Date: 20020304
Docket:
2000-1394-IT-I
BETWEEN:
NORMAND
BÉRUBÉ,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Angers,
J.T.C.C.
[1]
These are appeals which Normand Bérubé has
instituted under the informal procedure from assessments for the
1989, 1990, 1991, 1992, 1993, 1994 and 1995 taxation years. For
those years, Mr. Bérubé claimed tax credits in
respect of gifts of works of art to charities. The Minister of
National Revenue (the "Minister") disallowed the
credits on the grounds that Mr. Bérubé did not
actually make any gifts and that the receipts were not in
accordance with the Income Tax Act (the
"Act"). Furthermore, the receipts issued did not
correspond to the fair market value of the works.
[2]
Mr. Bérubé is a retired teacher. He has
training in art and holds a bachelor's degree in plastic
arts. He has always been interested in art works, to the point of
becoming an enthusiast. He says he collected numerous paintings
between 1976 and 1989, frequenting various establishments to
obtain them. In 1989, he was approached by a certain
Émile Amireault while visiting such an
establishment.
[3]
Mr. Amireault informed Mr. Bérubé that,
if he gave some of his paintings to organizations recognized by
the government, he could receive a tax deduction.
Mr. Amireault agreed to go to
Mr. Bérubé's home to examine his paintings
in order to determine whether they were suitable and to give him
advice concerning them.
[4]
Also in 1989, Mr. Bérubé made inquiries of
Revenue Canada regarding what Mr. Amireault had told him.
That same year, he agreed to have Mr. Amireault come to his
home. For that year—and the same scenario was repeated
until 1993—Mr. Amireault went to
Mr. Bérubé's home, selected some art works
and made a list of them; he subsequently prepared a receipt and
returned to pick up the works. According to the evidence,
Mr. Amireault was also a mandatary for the charity to which
the gifts were made.
[5]
In 1993, an incident occurred: Mr. Bérubé
observed when Mr. Amireault returned with the receipt that,
on the receipt, Mr. Amireault had substituted works
belonging to him for those that had been donated.
Mr. Bérubé says he was offended at the time,
but, since the works substituted were of equivalent value, he did
nothing. It was not until September 9, 1996, that he
revealed the incident in a letter to Revenue Canada auditor,
Claude Potvin.
[6]
In 1994, Mr. Bérubé kept his distance from
Mr. Amireault. While taking courses at La Maison d'Art
Fra Angelico, he met Father Michel Jacques and, in the
following two years, donated art works to La Maison Fra
Angelico.
[7]
Mr. Bérubé admitted in cross-examination that
Mr. Amireault was a mandatary of two of the charities to
which he had made gifts: the Fondation Collège de
l'Assomption and the Fondation Don des Arts. Furthermore, he
knew that Mr. Amireault organized the auctions of the
Fondation Don des Arts. Mr. Bérubé concluded
by saying that the assistance he had received from
Mr. Amireault had been useful to him and that everything
appeared to him to have been above board. In the last
three years in which he dealt with Mr. Amireault,
Mr. Bérubé paid him a commission of
three percent of the established value of the art works.
When questioned about the contradictions in the documentation
filed, that is to say, contradictions concerning the works to
which the receipts refer, he answered that he had acted in a
confused stated of mind but in good faith, particularly in
writing his letter dated September 9, 1996, in which he
declared that the works described on the appraisal certificates
were not those he had given to the charities through
Mr. Amireault.
[8]
Mr. Bérubé's interest in and passion for
art were confirmed by three witnesses, all of whom had known
Mr. Bérubé for more than 20 years. He was
described as an artist, a collector of paintings and an art
lover. Over the years, he has become a connoisseur and many
people go to consult him. Some have accompanied him to flea
markets and auctions. However, no one could identify or comment
on the art works in issue in this case.
[9]
Mr. Bérubé chose not to call any expert
witnesses and therefore adduced no evidence concerning the fair
market value of the gifts made in the relevant years.
[10]
Counsel for the respondent produced two witnesses:
Claude Potvin, the auditor for the relevant period, and
Denis Lemieux, an investigator. Both spoke of the exhaustive
research conducted in the course of the investigation into
Mr. Bérubé's transactions, the charities
linked to Mr. Amireault and the value of the works given to
those charities and resold by them.
