Décary,
J:—The
issue
in
this
case
is
to
determine
if
the
aggregate
taxable
value
of
the
estate
of
the
late
Sam
Landsman,
as
computed
under
the
provisions
of
the
Estate
Tax
Act,
is
the
fair
market
value
of
the
property
he
owned
at
the
time
of
his
death.
The
plaintiff
has
declared
in
the
estate
return
a
nil
aggregate
taxable
value
that
was
accepted
by
the
Minister
for
the
original
assessment,
but
afterwards
a
new
assessment
was
issued
that
valued
the
property
at
$595,327.12.
An
appeal
to
the
Tax
Review
Board
was
disallowed
and
the
action
of
this
Court
ensued.
Summarily,
the
deceased
and
his
brother,
Louis
Landsman,
and
another
person
each
had
a
one-third
interest
in
16
companies.
A
few
of
these
companies
were
more
important
than
the
others
but
in
each
instance
the
business
pertained
to
real
estate.
The
financing
of
these
companies
was
done
in
part
through
loans
of
the
three
shareholders
to
the
less
important
companies,
which
in
turn
lent
that
money
to
the
few
important
ones.
The
result
was
that
the
deceased,
his
brother
and
the
third
person
had
debts
owed
to
them
by
the
less
important
companies
and
also
they
guaranteed
bank
loans;
these
companies
had
debts
owed
to
them
by
the
few
more
important
companies;
that
way
of
financing
created
an
interdependence
that
has
a
direct
effect
on
the
value
of
the
shares,
but
account
has
to
be
taken
of
some
special
provisions
of
the
Estate
Tax
Act.
There
may
be
no
need
to
elaborate
the
facts
concerning
the
debts
owed
to
the
deceased
if
recourse
is
had
to
the
provisions
of
subsections
28(1)
and
(2)
of
the
Act,
which
read:
28.
(1)
Where,
immediately
prior
to
the
death
of
a
deceased,
there
belonged
to
the
deceased
and
one
or
more
persons
connected
with
him
by
blood
relationship,
marriage
or
adoption,
shares
in
the
capital
stock
of
a
corporation
sufficient
in
number
to
control
the
corporation,
under
such
circumstances
that
the
shares
in
the
capital
stock
of
the
corporation
that
belonged
to
the
deceased
alone
were
not
sufficient
in
number
to
control
the
corporation,
the
value
of
each
of
the
shares
in
the
capital
stock
of
the
corporation
that
belonged
at
that
time
to
the
deceased
shall,
unless
it
is
established
that
the
deceased
and
such
one
or
more
other
persons
were
persons
dealing
with
each
other
at
arm’s
length,
be
determined
for
the
purposes
of
this
part
as
though
each
such
share
so
belonging
to
the
deceased
formed
part
of
a
group
of
shares
that,
at
that
time,
belonged
to
the
deceased
and
were
sufficient
in
number
to
control
the
corporation.
(2)
For
the
purposes
of
this
section,
a
corporation
that,
immediately
prior
to
the
death
of
a
deceased,
was
controlled,
whether
directly
or
indirectly
and
whether
through
holding
a
majority
of
the
shares
of
the
corporation
or
in
any
other
manner
whatsoever,
by
the
deceased,
by
one
or
more
persons
connected
with
him
as
described
in
subsection
(1),
by
the
deceased
and
such
one
or
more
other
persons
or
by
any
other
person
on
his
or
their
behalf
shall
be
deemed
to
be
a
person
connected
with
the
deceased
as
described
in
subsection
(1).
In
my
view
the
deceased
having
a
one-third
interest
in
each
company,
and
his
brother
Louis
also
having
a
one-third
interest,
was
deemed
to
be
controlling
each
company
and
also
deemed
not
to
be
dealing
at
arm’s
length
with
each
company
by
virtue
of
the
provisions
of
subsection
28(1),
and
each
of
the
companies
is
deemed
not
to
be
dealing
at
arm’s
length
with
the
deceased
by
virtue
of
the
provisions
of
subsection
28(2)
of
the
Act.
These
presumptions
have
a
direct
effect
on
the
quality
of
the
debts
owed
the
deceased
by
the
different
companies
by
virtue
of
subsection
29(1)
which
reads
as
follows:
29.
(1)
Where,
immediately
prior
to
the
death
of
a
deceased,
there
remained
outstanding
a
debt
owing
to
the
deceased
(a)
by
any
person
connected
with
him
by
blood
relationship,
marriage
or
adoption,
or
(b)
by
any
corporation
that,
at
that
time,
was
controlled,
whether
directly
or
indirectly
and
whether
through
holding
a
majority
of
the
shares
of
the
corporation
or
of
any
other
corporation
or
in
any
other
manner
whatever,
by
the
deceased,
by
one
or
more
persons
connected
with
him
by
blood
relationship,
marriage
or
adoption,
by
the
deceased
and
such
one
or
more
other
persons
or
by
any
other
person
on
his
or
their
behalf,
the
value
of
the
debt
shall,
unless
it
is
established
that
at
the
time
of
the
creation
of
the
debt
the
deceased
and
such
debtor
were
persons
dealing
with
each
other
at
arm’s
length,
be
determined
for
the
purposes
of
this
part
as
though
the
amount
thereof
outstanding
immediately
prior
to
the
death
of
the
deceased
had,
at
that
time,
become
due
and
payable
to
him.
