court
made
the
following
comments:
Admittedly,
the
appellant
had
certain
rights
under
the
Saskatchewan
Matrimonial
Property
Act,
S.S.
1979,
c.
M-6.1,
and,
by
virtue
of
this,
may
have
had
an
interest
in
the
property.
Any
such
interest
was,
however,
purely
contingent.
Subsection
21(1)
of
the
Matrimonial
Property
Act
provides
that:
21.
(1)
Upon
application
by
a
spouse
for
the
distribution
of
matrimonial
property,
the
Court
shall,
subject
to
any
exceptions,
exemptions
and
equitable
considerations
mentioned
in
this
Act,
order
that
the
matrimonial
property
or
its
value
be
distributed
equally
between
the
spouses.
Thus
the
appellant's
entitlement
to
the
farm
property
was
completely
dependant
on
her
making
an
application
for
a
distribution
of
the
parties’
matrimonial
property.
As
this
was
never
done,
it
is
impossible
for
this
Court
to
conclude
what
interest
in
the
property
the
appellant,
may
or
may
not
have
obtained.
Accordingly,
any
money
received
by
the
appellant
must
be
seen
as
accruing
not
as
a
result
of
the
disposition
of
the
farm
property,
but
rather
in
respect
of
her
waiving
her
nascent
rights
under
the
Matrimonial
Property
Act.
In
fact,
this
is
explicitly
stated
in
the
separation
agreement
That
(sic)
the
quantum
of
any
such
receipt
was
to
be
determined
by
reference
to
the
proceeds
of
disposition
of
the
farm
property
is
irrelevant.
Similarly
irrelevant
(to
return
to
my
initial
observation)
is
the
parties'
agreement
to
divide
any
capital
gain
arising
from
the
sale
equally
between
them.
Whatever
force
this
might
have
as
between
themselves,
the
parties
are
not
free
to
determine
how
the
capital
gains
are
to
be
allocated
for
the
purposes
of
the
Income
Tax
Act.
Rather,
they
belong
in
their
entirety
to
the
owner
of
the
property,
in
this
case
the
appellant's
husband.
The
second
case
cited
by
counsel
for
the
respondent
is
McGillivray
v.
M.N.R.,
[1986]
2
C.T.C.
2422;
86
D.T.C.,
1819.
Counsel
relied
on
this
decision
to
support
the
proposition
that
the
transfer
of
the
properties
to
the
appellant
could
not
be
directly
ascribed
to
the
fact
that
Olga
Bodnarchuk
gave
up
her
rights
under
the
Matrimonial
Property
Act
because
until
the
order
of
the
Unified
Family
Court
was
issued,
she
had
no
idea
what
her
rights
to
property
or
otherwise
would
be.
Counsel
further
pointed
out
that
in
any
event
in
the
present
appeal
the
order
did
not
specifically
deal
with
these
properties.
I
have
concluded
that
the
Minister’s
position
is
correct.
The
separation
agreement
relied
upon
by
counsel
for
the
appellant
is
not
entirely
consistent
in
its
treatment
of
this
transaction.
It
speaks
of
the
property
as
being
transferred
to
the
daughters
as
a
gift.
It
then
requires
the
daughters
to
encumber
the
property
by
way
of
mortgages
in
favour
of
their
mother.
Although
the
daughters
were
not
parties
to
the
Separation
Agreement
the
transactions
took
place
in
that
form.
If
Peter
Bodnarchuk
received
consideration
for
his
transfer
of
the
property
to
the
appellant,
it
did
not,
in
my
view,
exceed
the
sum
of
$50,000
which,
following
the
Separation
Agreement
and
at
his
direction,
was
paid
by
way
of
the
appellant
granting
the
required
mortgage
to
her
mother.
With
respect
to
the
submission
by
appellant's
counsel
that
Peter
Bod-
narchuk
did
not
have
a
full
equitable
interest
in
the
land
transferred,
I
can
only
say
that
there
is
no
foundation
for
that
proposition.
I
am
satisfied
that
Olga
Bodnarchuk
had
no
specific
interest
in
any
of
the
property
in
issue
either
by
virtue
of
the
separation
agreement
or
by
virtue
of
the
Matrimonial
Property
Act.
With
respect
to
similar
legislation
in
the
Province
of
Ontario,
the
Family
Law
Reform
Act,
Mr.
