Date: 19990608
Docket: 98-866-IT-I
BETWEEN:
THÉRÈSE LESSARD CARTIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
P.R. Dussault, J.T.C.C.
[1] The appellant is contesting an assessment issued by the
Minister of National Revenue (“the Minister”) under
section 160 of the Income Tax Act
(“the Act”), notice of which is dated November
22, 1996, and numbered 08488. Through that assessment, the
Minister is claiming an amount of $7,060.66 from the appellant as
a result of a transfer by her spouse, Roger Cartier, of the
undivided half of a residence located at 78 Rue Des Chênes
in Ste-Thérèse de Blainville, Quebec, around June
13, 1991.
[2] Subparagraph 3(a) of the Reply to the Notice of Appeal
states that Mr. Cartier’s tax liability was $7,060.66
for his 1989, 1990 and 1991 taxation years. That amount is not in
dispute, although the appellant did say that Mr. Cartier has
made some payments on that liability.
[3] The appellant and Mr. Cartier were married under the
regime of separation of property pursuant to a marriage contract
signed before a notary on June 18, 1969. Article 4 of
the contract (Exhibit A-2) contains an irrevocable gift inter
vivos of movable property worth $2,000.00 from Mr. Cartier to
the appellant and a similar gift of $20,000.00 in the following
terms:
[TRANSLATION]
The sum of TWENTY THOUSAND DOLLARS ($20,000.00)
---------------, which the future husband undertakes to pay to
the future wife at any time during the marriage, in whole or in
part, in the form of the movable or immovable property of his
choice once he feels that he can afford to pay it. If he does not
pay it during his lifetime, the future wife may claim it from the
future husband’s succession in preference to any legatee or
heir, but she shall do so in the easiest order of realization,
that is, she shall take the proceeds of life insurance policies
first, then the movable property and, only after that, the
immovable property.
[4] In 1986, the appellant and Mr. Cartier together purchased
the residence in question here for about $92,000.00. For that
purpose, they took out from the CIBC Mortgage Corporation a loan
of about $73,000.00 secured by a mortgage.
[5] In 1988, Mr. Cartier apparently borrowed an additional
amount to consolidate his debts. The total amount of the loans
secured by the mortgage on the residence thus increased to
$90,000.00.
[6] In the spring of 1991, when the appellant and her spouse
were a few months behind in their mortgage payments, they
received a 60-day notice from the mortgagee, the CIBC Mortgage
Corporation.
[7] Pursuant to an arrangement with that corporation, and
after the appellant paid $3,300.00 in arrears, it was agreed that
Mr. Cartier would transfer his undivided portion of the residence
to the appellant, who would assume the entire debt secured by the
mortgage.
[8] At about the same time, Mr. Cartier apparently stopped
living with the appellant. The appellant instituted divorce
proceedings in October 1998.
[9] On June 13, 1991, by notarial deed (Exhibit A-1), Mr.
Cartier transferred his undivided half of the residence to the
appellant for a price set out in the following terms:
[TRANSLATION]
This sale is being made at the price and for the amount of
ONE DOLLAR ($1.00), receipt whereof from the purchaser on
the signature hereof is hereby acknowledged by the vendor and a
general and final release is hereby given.
This sale is also being made on condition that the purchaser,
who undertakes so to do, pay, for the vendor and for his
discharge, any amount owed to the CIBC MORTGAGE
CORPORATION, 300 Boulevard Sicard, Ste-Thérèse,
QC J7E 3X5, under the deed of loan received by notary Jean
Blanchard on the thirty-first day of March nineteen hundred and
eighty-eight (1988) and registered at the Terrebonne
registry office as number 822207.
That amount shall be repayable in accordance with the terms
and conditions set out in the above-mentioned deed of loan
registered as number 822207, which the purchaser declares that
she is familiar with.
The vendor hereby waives his vendor’s privilege.
[10] According to the appellant, the debt owed to the CIBC
Mortgage Corporation on June 13, 1991, was about $71,000.00, or
$84,891.00 minus the $13,203.00 she had paid a few days
earlier.
[11] The value indicated in the contract for the undivided
portion of the residence transferred by Mr. Cartier to the
appellant was $61,750.00, and the total value of the residence
was set at $123,500.00. Those are the values relied on by the
Minister to assess the appellant and referred to in subparagraphs
3(f) and (g) of the Reply to the Notice of Appeal, and they are
not in dispute.
[12] As noted by counsel for the respondent, the transfer thus
resulted in a $19,304.00 profit for the appellant, who provided
consideration of $42,446.00 ($84,891.00 ÷ 2 + $1.00) for
property worth $61,750.00. However, the assessment was for only
$7,060.66, which was the amount owed by Mr. Cartier for his 1989,
1990 and 1991 taxation years at the time of the assessment.
[13] Although the appellant raised as an argument the
$20,000.00 gift provided for in the marriage contract, counsel
for the respondent was of the opinion that the price set out in
the contract of sale of June 13, 1991, did not justify an
inference that the parties intended to take that gift into
account for the purposes of the transaction.
[14] I agree with counsel for the respondent. The wording of
the price clause in the contract of sale of June 13, 1991, is
clear and not subject to interpretation. If the parties had
wanted the consideration to include the payment of the debt
incurred by Mr. Cartier when the appellant accepted the
irrevocable gift inter vivos of $20,000.00 made in the
marriage contract, they would have said so. The transfer to the
appellant could have been made by Mr. Cartier for consideration
that included the payment of his $20,000.00 debt to her, and she
would then have discharged him with respect to that amount.[1] The parties
obviously did not think of this, and it is clear that they were
not advised by the notary on this point. Unfortunately, I cannot
make up for their oversight now. As well, I will say in closing
my remarks on this issue that, in her divorce proceedings against
Mr. Cartier, the appellant asked the court to [TRANSLATION]
“[order] the respondent to pay the applicant $20,000.00 in
fulfilment of the gift undertaking set out in the marriage
contract” (see Exhibit A-3, page 5). This shows
that the appellant still believed that that debt had not yet been
paid.
[15] I merely add that the contract of sale of June 13, 1991,
also cannot be interpreted as a written separation agreement so
as to permit reliance on the special rule set out in subsection
160(4) of the Act. No reference is made therein to the separation
of the spouses, and the address given as their domicile is the
same, namely that of the residence in question here. The contract
also provides that the appellant is to become the absolute owner
as of the date of the contract, and that she is to have
possession and occupancy as of the same date.[2]
[16] As a result of the foregoing, the appeal is
dismissed.
Signed at Ottawa, Canada, this 8th day of June 1999.
“P.R. Dussault”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 29th day of March
2000.
Erich Klein, Revisor
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