Detchon v. R., [1996] 1 CTC 2475, 96 DTC 2032

Rip J.T.C.C.: — The appellants Eric Detchon and Clifford Goodwin appeal income tax assessments for the 1985 and 1986 taxation years on the basis neither of them received a benefit in respect of employment pursuant to paragraph 6(l)(a) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the “Act”) [1] as a result of their children attending their employer’s school, and alternatively, if a benefit was conferred, the value of the benefit received by each of the appellants was less than determined by the Minister of National Revenue (the “Minister”).

In assessing the appellants, the Minister considered that each of them received an employment benefit the value of which was equal to the tuition fees that the parents of other students were required to pay Bishop’s College School (“BCS”). Detchon had one child attending BCS for the whole of 1985 and two other children for the term September to December 1985. All three children attended BCS during both terms in 1986. The Minister added the amounts of $9,355 and $16,116 to his income for 1985 and 1986 respectively.

Goodwin had two children attending both school terms in 1985 and one child attending one term in 1985. All three children attended both terms in 1986. The Minister added the amounts of $12,410 and $16,116 to his income for 1985 and 1986 respectively.

The benefit was calculated to be the cost of tuition at BCS, as follows:

January to June 1985: $3,055

September to December 1985: 2,100

Total 1985: 5,155

January to June 1986: $3,100

September to December 1986: 2,272

Total 1986: 5,372

The appeals of Detchon and Goodwin were heard on common evidence. Both appellants testified at trial. Appeals on similar grounds from assessments for the 1985 and 1986 taxation years were also filed by Edward

B. Trower but Trower died before his appeals were heard. Counsel for Mina Trower, Sole Testamentary Liquidator of the Estate of Edward

B. Trower, who is also counsel for the appellants, and counsel for the respondent agreed that the decision in the appeals of Detchon and Goodwin would apply to the Trower appeals.

During the years in appeal the appellants were employed as teachers at BCS in Lennoxville, Quebec. BCS is a private educational institution incorporated as a non-profit corporation under the provisions of the Quebec Companies Act. It offers courses to males and females at the secondary level (grades 7 to 11) and grade 12. The school has both day students and boarding students.

Lawrence Sakamoto was Treasurer and Director of Finance at BCS in 1985 and 1986. At time of trial he was Treasurer. He stated BCS caters to people who in 1995 can afford to pay tuition and board aggregating $23,000 for their child’s education. Students from Mexico, Japan, Venezuela, Spain, United States and Canada and other countries attend BCS.

For the years in appeal the teachers at BCS had no “formal” contract said Sakamoto. They simply received a letter setting out their salary for the year. Although it was not stated in writing, Sakamoto testified, the teachers at BCS had certain obligations due to the fact BCS was primarily a boarding school: the teachers had to live on campus, attend chapel every morning, be available 24 hours a day, seven days a week and send their school age children to BCS. The teachers were also expected to eat at the school cafeteria since a “family atmosphere” was encouraged. BCS employed “about 40 teachers” during the years in appeal.

On the other hand, Sakamoto explained, the teachers were aware of the school’s policy of free tuition to children of staff. He described the free tuition as “part of the culture” of BCS. He stated staff “knew what is required of you by the nature of the place and what you are entitled to”. Staff entitled to free tuition for their children included administrators, including Sakamoto who sent his child to BCS.

Sakamoto insisted that teachers’ children were obliged to attend BCS. This was due to “the nature of the school”. He explained members of staff live on campus with their families and would not be “good for our image if [teachers’] children of school age go to a public school”.

“BCS” he said, “had no other choice”. For a child to go to a public school would mean, Sakamoto declared, “the staff child [is] playing for the opposition”.

Sakamoto said that if a teacher, for example, did not send his or her child to BCS “the teacher would have to think it over carefully”. He stated BCS did not have a policy of dismissing a teacher if a child did not attend the school, but suggested the teacher would be reprimanded by the school’s headmaster.

It was advantageous to BCS for the staff to send their children to the school, Sakamoto declared. Traditionally, he said, children of BCS staff do better academically than other students and so raise the average of the school. They also participate more actively in extra- curricular activities. These children are role models. He also stated that if the children attend BCS the staff is better able to devote their time to the school; their time is not disturbed with their child’s daily travel to school in Lennox ville.

