Haggarty v. The Queen, 2003 TCC 358 (Informal Procedure)

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-1926(IT)I

BETWEEN:

DOUGLAS HAGGARTY,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

René Boileau(2002-2038(IT)I), Edward Gontarski (2002-2141(IT)I),

Richard Lavigueur(2002-2142(IT)I), Jan Wojcik (2002-2170(IT)I),

Colette Plouffe(2002-2312(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.C.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2038(IT)I

BETWEEN:

RENÉ BOILEAU,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), Edward Gontarski (2002-2141(IT)I),

Richard Lavigueur(2002-2142(IT)I), Jan Wojcik (2002-2170(IT)I),

Colette Plouffe(2002-2312(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.C.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2141(IT)I

BETWEEN:

EDWARD GONTARSKI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Richard Lavigueur(2002-2142(IT)I), Jan Wojcik (2002-2170(IT)I),

Colette Plouffe(2002-2312(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2142(IT)I

BETWEEN:

RICHARD LAVIGUEUR,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Jan Wojcik (2002-2170(IT)I),

Colette Plouffe(2002-2312(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2170(IT)I

BETWEEN:

JAN WOJCIK,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Colette Plouffe(2002-2312(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2312(IT)I

BETWEEN:

COLETTE PLOUFFE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Jan Wojcik(2002-2170(IT)I), Richard Gontarski (2002-2313(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
Agent for the Appellant:	Daniel Rivard
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2313(IT)I

BETWEEN:

RICHARD GONTARSKI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Jan Wojcik(2002-2170(IT)I), Colette Plouffe (2002-2312(IT)I),

Luis Vieira(2002-2315(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2315(IT)I

BETWEEN:

LUIS VIEIRA,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Jan Wojcik(2002-2170(IT)I), Colette Plouffe (2002-2312(IT)I),

Richard Gontarski(2002-2313(IT)I), Daniel Rivard (2002-2582(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-2582(IT)I

BETWEEN:

DANIEL RIVARD,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Jan Wojcik(2002-2170(IT)I), Colette Plouffe (2002-2312(IT)I),

Richard Gontarski(2002-2313(IT)I), Luis Vieira (2002-2315(IT)I)

and Kendra Hayden (2002-3017(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant himself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Docket: 2002-3017(IT)I

BETWEEN:

KENDRA HAYDEN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on common evidence with the appeals of

Douglas Haggarty (2002-1926(IT)I), René Boileau (2002-2038(IT)I),

Edward Gontarski(2002-2141(IT)I), Richard Lavigueur (2002-2142(IT)I),

Jan Wojcik(2002-2170(IT)I), Colette Plouffe (2002-2312(IT)I),

Richard Gontarski(2002-2313(IT)I), Luis Vieira (2002-2315(IT)I)

and Daniel Rivard (2002-2582(IT)I) on April 15, 2003, at Montréal, Quebec

Before: The Honourable Judge Pierre Archambault
Appearances:
For the Appellant:	The Appellant herself
Counsel for the Respondent:	Anne-Marie Boutin Dany Leduc

____________________________________________________________________

JUDGMENT

The appeal from the assessment made under the Income Tax Act concerning the 1993 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

Citation: 2003TCC358

Date: 20030522

Dockets: 2002-1926(IT)I, 2002-2038(IT)I, 2002-2141(IT)I,

2002-2142(IT)I, 2002-2170(IT)I, 2002-2312(IT)I,

2002-2313(IT)I, 2002-2315((IT)I, 2002-2582(IT)I

and 2002-3017(IT)I

BETWEEN:

DOUGLAS HAGGARTY, RENÉ BOILEAU,

EDWARD GONTARSKI, RICHARD LAVIGUEUR, JAN WOJCIK,

COLETTE PLOUFFE, RICHARD GONTARSKI, LUIS VIEIRA,

DANIEL RIVARD and KENDRA HAYDEN,

Appellants,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Archambault, J.T.C.C.

[1]      The appellants have contested the assessments made by the Minister of National Revenue (the Minister) concerning the 1993 taxation year. In computing each appellant's income, the Minister disallowed the business loss allocated to each appellant by one of the following two partnerships: Société Infodecom Enr. (Infodecom) and Société Taylorisme Enr. (Taylorisme) (the partnerships). Each of the appellants held a partnership interest in Infodecom, except for Mr. Lavigueur, who held a partnership interest in Taylorisme. The amount of the partnership interest held in one or the other partnership and the amount of the loss claimed as a deduction by each appellant are shown in the following table:[1]

