Beaudoin v. The Queen, docket 2000-2967-IT-I (Informal Procedure)

Date: 20010423

Docket: 2000-2967-IT-I

BETWEEN:

DANIEL BEAUDOIN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Tardif, J.T.C.C.

[1]            This is an appeal from notice of assessment number 13180, dated October 8, 1999, for an amount of $17,035.80. The appeal is made under subsection 160(1) of the Income Tax Act ("Act") and the transferor is Renold Beaudoin, the appellant's father.

[2]            The appellant stated that he was represented by his father, Renold Beaudoin. He admitted a number of the alleged facts assumed when assessment number 13180 was made on October 8, 1999. The facts admitted are set out in the Reply to the Notice of Appeal as follows:

[TRANSLATION]

(a)            Renold Beaudoin is the father of Daniel Beaudoin;

...

(d)            on June 19, 1998, Renold Beaudoin sold the immovable (hereinafter the "property") located at 47 Rue Raby, Fleurimont, Quebec, to the appellant by notarial deed registered on June 22, 1998, for the sum of $1;

(e)            as additional consideration, the appellant assumed a hypothec of $66,000 held by the Caisse Populaire Desjardins de Sherbrooke-Est;

(f)             according to the municipal assessment, the market value of the property was $83,100;

(g)            on June 10, 1998, the Caisse Populaire de Sherbrooke-Est made an appraisal of the property for the purpose of the hypothec refinancing;

(h)            the expert consultants Simard Dussault & Associés established that the fair market value (hereinafter the "FMV") of the property at June 9, 1998, was $88,000, as appears in the appraisal report;

                ...

[3]            The point at issue is whether the Minister of National Revenue was justified in issuing assessment number 13180 to the appellant, Daniel Beaudoin, on October 8, 1999, as a result of the acquisition on June 19, 1998, of an immovable belonging to the appellant's father.

[4]            The appellant's evidence consisted of his testimony and the testimony of his father. They said they were very surprised that the notarized agreement states that the consideration was $1. They maintained that the consideration was $66,000 instead. Renold Beaudoin also stated adamantly that he had never borrowed from the Caisse populaire; he testified that his son, Daniel, had done all that was needed and had obtained the $66,000 loan, which he has since been repaying to the Caisse Populaire Desjardins de Sherbrooke-Est.

[5]            Renold and Daniel Beaudoin claim that the property was transferred for $66,000, not the nominal value of $1, as stated in the notarized agreement.

[6]            It is easy to understand the interpretation of the appellant and his father, particularly since Renold Beaudoin in fact received and obtained $66,000 at the time and as a result of the transaction. The authentic documents, which are proof of their content, state that the hypothec was obtained by Renold Beaudoin and was assumed by his son, the appellant (Exhibits I-1 and I-2).

[7]            These details are of no importance for this case since what must be decided is essentially whether the consideration paid or assumed at the time of the transfer corresponded to the actual value of the property, which was the subject of the said transfer.

[8]            On this point, I find that the balance of evidence clearly shows that the value of the immovable transferred vastly exceeded $66,000. A hypothec for that amount was granted by the Caisse populaire at the time. Although this figure is not of scientific or absolute value, I do not think it unreasonable to presume that a financial institution such as a caisse populaire never lends the full amount required for a transaction where the sole guarantee is a hypothec on the property that is the subject of the transaction.

[9]            Apart from this element, the evidence also showed, based on what the father of the appellant himself admitted, that he was in serious financial difficulty at the time. This was moreover confirmed by an assignment of his property on December 21, 1999 (Exhibit I-3).

[10]          Although Renold Beaudoin said that he did not know at the time of the transaction that he had an outstanding debt toward Revenue Canada, I believe that he knew perfectly well that he had a tax liability, the amount of which might have been uncertain, but I am convinced that he knew he owed a significant amount to the tax authorities. Moreover, of all the debts that led him to assign his property, his tax liability represented more than 80 percent of his total debts at the time of bankruptcy, that is, more than $38,000 out of a total of $48,160 (Exhibit I-3).

