[OFFICIAL ENGLISH TRANSLATION]
97-1199(IT)I
BETWEEN:
HÉLÈNE THOMASSIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on February 23, 1998, at
Québec, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Agents for the
Appellant:
Gaétan Roy
Alexis-François Charette
André Côté
Counsel for the Respondent: Pascale
O'Bomsawin
JUDGMENT
The
appeals from the assessments made under the Income Tax Act
for the 1989, 1990, 1991, 1992 and 1993 taxation years are
dismissed in accordance with the attached Reasons for
Judgment.
Signed at Ottawa, Canada, this 31st day of March 1998.
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980331
Docket: 97-1199(IT)I
BETWEEN:
HÉLÈNE THOMASSIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] In 1988, Luc Thomassin, the
appellant's son, took steps with a view to the purchase of a
business operating under the firm name Alimentation
Chanoine-Scott Enr. To that end, he prepared documentation and
set up the company 2551-6279 Québec Inc., in which
he held all the issued capital stock.
[2] In order to carry out his plan,
Luc Thomassin had to get the involvement of the appellant, his
mother, as guarantor. On June 30, 1988, she provided her son with
mortgage security to guarantee a loan of up to $62,000.
[3] After becoming the owner of the
business he wanted, Luc Thomassin invested in modernizing it. He
also acquired a competitor in order to boost the sales figures of
his new business. All his endeavours and initiatives aimed at
straightening out the financial situation proved unsuccessful.
After a few months of operations, business did not improve and
the new company was no longer able to meet its financial
obligations; as a result, the appellant was turned to.
[4] Relying on the terms of the
security contract, the lender, the Caisse Populaire St-Yves, thus
required that the appellant repay the money owed by her son and
his company. The evidence has established that it was the
appellant who made the monthly payments from August 1989.
[5] Having lost all hope of making the
business profitable, the appellant's son, the sole
shareholder in the company that owned the business, decided on
the bulk sale of the company's assets. In accordance with the
Civil Code, Luc Thomassin had to list all the creditors and
indicate how much was owed to each. Although he admitted and
acknowledged that the appellant was at that time a creditor, her
name and the amount owed to her did not appear on the list
attached to the bulk sale contract respecting the company's
assets.
[6] Once the assets were sold, the
company ceased all activity. Two or three years later, Luc
Thomassin decided to declare personal bankruptcy.
[7] Throughout that period, the
appellant did not undertake or initiate any proceedings or take
any action to be reimbursed for the amounts she had paid out. On
the contrary, she assumed fully the obligations under the
security contract.
[8] Harassed by the Caisse Populaire
St-Yves, the appellant, having become worried and nervous,
decided to reimburse by means of loans obtained from the National
Bank all the money owed to the credit union.
[9] The loans obtained from the
National Bank also allowed the appellant to repay debts affecting
the real property which had been provided as security and which
generated rental income. At that point, the balance owed under
the security contract was between $45,000 and $47,000.
[10] When asked why she had provided the
security, the appellant said that she trusted her son, who was
responsible, experienced and hardworking. She stated that, as
well, she did not want him to end up on welfare.
[11] Roughly speaking, those are the facts
giving rise to the dispute involved in this appeal. The issue was
stated as follows:
[translation]
Did the appellant suffer a business investment loss in any of
the 1989, 1990, 1991, 1992 and 1993 taxation years?
[12] The evidence has clearly established
that the security document provided by the appellant was not
motivated by any thought of profit. Essentially, it was a noble
and generous gesture of support by a mother toward her son. The
appellant never had any idea or intention of profiting or
benefiting from her involvement as guarantor.
[13] The sole motivation for the
appellant's action was the desire to help her son, to make a
sort of disinterested contribution to his greater well-being.
After thinking things over and assessing the situation, she
wanted to enable her son to build a future for himself. As a
mother, she wished through this magnanimous act to help support
an initiative of her son's, believing that he would be equal
to the challenge.
[14] Having become a victim of her own
generosity, the appellant realized that her contribution might
have harmful effects on her own financial situation by
jeopardizing the very source of some of her income, since she had
had to mortgage a number of her properties when she provided the
security.
[15] In order to keep and safeguard the
source of that income, the appellant consolidated the debts
relating to the properties she had provided as security, in order
to render her obligations-considerably increased by the payments
resulting under the security contract-more realistic and
reasonable.
[16] The payments made under the security
contract during the years at issue were not expenses that could
be considered business investment losses.
[17] The appellant's financial assets
were never linked with those of her son's business. In other
words, regardless of the outcome of the son's venture, there
were only two possibilities: either the son successfully met the
challenge and the appellant had the satisfaction of having
contributed to his success without, however, deriving any
financial benefit or gain therefrom; or her son failed and she
was simply obliged to repay the loan from the financial
institution on his behalf.
[18] Unfortunately for the appellant, the
second possibility materialized and, as a result, she was obliged
to repay considerable amounts of money because of the guarantee
she had provided. This fact does not suffice for her appeal to be
allowed, since the payments made do not satisfy the conditions
for being considered and treated as business investment
losses.
[19] Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 31st day of March 1998.
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor
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