	Partnership Interest	Loss
Douglas Haggarty	$6,000	$10,126
René Boileau	$12,000	$20,252
Edward Gontarski	$9,000	$15,189
Richard Lavigueur	$22,000	$36,535
Jan Wojcik	$12,000	$20,252
Richard Gontarski	$9,000	$15,189
Colette Plouffe	$6,000	$15,189
Kendra Hayden	$6,000	$14,682
Luis Vieira	$7,000	$11,813
Daniel Rivard	$5,000	$12,448

[2]      In support of the assessments, the respondent has argued that the appellants are not entitled to the losses allocated to them by the partnerships, for the following reasons:

(i)       the partnership interest held in one or the other partnership constituted a tax shelter within the meaning of subsection 237.1(1) of the Income Tax Act (the Act) and none of the appellants provided the Minister with the prescribed form, Form T5004, indicating in particular a tax shelter identification number;

(ii)       the partnerships had no legal existence;

(iii)      even if the partnerships had a legal existence, they did not actually operate a business;

(iv)      alternatively, even if there was a partnership that had in fact operated a business, the appellants were limited partners within the meaning of subsection 96(2.4) of the Act and could not claim the full amount of the loss.

[3]      At the beginning of the hearing, I asked the appellants to admit whether the assumptions of fact on which the Minister had relied in making the assessments, as set out in the Replies to the Notices of Appeal written by an agent of the Minister, were true in whole or in part. Each Reply contained 29 or 30 subparagraphs setting out those assumptions of fact. Many of those assumptions of fact dealt with the activities of the partnerships or their agents and the financial statements and forms filed by the partnerships with the Minister. All the appellants stated that they had no knowledge of those assumptions of fact. This situation is not surprising since none of the appellants present at the hearing admitted that they had ever attended partners' meetings to plan the activities of the partnerships. None of them had taken part in the management of the partnerships. Nonetheless, Infodecom had only 16 partners, and Taylorisme had eight. Anything the appellants might have known about the partnerships, they learned from Raymond Blondin, apparently the promoter of the partnerships, or from one Mr. Bélanger, the financial advisor who had proposed that each appellant acquire an interest in one or the other partnership. Most of the appellants were only able to indicate the amount of the loss they had claimed as a deduction and (with a few exceptions) the amount they had invested in the partnerships.

[4]      I suggested to the appellants that the first issue raised by the appeals be addressed: whether their interests in the partnerships constituted a tax shelter and whether they had provided Forms T5004 indicating the tax shelter identification numbers. If their partnership interests constituted tax shelters but no tax shelter identification numbers were provided to the Minister, under the rule set out in subsection 237.1(6) of the Act, the appellants were not entitled to deduct the losses they had claimed. Since, in the Replies to the Notices of Appeal, the respondent did not set out the facts required to establish whether each partnership interest was a tax shelter, it was agreed that the respondent's evidence on this issue would be adduced and assessed before the evidence on the other issues raised by these appeals was adduced.

[5]      The respondent then called as witnesses three taxpayers (other than the appellants) who were members in one or the other partnership: a pharmacist and a financial advisor who each acquired a partnership interest in Taylorisme and a teacher who acquired a partnership interest in Infodecom. All three witnesses stated that their investment in one or the other partnership had been presented to them as a tax shelter. The pharmacist stated that his financial advisor had convinced him that a $10,000 investment in Taylorisme would allow him to deduct losses of $20,000 and thus obtain an income tax refund equal to at least the amount invested in that partnership. According to Form T5015 (Reconciliation of Partner's Capital Account) completed by Taylorisme in 1993, the pharmacist apparently acquired a partnership interest of $14,600. In fact, the pharmacist stated under oath that he had invested only $10,000. According to Form T5013 Supplementary, Taylorisme had allocated the appellant a business loss of $24,246. The pharmacist acknowledged that he did not attend any meetings of the partners in Taylorisme. He did not know the other partners or Mr. Blondin. He knew nothing about the activities of that partnership. He did not even know what became of his interest in the partnership. The only thing that mattered to him was obtaining a tax benefit.

[6]      The other partner in Taylorisme who testified, the financial advisor, also acknowledged that he had invested in this partnership primarily to reduce his income tax. He, too, did not attend any meetings and was not involved in the activities of Taylorisme. He, too, did not know the other partners. He knew nothing about the activities of Taylorisme. He did not know what became of this partnership. The person who had encouraged him to invest in it was Mr. Blondin, who had convinced him that he could obtain a "tax yield" of nearly 20 per cent. Mr. Blondin had prepared for him an analysis of his tax situation and outlined three possibilities: the first, with no investment in Taylorisme; the second, with a $20,000 investment; and the third, with a $30,000 investment. An investment of $20,000 in Taylorisme would provide him with tax savings of $23,977 and thus a $3,977 "benefit". Although the financial advisor invested only $20,000, Form T5015 completed by Taylorisme indicates a partnership interest of $29,600. Form T5013 Supplementary allocates a loss of $49,156 to the financial advisor.