Justice
McIntyre
made
the
following
comments
in
Maroukis
v.
Maroukis,
[1984]
2
S.C.R.
137;
12
D.L.R.
(4th)
321
at
page
140:
The
most
important
issue,
and
the
one
upon
which
this
case
turns,
is
the
determination
of
the
time
at
which
the
matrimonial
home
became
vested
in
the
appellant
to
the
exclusion
of
her
former
husband.
The
appellant
contended
that
the
trial
judge
made
no
error
in
choosing
the
date
of
the
separation
of
the
parties
as
the
effective
time
at
which
the
vesting
occurred.
It
was
argued
that
upon
a
true
construction
of
the
words
of
s.
4
of
the
Act
the
rights
of
an
applicant
spouse
crystallized
on
the
separation
or
on
the
bringing
of
the
application
for
division
of
the
property.
This
proposition
was
accepted
by
the
trial
judge
and
he
said:
In
these
proceedings,
the
parties
separated
in
October
1978
and
in
my
opinion
the
right
of
the
wife,
as
set
out
in
the
judgment,
crystallized
as
of
that
date.
The
court
order
of
October
10,
1979,
is
merely
a
declaration
as
to
the
property
rights
as
between
husband
and
wife
as
of
the
date
of
the
crystallization
of
their
rights
in
October
1978
and
is
an
implementation
of
that
finding
by
vesting
their
rights.
The
judgment
of
the
Court
of
Appeal
is
now
reported
at
24
R.F.L.
(2d)
113.
Wilson
J.A.
(as
she
then
was),
with
whom
Brooke
and
Thorson
JJ.A.
concurred
on
this
issue,
disagreed
with
the
trial
judge
and
said,
at
p.
117:
I
must
respectfully
disagree
with
the
effect
Luchak
J.
has
given
to
s.
4(1)
of
the
Family
Law
Reform
Act.
I
do
not
think
the
subsection
confers
rights
in
property
in
the
absence
of
an
order
of
the
court.
I
think
the
subsection
simply
sets
out
the
circumstances
in
which
the
court
may
make
an
order
for
equal
division
of
the
family
assets.
I
appreciate
that
the
subsection
uses
the
words
“is
entitled
to”,
which
seem
to
suggest
a
statutory
right,
but
the
opening
words
of
the
subsection
"Subject
to
subsection
4”,
which
empowers
the
court
to
make
an
unequal
division,
make
it
clear
that
subs.
(1)
does
not
confer
the
right
to
an
equal
division,
but
merely
state
that,
prima
facie,
the
court
should
order
an
equal
division,
but
not
if
equality
would
be
inequitable
having
regard
to
the
items
listed
in
paras.
(a)
to
(f)
of
subs.
(4).
I
believe,
therefore,
that
until
Luchak
J.
made
his
order
of
10th
October
1979
the
matrimonial
home
continued
to
be
held
in
joint
tenancy
and
that
the
executions
against
the
husband
filed
prior
to
that
date
attached
to
his
interest
in
it.
The
learned
judge
accordingly
had
no
jurisdiction
to
vest
the
property
in
the
wife
free
and
clear
of
those
executions.
I
am
in
complete
agreement
with
this
statement
and
adopt
it
in
concluding
that
the
full
estate
in
the
matrimonial
home
vested
in
the
appellant
wife
only
on
the
making
of
the
order
by
Judge
Luchak
on
October
10,
1979.
The
Act
does
not
automatically
confer
any
property
interest
in
family
assets.
Subsections
4(1)
and
2)
of
the
Act
provide:
4.
(1)
Subject
to
subsection
(4),
where
a
decree
nisi
of
divorce
is
pronounced
or
a
marriage
is
declared
a
nullity
or
where
the
spouses
are
separated
and
there
is
no
reasonable
prospect
of
the
resumption
of
cohabitation,
each
spouse
is
entitled
to
have
the
family
assets
divided
in
equal
shares
notwithstanding
the
ownership
of
the
assets
by
the
spouses
as
determinable
for
other
purposes
and
notwithstanding
any
order
under
section
7.
(2)
The
court
may,
upon
the
application
of
a
person
who
is
the
spouse
of
another,
determine
any
matter
respecting
the
division
of
family
assets
between
them.
The
mechanism
for
the
division
of
property
provided
for
by
s.
