Date: 19980710
Dockets: 96-4431-IT-G; 96-4432-IT-G; 96-4433-IT-G
BETWEEN:
TODD BIDERMAN, MATTHEW BIDERMAN, JUSTIN BIDERMAN,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent,
Reasons for Judgment
McArthur, J.T.C.C.
[1] These appeals concerning the Appellants' assessments,
dated July 19, 1995, were heard on common evidence. The Minister
of National Revenue (the "Minister") assessed the
Appellants $74,723[1] in respect of a Transfer of Property to them by their
father, Michael B. Biderman, within the meaning of section
160 of the Income Tax Act (the "Act"). It
is not in dispute that at all material times
Michael B. Biderman was indebted to Revenue Canada and
had been since 1989.
[2] Dale Rochelle Biderman, wife of Michael B. Biderman and
mother of Matthew Biderman, Todd Biderman and Justin Biderman,
died of cancer on October 6, 1991, leaving three children under
the age of 18 years. Letters probate were granted on May 15,
1992, appointing Michael B. Biderman executor of the estate. The
testatrix left her entire estate to her husband and failing him,
in trust for her children.
[3] During the years 1990 through to 1994, Revenue Canada
officers expended considerable effort to collect the
indebtedness, which in 1992 was in excess of $50,000 from Michael
B. Biderman.
[4] On September 30, 1994, Michael B. Biderman executed a
disclaimer of his interests as a beneficiary of his wife's
estate. At the time of her death, Dale Rochelle Biderman
owned property at 1370 Hastings Drive, London, Ontario and 500
common shares in Jandale Holdings Ltd. Hastings Drive was her
principal place of residence where her husband and children
continue to live. Jandale was incorporated by her family, Janice
Slopen her sister, and she and her siblings retained the common
shares.
[5] The real property was transferred to the Appellants by
Transfer/Deed, registered October 7, 1994 and the shares were
transferred by a Declaration of Transmission dated September 30,
1996, by Michael B. Biderman in his capacity as executor of the
estate with respect to Jandale.
[6] The fair market value of Hastings Drive, at the time of
the transfer was $180,000. There was no evidence as to the value
of the shares of Jandale Holdings Ltd. Since his wife's
death, Michael B. Biderman has continued to occupy the real
property, with his children, as his own.
[7] Hastings was transferred within three years from the date
of the death of Dale Rochelle Biderman which avoided the vesting
of the real property in favour of Michael B. Biderman.[2] Given the presumption
in favour of vesting, the remaining assets of the deceased may
well have vested in the person beneficially entitled. Michael B.
Biderman is a lawyer who is presently suspended from practising
law in Ontario and earns a modest income as a paralegal.
[8] On September 30, 1994, Michael B. Biderman executed a
disclaimer and waiver of any claim interest or title in his
deceased wife's estate. The Appellants submit that as a
result of the disclaimer the estate was required to transfer the
estate assets to Earl Biderman in trust for the Appellants. At
the time of the transfer to them, the Appellants Todd, Matthew
and Justin were 18, 20 and 16 years old.
Position of the Appellants
[9] The disclaimer by their father, Michael B. Biderman, meant
that he never owned the estate assets in his personal capacity.
The transfer of the real property and the shares to the
Appellants was from the estate and not from
Michael B. Biderman personally.
Respondent's Position
[10] Michael B. Biderman had owed Revenue Canada over $70,000.
As former spouse of the deceased and father of the Appellants, he
was not dealing with the Appellants at arm's length. In May
of 1992, he undertook to pay Revenue Canada $20,000 from the
distribution of his deceased spouse's estate. On November 27,
1992, the Minister registered in the Federal Court a certificate
of judgment certifying as payable by Michael B. Biderman, the sum
of $60,926 and a writ of fieri facias was issued February
24, 1993.
[11] When Michael B. Biderman surrendered his interest in the
estate resulting in the estate's assets going to his three
sons, the Minister assessed his three sons pursuant to section
160 of the Act on the basis that their father had an
interest in the estate assets when he signed the Disclaimer and
Waiver.
[12] Subsection 160(1) of the Act reads as follows:
"Where a person has, ...transferred property, either
directly or indirectly, by means of a trust or by any other means
whatever, to
...
(c) a person with whom he was not dealing at arm's
length,
..."
[13] Subsection 248(1) of the Act reads in part as
follows:
"'property' means property of any kind whatever
whether real or personal or corporeal or incorporeal and, without
restricting the generality of the foregoing, includes
(a) a right of any kind whatever, a share or a chose in
action,
..."
Analysis
[14] The purpose of section 160 of the Act is to
prevent a taxpayer from defeating the claim of the Minister to
unpaid taxes by transferring his assets to persons with whom he
is not dealing at arm's length.
[15] The Appellants submit that Michael B. Biderman validly
disclaimed an interest in his deceased wife's estate on
September 30, 1994 and that he had no interest whatsoever in the
real property or of the Jandale shares at the time the estate
transferred them to the Appellants.
[16] Even if I go as far as finding Michael B. Biderman
executed a valid disclaimer, I have no difficulty concluding that
he had a right derived from the will which had the net value of
the real property and the shares and by disclaiming that right a
transfer of property resulted within the meaning of
section 160 of the Act. The purpose of section 160 is
to ensure that the tax debtor does not put assets out of reach of
Revenue Canada. The voiding of the devise and bequest by a
disclaimer prevents the Minister from collecting tax money
owing.
[17] Michael B. Biderman transferred to his sons the rights
that he had in the estate of his wife. He provided that framework
whereby his children became eligible, as the only other named
beneficiaries in the will, to be chosen to inherit the property
willed by Dale Rochelle Biderman.
[18] The word "transfer" is to be interpreted in a
very broad sense as referred to in the Estate of David Fasken
v. Minister of National Revenue 49 DTC 491 (Exch).
[19] In the Queen v. Kieboom 92 DTC 6382 (FCA), a
taxpayer caused his company to issue common shares to his wife
and children. The Court found that this indirect transfer was in
fact a transfer. The taxpayer had divested himself of certain
rights to receive dividends should they be made. An analogy can
be made in the present instance. Michael B. Biderman divested
himself of certain rights to receive a house and shares. He
divested himself of a right to the assets of his wife's
estate. That is a transfer of property within the meaning of
subsection 160(1). Although a transfer resulted from an
operation of law it was set in motion by the disclaimer and
waiver as expressed in Les Placements R.I.O. Inc. v. The
Queen 97 DTC 1223, TCC at 1226.
[20] The word property has been widely interpreted. The
definition in subsection 248(1) is all encompassing. In
Kieboom (supra) the word "property" is
indicative and descriptive of every possible interest which a
person can have.
[21] Michael B. Biderman was living at 1370 Hastings Drive,
London, at the time of Dale Rochelle Biderman's death. He
continued to live there after her death, taking advantage of his
inheritance and he still lives there today. He negotiated with
Revenue Canada on the basis that the assets willed were his
personally. He benefited from those assets for almost three years
by having a home for himself and his children and as such he
cannot be said to disclaim under the will. He could only
surrender or release his interest in the estate.
[22] In conclusion, I find that the interest or right that
Michael B. Biderman had in the estate was passed to his three
sons by an indirect means such that the property was transferred
within the meaning of section 160 of the Act.
[23] The appeal is dismissed with costs.
Signed at Ottawa, Canada, this 10th day of July 1998.
"C.H. McArthur"
J.T.C.C.
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