These
provisions
create
another
presumption,
and
such
a
debt
owed
to
the
deceased
can
have
only
one
value
in
view
of
the
non-arm’s
length
concept:
the
value
of
the
amount
outstanding
at
time
of
death.
Such
a
presumption
does
not
allow
the
slightest
regard
to
the
capacity
to
pay
of
the
debtor
companies.
Even
if
the
companies
were
not
able,
at
the
time
of
death,
to
repay
the
debts,
still
these
provisions
deem
these
debts
or
amount
still
due
to
be
worth
the
face
value
or
the
full
amount
outstanding.
The
assessment
cannot
be
attacked
successfully
on
these
debts
owed
the
deceased
by
the
companies.
Now
we
shall
deal
with
the
treatment
of
the
inter-company
debts.
In
my
view,
it
is
not
the
same
for
the
loans
granted
by
the
smaller
companies
to
the
few
more
important
companies
as
for
the
debts
owed
the
deceased
by
the
companies.
In
my
opinion,
the
provisions
of
sections
28
and
29
of
the
Estate
Tax
Act
do
not
cover
debts
owed
by
one
company
to
another,
when
each
of
these
companies
is
controlled
by
the
same
person
because
there
is
no
section
in
the
Estate
Tax
Act
stating
that
two
companies
that
are
deemed
to
be
controlled
by
the
same
person
are
companies
not
dealing
at
arm’s
length.
The
Estate
Tax
Act
has
no
provisions
similar
to
subsection
139(5)
and
subparagraph
139(5a)(c)(i)
of
the
Income
Tax
Act
(1952)
which
read:
(5)
For
the
purposes
of
this
Act,
(a)
related
persons
shall
be
deemed
not
to
deal
with
each
other
at
arm’s
length;
and
(b)
it
is
a
question
of
fact
whether
persons
not
related
to
each
other
were
at
a
particular
time
dealing
with
each
other
at
arm’s
length.
(5a)
For
the
purpose
of
subsection
(5),
(50)
and
this
subsection,
“related
persons”,
or
persons
related
to
each
other,
are
(c)
any
two
corporations
(i)
if
they
are
controlled
by
the
same
person
or
group
of
persons,
I
think
that
in
view
of
that
omission
in
the
Estate
Tax
Act,
the
debt
owed
by
some
of
the
companies
to
the
others
have
to
be
taken,
not
at
their
face
value
or
at
the
value
of
the
outstanding
amount
of
the
debt,
but
at
a
value
duly
appraised
by
taking
into
account
all
the
relevant
factors,
including
the
danger
of
bankruptcy,
which
could
affect
the
value
of
the
shares.
This
may
well
result
in
an
increase
in
a
company
and
a
decrease
in
another
one
when
valuing
the
shares
but
I
have
no
way
to
ascertain
that
effect.
The
other
point
to
be
discussed
is
the
one
concerning
the
debts
the
deceased
owed.
As
per
the
evidence
adduced,
it
is
my
opinion
that
the
debt
owed
to
the
Bank
of
Montreal,
in
the
amount
of
$51,605.89
was
a
debt
that
has
to
be
taken
into
account
in
computing
the
net
aggregate
value
of
the
estate.
It
is
my
considered
opinion
that
the
evidence,
on
account
of
its
nature
and,
unfortunately,
because
of
the
way
it
was
adduced,
does
not
permit
me
to
determine
an
amount
that
could
be
found
to
be
fair
and
not
arbitrary
as
being
the
aggregate
taxable
value
of
the
property
of
the
deceased.
That
state
of
affairs
is
even
less
understandable
when
one
considers
that
the
learned
member
of
the
Tax
Review
Board,
Mr
St-Onge,
has
remarks
in
his
judgment
to
that
effect.
It
is
reasonable
to
believe
that
the
following
factors,
amongst
others,
existing
at
the
time
of
death
of
Sam
Landsman,
have
not
been
properly
weighed
by
the
Minister
in
establishing
the
fair
market
value
for
purposes
of
the
aggregate
taxable
value:
the
strong
possibility
that
the
estate
be
obliged
to
resort
to
bankruptcy
and
also
the
high
cost
of
money
involved
to
bring
to
an
end
the
construction
of
an
apartment
building
in
Ottawa.
The
evidence
of
the
executor
is
to
the
[effect]
that
bankruptcy
at
the
time
of
the
death
of
Sam
Landsman
was
avoided
for
the
sole
reason
of
keeping
the
family
name
honourable.
The
testimony
of
the
chartered
accountant,
Mr
Raphael,
indicates
the
same
state
of
affairs
as
to
the
danger
of
bankruptcy;
the
high
cost
of
money
needed
to
finish
the
building
is
evidenced
by
the
same
witnesses.
Therefore,
the
appeal
is
allowed
and
the
matter
is
referred
back
to
the
Minister
for
reconsideration
of
the
fair
market
value
of
the
shares
owned
by
the
deceased
and
for
reassessment
allowing
as
a
deduction
in
computing
the
aggregate
taxable
value
of
the
estate
an
amount
of
$51,605.89
and
including
in
computing
the
aggregate
taxable
value
of
the
estate,
pursuant
to
sections
28
and
29
of
the
Estate
Tax
Act
(1958),
the
face
value
of
the
debts
owed
the
deceased
by
the
corporations
not
dealing
at
arm’s
length
with
him,
each
party
paying
its
own
costs.
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