Margaret T Carrigan v. Minister of National Revenue, [1981] CTC 2990, 81 DTC 916

John B Goetz:—This is an appeal with respect to two assessments of the appellant’s liability pursuant to section 160 of the Income Tax Act, SC 1970- 71-72, c 63, as amended. The notices of assessment were dated March 7, 1980.

The respondent submits that:

5. . . . the Appellant is jointly and severally liable to pay the amount that Leonard P Carrigan was liable to pay under the Income Tax Act as a result of the property transferred to the Appellant on August 23,1974, Pursuant to Section 160(1 )(d)(i).

6. . . . the appellant is jointly and severally liable to pay a part of the amount that Leonard P Carrigan was liable to pay under the Income Tax Act equal to the value of the property transferred to the Appellant on June 7, 1977, pursuant to section 160(1)(d)(ii).

In assessing the appellant, the respondent relied, inter alia, upon section 160 of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Issue

The issues to be determined are whether the transfer of property dated October 23, 1974, from Leonard P. Carrigan to the appellant, and also the transfer of property dated June 7, 1977 from Leonard P Carrigan to the appellant come within the ambit of section 160 of the Income Tax Act. Counsel for the respondent stated that section 160 applied.

Facts

The provisions of section 160 of the Income Tax Act 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,

(a) to his spouse or to a person who has since become his spouse, or

(b) to a person who was under 18 years of age, the following rules are applicable:

(c) 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 or section 75, as the case may be, in respect of income from the property so transferred or from property substituted therefor;

and

(d) the transferee and transferor are jointly and severally liable to pay the lesser of

(i) any amount that the transferor was liable to pay under this Act on the day of the transfer, and

(ii) a part of any amount that the transferor was so liable to pay equal to the value of the property so transferred;

but nothing in this subsection shall be deemed to limit the liability of the transferor under any other provision of this Act.

At all times material to this appeal, the appellant was the spouse of one Leonard P Carrigan, who came under investigation by Revenue Canada. William Mader, an investigator, indicated that in July 1977 he was assigned to check into the record of Lake Echo Forest Park Limited (“Lake Echo Park Limited”), of which Mr Leonard P Carrigan was a 50% shareholder. In attempting to conduct an audit earlier in 1977, Leonard Carrigan advised that records were not available and that they had been “stolen”. The limited company bought two plots of land in Echo Park area which is recreation- al/residential area near a lake, for the purpose of subdividing. On examination of the records at the local municipal county office, it was discovered that some of the proceeds of the Lake Echo Park Limited property went unreported and therefore there arose a situation of unreported income. This witness filed two certified copies of records of conviction of Mr Carrigan for tax evasion under section 239 of the Income Tax Act, representing misconduct on the part of Leonard Carrigan between December 31, 1972 and August 1, 1977. Leonard Carrigan was tried in Halifax on January 13, 1981. Assessments were filed indicating that they had been issued prior to the above-mentioned prosecutions and convictions. Two certificates in the Federal Court of Canada were filed indicating in the Certificate of Certificate of Registration whereby $86,001.13, together with additional interest on the sum of $59,463.51 was payable by Leonard Carrigan on arrears and interest on taxes owing to the Government of Canada. The respondent also filed as Exhibit R-11 a Certificate of the Supreme Court of Nova Scotia, relating to assessments under the Income Tax Act, said Certificate indicating that the appellant owed $33,694.73, together with additional interest on the sum of $23,310.63.

Clearly, the respondent has proved one of the essential ingredients involving the application of section 160 of the Income Tax Act. I am referring to the evidence of the special investigator prior to referring to the evidence of the appellant so that the inconsistencies in the appellant’s evidence and the nefarious conduct of Leonard Carrigan (who was not called by the appellant’s counsel, which under the circumstances I consider prudent) could not be more thoroughly examined. The investigator examined and analyzed all the accounts in the names of Mr and Mrs Carrigan. He noticed no movement of the sum of $500 (hereinafter referred to in the evidence of Mrs Carrigan) on a monthly basis. As a result of this investigation Mr Mader determined that Leonard Carrigan had charged a portion of his house to Lake Echo Park Limited. In fact, in 1973 Carrigan was paid $45,200 In cheques through Lake Echo Park Limited. These cheques went into his own account. This is not all of the evidence given by Mr Mader. I will allude to it further as I deal with the evidence given by the appellant.

