Citation: 2010TCC402
Date: 20100728
Docket: 2009-3589(IT)I
BETWEEN:
MARC DEMERS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan, J.
[1] The issue in
this Informal Procedure appeal is whether the Appellant, Marc Demers, is
entitled to deduct an allowable business investment loss (“ABIL”) of $37,000 in
his 2006 taxation year. Mr. Demers represented himself at the hearing and was
the only witness to testify. He was credible in his evidence and well‑organized
in his submissions. The difficulty is that his claim for an ABIL cannot be justified
under the Income Tax Act.
[2] Mr. Demers
admitted all of the assumptions of fact upon which the Minister based his
reassessment:
a) On February 10, 2003, by way of transfer, pursuant to
section 147.3 of the Income Tax Act R.S.C. 1985, c.1 (5th Supp.)
as amended (the “Act”), the Appellant transferred from the Régime de
retraite Société de transport de Montréal (hereinafter “the Regime”)
$55,000 to a self directed Registered Retirement Savings Plan (hereinafter “the
RRSP”);
b) The funds so transferred were under the trust of CTI
Capital Inc. and the RRSP acquired 55,000 common shares of Société
Coopérative de producteurs de bois précieux Québec Forestales Inc.
(hereinafter “the Coop”);
c) On July 31, 2003, by way of transfer, pursuant to
subsection 146(16) of the Act the Appellant transferred from the Caisse
d’économie des employés STCUM account Compte de retraite
immobilisé (hereinafter “the CRI”) $19,000 to the RRSP;
d) The funds so transferred were under the trust of CTI
Capital Inc. and the RRSP acquired 19,000 common shares of the Coop;
e) The Appellant was the beneficiary of the RRSP;
f) During the taxation years that the Appellant had made
contributions to the Regime and CRI he had benefited from the deduction from
his income for such contributions;
g) On the statement from the trustee CTI Capital Inc. for
October 31, 2006, the fair market value of the investment in Appellant’s RRSP
for the Coop was NIL.[1]
[3] As it turned
out, the entire $74,000 transferred to the self-directed RRSP with CTI Capital
Inc. was ultimately lost. Mr. Demers seeks a deduction for one‑half that
amount under s.38(c) of the Act.
[4] Mr. Demers’
position is that the $74,000 ought to be deductible as an ABIL because the
funds transferred to CTI Capital Inc. in trust were, in fact, treated as his
personal property. Firstly, the source of the $74,000 was his employment; that
amount was also described in CTI Capital Inc.’s statements as “votre
portefeuille de titres”[2]. As further proof of the personal nature of his
interest, he put in evidence a subpoena issued in his name by the Commission
des valeurs mobilières du Québec on August 28, 2003[3]. While the evidence on this point is not clear, it
seems that in 2003 there was some sort of provincial inquiry concerning
investments in Coopératives de Producteurs de bois précieux Québec
Forestales (referred to herein as the “Co-op”). The proceedings in respect
of which the subpoena was issued were ultimately cancelled but under the
subpoena, Mr. Demers was directed to bring to the inquiry various documents
having to do with his investments in the Co-op. Mr. Demers argued that the fact
that the subpoena had been issued in his name rather than to CTI Capital Inc.
shows that the investment was personal to him.
[5] Mr. Demers also
relied on the fact that in 2002 and 2003 Revenue Québec had accepted his
claim for a deduction of amounts invested in Coop[4] and had allowed his claim for an ABIL of $37,000 in
2006[5].
[6] The Minister’s
position is that no amount is deductible by Mr. Demers because the $74,000 was
held for him in trust by CTI Capital Inc.; thus, while the trustee might be
able to claim an ABIL[6], the deduction is not available to Mr. Demers personally. Counsel for the Respondent argued
further that the only circumstance in which a taxpayer might personally claim
an ABIL is subsection 146(6) but that provision does not apply to Mr.
Demers because the funds transferred to CTI Capital Inc. in trust were not a
“non-qualified investment” as defined in subsection 146(1) of the Act.
Mr. Demers admitted the assumptions in which such amounts are described as
“registered retirement savings plan” funds. A “registered retirement savings
plan” incorporates the definition of “retirement savings plan” set out in
subsection 146(1):
(a) a contract between an individual and a person
licensed or otherwise authorized under the laws of Canada or a province to
carry on in Canada an annuities business, under which, in consideration of
payment by the individual or the individual’s spouse or common-law partner of
any periodic or other amount as consideration under the contract, a retirement
income commencing at maturity is to be provided for the individual, or
(b)
an arrangement under which payment is made by an individual or the
individual’s spouse or common-law partner
(i)
in trust to a corporation licensed or otherwise authorized under the
laws of Canada or a province to carry on in Canada the business of offering to
the public its services as trustee, of any periodic or other amount as a
contribution under the trust,
[7] Finally, the
Minister argued that Mr. Demers had already been permitted an RRSP contribution
deduction for the various amounts making up the $74,000 invested and
subsequently lost; it would be a duplication to allow a further deduction of
that an amount as an ABIL.
Analysis
[8] The evidence
presented does not justify interfering with the Minister’s reassessment. Mr.
Demers admitted that the $74,000 was transferred under the trust of CTI Capital
Inc. As such, although Mr. Demers was the beneficiary of the funds invested,
the property was that of the trustee. Neither the description of the
investments in the CTI Capital Inc. statements or the issuance of a subpoena to
Mr. Demers alters that fact. The subpoena is particularly unpersuasive; it
is not at all clear what the circumstances of its issuance were or what purpose
his testimony was intended to serve. In any event, nothing came of it that is
relevant to this appeal.
[9] As for Mr.
Demers’ other arguments, the federal Minister of National Revenue is not bound
by the assessment of Revenue Québec. His duty is to reassess in
accordance with the Income Tax Act. As for Mr. Demers’ further argument
that there is nothing in the Act to prohibit him from claiming an ABIL,
the question is not whether the deduction is prohibited but rather, whether he
can satisfy the statutory criteria for making such a claim. This he is unable
to do as it was not his property that was disposed of as required under paragraph
39(1)(c); accordingly, the appeal must be dismissed.
Signed at Ottawa,
Canada, this 28th day of July, 2010.
“G. A. Sheridan”
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