[11]
Claude Potvin's investigation began in August 1996 and
ended in October of that year. On August 9, 1996, he wrote
to Mr. Bérubé asking him, with respect to the
art works given in the relevant years, for proof of the
purchases, of the prices and of the payment of those prices, and
for any additional documentation.
[12]
In a conversation with Mr. Potvin, the accountant
François Robert Lemire, who represented
Mr. Bérubé, stressed his client's good
faith and said that neither Mr. Bérubé nor
Émile Amireault had any proof of purchase.
Mr. Potvin subsequently received from the appellant certain
invoices pertaining to the purchase of works given in the
relevant years.
Statute-barred
years
[13]
The onus is on the respondent to adduce evidence justifying
notices of reassessment for 1989, 1990, 1991 and 1992. Those
notices must satisfy the Court on a balance of probabilities that
Mr. Bérubé made a misrepresentation
attributable to neglect, carelessness or wilful default, or that
he committed some fraud in filing the return or in supplying any
information, as contemplated in
subparagraph 152(4)(a)(i) of the
Act.
[14]
In Venne v. Canada, [1984] F.C.J. No. 314 (F.C.T.D.)
(Q.L.), 84 DTC 6247, Strayer J. described the burden of
proof as follows:
I
am satisfied that it is sufficient for the Minister, in order to
invoke the power under
sub-paragraph 152(4)(a)(i) of the Act to show
that, with respect to any one or more aspects of his income tax
return for a given year, a taxpayer has been negligent. Such
negligence is established if it is shown that the taxpayer has
not exercised reasonable care. This is surely what the words
"misrepresentation that is attributable to neglect"
must mean, particularly when combined with other grounds such as
"carelessness" or "wilful default" which
refer to a higher degree of negligence or to intentional
misconduct. Unless these words are superfluous in the section,
which I am not able to assume, the term "neglect"
involves a lesser standard of deficiency akin to that used in
other fields of law such as the law of tort.
[15]
Did Mr. Bérubé exercise reasonable care? He
tells us that he met Émile Amireault in 1989 and was
informed by him that he could obtain tax deductions by donating
some of his art works to charities recognized by the government.
Now, getting tax deductions is not bad in itself, but the
deduction must be permitted under the applicable statutory
provisions. Mr. Bérubé failed to exercise
reasonable care when he left it to Mr. Amireault to handle
everything, that is to say: to find the charities, establish the
market value of the works, obtain receipts and even deliver the
works. What should stand out particularly in all of this is that
Mr. Bérubé never questioned
Mr. Amireault's appraisals. And yet
Mr. Bérubé represents himself as a connoisseur
and collector who has been active in the field for more than
20 years. He disclosed the prices he had paid for his
paintings. Could he really think their value had increased that
much?
[16]
Mr. Bérubé took the step of contacting Revenue
Canada to obtain information regarding Mr. Amireault's
statements. That should have been sufficient to make him aware of
the requirements of the Act, particularly as regards the
determination of the market value of gifts to
charities.
[17]
The documents Mr. Bérubé provided, namely his
proofs of purchase for all the relevant years, raise some doubt
as to the authenticity of the information they contain and even
as to Mr. Bérubé's intentions. The
evidence showed that some of those invoices were issued following
the auditor's request in order to satisfy the auditor,
regardless whether they were accurate or not. So it is that one
of the invoices indicates a purchase of two paintings on
November 9, 1979. By sheer coincidence, a gift was made of
those same two paintings in 1990.
Mr. Bérubé admits that the invoices were made
at his request. To that must be added the contradictions between
those invoices and the acquisition prices shown in the amended
income tax returns.
[18]
In light of these facts, I am satisfied that the respondent has
discharged the burden of furnishing the proof necessary to
justify the reassessments for the statute-barred
years.
1989
[19]
In 1989, Mr. Bérubé donated 14 works of
art, the stated total value of which was $9,290, to the Fondation
Collège de l'Assomption. He filed in evidence a
receipt he had obtained from that organization. The respondent
contends that the receipt is not in compliance with
section 3500 of the Income Tax Regulations
("Regulations") and that
Mr. Bérubé did not make genuine donations or
prove that he owned the works at the time the donations were
made. Lastly, the fair market value was not shown on the
receipts, and there were no appraisals by an independent
expert.
