Citation: 2013 TCC 203
Date: 20130620
Docket: 2011-2085(IT)G
BETWEEN:
ROGER CARRIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Roger Carrier appeals
from the assessment of tax on subsection 15(1) shareholder benefits that the
Respondent maintains he received from two of his wholly-owned companies, Agence
Roger Carrier inc. (“Agence Roger Carrier”) and 2971-1181 Québec inc. carrying
on business as Génie Concepts (“Génie Concepts”). The aggregate amount of the
benefits is approximately $175,000. The assessments are in respect of the 2004
taxation year. Penalties were also assessed under subsection 163(2).
Facts
[2]
At all material times
the Appellant, Roger Carrier, was the sole shareholder and director of Agence
Roger Carrier and Génie Concepts. Both corporations had carried on active
businesses. However, by 2001 their only remaining relevant assets were cash
investments.
[3]
In 2001 Mr. Carrier was
presented with an opportunity to invest money for a five-year term in Commodore
Corp. (“Commodore”) in the Bahamas which would generate a 25% rate of return
provided Commodore earned at least 35% returns in the period. Mr. Carrier
invested $70,000 of his personal funds in Commodore. He also caused Agence
Roger Carrier to invest $150,000 and Génie Concepts to invest a further
$25,000. Agence Roger Carrier’s funds had until that time been invested with
Great West Life. The total amount invested was $245,000. The amounts invested
by Agence Roger Carrier and Génie Concepts represented virtually all of their
remaining assets at that time. Skeletal investment agreements were entered into
with Commodore to reflect this. These investments remain somewhat unexplained.
On the same day the Appellant signed his investment contract in Commodore, he
also signed a contract of loan with Commodore as lender for the same amount at
8% interest which the Appellant could not explain nor reconcile with his
investment contract.
[4]
Agence Roger Carrier
and Génie Concepts both stopped filing tax returns after their 2001 taxation
years. Their prior years’ taxes had not been fully paid. As discussed below,
Mr. Carrier has since personally paid the corporation’s previously assessed
taxes. However, they still never filed tax returns for the subsequent years.
[5]
Mr. Carrier became
concerned about the Commodore investments in late 2003 and pushed Commodore for
repayment of the $245,000 amount invested by him and his two corporations.
After some discussions, a Canadian corporation, (that may have assumed Commodore’s
obligations under the mysterious contract of loan immediately in 2001) Société
Financière Speedo (1993) Ltée (“Speedo”), repaid $240,000. Speedo’s cheque
dated January 14, 2004 for $240,000 was made payable to Roger Carrier
personally.
[6]
On February 10, 2004
Roger Carrier opened a personal bank account in his sole name at Banque de
Montréal and endorsed and deposited Speedo’s $240,000 cheque in that account.
[7]
On April 13, 2004 Roger
Carrier caused a $240,000 amount to be transferred by Banque de Montréal to a
BMO Nesbitt Burns Investment account in his sole name.
[8]
In May 2004, the
registrations (“immatriculations”) of Agence Roger Carrier and Génie Concepts
were both struck (“radiée”) by the relevant provincial ministry for having
failed to file the required annual returns. Under applicable Québec law, they
were there upon deemed to have been legally dissolved. No attempt has ever been
made to revive them.
[9]
In May 2004, Roger
Carrier registered the name “Motorisés de la Capitale senc (societé en nom
collectif)”, for a new business he and his wife were starting up.
[10]
In May 2004, Roger
Carrier hired a new accountant to do to bookkeeping and to prepare financial
statements and tax returns for himself and for Motorisés de la Capitale senc.
He did not inform his new accountant at the time of the details of his Nesbitt
Burns investment account.
[11]
In July 2004, Roger
Carrier closed his Nesbitt Burns investment account and had the amount
transferred to a new BMO account in the name of Motorisés de la Capitale senc.
[12]
Later in July 2004, Roger
Carrier and his wife incorporated 9144-7979 Québec Inc. (“9144”). The business
of Motorisés de la Capitale senc was then carried on by that new corporation. The
new BMO bank account of Motorisés de la Capitale senc that was seemingly
renamed as that of 9144.
[13]
Prior to the Canada
Revenue Agency (“CRA”) audit, Roger Carrier did not inform his new accountant
of the source of the funds in his Nesbitt Burns account nor did he ever suggest
it was not fully owned by him personally. The amount transferred to Motorisés
de la Capitale senc was recorded on the books as an amount due to Roger Carrier
personally when it was transferred in July 2004. Similarly, the amount was
shown as due to Roger Carrier personally on the financial statements of 9144
from its inception.