BCS has never achieved full capacity and its cost of having its staff’s children attend is “virtually nothing”, Sakamoto stated. These children, he said, “do not take places of other children”. The children of BCS staff are fully integrated in the school’s general population. They attend the same classes and follow the same programs as paying students.

Salaries are not dependent on whether their child is attending BCS, Sakamoto stated. There is no increase in a salary paid to a teacher, for example, once his or her child leaves the school. A staff parent cannot transfer his or her right to send a child to BCS to another person, for example, to a niece or nephew.

Sakamoto acknowledged that in 1985 and 1986 BCS incurred losses from its operations. “The school”, he said, “has more deficits than breakeven or income”. BCS is a registered charity.

Sakamoto estimated that 14 or 15 children of BCS staff attended the school during 1985 and 1986. Approximately 300 students attended BCS during those years of which 240 were boarders and 60 were day students. Children of staff were day students. Fees for room and board were $11,000 for the 1984-1985 term and $11,950 for the 1985-1986 term. Fees for day students for the 1984-1985 term and 1985-1986 term were $6,900 and $7,470 [2] respectively.

The financial statements of BCS for financial years ending June 30, 1985, 1986 and 1987 were produced as evidence. Respondent’s counsel calculated that for the period ending June 30, 1985, the cost of instruction and “instructional administration” to BCS was $1,503,894. Based on a student population of 300, including staff children, the cost of instruction and related administration for each student was $5,013. Similar costs per student for 1986 and 1987 fiscal years were $5,504 and $5,023 respectively.

During 1985 and 1986 Detchon’s salary from BCS was $25,582 and $30,621 respectively and Goodwin’s salary was $28,675 and $26,619 respectively.

Neither Detchon nor Goodwin paid any tuition for their children. They did, however, pay personal service fees for each child in the amount of $300 for the 1984-85 school year and $500 for the 1985-86 school year. These fees covered transportation costs and rental expenses for school athletics, accident insurance, cadet fees, student identification cards and costs of movies and dances. Sports were compulsory at BCS. Detchon added he also paid for school uniforms, trips and books; these expenses were approximately $1,500 a year.

Respondent’s counsel asked Sakamoto “What is so special at BCS you’d want to pay so much?” Sakamoto replied BCS provides a “traditional, safe education [with] old values”. He also stated that if a child is barred by Quebec law from attending an English school in Quebec, that child may attend BCS.

Sakamoto explained that the high tuition fees at BCS are the result of the school not receiving financial assistance from the government of Quebec. The Minister of Education of Quebec, in accordance with section 84 of An Act Respecting Private Education, c. E.9.1, (“Private Education Act’) established annually budgetary rules to determine the amount of subsidies to be paid to accredited institutions for dispensing accredited services. These rules provide for the allocation of a base amount for each full-time student daily enrolled in secondary school instructional services in general education for which accreditation is granted. No accredited institution may charge for educational services for which it is accredited, an amount in excess of the maximum amount determined by regulation of the Minister of Education. BCS did not, and does not, receive government subsidies since the language of instruction at BCS is English and not French: Charter of the French Language c. C-ll section 72 (the “Charter”). If BCS followed the language stipulations, declared Sakamoto, it would lose students since the majority of students do not comply with the Charter’s requirements. BCS received provincial grants before the Private Education Act and the Charter came into force.

The children of the appellants received certificates of eligibility to be educated in English since the appellants received their elementary education in English in Quebec: section 73 of the Charter. Thus, the appellants’ children had the right to attend English public elementary and high schools in Lennoxville at no cost.

Detchon testified he is in his twenty-sixth year of teaching at BCS. His wife also taught at BCS in the years in appeal and at time of trial was the school’s Director of Admissions. Detchon confirmed that no formal employment contract existed between him and BCS for the years in appeal. At the beginning of the year the headmaster sent a letter outlining salary for the upcoming year. There were no written terms or conditions of employment, Detchon stated, but a teacher was “expected to be there the whole working day (and) work hard .. attend chapel ... [coach] sports [eat] meals on campus”, at least breakfast and lunch, and “dinner, if on duty”. Teachers may also be “on call”. Detchon stated teachers are on duty one out of every three days. Teachers were expected to be on campus, or “on call”, in the event, for example, a child “required help” during the evening. “When you live on campus, your house is not your house ... You have children coming and going all the time.”