[20]
The first point concerns the validity of the receipt filed by
Mr. Bérubé. The relevant parts of
section 3500 and subsections 3501(1) and (1.1) of the
Regulations provided as follows:
3500. In this
Part,
"official
receipt" means a receipt for the purpose of
paragraph 110(1)(a), (b), (b.1) or
subsection 110(2.2) of the Act, containing information
as required by section 3501 or 3502.
.
. .
"other recipient of a
gift" means a person referred to
in any of subparagraphs 110(1)(a)(iii) to (vii),
paragraph 110(1)(b) or (b.1) or
subparagraph 110(2.2)(a)(ii) of the Act to whom a
gift is made by a taxpayer;
.
. .
3501. (1)
Every official receipt issued by a registered organization
shall contain a statement that it is an official receipt
for income tax purposes and shall show clearly in
such a manner that it cannot readily be altered,
(a) the name
and address in Canada of the organization as recorded with the
Minister;
(b) the
registration number assigned by the Minister to the
organization;
(c) the serial
number of the receipt;
(d) the place
or locality where the receipt was issued;
(e) where the
donation is a cash donation, the day on which or the year during
which the donation was received;
(e.1) where
the donation is a gift of property other than
cash
(i) the day on which the donation was
received,
(ii) a brief description of the
property, and
(iii) the name and
address of the appraiser of the property if an appraisal is
done;
(f) the day on
which the receipt was issued where that day differs from the day
referred to in paragraph (e) or
(e.1);
(g) the
name and address of the donor including, in the case of
an individual, his first name and
initial;
(h) the amount
that is
(i) the amount of a cash donation,
or
(ii)
where the donation is a gift of property other than cash, the
amount that is the fair market value of the property at the time
that the gift was made; and
(i) the
signature, as provided in subsection (2) or (3), of a
responsible individual who has been authorized by the
organization to acknowledge donations.
(1.1) Every
official receipt issued by another recipient of a gift
shall contain a statement that it is an official receipt
for income tax purposes and shall show clearly in
such a manner that it cannot readily be altered,
(a) the name
and address of the other recipient of the gift;
(b) the serial
number of the receipt;
(c) the place
or locality where the receipt was issued;
(d) where the
donation is a cash donation, the day on which or the year during
which the donation was received;
(e) where
the donation is a gift of property other than
cash,
(i) the day on which the donation
was received,
(ii) a brief description of the
property, and
(iii) the
name and address of the appraiser of the property if an
appraisal is done;
(f) the day on
which the receipt was issued where that day differs from the day
referred to in paragraph (d) or
(e);
(g) the
name and address of the donor including, in the case of
an individual, his first name and
initial;
(h) the amount
that is
(i) the amount of a cash donation,
or
(ii) where the donation is a
gift of property other than cash, the amount that is the fair
market value of the property at the time that the gift was made;
and
(i) the
signature, as provided in subsection (2) or (3.1), of a
responsible individual who has been authorized by the other
recipient of the gift to acknowledge donations.
[21]
It should be borne in mind that subsection 118.1(2) of the
Act provides that a gift shall not be included in the
total charitable gifts, among other gifts, unless the gift is
proven by a receipt therefor that contains prescribed
information.
[22]
The receipt dated December 16, 1989, from the Fondation
Collège de l'Assomption does not meet the requirements
of the Regulations. It contains neither the day on which
the gift was received nor a brief description of the property
given. The name and address of the appraiser of the property are
not shown either. Furthermore, the receipt shows a cash donation
made to the organization in question, not a gift of art
works.
[23]
I agree with the comments made by the Honourable
Judge Tardif of this Court in ruling in Plante v.
Canada, [1999] T.C.J. No. 51 (Q.L.), on the importance
of the requirements prescribed by the Regulations.
Judge Tardif states the following in this regard in
paragraphs 46 and 47:
46.
The requirements in question are not frivolous or unimportant; on
the contrary, the information required is fundamental, and
absolutely necessary for checking both that the indicated value
is accurate and that the gift was actually made.
47.
The purpose of such requirements is to prevent abuses of any
kind. They are the minimum requirements for defining the kind of
gift that can qualify the taxpayer making it for a tax
deduction.
[24]
In light of this conclusion, Mr. Bérubé did
not prove that his receipt meets the requirements and he may not
in this instance receive a tax credit for 1989.
[25]
It is therefore unnecessary to consider the other questions
raised by the respondent for that year.
1990
[26]
In his income tax return for 1990, Mr. Bérubé
claimed tax credits in respect of an amount of $1,350 and an
additional amount of $660 representing the value of gifts of art
works made to the Fondation Collège de l'Assomption.
