Date: 20010518
Docket: 1999-1922-IT-I
BETWEEN:
JOHN HOWARD BANNON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
For the Appellant: The Appellant himself
Counsel for the Respondent: Cathy Chalifour
____________________________________________________________________
Reasons for Judgment
(Delivered orally from the Bench at London, Ontario,
on June 13, 2000)
McArthur J.
[1]
The Minister of National Revenue reassessed the Appellant's
1996 income tax return for his failure to report income he had
received from Great West Life Insurance in the amount of $1,647.
The Appellant is presently retired and in 1984, he purchased a
life insurance policy from Great West Life and paid approximately
$6,450 in premiums over a period of 12 years with tax-paid
dollars. At the time of his retirement in 1986, he cancelled the
policy and received a refund from Great West of $6,300.
[2]
Great West Life informed the Appellant by letter dated September
18, 1998 that at the time of the surrender of the policy, the
adjusted cost base was $4,656. An additional sum of $1,647 was
added to the cash surrender value representing dividends which
Great West describes as a taxable gain. The Minister's Reply
to the Notice of Appeal described this amount as interest when in
fact it was dividends, both of which are taxable. The Appellant
takes the position that he contributed $6,500 tax-paid
dollars to Great West and received only $6,300 on surrender of
the policy and that he should not be taxed on tax-paid dollars.
In fact, what the Appellant received from his contribution of
$6,450 was only $4,656. Unfortunately, it appears that this was a
poor investment and the Appellant lost $1,650 in capital. Great
West Life, in addition to the surrender value, paid dividends of
$1,647. There is no question that this amount is taxable in the
hands of the Appellant. For these reason, I am dismissing the
appeal.
[3]
With respect to interest and penalty, the Income Tax Act
provides that there is discretion in the Court on the basis of
due diligence to waive penalty. I refer to the decision in
Pillar Oilfield Projects Ltd. v. The Queen, [1993]
G.S.T.C. 49, which was explained in the decision of the Federal
Court of Appeal in Consolidated Canadian Contractors Inc. v.
Canada, [1998] G.S.T.C. 91. Therefore, the appeal is allowed
only for the purposes of waiving the penalty imposed on the
Appellant and in all other respects the Minister properly
included the amount of $1,647 in the income of the Appellant for
the 1996 taxation year.
Signed at Ottawa, Canada, this 18th day of May, 2001.
"C.H. McArthur"
J.T.C.C.
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