The appellant lived with her husband at 15 Charlois Court in the City of Dartmouth, in the County of Halifax. Mrs Carrigan filed Exhibit A-3 which purports to be an offer to purchase by her, from Leonard P Carrigan, of 15 Charlois Court and Lots 7 and 8 Dempster Crescent which is known as the “lake property”. One of the figures appearing in this document is “Cost of House — $35,309.85”. Mrs Carrigan stated that this agreement had been drawn up by her husband and that the first time that she had observed it was two weeks prior to the hearing in the office of her counsel, Mr Gregg, and this was in preparation for the hearing. The figure of $35,309.85 has an interesting background in that it appears at 9 and 10 of the appellant’s appraiser’s report referred to as appendix “C”. This purports to be a schedule of personal expenses of L P Carrigan charged to the company. Mrs Carrigan, the appellant, admitted that she had not seen appendix “C” until it was presented to her at the hearing. She identified her husband’s signature to the document. Mr Mader, in his evidence, says that appendix “C” does not show the whole cost of Charlois Court but only represents a Lake Echo Park Limited write-off and it was written off in the books of the limited company but revealed the expenses of Mr and Mrs Carrigan. Mader unequivocally states that the figure of $35,309.85 appearing in Exhibit A-3 could not have been prepared prior to 1979 because that figure came directly from appendix “C” of Exhibit A-1 which is the appraisal report; and in fact Mader says that he prepared appendix “C”, that is he had it typed from a handwritten list given to him with respect to Lake Echo Park Limited by Mr Carrigan’s accountant who attempted to show it as a business expense on Lake Echo Park Limited books.

Mrs Carrigan’s answer in cross-examination as to the reason for the transfer of her husband’s interest in the various properties to her was because she was having domestic problems and her husband over-drank. She maintains that she paid him $500 cash per month but there is no indication of any activity in any of her accounts relating to $500, nor does it appear in the accounts of her husband Leonard Carrigan. In the midst of her cross-examination, her counsel Mr Gregg asked leave to file certain receipts, purportedly made by Leonard Carrigan to his wife. The respondent consented to this request and then on further examination the appellant admitted that she had never received the receipts at any time, that she knew that she always paid him $500 in cash. In spite of Mr Mader’s careful investigation of Leonard Carrigan’s affairs, he stated that these receipts were never, at any time, presented to him and the first time he saw them was at the hearing of the appeal. My conclusion at looking at this bundle of receipts known as Exhibit A-4, is that they were indeed written by Mr L P Carrigan, all with the same pen (purportedly over a long period of time) and, in my view, they can only have been prepared for the hearing and drawn all at the same time. As mentioned, appendix “C” was drawn from handwritten notes with respect to Lake Echo Park Limited and provided by their accountant and it is entitled: “Paid For Lake Echo Forest Park Limited by L P Carrigan”, and filed as Exhibit R-13. It is from this document that appendix “C” was drawn by Mr Mader, the Revenue Canada investigator.

Findings

From the facts above, I have concluded that the appellant was, in spite of herself, drawn into the tax problems of her husband. In the appellant’s notice of appeal prepared by Mr Gregg, he says as follows:

Facts

On March 7, 1980, Mrs Margaret Theresa Anne Carrigan was assessed, under Section 160 of the Income Tax Act, for $15,210.61, by way of Notice of Assessment Number 378625, as follows:

“You are hereby assessed tax under Section 160 of the Income Tax Act. By instrument dated August 23, 1974, Leonard P Carrigan did transfer to you one- half of all his rights and interest in the family home at 15 Charlois Court, Dartmouth, Nova Scotia. The assessment represents the amount of income tax owed by Leonard P Carrigan at the date of transfer.”

