Date: 19980119
Docket: 97-683-IT-I
BETWEEN:
ALLAN RICHARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
G. Tremblay, J.T.C.C.
Point at issue
[1] According to the Notice of Appeal and the Reply to the
Notice of Appeal the question is whether, in calculating his
income for the 1986 taxation year, the appellant is entitled to
deduct $3,191 as fees paid to investment counsel pursuant to
s. 20(1)(bb) of the Income Tax Act ("the
Act").
[2] According to the respondent the fees in question were paid
for a profitability study on possible purchases of immovable
property, not securities as provided in s. 20(1)(bb)
of the Act. Further, in the respondent's submission the fees
were not paid for the purpose mentioned in
s. 18(1)(a): they were actually a capital outlay
within the meaning of s. 18(1)(b).
[3] The instant case was apparently postponed
sine die in 1988 following an appeal to the Federal
Court in Charron et al.[1] That case concerned the sale of a share in a
multiple-unit residential building.
Burden of proof
[4] The appellant has the burden of showing that the
respondent's assessment is incorrect. This burden of proof
results from several judicial decisions, including the judgment
of the Supreme Court of Canada in Johnston v. Minister of
National Revenue.[2]
[5] In that judgment the Supreme Court held that the facts
assumed by the respondent in support of the assessments or
reassessments must be presumed to be true until the contrary is
shown. In the instant case the facts assumed by the respondent
are set out in subparagraphs (a) to (d) of paragraph 7 of the
Reply to the Notice of Appeal. That paragraph reads as
follows:
[TRANSLATION]
7. In making the assessment for the 1986 taxation year the
Minister took into account inter alia the following
facts:
(a) in connection with a deduction for carrying charges a sum
of $3,191 was paid by the appellant to
J. André Émond for services as a real
estate investment counsellor in the 1986 taxation year;
[admitted]
(b) J. André Émond conducted a
profitability study of possible real estate purchases for a group
of investors which included the appellant; [admitted]
(c) as a result of this study the appellant, with other
investors, became an undivided co-owner of several immovable
properties; [admitted]
(d) the fees paid to an investment counsellor are fees
incurred in the purchase of property and such fees are not
deductible. [denied]
[6] The provision of the Act which governs the instant case is
s. 20(1)(bb), which reads as follows:
20. Deductions permitted in computing income from business
or property.
(1)Notwithstanding paragraphs 18(1)(a),
(b) and (h), in computing a taxpayer's income
for a taxation year from a business or property, there may be
deducted such of the following amounts as are wholly applicable
to that source or such part of the following amounts as may
reasonably be regarded as applicable thereto:
. . .
(bb) Fees paid to investment counsel. — an
amount other than a commission paid by the taxpayer in the year
to a person
(i) for advice as to the advisability of purchasing or selling
a specific share or security of the taxpayer, or
(ii) for services in respect of the administration or
management of shares or securities of the taxpayer,
if that person's principal business
(iii) is advising others as to the advisability of purchasing
or selling specific shares or securities, or
(iv) includes the provision of services in respect of the
administration or management of shares or
securities . . . .
[7] The respondent's first argument is that the condition
set out in s. 20(1)(bb)(i) of the Act was not met
since a real estate transaction is at issue in the instant
case.
[8] Charron et al., heard by this Court, was a similar
case to the one before the Court. It was established in that case
that this type of transaction is within the jurisdiction of the
Commission des valeurs mobilières (C.V.M.) du
Québec (Charron et al., at p. 101). The same
is true of the Ontario Securities Commission (Charron et
al., at p. 105: 4.03.1.6 in fine).
[9] As to the second condition in s. 20(1)(bb),
paragraph 4.03.1.6, beginning at p. 104 of the
aforesaid case, explains the meaning of “security”,
with abundant supporting precedent.
[10] The third condition in s. 20(1)(bb) is also
met because, even if Mr. Émond did not perhaps think
he was advising others as to the advisability of purchasing
securities, he did in fact sell them (see para. 4.03.1.10 of
the aforesaid case). The same is true of the fourth condition,
regarding the management of shares or securities.
[11] The decision in Charron et al. has not been
overturned by any court. Boucher[3]is to the same effect.
Conclusion
[12] The appeal is allowed with costs.
Signed at Quebec, Canada, this 19th day of January 1998.
“Guy Tremblay”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true this 2nd day of September
1998.
Stephen Balogh, Revisor
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