Date: 19991101
Docket: 98-1242-IT-I
BETWEEN:
WILLIAM E. GREEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
McArthur J.T.C.C.
[1] The issue in this appeal is to determine the correct
amount of taxable dividend income to be included in William E.
Green's 1996 income. I will attempt to simplify the somewhat
complicated facts.
[2] In 1993, Mr. Green purchased 1000 US shares of the
Canadian Imperial Bank of Commerce (the “shares”) for
US$26,350. In 1996, he received notice that the shares were being
redeemed for US$26.75 per share. In the spring of 1997, he
received a T5 (the “first T5”) indicating 1996
dividends of US$3,816.12 from the shares, which included an
incorrect deemed dividend of US$1,750.00 upon the redemption of
the shares. Mr. Green was not aware of the incorrect deemed
dividend when he received the first T5. Subsequent to that,
Mr. Green received an Amended T5, an Additional T5, and a
letter from his broker (Green Line Investor Services) with an
attached letter from the R-M Trust Company as agent for CIBC. The
Amended T5 indicated dividends of US$2,066.12 from the shares,
which is equal to the dividends from the first T5, US$3,816.12,
less the incorrect deemed dividend of US$1,750.00. The Additional
T5 indicated the correct taxable deemed dividend of C$10,155.00
upon the redemption of the shares. Unlike the first T5, the
Additional T5 correctly took into account the difference in the
Canadian and US exchange rates between the time of issue of the
shares in 1991 and the time of redemption of the shares in
1996.
[3] Letters from Green Line Investor Services and the R-M
Trust Company explained the Amended T5 and the Additional T5. Mr.
Green did not understand these letters and he filed his 1996
Income Tax Return reporting the Amended dividend and the
Additional dividend. The Minister assessed Mr. Green on the
assumption that his return was properly filed and on the
assumption that the Amended T5 and the Additional T5 were
correct. Mr. Green claims that he should not have reported the
Amended and Additional dividends and that he should have reported
the amount of the dividend on the first T5 because this is the
amount that he understood and he claims he actually received.
[4] The following are the Appellant's submissions:
PROPOSED TREATMENT OF INCOME FROM
CIBC NON-CUMULATIVE PREFERENCE CLASS A
SERIES 10 SHARES
WILLIAM F. GREEN
Treatment of Dividend Income:
Total of 1996 Dividend Income (tab 10) USD $3,816.12
Conversion to Canadian dollars @ 1.351 (tab 7)= $5,155.58
Dividend gross-up @ 125% = $6,444.47
Taxpayer proposes that dividend income reported on Schedule 4
of 1996 T1 in the amount of $13,644.16 be replaced by
$6,444.47.
Treatment of Investment Income:
By virtue of purchase and disposition of the CIBC
non-cumulative preference class A Series 10 shares, in US
dollars, the taxpayer has realized no income from the changes in
the relative exchange rates:
Shares purchased 03/30/93 USD: $26,350.40 (tab 2)
Conversion to Canadian dollars @ 1.2898 = $33,986.73
(supp Per RBC Dominion Securities)
Shares sold 12/02/96 USD: $25,000.00 (tab 5)
conversion to Canadian dollars @ 1.3510 = $33,775.00
(tab 7)
Net Loss: ($211.75)
The Appellant submits that he did not receive $8,124 in CIBC
Preferred Dividends and should not be taxed on that amount.
[5] The following are the submissions of the Respondent:
Originally the Appellant was issued a T5 in the amount of
US$3,816.12 re dividend income.
The original T5 was incorrect and the Appellant was
subsequently issued two new T5s.
#1 Amended T5 = $2,066.12 US ($3,816.12 - $1,750.00 =
$2,066.00)
#2 Additional T5 = $8,124.00 CND Deemed Dividend
(which is 1.75 US/share)
Calculation: Redemption Price – Paid Up Capital (PUC) =
Deemed Dividend
$26.76 US - $25.00 US = $1.75 US
$36.139 CDN (exchange rate $1.3510 December 2, 1996)
$28.015 CDN (exchange rate $1.1206 November 5, 1991)
$36.139 - $28.015 = $8.124 CDN (Deemed Dividend of
$8,124.00)
The Minister stated that the amount of $8,124 was properly
included in the Appellant's income pursuant to section 3 and
paragraph 12(1)5 of the Income Tax Act. The initial onus
rests with the taxpayer to demolish the Minister's
assumptions relied on in arriving at the assessment.[1]
[6] Mr. Green was ably represented by counsel who relied on a
"Statement of Investment Income Summary – 1996"
as evidence that the dividend income for the shares was
$3,816.
[7] In my view, Mr. Green cannot succeed in this matter
because he did not establish that the Amended T5 and the
Additional T5 were incorrect. I sympathize with Mr. Green because
it was difficult to understand the first T5, the Amended T5, the
Additional T5, and the letters from Green Line Investor Services
and R-M Trust Company. However, the fact that he did
not understand the Amended T5 and the Additional T5 is not
evidence that the T5s were incorrect and it does not establish
that the Minister’s assumption was incorrect. Furthermore,
Mr. Green did not establish his position that he actually
received US$3,816.12 in the first T5 because he did not produce
evidence (such as a cancelled check or a bank deposit book)
showing that he received this amount. The “Statement of
Investment Income Summary - 1996” that he relied on was not
evidence that he received this amount. For these reasons, I would
find that Mr. Green did not demolish the Minister’s
assumption. In my view, the Minister’s assumptions were
correct. He properly assessed Mr. Green’s 1996 income tax
return in accordance with section 3, paragraph 12(1)(j), and
subsections 82(1) and 84(3) of the Act.
[8] The appeal is dismissed.
Signed at Ottawa, Canada, this 1st day of November, 1999.
"C.H. McArthur"
J.T.C.C.
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