[7]      The third witness for the respondent was a teacher who had invested $5,000 in Infodecom. Mr. Bélanger, whose services she had retained in filing her 1993 income tax return, had encouraged her to invest in this partnership. Her goal in making this investment was to reduce her income tax, not to become involved in a commercial business. Mr. Bélanger had claimed that she could obtain an income tax refund of approximately $7,000 from an investment of $5,000. Mr. Bélanger had told the teacher that each dollar invested in such a partnership would provide her with a deduction of $2.50. He had assured her that this investment was entirely legal, although she was not convinced that it was "ethical". Like the two other witnesses for the respondent, the teacher acknowledged that she did not attend any meetings of the partnership (in her case, Infodecom) in which she had invested. She did not know who the managers of this partnership were. Although she stated that she had invested only $5,000, Form T5015 (Reconciliation of Partner's Capital Account) indicates that a $7,300 investment was made. According to Form T5013 Supplementary completed by Infodecom, she was allocated a business loss of $12,320.

[8]      Diane Bérubé, an objections officer at the time, also testified. She adduced the information returns filed by Taylorisme and Infodecom. These returns each include Form T5013 Summary (Partnership Information Return), Form T5015 (Reconciliation of Partner's Capital Account), and a copy of Form T5013 Supplementary sent to each partner, on which the partnership indicates the amount of the loss allocated to the partner. Ms Bérubé stated that Forms T5013 Summary filed by the partnerships indicate no tax shelter identification number but only the taxfiler's identification number. She also adduced as Exhibit I-9 a book of exhibits containing the appellants' income tax returns. She told the Court that she did not see a Form T5004 (Statement of Tax Shelter Loss or Deduction) filed with any of the appellants' income tax returns. Mario Desmarais, an officer with the Minister's litigation office, testified that each of the appellants failed to file Form T5004 indicating in particular a tax shelter identification number, and that a check of the Minister's database revealed that no tax shelter identification numbers had been given to the partnerships. The name of either partnership or the name of the promoter Mr. Blondin (at least, in this database Mr. Blondin's name was not connected to those partnerships) were not found in that database.

[9]      After counsel for the respondent finished presenting their evidence on the first issue, I gave the appellants an opportunity to present evidence in rebuttal. Only Mr. Lavigueur testified. He stated that he had discussed the issue of the tax shelter identification number with Mr. Blondin. Mr. Blondin is described as a "director" in the Partnership Information Return filed by Taylorisme and as a "resource person" in the Partnership Information Return filed by Infodecom. According to Mr. Lavigueur, Mr. Blondin had told him that there was no need to obtain a tax shelter identification number since the scientific research and experimental development expenses were to be incurred by subcontractors of Taylorisme. Even though the very rudimentary prospectus provided to investors advised them to consult their own financial advisor, Mr. Lavigueur acknowledged that he did not do so and had relied on Mr. Blondin.

[10]     I then asked the parties to make their arguments on the first issue. None of the appellants who responded presented any argument against the respondent's position, namely, that the investments in the partnerships constituted tax shelters and that no tax shelter identification numbers had been obtained or been provided by the appellants to the Minister with their income tax returns.

Analysis

[11]     Concerning the first issue, the two relevant provisions are subsections 237.1(1) and 237.1(6) of the Act, which are reproduced below:

237.1(1) Definitions. In this section,

...

"tax shelter" means any property in respect of which it may reasonably be considered having regard to statements or representations made or proposed to be made in connection with the property that, if a person were to acquire an interest in the property, at the end of any particular taxation year ending within 4 years after the day on which the interest is acquired,

(a) the aggregate of all amounts each of which is

(i) a loss represented to be deductible in computing income in respect of the interest in the property and expected to be incurred by or allocated to the person for the particular year or any preceding taxation year...

...

           

                        would exceed

(b) the amount, if any, by which

(i) the cost to the person of the interest in the property at the end of the particular year,

            would exceed

(ii) the aggregate of all amounts each of which is the amount of any prescribed benefit that is expected to be received or enjoyed directly or indirectly in respect of the interest in the property, by the person or a person with whom the person does not deal at arm's length

           

                      ...

237.1(6) Deduction disallowed. In computing the amount of income ... of ... a taxpayer under this Act ... , no amount may be deducted in respect of an interest in a tax shelter unless the taxpayer files with the Minister a prescribed form containing prescribed information, including the identification number for the shelter.