He also claimed a credit in respect of a gift purportedly worth
$6,700 to Entraide-cancer du
Québec inc.
[27]
The receipt for $1,350 issued by Fondation Collège de
l'Assomption does not meet the requirements of the
Regulations as set out in the preceding paragraphs. The
receipt from Entraide-cancer does not show the day on which
the donation was received and does not contain a description of
the property or indicate either the name or address of the
appraiser. No receipt was filed for the gift of $660 to the
Fondation Collège de l'Assomption. For the same
reasons as those stated concerning the 1989 taxation year, I find
that Mr. Bérubé may not receive the tax credit
for 1990.
1991
[28]
For 1991, according to his income tax return,
Mr. Bérubé claimed a credit for charitable
donations totalling $9,457.97. He appended to his return a
receipt from the Fondation Don des Arts dated December 16,
1991, for a total amount of $10,975. The total of the respective
values of the works of art shown on the receipt should come to
$10,475, not $10,975. However, the letter accompanying the
donation states the value of each painting and indicates a total
of $10,975. This error is immaterial to the resolution of this
case. With respect to the 1991 taxation year,
Mr. Bérubé admits that he paid
Émile Amireault, the owner of Galerie d'Art
Annie-Claude enr., a commission equal to
three percent of the amount determined by the appraisal,
that is, $329.25 plus GST. Mr. Bérubé
acknowledges that Mr. Amireault insisted on these conditions
for the last three years in which
Mr. Bérubé did business with him.
[29]
This time, the receipt filed in evidence meets the requirements
of the Regulations. However, the onus is on the appellant
to show that a donation of property or objects was indeed made
and that the amount indicated on the receipt represents the fair
market value of that property.
[30]
This Court has, on a number of occasions, considered the matter
of the factors that are essential to the existence of a donation.
See Paradis v. Canada, [1996] T.C.J. No. 1638 (Q.L.),
[1997] 2 C.T.C. 2557, and Côté v.
Canada, [1998] T.C.J. No. 1046, 99 DTC 72. Without
repeating the entire analysis of that matter, I find that, in
1991, the appellant made a gift of the paintings in question to
the charity Fondation Don des Arts. Although
Mr. Bérubé could not produce all his invoices
relating to the purchase of the paintings in question, I am able
to find on the whole of the evidence that he had had a collection
of paintings for a number of years, that he made a gift of the
paintings described in the exhibits filed in evidence concerning
1991 and that the charity named in fact received the
paintings.
[31]
It is the question of market value that presents the greatest
difficulty, and the appellant adduced no evidence on that
aspect.
[32]
In Côté, supra, Chief Judge Garon
reiterated what fair market value is, namely: that which is
obtained in an open and unrestricted market in which the price is
hammered out between willing and informed buyers and sellers on
the anvil of supply and demand.
[33]
In 1991, the appellant made a gift of five
11" x 16" paintings by
Michel St-Amour, five 16" x 20"
paintings by the same artist and one
28" x 22" painting by Niska. He filed a few
invoices relating to the purchase of the
Michel St-Amour paintings, but there is no evidence to
satisfy me that the paintings shown on those invoices are in fact
the same as those given to the Fondation Don des Arts. It is the
same artist, but are they the same paintings?
[34]
Moreover, the appellant admitted that some of his proofs of
purchase had been reconstituted by a certain Ms. Gagnon of
Équipements Longueuil Enr., at whose business there
had been a fire. She made the invoices on the basis of what she
thought had been the value of a particular painting at the time
of purchase, not on the basis of the actual price
paid.
[35]
The respondent called as a witness Denis Lemieux, who has
been an investigator with the Canada Customs and Revenue Agency
for 22 years. Mr. Lemieux conducted an investigation by
making inquiries of donors of art works and certain charities.
His investigation took place over several years, and the
information gathered provided him with the prices received by the
charities on the subsequent disposition of the works. This
enabled him to compare those prices with the value stated in the
appraisals provided when the receipts were prepared. His
investigation showed that the paintings sold by the Fondation Don
des Arts fetched on average only 10 percent of the amounts
determined in the appraisals. I am therefore prepared to allow
the appellant a market value of $1,097 for the paintings
indicated on the receipt issued by the Fondation Don des Arts for
the 1991 taxation year.