[11]          Would Renold Beaudoin have assigned his property for debts amounting to only $9,350, the amount owed in addition to his tax liability? I do not think so.

[12]          Lastly, Mr. Beaudoin stated that the burden of his debts had led him to offer his property to his son in order to obtain new money, thus enabling him to pay off a significant portion of his debts, in particular, a balance of more than $7,650 on the hypothec, a car loan of $13,900, various debts incurred in the operation of a bar through 24-280414, a numbered company, and the outstanding balance of approximately $20,000 on his line of credit.

[13]          He contended that the residence that had been the subject of the transaction was a property of great value in the Beaudoin family patrimony. He explained that the residence had been built by his ascendants and that he very much wanted it to remain in his family; hence, his very strong interest in selling it to his son.

[14]          To justify the amount of the transaction, Renold Beaudoin described the immovable as being in a dilapidated condition in that the roof had to be replaced, the foundation repaired, the balconies redone and the furnaces changed.

[15]          On this point, the appraisal commissioned by the Caisse populaire at the time of the application for $66,000 in financing shows that the immovable in fact needed repairing. The evidence shows that these were standard repairs having regard to the age of the property.

[16]          The evidence also showed that the vendor of the immovable had lived there for several months after the transfer and that he had kept that address as his personal address.

[17]          As for the purchaser, the evidence shows that he did reside there but for an undetermined period. The property has since been rented to two tenants and brings in more than $1,000 a month. What is the actual value of the immovable?

[18]          On this point, the evidence revealed a decisive element confirming and corroborating all the other indicators that the value vastly exceeded the amount of $66,000 agreed upon. That element is the statement by the appellant himself that the father-son relationship had to be taken into account to explain the consideration stated in the notarial deed.

[19]          This statement by the appellant, together with all the other evidence, in particular, the amount of the loan granted by the Caisse, the income from the immovable, the municipal assessment, the appraisal prepared by Simard, Dussault et Associés (Exhibit I-4) and all the other circumstances lead me to believe that the value of $88,000 assigned to the immovable seems fair, appropriate and reasonable in the circumstances.

[20]          The issue of the transfer between persons not dealing with each other at arm's length was not contested at all. As to the tax liability, the balance of evidence is that the vendor was or must have been quite familiar with the situation since there were outstanding amounts for a number of taxation years.

[21]          The purpose of subsection 160(1) of the Act is to prevent a tax debtor from transferring one or more of his properties to a person with whom he is not dealing at arm's length in order to avoid having to pay his tax liability. This provision in no way affects a transfer made for fair and actual consideration since, in that instance, the tax debtor's patrimony is in no way affected or reduced. The matter is quite different where a transfer is made for no consideration or for consideration which is less than the actual value, in which case the transferee of the transferred property is jointly and severally liable with the tax debtor transferor for an amount up to the actual value of the transferred property.

[22]          In the instant case, an immovable the value of which was established on the balance of evidence at $88,000 was transferred.

[23]          The transfer was made between the appellant and his father, two persons who were not dealing with each other at arm's length.

[24]          Lastly, the evidence revealed that the vendor of the immovable had a tax liability of $17,035.80 at the time of the transaction. For these reasons, the appeal is dismissed.

Signed at Ottawa, Canada, this 23rd day of April 2001.

"Alain Tardif"

J.T.C.C.

Translation certified true on this 4th day of december 2002.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]

2000-2967(IT)I

BETWEEN:

DANIEL BEAUDOIN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on March 13, 2001, at Sherbrooke, Quebec, by

the Honourable Judge Alain Tardif

Appearances

Agent for the Appellant:                                     Renold Beaudoin

Counsel for the Respondent:                              Dany Leduc

JUDGMENT

                The appeal from the assessments made under subsection 160(1) of the Income Tax Act, notice of which bears number 13180, dated October 8, 1999, is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Canada, this 23rd day of April 2001.

"Alain Tardif"

J.T.C.C.

Translation certified true on this 4th day of december 2002.

Sophie Debbané, Revisor

[OFFICIAL ENGLISH TRANSLATION]