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Citation: 2005TCC10
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Date: 20050112
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Docket: 2004-2857(IT)I
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BETWEEN:
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MARIO TARDIF,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
BédardJ.
[1] In filing his income tax return
for the 2000 taxation year, the Appellant deducted an allowable
business investment loss (ABIL) of $36,624.59 ($48,832.79 x 75%)
for the 2000 taxation year.
[2] Through the notice of reassessment
dated October 2, 2003, for the 2000 taxation year, the Minister
of National Revenue (the "Minister") made the following
changes:
(i) He increased the business
investment loss (BIL) by $4,000 in accordance with the
Appellant's request, such that the BIL was established at
$52,832.
(ii) He allowed the Appellant an
ABIL deduction of $26,416, namely the ABIL of $52,832 times 50%.
The Minister used the 50% rate to compute the ABIL since, under
subsection 50(1) of the Income Tax Act (the
"Act"), the Appellant is deemed to have disposed of his
debt at the end of the 2000 taxation year and the rate in effect
for computing the ABIL at the end of the year 2000 was 50%.
[3] On November, 26, 2003, the
Appellant served on the Minister a notice of objection to the
notice of reassessment dated October 2, 2003, for the 2000
taxation year.
[4] On March 31, 2004, the Minister
affirmed the reassessment dated October 2, 2003, for the
2000 taxation year by relying on the reasons mentioned in
paragraph 2 above.
Analysis
[5] The evidence has established
that
(i) the Appellant was the sole
shareholder of the company Distribution Mario Tardif Inc.
(the "company");
(ii) the company operated a
frozen products distribution business;
(iii) the company had been dissolved
on May 2, 2000;
(iv) the Appellant had paid, during
the period from May 1999 to December 31, 1999, the
company's debts that totalled $19,639.18; that amount had
been treated like a loan from the Appellant to the company;
(v) during the period from January 1,
2000, to April 30, 2000, the Appellant had paid the company's
debts that totalled $16,664.07; that amount had been treated like
a loan from the Appellant to the company;
(vi) In March 2002, the Appellant had
paid $16,529 to a financial institution as guarantor of a loan
contracted by the company with that institution.
Appellant's position
[6] The Appellant first submitted that
part of the debts ($19,639.18) owed to him by the company on
December 31, 1999, was unrecoverable on that date. In that
regard, he argued that although the company was dissolved on
May 2, 2000, it had been inoperative on December 31,
1999, and that he was therefore entitled to claim, for his 1999
taxation year, a BIL with regard to those debts.
[7] I must first point out that the
Appellant has not established that the debt of $19,639.18 was
unrecoverable on December 31, 1999. If he had persuaded me of
that fact, I would have reduced the BIL accordingly for his 2000
taxation year, without being able to allow him the loss incurred
during his 1999 taxation year because only the appeal concerning
the 2000 taxation year is before me. I would add that the
Appellant could no longer claim that loss in his 1999 taxation
year because the time limits for doing so have probably run
out.
[8] The Appellant submitted that the
loss had been incurred during the dissolution of the company, on
May 2, 2000, thus between February 27, 2000, and October 18,
2000. He then argued that section 38 of the Act states that the
rate in effect at the time for computing the ABIL was 66.66% and
not 50%.
[9] In my view, it is clear that under
subsection 50(1) of the Act, the Appellant is deemed to have
disposed of his debt on December 31, 2000, and that the rate in
effect for computing the ABIL at the end of the year 2000 was 50%
and not 66.66% as the Appellant claims is the case pursuant to
paragraph 38(c) of the Act.
[10] For those reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 12th day of January 2005.
Bédard J.
Translation certified true
on this 13th day of April 2005
Aveta Graham, Translator
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