1992
[36]
For 1992, Mr. Bérubé claims a charitable
donations credit with respect to an amount of $11,000. The
receipt provided by Les Centres d'accueil du
Chemin du Roy Inc. does not meet the requirements of
the Regulations as set out above in that it does not
describe the property given or identify any appraiser.
[37]
In a letter dated September 9, 1996, to Revenue Canada
auditor Claude Potvin, the appellant admitted that the
paintings shown on the receipt issued for 1992 had been
substituted for those of the appellant by
Émile Amireault. The effect of that substitution is
thus that the charity never received the paintings belonging to
the appellant.
[38]
For these reasons, the appellant may not receive a tax credit for
1992.
1993
[39]
The appellant filed four receipts for charitable donations
for 1993. The first, issued by the ensemble Musica Nova on
August 27, 1993, is a receipt for $4,125 for a gift of art
works made by the appellant. For reasons set out in the preceding
paragraphs, that receipt does not meet the requirements of the
Regulations: the works are not described and the
appraiser's name and address are not indicated, nor is the
day on which the donation was received. The appellant therefore
may not receive a credit for 1993.
[40]
The second receipt, for $3,875, was issued by the Fondation Don
des Arts on September 4, 1993. The third receipt, for $500,
was issued on December 14, 1993, also by the Fondation.
Both receipts are for gifts of paintings and art works and are
expressly mentioned in the letter of September 9, 1996, to
Claude Potvin, in which the appellant admitted that the
paintings he had given had been the object of a substitution by
Émile Amireault. As the charities did not receive the
property in question, there was no donation within the meaning of
the Act, as explained above. The appellant therefore may
not receive a credit.
[41]
The last receipt, for $1,200, was issued by the Fondation Don des
Arts on December 28, 1993, and complies with
section 3500 of the Regulations. However, was there a
gift that met the requirements of the Act? The appellant
testified that he realized during the 1993 taxation year that
Émile Amireault was substituting his works for the
appellant's for the purposes of the donations to the
charities. Although offended by the practice, the appellant
accepted it because Mr. Amireault had substituted works of
equivalent value. But how could the appellant come to this
conclusion without having seen the works given? I cannot conceive
that he could have permitted such a substitution without
realizing that he was also casting doubt on his own integrity and
good faith. The authenticity of the entire transaction is thus
seriously undermined, to the point where I cannot conclude that
the paintings described in the receipt issued by the charity in
question were actually donated. The appellant therefore may not
receive the credit in this instance.
1994
[42]
For 1994, the appellant filed three receipts from charities.
La Maison d'Art Fra Angelico issued one for $980 on
November 25, 1994. That receipt does not describe the
property or state its market value; the receipt is thus not in
compliance with section 3500 of the Regulations and
the appellant may not make use of it.
[43]
The other two receipts, dated December 28, 1993, and
January 27, 1994, were issued by the Fondation Don des Arts
for amounts of $3,375 and $3,975 respectively. The appraiser
shown is the Galerie d'art Annie-Claude, which was
owned and operated by Émile Amireault. For the
reasons stated with regard to the 1993 taxation year in the case
of the same charity, I cannot come to a different conclusion from
that concerning the 1993 transactions. I am not satisfied on the
evidence that the appellant's paintings described on the
receipts were in fact given to the donee. The appellant therefore
may not make use of those receipts.
1995
[44]
The appellant filed two receipts from charities for the 1995
taxation year. The first, dated February 28, 1995, is from
La Maison d'Art Fra Angelico, and the other, dated
June 30, 1995, from the Musée des Beaux-Arts de
Sherbrooke. They are for $25,455 and $5,750 respectively. The
respondent informed the Court that she accepted the receipt from
the Musée des Beaux-Arts de Sherbrooke.
[45]
However, the respondent does not accept the receipt from La
Maison d'Art Fra Angelico, again for the same reasons. That
receipt does not comply with section 3500 of the
Regulations based on what is stated above. It does not
describe the property or give the appraiser's name. The
appellant confirmed that the receipt was for a gift of art works.
He therefore may not receive the credit in respect of such a
gift.
