Beatrice E Walman v. Minister of National Revenue, [1979] CTC 2286, 79 DTC 272

Guy Tremblay:—This case was heard at Vancouver, British Columbia, on February 19, 1979.

1. Point at Issue

The problem is whether the appellant’s deceased husband was an independent contractor or an employee. If he were an employee, the appellant has the right not to include in her revenue the amount of $7,055.87 received in 1976 as death benefit.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof results especially from several judicial decisions, including the judgment delivered by the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

3.01 According to the evidence, at least during the 1974 and 1975 taxation years, the appellant’s husband was an exclusive agent of State Farm Mutual Automobile Insurance Co, State Farm Life Insurance Co and State Farm Fire and Casualty Insurance Co.

3.02 He was paid by commission. He paid his own expenses (advertising, automobile, convention).

3.03 The appellant’s husband, Mr Richard Henry Walman, died in December 1975.

3.04 In 1976, the appellant received $7,055.87 from the three companies mentioned in paragraph 3.01 above. This amount, detailed in a letter dated May 30,1977 and sent to the appellant by State Farm Mutual Automobile Insurance Company, is as follows:

3.05 In the same letter, the writer informs the appellant:

. . . As you know, your late husband was an Agreement Agent with the companies, and therefore in the capacity of an independent businessman. Also, the monies received have always been referred to as Termination Payments. It is logical for you to assume that in fact this would be what you may refer to as pension, however, the amount of money being paid as Termination Payments is based on service compensation for the Automobile Company and commissions of the Fire & Casualty Company and for the Life Company will be an amount equal to servicing payments.

3.06 The agent’s agreement was not filed as evidence.

3.07 In filing his 1974 income tax return, Mr Walman described himself, at page 1, as self-employed. At page 3, in section “Self-employment” to item “name of firm” he wrote: “R H Walman Insurance”. Finally, he paid his Canada pension contribution plan on “self-employed earnings”.

3.08 In filing the 1975 income tax return of her husband, the appellant paid a contribution of the same nature to the Canada pension contribution plan. She also presents her husband’s income as “income from self-employment”.

3.09 In filing her own 1976 income tax return, the appellant considered the amount of $7,055.87 as death benefit and did not include it in her income.

3.10 By assessment dated August 2,1977, the respondent included the said amount in the appellant’s income.

3.11 On October 7, 1977, the appellant filed a notice of objection.

3.12 On March 28,1978, the respondent issued a notice of reassessment by which it confirmed the inclusion in the appellant’s income of the amount of $7,055.87.

3.13 On June 20, 1978, the appellant lodged a notice of appeal before the Tax Review Board.

4. Law—Comments

4.1 Law

The main subsection involved in the present case is 248(1) of the new Income Tax Act:

“Death benefit” for a taxation year means the amount or amounts received in the year by any person upon or after the death of an employee in recognition of his service in an office or employment minus

(a) where the amount or amounts were received by his widow, the lesser of . . .

4.2 Comments

It is clear from the definition quoted above that the first requirement to have a “death benefit” is to be an employee.

The appellant, as explained above, had the burden to prove that fact if she wished to win the present case.

The evidence, as described in paragraphs 3.04 to 3.08 of the Facts, shows that Mr Walman was self-employed and so was not an employe of the three insurance companies.

The Board has no other alternative but to dismiss the appeal.

5. Conclusion

The appeal is dismissed in accordance with the above reasons for judgment.

Appeal dismissed.