Citation: 2006TCC515
Date: 20061115
Docket: 2006-956(IT)I
BETWEEN:
CLAUDE BERTRAND,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Bédard J.
[1] This is an appeal
under the informal procedure from an assessment which was made by the Minister
of National Revenue ("the Minister") and which added to the
Appellant's income the amount of $8,615 on account of registered retirement
savings plan (RRSP) income.
Facts
[2] The Appellant filed
a notice of intention to make a proposal in bankruptcy on
July 19, 2001 ("the proposal"). Under the proposal, the
Appellant's RRSPs would go to pay the amounts owed to his creditors. The
relevant paragraph of the proposal reads as follows:
[TRANSLATION]
The debtor shall transfer seisin of his
registered retirement savings plans, the aggregate gross value of which is
approximately $8,200, to the trustee. The amount, net of tax, which shall
be collected by the administrator shall be distributed to the creditors.
[3] The proposal was
accepted by the creditors on November 29, 2001. It was ratified by
the Superior Court on January 21, 2002.
[4] Upon filing his
notice of intent, the Appellant held two RRSPs: one with the Laurentian Bank
and the other with Scotiabank. Under the terms of the proposal, Claude Moisan,
the bankruptcy trustee, sent a letter dated December 20, 2001 to both
banks, requesting the redemption of the Appellant's RRSPs.
[5] The Laurentian Bank
RRSPs were redeemed on January 10, 2002. The Laurentian Bank sent a cheque
for $3,750.04 to the trustee. The details of the withdrawal are as follows:
Gross amount: $4792.89
Federal tax: $237.34
Provincial tax: $759.50
Administration fees: __$46.01
Net amount: $3,750.04
[6] The Scotiabank
RRSPs were redeemed on March 10, 2002. The details of the withdrawal
are as follows:
Gross amount: $4003.62
Federal tax: $
200.18
Provincial tax:
$640.58
Administration fees: __$25.00
Net amount: $3,137.86
[7] The Appellant had
already reported an amount of $135 in his income tax return for the 2002
taxation year as RRSP income. Consequently, the Minister added the difference,
that is to say, a total of $8,615 in RRSP income, to the Appellant's income,
calculated as follows:
Laurentian Bank RRSP (less $46.00
$4,746.88
in administration fees not
shown as RRSP income T4-RSP )
Scotiabank RRSP
$4,003.62
Less amount reported by the Appellant __
$135.00
Net amount:
$8,615.50
Issue
[8] The issue is
whether the reassessment of February 3, 2006, in respect of the Appellant's
2002 taxation year, is well founded. By this reassessment, the Minister added
$8,615 from an RRSP to the Appellant's income for the 2002 taxation year. The
actual determination to be made is whether the Appellant received a total of
$8,749 from his RRSP in the 2002 taxation year, thereby requiring the amount to
be included in his income for his 2002 taxation year under paragraph 56(1)(h)
and subsection 146(8) of the Income Tax Act ("the Act") .
The law
[9] The inclusion of
amounts from an RRSP is prescribed by paragraph 56(1)(h) of the
Act, which reads as follows:
56. [Amounts to be included in income for
year]
(1) Without restricting the generality of
section 3, there shall be included in computing the income of a taxpayer for a
taxation year
(h) [Registered retirement savings plan, etc.] amounts required by
section 146 in respect of a registered retirement savings plan or a registered
retirement income fund to be included in computing the taxpayer's income for
the year;
[10] Thus, paragraph
56(1)(h) of the Act refers to the relevant rules of section 146,
which states the amounts that must be included in computing a taxpayer's
income. The relevant part of that section of the Act is subsection 146(8),
which reads as follows:
146. (8) [Benefits taxable] There shall be
included in computing a taxpayer's income for a taxation year the total of
all amounts received by the taxpayer in the year as benefits out of or
under registered retirement savings plans, other than excluded withdrawals (as
defined in subsection 146.01(1) or 146.02(1)) of the taxpayer and amounts that
are included under paragraph (12)(b) in computing the taxpayer's income.
The Appellant's position
[11] The Appellant's
first submission is that he did not "receive" the proceeds of the
RRSP because the trustee collected the proceeds and remitted them to the creditors,
and thus, subsection 146(8) of the Act cannot apply.
[12] In my opinion, this
argument is without foundation. The courts have defined the term
"receive" very broadly. For example, in Morin, the Federal Court (Trial Division)
held that the word receive "obviously means to get or to derive benefit
from something." The Court applied this holding in Mintzer.
[13] Moreover, with
respect to the collection of an RRSP by a trustee as part of a taxpayer's
proposal in bankruptcy, the Court in Agard held that the appellant received the
proceeds of his RRSP even though the amount did not come into his hands. The
Court stated as follows in this regard:
9. . . . In addition, the Appellant
claims that he never received the monies from the RRSP and therefore cannot be
taxed on its receipt. This argument is also without merit. All of the assets of
the Appellant remained the assets of the Appellant and not the trustee under
the Proposal. [Footnote omitted.]
10. Under the Proposal, the Appellant
merely directed what was to happen to the proceeds of the RRSP. The proceeds
were always his property just as the RRSP itself was his. The trustee was
merely a conduit through which the funds passed on their way to the creditors. .
. .
[14] In the case at bar,
the Appellant had a legal obligation to reimburse his creditors and comply with
the terms of the proposal, which provided that he had to transfer seisin of the
RRSPs to the trustee so that he could reimburse the unsecured creditors. In the
bankruptcy proposal, the Appellant decided to use his RRSPs. Thus, the
Appellant benefited from the proceeds of his RRSPs in that his creditors were
reimbursed and he was discharged from his debts.
[15] The Appellant's last
argument was that the decision in Marchessault should be applied to the instant case.
There, the appellant filed a bankruptcy proposal that was ratified by the
Superior Court on July 10, 2003. The appellant submitted that since a
proposal had been made, the 2003 taxation year should be divided into two
periods: pre-proposal and post-proposal. The Minister, however, alleged
that where a proposal in bankruptcy is made, the taxation year cannot be split
in two. Justice Lamarre of the Tax Court of Canada held that the taxation
year should be divided into two parts. In reaching this conclusion, she stated
that courts sitting in bankruptcy had the power to render a declaratory
judgment dividing a taxation year into two parts. If courts dealing with
bankruptcy matters had not so held, the Court would have an incidental power to
rule on this issue and then determine what should be included in the
pre-proposal and post-proposal periods. Applying Bernier and Gollner, Lamarre J. held that subsection
128(2) of the Act also applies to situations where a taxpayer makes a proposal
in bankruptcy. Under subsection 128(2), a year ends and a new year
begins on the date of a taxpayer's bankruptcy.
[16] In my opinion, Marchessault
cannot apply to the facts of the instant case. It should be recalled that
the decision of Lamarre J. in Marchessault was that a new taxation year
must begin immediately after the date of a proposal. In the case at bar, the
notice of intention was filed on July 19, 2001, and the date of the proposal is
November 19, 2001. However, the RRSPs were collected during the following
taxation year, namely 2002. Thus, even if a year had to be divided, it would be
the 2001 taxation year. However, that is not the year covered by the instant
appeal. The taxation year in question is the 2002 taxation year, and the
proceeds of the RRSP were received in 2002.
[17] For these reasons,
the appeal is dismissed.
Signed at Ottawa, Canada, this
15th day of November 2006.
"Paul Bédard"
Translation certified true
on this 11th day of July 2007.
Brian McCordick, Translator
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