Penalties
[46]
The Minister assessed the appellant a penalty for each of the
taxation years in issue under subsection 163(2) of the
Act, which provided as follows:
(2) False statements or
omissions. Every person who,
knowingly, or under circumstances amounting to gross negligence
in the carrying out of any duty or obligation imposed by or under
this Act, has made or has participated in, assented to or
acquiesced in the making of, a false statement or omission in a
return, form, certificate, statement or answer (in this section
referred to as a "return") filed or made in respect of
a taxation year as required by or under this Act or a regulation,
is liable to a penalty of the greater of $100 and 50% of the
total of
(a) the amount, if
any, by which
(i) the amount, if any, by
which
(A) the tax for the
year that would be payable by the person under this
Act
exceeds
(B) the amount that
would be deemed by subsection 120(2) to have been paid on
account of the person's tax for the year
if
the person's taxable income for the year were computed by
adding to the taxable income reported by the person in the
person's return for the year that portion of the person's
understatement of income for the year that is reasonably
attributable to the false statement or omission and if the
person's tax payable for the year were computed by
subtracting from the deductions from the tax otherwise payable by
the person for the year such portion of any such deduction as may
reasonably be attributable to the false statement or
omission
exceeds
(ii) the amount, if any, by
which
(A) the tax for the
year that would have been payable by the person under this
Act
exceeds
(B) the amount that
would have been deemed by subsection 120(2) to have been
paid on account of the person's tax for the year
had the person's tax
payable for the year been assessed on the basis of the
information provided in the person's return for the
year,
. . .
[47]
The onus is thus on the respondent to show on a balance of
probabilities that the appellant made a false statement in his
income tax returns for the years in question and that that
statement was made knowingly or under circumstances amounting to
gross negligence.
[48]
I am in agreement with Strayer J.'s remarks in
Venne, supra, concerning the notion of gross
negligence:
"Gross
negligence" must be taken to involve greater neglect than
simply a failure to use reasonable care. It must involve a high
degree of negligence tantamount to intentional acting, an
indifference as to whether the law is complied with or
not.
[49]
In my view, the respondent has discharged her burden and shown on
a balance of probabilities that the appellant knowingly, or under
circumstances amounting to gross negligence, made a false
statement in his income tax returns for the years in
question.
[50]
In paragraphs 13 to 17 of these reasons, I have already
discussed the appellant's conduct as it relates to the
statute-barred taxation years. The same findings of fact apply to
the analysis of the evidence concerning the penalties and extend
beyond the statute-barred years to include all the taxation years
in issue.
[51]
The most important facts for the purposes of the present analysis
are revealed by the investigator's testimony and that of the
auditor. It may be concluded from their analyses of the prices
obtained by the various donees on reselling the paintings they
had received as donations that the appraisals provided were four
to ten times higher than the market value of the paintings.
Auctions are perhaps not the best way to establish fair market
value, but they do nevertheless give a good indication. In the
instant case, the difference is after all considerable, and a
reasonable person could not conclude otherwise than that the
appraisals provided were unrealistic, not to say totally lacking
in credibility.
[52]
This discrepancy in the prices becomes all the more striking when
the taxpayer concerned is an art enthusiast. The difference
between the purchase prices he was able to document and the
appraisals, or the amounts of the receipts obtained from the
donees, is enormous. The appraisals or receipts are on average
three to four times higher than the purchase prices. This in
itself is sufficient for me to be able to conclude that the
appellant was looking for tax shelters, that he knew it was a
good arrangement for him and that the higher the appraisal was,
the greater the tax credit claimed would be as well.
[53]
The appellant did not question Émile Amireault's
way of doing things. He chose to let Mr. Amireault organize
and take care of everything because the result would be
advantageous for him. Even after learning in 1993 that
Mr. Amireault was substituting his own paintings for his,
the appellant took more than a year to distance
himself.
[54]
The evidence also shows that, once he was under investigation by
Revenue Canada, the appellant requested receipts from the persons
from whom he had purchased certain paintings. To help him out,
those persons established the values of the paintings based on
what they remembered the price to have been at the time they were
purchased.
[55]
In cross-examination, the respondent brought out obvious
contradictions between the purchase prices shown on the receipts
and the purchase prices reported in the income tax returns; she
also brought out the fact that it was impossible for the
appellant to explain the expenses reported in the amended
returns. Those same amended returns also show the difference
between the adjusted cost base and the proceeds of
disposition.
[56]
For example, the amended return for 1992 (Exhibit I-4)
shows an adjusted cost base of $75 for a canvas by
Lise Gervais and proceeds of disposition of $3,200. The
discrepancy is also apparent for the other two canvasses
reported in the amended return. There is no mention in that
return of the other two works which the appellant says he gave in
1992, one by Ben Houstie and another by Anne Noeh. Nor
could the appellant explain the expenditures and expenses
reported in the 1992 amended return.