                                                                         

[Emphasis added.]

[12]     The evidence adduced by the respondent clearly establishes that the partnership interests were property in respect of which it might reasonably be considered having regard to statements or representations made or proposed to be made in connection with the property that, if a person were to acquire an interest in the property, the amount of a loss represented to be deductible in computing income "would exceed" the cost of the partnership interest. Here, the deductible loss not only exceeded the cost of the partnership interest, but was high enough to allow a potential investor to obtain an income tax refund that "would exceed" the cost of the partnership interest. The figures that Mr. Blondin provided the financial advisor who invested in Taylorisme are very revealing: the amount of the tax savings would exceed the amount of the financial advisor's investment by $3,977. As well, need I recall, the amount of the loss claimed as a deduction by each appellant for the first fiscal year of the partnership concerned greatly exceeded the cost of the partnership interest acquired. Since the evidence has established that the partnerships obtained no tax shelter identification number and that the appellants provided no prescribed forms (Forms T5004) indicating tax shelter identification numbers to the Minister with their income tax returns, one conclusion is inevitably reached. Indeed, under subsection 237.1(6) of the Act, in computing the amount of income of a taxpayer, no amount may be deducted by him "in respect of an interest in a tax shelter" unless the taxpayer files with the Minister a prescribed form containing prescribed information, including the tax shelter identification number. Since this condition set out in subsection 237.1(6) has not been met here, in applying this subsection I have no choice but to confirm the assessments made by the Minister who, in computing the income of each appellant, disallowed the deduction of the business loss allocated to each appellant by Infodecom or Taylorisme.

[13]     As a result, it has not been necessary to adduce further evidence on the other issues: whether Taylorisme and Infodecom were genuine partnerships; whether these partnerships actually operated a business; and whether the appellants were limited partners within the meaning of subsection 96(2.4) of the Act. I gave the appellants each an opportunity to continue the hearing of their appeals so that the evidence on these other issues could be heard. In light of my finding on the first issue, the appellants each told me that they saw no point in continuing the hearing of their appeals. I then rendered my decision and dismissed the appeals.

[14]     In his testimony, the appeals officer indicated that the Minister had decided unilaterally and without obtaining agreement from the appellants to suspend the processing of their Notices of Objection because he wanted to await the outcome of the appeal in McKeown v. Canada, [2001] T.C.J. No. 236 (Q.L.), which raised issues very similar to those raised in the objections by each appellant in this case. According to the individual Replies to the Notices of Appeal, the Minister's initial assessments concerning the 1993 taxation year were made in the spring and summer of 1994. The reassessments disallowing the losses claimed as deductions were made in March 1997, within the time periods set out in the Act for making reassessments. Even though the Notices of Objection were filed by the appellants in the spring of 1997, it was only in March 2002, five years later, that the Minister confirmed the assessments.

[15]     Some of the appellants who spoke at the hearing stated that they would experience significant financial harm if the assessments were to be confirmed. This financial harm presumably results in part from the interest that has continued to accrue, since apparently these appellants have exercised their right not to pay the tax owing while they have been contesting the Notices of Assessment. It also appears that some of the appellants did not realize that this interest would continue to accrue while consideration of their cases was suspended.

[16]     Since some of these taxpayers exerted pressure on the objections service to have their cases processed and were told that doing so was impossible because of the Minister's decision to await the outcome of the appeal in McKeown and, since that decision was made unilaterally and without obtaining agreement from the appellants concerned, I consider it desirable for the Minister to consider waiving much of the interest resulting from these assessments. Of course, I am simply expressing a desire since the Court has no jurisdiction to order such a waiver.

[17]     Even though under section 169 of the Act, the appellants were entitled to appeal to the Tax Court of Canada after the 90-day time period following service of the Notices of Objection had elapsed and the Minister had not notified them that he had vacated or confirmed the assessments or had reassessed, it would have been more prudent for the Minister to have informed these taxpayers that they were entitled to make use of section 169 and not to await the decision in McKeown or, at the very least, to have reminded them of what is stated on the Notice of Objection form: that in all cases interest will continue to accrue on any amount payable. For these reasons, the appellants could appeal to the Minister "in equity" for an exercise of ministerial discretion in determining whether part of the interest on their tax owing should be waived.

[18]     For all these reasons, the appeals by each of the appellants are dismissed. Because these appeals have been heard under the informal procedure, no costs are awarded to the respondent.

Signed at Ottawa, Canada, this 22nd day of May 2003.

"Pierre Archambault"

J.T.T.C.

Translation certified true

on this 6^th day of June 2003.

Sophie Debbané, Revisor

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