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Docket: 2004-3125(IT)I
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BETWEEN:
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RAPHAËL ROBERT ABTAN,
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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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____________________________________________________________________
Appeal heard on July 5, 2005 at Toronto, Ontario.
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Before: The
Honourable D.G.H. Bowman, Chief Justice
Appearances:
For the
Appellant: The Appellant himself
Counsel for the
Respondent: Anik Jodouin
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____________________________________________________________________
JUDGMENT
The
appeal from the assessment made under the Income Tax Act for the 2001 taxation
year is dismissed.
Signed at Toronto, Ontario, this 9th
day of August, 2005.
Bowman,
C.J.
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Citation: 2005CCI482
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Date: 20050809
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Docket: 2004-3125(IT)I
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BETWEEN:
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RAPHAËL ROBERT ABTAN,
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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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REASONS FOR JUDGMENT
Bowman,
C.J.
[1] This is an appeal from an assessment for the
2001 taxation year. The case proceeded in both French and English and
accordingly, under section 20 of the Official Languages Act, the
judgment is issued simultaneously in both official languages.
[2] The narrow issue is
whether the appellant, who declared bankruptcy in 1999 and who, in 2001
continued to be an undischarged bankrupt, was entitled to deduct under section 111
of the Income Tax Act in computing his taxable income for 2001 a
non-capital loss arising essentially from a terminal loss sustained on the sale
of buildings in 2000.
[3] There was some
confusion on the part of the Minister with respect to where the $82,366 came
from. The Minister seems to have accepted that the appellant in 2000 sustained
a non-capital loss of 50% of $230,000, or $115,000 giving rise to a net
non-capital loss after the appellant’s other income of $57,000.
[4] The witness for the
respondent was unable to be specific with respect to whether the $57,000 formed
part of the $82,366 claimed in 2001.
[5] The original reply
contained a number of wrong or irrelevant assumptions. However, whatever may be
the figures, the respondent’s position is that non‑capital losses from
prior years cannot be carried forward to a year in which the taxpayer is an undischarged
bankrupt.
[6] The non‑capital
loss which he claimed to carry forward amounted to $82,366 and was declared in
his 2001 return. The respondent does not question the amount of the loss but
denies its deductibility in 2001 on the basis that during his bankruptcy he was
not entitled in computing his taxable income to deduct under section 111
losses sustained in earlier years. He had not received his absolute discharge.
[7] Subsection 128(2) of
the Income Tax Act reads in part as follows:
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128(2) Faillite d’un
particulier. Lorsqu’un particulier est en faillite, les règles suivantes
s’appliquent :
[...]
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128(2) Where individual bankrupt. Where an
individual has become a bankrupt, the following rules are applicable:
[...]
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f) malgré l’alinéa e),
le particulier doit produire une déclaration distincte de son revenu pour
toute année d’imposition durant laquelle il a été en faillite, calculé comme
si :
[...]
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(f)
notwithstanding paragraph (e), the individual shall file a
separate return of the individual’s income for any taxation year during which
the individual was a bankrupt, computed as if
[...]
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(iii)
dans le calcul du revenu imposable du particulier pour l’année, aucun montant
n’était déductible en application de l’un des alinéas 110(1)d) à d.3)
ou de l’article 110.6 au titre d’un montant inclus dans le revenu en
application du sous‑alinéa e)(i), et aucun montant n’était
déductible selon l’article 111,
[...]
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(iii) in
computing the individual’s taxable income for the year, no amount were
deductible under any of paragraphs 110(1)(d) to (d.3) and
section 110.6 in respect of an amount included in income under
subparagraph (e)(i), and no amount were deductible under
section 111, and
[...]
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g)
malgré les sous-alinéas e)(ii) et (iii) et f)(iii) et (iv),
lorsque le particulier obtient sa libération inconditionnelle:
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(g) notwithstanding
subparagraphs (e)(ii) and (iii) and (f)(iii) and (iv),
where at any time an individual was discharged absolutely from bankruptcy,
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(i) dans le calcul de son
revenu imposable pour une année d’imposition se terminant après la
libération, aucun montant ne peut être déduit en application de
l’article 111 au titre de pertes pour les années d’imposition s’étant
terminées avant la libération.
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(i) in computing the individual’s
taxable income for any taxation year that ends after that time, no amount
shall be deducted under section 111 in respect of losses for taxation
years that ended before that time.
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[8] It was clear from
Mr. Abtan’s evidence that the amount of $82,366 claimed at line 252
of his 2001 return as “Non‑capital losses of other years” represented the
unused portion of a loss sustained by him in 2000.
[9] Mr. Abtan
points to what he considers to be an inconsistency. He was allowed to deduct in
2000 in computing income a portion of the loss that he sustained in that year
but was denied the deduction in 2001 in computing taxable income of the unused
portion that he seeks to carry forward to 2001 under section 111. The
short answer is that, however illogical it may seem, the Income Tax Act permits
the deduction in computing income of losses sustained in the year by a bankrupt
but does not permit the deduction in computing taxable income under
section 111 of losses of previous years. The result is an unfortunate one
but the provision of the Act to which I referred are clear.
[10] The appeal is
dismissed.
Signed at Toronto,
Ontario, this 9th day of August, 2005.
Bowman,
C.J.
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COURT FILE NO.:
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2004-3125(IT)I
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STYLE OF CAUSE:
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Raphaël Robert
Abtan v.
Her Majesty The
Queen
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PLACE OF
HEARING:
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Toronto, Ontario
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DATE OF HEARING:
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July 5, 2005
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REASONS FOR
JUDGMENT BY:
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The Honourable
D.G.H. Bowman, Chief Justice
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DATE OF
JUDGMENT:
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August 9, 2005
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For the
Appellant:
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The Appellant
himself
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Counsel for the
Respondent:
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Anik Jodouin
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For the
Respondent:
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John H. Sims,
Q.C.
Deputy Attorney
General of Canada
Ottawa, Canada
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