[57]
The appellant's amended income tax return for 1993
(Exhibit I-6) indicates a total acquisition cost for
four paintings of $855. Those paintings had been purchased
in the two previous years. The total proceeds of disposition were
$5,675. In addition, two out of four canvasses indicated in
that return do not correspond to those shown on the receipts
issued for that year. Receipt number 536
(Exhibit A-6) shows a painting by Daniel Lavoie,
which is not mentioned in the amended return. A canvas by
René Després shown on receipt number 118
(Exhibit A-6) does not appear in that return either.
And yet the receipts indicate that those canvasses were given
during the year. The appellant admitted these facts in
cross-examination.
[58]
For the same year, the appellant filed a proof of purchase
(Exhibit A-6) for an untitled
14" x 18" painting by Niska. That receipt,
bearing number 305702, shows March 25, 1982, as being
the date of purchase and the cost as being $850. The amended
income tax return indicates a canvas by Niska for which the year
of acquisition was 1992, the acquisition cost $85 and the selling
price $1,050. The appellant admitted in cross-examination that it
was the same painting. He was unable to assure the Court that the
paintings on his list of works for 1993, which are shown as being
by René Després, were the same as those
indicated in his amended return, nor was he able to provide any
explanations.
[59]
The appellant filed an amended income tax return for 1994
(Exhibit I-9). In Schedule 3, he reports a canvas
by Gilles Gingras acquired in 1994 for $325. That canvas
corresponds to the one shown on receipt number 1222
(Exhibit A-7) issued by the donee for the same year.
The appellant was unable to produce any proof of acquisition. The
situation was the same for a canvas by
Colette Cloutier.
[60]
In the same amended return, the appellant reports a canvas by
Gilles Jacques, which he indicates having acquired in 1994
for $75. For the same canvas, he also produced a proof of
purchase dated January 23, 1981, showing a cost of $925.
That canvas is the one shown on receipt number 1242 issued
by the charity (Exhibit A-7). The appellant was unable
to provide any explanation of this contradiction.
[61]
It is clear that the appellant knew this entire tax credit affair
could benefit him and that he chose to close his eyes, hoping
that the credit claims would be allowed. Even after his efforts
to distance himself from Mr. Amireault after six years,
he once again filed receipts showing inflated values.
[62]
The appellant displayed surprising indifference as to his
obligations. He knew the value of his paintings and that it had
not risen so dramatically.
[63]
This conduct is consistent with that described by Strayer J.
in Venne, supra. I therefore conclude that the
penalties were rightly assessed by the respondent. However, the
amount of the penalty for the 1991 taxation year will have to be
adjusted in light of these reasons.
[64]
For these reasons, the appeal from the assessment made for the
1991 taxation year is allowed, and the assessment is referred
back to the Minister for reconsideration and reassessment on the
basis that the appellant is entitled to a credit for charitable
donations in respect of an amount of $1,097, and the penalty
assessed under subsection 163(2) of the Act shall be
adjusted accordingly. The appeals from the assessments made for
the 1989, 1990, 1992, 1993, 1994 and 1995 taxation years are
dismissed.
Signed at Ottawa, Canada, this
4th day of March 2002.
"François
Angers"
J.T.C.C.
Translation certified
true on this 18th day of June 2002.
[OFFICIAL ENGLISH
TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-1394(IT)I
BETWEEN:
NORMAND BÉRUBÉ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on November 5, 2001, at
Montréal, Quebec, by
the Honourable Judge François
Angers
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Chantal Jacquier
JUDGMENT
The appeal from the assessment made under the Income Tax
Act for the 1991 taxation year is allowed and the assessment
is referred back to the Minister for reconsideration and
reassessment on the basis that the appellant is entitled to a
credit for charitable donations in respect of an amount of $1,097
and that the penalty assessed under subsection 163(2) of the
Act shall be adjusted accordingly.
The appeals from the assessments made under
the Income Tax Act for the 1989, 1990, 1992, 1993, 1994
and 1995 taxation years are dismissed.
Signed at Ottawa, Canada, this 4th day of March
2002.
J.T.C.C.
Translation certified
true
on this 18th day of June
2002.
Erich Klein, Revisor
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