[14]
The amounts were shown
as due to Roger Carrier personally on 9144’s financial statements, and in its
annual tax returns, until after CRA commenced the audit of Roger Carrier in
July of 2008. It was also after that time that the new accountant was first
informed of the provenance of Mr. Carrier’s Nesbitt Burns investment account.
Following that, the entire $175,000 amount originally coming from Agence Roger
Carrier and Génie Concepts was shown as due to related companies, notwithstanding
that there had been a $5,000 loss resulting from Speedo only repaying $240,000,
and notwithstanding there had been investment gains and losses while invested
with Nesbitt Burns.
[15]
It should also be noted
that in February 2006, Mr. Carrier was quick to pay from his own funds the
outstanding tax arrears of Agence Roger Carrier and Génie Concepts once a CRA Collections
officer suggested to him that it could assess him personally under section 160 as
his companies had transferred their cash assets to him. He did not discuss this
with his new accountant at the time. In the course of this, he twice told the
CRA collections officer that he had spent the monies to live on. He did not say
that the companies had loaned the monies to 9144 for its new business. One can
assume that those exchanges with the CRA may have led to his personal audit and
the reassessments in question.
Analysis and Conclusion
[16]
In view of that
evidence, I am entirely satisfied that it was in fact the intention of Roger
Carrier, and therefore of his corporations, Agence Roger Carrier and Génie
Concepts, since at least when the three Commodore investments were repaid to
him by Speedo in 2004, to confer a benefit on Mr. Carrier by allowing him to
appropriate the remaining cash assets of these two corporations. This would
have allowed him to effectively wind up and dissolve these corporations without
being subject to tax on the distributions to him.
[17]
I can discern no other
possible explanation of the corporations’ intentions that is reasonable in view
of the evidence before me. The Appellant’s counsel could not really suggest
another either.
[18]
The amounts involved
are far too significant to have been an oversight. To my mind, any suggestion
to the contrary is negated by the following facts:
(i) he deposited the
amounts to new bank and investment accounts opened for the sole purpose of
depositing the funds, yet he opened those in his sole name;
(ii) he failed to take any
steps to revive the corporations or to cause them to file tax returns;
(iii) he failed to inform
his accountant at anytime prior to 2008 when the CRA audit commenced, and he
decided to inform the accountant very shortly after the CRA audit commenced;
(iv) the total absence of
any plan or method to ever repay the amounts due to Agence Roger Carrier and
Génie Concepts even after 2008 when they were recorded as debts of 9144;
(v) his responses to the
2006 CRA Collections agent. He acknowledged then that he had taken the money
and he said he had used it to live on. He paid these two corporations’ tax
debts personally once the section 160 transferee liability provision was
discussed. He did not ever mention at that time having financed the Motorisés
de la Capitale senc business;
(vi) his explanation that it
was always his intention to have these amounts loaned by Agence Roger Carrier
and Génie Concepts to the new Motorisés de la Capitale senc business cannot be
accepted. There was ample opportunity to reflect that correctly from the outset
or to revise it on several occasions prior to the CRA audit commencing. He put
the money in the new personal accounts for months before the new business name
was even registered;
(vii) Once the CRA audit was
commenced, he assumed all of the Speedo loss personally and posted the initial
$150,000 and $25,000 amounts as owing to Agence Roger Carrier and Génie
Concepts by 9144. Had loans been properly the plan from the outset, these two
corporations would have suffered their share of the $5,000 Commodore loss.
[19]
For these reasons, the subsection
15(1) shareholder benefits were properly assessed and Mr. Carrier’s appeal in
respect of tax on the amount of the shareholder benefits must be dismissed. I
find, on the evidence, that those benefits were knowingly and intentionally
conferred in 2004 for the purpose of assisting Mr. Carrier to avoid paying tax
upon the winding up of the corporations. The accounting entries subsequent to
the commencement of the CRA audit reflect ineffective attempts to revise
history and the record in order to avoid or challenge any potential tax reassessment.
[20]
I have concluded, on
the facts, Mr. Carrier’s plans and actions were deliberate and intentional. For
that reason, the subsection 163(2) penalties assessed are also appropriate as
part of this included knowingly omitting to report the benefits in his 2004 tax
return.
[21]
The appeal is
dismissed, with costs.
Signed at Toronto, Ontario this 20th day of June 2013.
"Patrick Boyle"
Translation certified true
On this 4th day of August 2016
François Brunet, Revisor
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