4
of
the
Act
may,
subject
to
the
conditions
precedent
in
s.
4(1),
only
be
set
in
motion
by
an
application
for
distribution
under
s.
4(2),
which
gives
the
court
the
power
to
determine
the
division
of
matrimonial
property
between
the
spouses.
Prior
to
the
conclusion
of
the
application
and
the
order
for
distribution,
the
new
property
régime
created
by
the
Family
Law
Reform
Act
(i.e.
the
prima
facie
entitlement
of
each
spouse
to
one
half
the
family
assets
regardless
of
ownership)
is
not
in
effect.
Each
spouse
has
the
right
under
the
Act
to
invoke
the
new
régime
by
application
under
s.
4(2)
upon
the
occurrence
of
one
of
the
three
“triggering
events"
set
out
in
s.
4(1),
but
until
the
court
order
is
made
the
right
is
only
a
personal
right
to
require
the
court
to
determine
the
ownership
of
family
assets.
The
vesting
in
a
spouse
of
the
specific
property
making
up
his
or
her
respective
share
takes
place
upon
the
date
the
court
order
is
made.
There
is
no
authority
in
the
Act
for
an
order
retroactively
vesting
property
in
a
spouse
as
the
appellant
contends
and
as
Judge
Luchak
ordered.
The
property
régime
and
the
rights
created
by
the
Matrimonial
Property
Act
are
sufficiently
similar
to
those
found
in
the
Ontario
statute
considered
in
Maroukis,
supra,
to
warrant
the
application
of
the
principles
enunciated
therein.
I
add
only
that
in
any
event
the
Order
of
the
Unified
Family
Court
was
silent
as
to
property
and
cannot
in
any
manner
be
read
as
vesting
property
in
Olga
Bodnarchuk.
Counsel
for
the
appellant
also
submitted
that
the
assessment
is
contrary
to
the
Canadian
Charter
of
Rights
and
Freedoms,
Part
I
of
the
Constitution
Act,
1982
(Charter)
to
the
extent
that
it
infringes
the
right
of
equality
before
and
under
the
law
pursuant
to
section
15
of
the
said
Charter.
There
is
no
merit
in
this
submission.
On
balance
I
am
satisfied
that
the
requirements
of
section
160
have
been
met
and
the
Minister’s
assessment
was
properly
made.
There
was
a
transfer
of
property
by
Peter
Bodnarchuk
to
the
appellant
who
was
a
person
with
whom
he
was
not
dealing
at
arm's
length.
Where
such
a
transfer
is
established
the
transferee
and
transferor
are
jointly
and
severally
liable
to
pay
the
lesser
of
1)
any
amount
the
transferor
was
liable
to
pay
under
this
Act
on
the
day
of
the
transfer,
and
2)
a
part
of
any
amount
the
transferor
was
so
liable
to
pay
equal
to
the
value
of
the
property
so
transferred.
One
minor
matter
remains
to
be
dealt
with.
In
assessing
as
he
did
the
respondent
assumed
that
there
was
no
appeal
with
respect
to
the
reassessment
of
Peter
Bodnarchuk’s
1981
taxation
year.
That
is
not
correct
since
on
June
2,
1989
a
further
notice
of
reassessment
with
respect
to
his
1981
taxation
year
was
made
by
the
respondent.
This
puts
into
question
the
Minister’s
assumption
that
as
a
result
of
the
reassessment
of
Peter
Bodnarchuk's
taxation
years
1978
to
1981
inclusive,
he
is
liable
to
pay
Part
One
tax
of
$65,168.38.
Therefore
to
ensure
that
the
liability
of
the
appellant
in
this
case
is
accurately
determined
it
is
my
intention
to
allow
the
appeal
and
to
refer
the
matter
back
to
the
Minister
for
reconsideration
and
reassessment
on
the
following
basis:
(1)
that
the
fair
market
value
of
the
South
half
of
section
21-
41-28
W2
is
no
more
than
$150,000;
(2)
that
the
appellant's
equity
in
this
property
is
no
more
than
$100,000;
and
(3)
that
the
respondent
accurately
and
properly
calculate
the
liability
of
the
transferor
for
the
purposes
of
the
assessment
made
against
the
appellant
pursuant
to
the
provisions
of
subsections
160(1)
and
(2)
of
the
Act.
There
will
be
no
costs.
Appeal
allowed.
Email this Content