Rolland Lachapelle v. Minister of National Revenue, [1982] CTC 2556, 82 DTC 1593

The Chairman [TRANSLATION]:—The appeal by Mr Rolland Lachapelle is from a tax assessment for the 1979 taxation year in which the Minister of National Revenue did not allow the appellant to divide equally with his former wife a sum of $37,483 for 1979.

Since the appellant was not satisfied with the assessment of the Minister of National Revenue, he lodged an appeal with the Tax Review Board.

Facts

In 1973 the appellant, who was at that time married under the regime of community of property, sold certain properties to Overnite Express, and the respondent considered this to be a business transaction. The proceeds of the sale of $250,000, of which $193,613 was in the form of a hypothec, were then income of the appellant that had to be included in his tax return for the 1973 taxation year.

During the following years the appellant took advantage of the provisions for reserves in subparagraphs 12(1 )(e)(ii) and 20(1 )(n)(ii) of the Income Tax Act, RSC 1952, c 148, and spread over a period of years the amounts still receivable from the sale to Overnite Express.

In 1978 the respondent allowed as a reserve the deduction of $148,617 still receivable for the said transaction. Since a sum of $143,500 was the balance receivable at the close of the 1979 taxation year, a deduction in the amount of $111,134 was allowed as a reserve for 1979.

In his financial statements for 1979 (Exhibit R-1), the appellant added to the item “Reconciliation of net income” in computing his income for the 1979 taxation vear:

For tax purposes, however, the appellant divided the income of $37,483 equally with his former wife Mrs Lucienne Raymond (Lachapelle), and reported his income for 1979 as being $18,742. There was no dispute with respect to the facts and the amounts. It is the dividing of the appellant’s income for 1979 with Mrs Raymond (Lachapelle) that is at issue in this case.

The appellant submitted that a decree absolute of divorce between him and his wife was granted by the Honourable Jacques Boucher, J of the Superior Court in the City of Hull on December 30, 1974 (Exhibit A-1).

The community of property was divided between the appellant and Mrs Lucienne Raymond (Lachapelle) by a deed dated August 12, 1976 (Exhibit A-2).

By a notarized deed of June 16, 1978 Mrs Lucienne Raymond (Lachapelle) “undertakes and agrees to pay her tax on the above-mentioned accounts receivable from this day for all amounts receivable under the said accounts” (Exhibit A-3).

The appellant submitted that in the circumstances the income received in 1979 from the Overnite Express transaction should accordingly be divided between him and his former wife.

Counsel for the respondent, however, submitted that the transaction in issue here took place in 1973 and that the whole of the income from the sale was taxable in its entirety in 1973 and should be included in the appellant’s tax return for the year in which the sale took place.

Although the appellant was married under the regime of community of property, the principle enunciated in the decision of the Supreme Court of Canada in Frank Sura v MNR, [1962] CTC 1; 62 DTC 1005, to the effect that the husband as head of the family and administrator of the community is alone liable for the tax on the income of the community property, applies here.

In 1973 the husband alone was liable for the tax on the income from the sale of property to Overnite Express. Subparagraphs 12(1)(e)(ii) and 20(1 )(n)(ii) of the Act do not in any way change the appellant’s duty to pay the tax; in order to reduce the appellant’s burden of satisfying the duty to pay tax that was already clearly established for 1973, they merely spread over a period of several years the payment of the tax on the amounts not yet received.

The divorce, the sharing of the community property and the undertaking of Mrs Lucienne Raymond (Lachapelle), all of which took place after 1973, have no relevance to the appellant’s obligation to pay the tax on income he earned in 1973 and for which he alone was liable.

Although he was given an opportunity to do so at the hearing, the appellant chose not to reply to any of the submissions made by counsel for the respondent.

In view of the facts, the legisltion and the case law cited in this case, I must hold that the respondent’s assessment is correct.

My decision is accordingly to dismiss the appeal.

Appeal dismissed.