On the same date, March 7, 1980, Mrs Carrigan was assessed for $60,000.00 by way of Notice of Assessment Number 378629 as follows:

“You are hereby assessed tax under Section 160 of the Income Tax Act. By instrument dated June 7, 1977, Leonard P Carrigan did transfer to you all his rights and interest in the family home at Charlois Court, Dartmouth, Nova Scotia, together with two lots and cottage at Mineville, Halifax County, Nova Scotia.”

The abstract of title for the two cottage properties at Mineville, Halifax County, Nova Scotia, is as follows:

Warranty Deed	Lake Echo Forest Park Limited
2975/24	— to —
August 21, 1974	Leonard P Carrigan and wife,
January 13, 1976	Margaret Theresa Anne Carrigan,
$1.00	as Joint Tenants
Warranty Deed	Lake Echo Forest Park Limited
2975/28	— to —
August 21, 1974	Leonard P Carrigan and wife,
January 13, 1976	Margaret Theresa Anne Carrigan,
$1.00	as Joint Tenants
Warranty Deed	Leonard P Carrigan and wife,
3122/473	Margaret Theresa Anne Carrigan,
June 7, 1977	— to —
June 10, 1977	Margaret Theresa Anne Carrigan,
$1.00

The abstract of title for the family home at 15 Charlois Court, Dartmouth, Nova Scotia, is as follows:

This document clearly sets forth the dealings with the properties at issue in this appeal. I find that the respondent is correct in his assertion that on August 23, 1974 Leonard P Carrigan transferred to the appellant, as a joint tenant, one-half interest in the land and house located at 15 Charlois Court, Dartmount, Nova Scotia, at which time Carrigan had accumulated (apparently from the records filed) tax arrears in the amount of $15,210.61 for his 1973 taxation year. I further find that on June 7, 1977, Leonard P Carrigan transferred to the appellant his remaining one-half interest in the land and house located at 15 Charlois Court, Dartmouth, Nova Scotia, and also his interest in two cottage properties hereinbefore referred to as Lots 7 and 8, located at Mineville, Halifax County, Nova Scotia.

What, then, was the value of 15 Charlois Court on August 23, 1974 and on June 7, 1977? And what was the value of the two cottage properties on June 7, 1977? One Robert E Beer, FRI, was called as an appraiser for the appellant. Mr Beer found that the 15 Charlois Court property, as of August 1974, was worth $50,000 and that as of June 1977, it was worth $70,000. He values Lots 7 and 8 Dempster Crescent, Echo Park area, as of June 1977, in the amount of $23,000. Both he and the government appraiser used the cost approach and the market data approach, each giving the sale prices of what they individually considered comparable properties at or about the dates in question, that is 1974 and 1977.

Mr Lome Richard Perry appeared as a witness for the respondent. Mr Perry is a real estate appraiser with high qualifications and considerably more experience than the appellant’s appraiser. I found his appraisal report complete and thorough and in comparison to that of Mr Beer’s appraisal, considerably superior. Mr Perry felt that the 15 Charlois Court property, as of August 23, 1974, was worth $102,500 and that as of June 7, 1977, it was worth $113,000. It was his opinion that Lots 7 and 8 Dempster Crescent, Echo Park subdivision, Mineville, Halifax County, Nova Scotia, had a value as of June 1977 of $40,400. The appellant’s appraiser valued these properties at $23,000. Both appraisers felt that the cottage properties’ highest and best use would be residential, and indeed all properties were used as residential properties above Dempster Road, which was the road that gave access to the said lots.

After having perused both appraisals very carefully, I have concluded that the appraised values for the residential and cottage properties by Mr Lome Richard Perry appear reasonable.

I have also perused the following cases which were cited to me:

Allison Janet Craig v MNR, [1973] CTC 2119; 73 DTC 116;

Maria Elizabeth Rafael v MNR, [1978] CTC 2398; 78 DTC 1300;

Dorrine L Payette v MNR, [1979] CTC 2052; 79 DTC 81;

Aneda Fisher v MNR, [1979] CTC 2771; 79 DTC 661.

For the above reasons, I dismiss the appeal.

Appeal dismissed.