In Detchon’s view he had to send his children to BCS. Before attending BCS, Detchon’s children attended Lennoxville Public School, an elementary school in Lennoxville.

Detchon acknowledged that he was not in a financial position to pay tuition fees to BCS for his children. His last child graduated from BCS three years ago, he said, and he “finished paying BCS this past year”.

Goodwin’s evidence was similar to Detchon’s. His wife also taught at BCS during the years in appeal. Originally Mrs. Goodwin worked on a part-time basis and subsequently on a full-time basis; there is no evidence as to her work status in the years in appeal.

Submissions

Appellant’s counsel, M. Gauthier, submitted firstly, that the free tuition given by BCS to the children of the appellants was not a benefit from employment contemplated by paragraph 6(1 )(a) of the Act, and secondly, if the free tuition was a benefit, the value of the benefit was not equal to the tuition charged by BCS.

M. Gauthier declared the policy not to charge tuition was beneficial to BCS and probably a disadvantage or burden to the appellants. The character of BCS required teachers to be on campus to serve students at all times. Teachers whose children attended BCS were not burdened with transporting their children off campus for education. The image of BCS was protected when its own teachers sent their children to BCS. This, Sakamoto had testified, helps marketing BCS. BCS had the advantage of students who served as role models to the other students. Counsel also queried whether it was advantageous to a child or a parent for the child to attend a school in which a parent taught.

The essence of the argument of appellants’ counsel was that if I find his clients received a benefit from their employer, the value of the benefit was less than the amount of the tuition charged by BCS. If what is assessed by paragraph 6(1 )(a) of the Act is the fair market value of a benefit then one must refer to the standard definition of fair market value, that is, the value of a thing a person not obligated to buy would pay to a person not obligated to sell.

Parliament contemplated that in certain circumstances the word “value” in paragraph 6(1 )(a) may mean something other than fair market, counsel declared. Revenue Canada has recognized, for example, “that subsidized meals provided to employees [are] not considered to confer a taxable benefit provided the employee is required to pay a reasonable charge”, that is, the cost of the food, its preparation and service. Interpretation Bulletin IT-470, dated February 16, 1981. Counsel also referred to paragraph 26 (counselling services provided by the employer on retirement) and paragraphs 42 and 43 (airline employees who travel with airline passes on stand-by and bus and rail employees) of Bulletin IT-470R, dated April 3, 1988 (and December 11, 1989) where Revenue Canada recognizes value of a benefit to be something other than fair market value.

Counsel suggested that the value of any benefit to the appellants be the incremental cost to BCS if providing education to their children. He added that since BCS had extra space which was filled in part by the appellants’ children and the cost to BCS of teaching these students was negligible, there was no benefit to the appellants because there was no cost to the employer. Or, the value of the benefit was zero.

Valuing a benefit at incremental or marginal cost, M. Gauthier stated, has been affirmed by Canadian and English Courts. He referred to Pepper (Inspector of Taxes) v. Hart, [1993] A.C. 593, [1993] 1 All E.R. 42 (H.L.). The facts in Pepper and Hart are similar to those at bar. In that case the taxpayers paid one fifth of the tuition fees. The taxpayers considered they had received an emolument as a result of paying a reduced fee for tuition but maintained the cash equivalent of the benefit had to be determined under the principle of marginal costing. The Appellate Committee held that on the true construction of the English statute the taxpayers were assessable on the extra cost of the providing the benefit, and from the point of -view of expense incurred it could not be said that its provision involved significant cost to the school. However, as stated recently by Bonner J.T.C.C. in Giffen v. R. (sub nom. Giffen v. The Queen, 93-1804(IT)G, dated August 11, 1995 (unreported)), Pepper v. Hart is of no assistance since it turns on a statutory provision which has no equivalent in the Act. I do not accept Pepper v. Hart as authority for the proposition that a benefit from employment may be valued at the incremental or marginal cost to the employer.

In any event, counsel argued, Revenue Canada also has recognized that value may be determined at cost. For example, Bulletin IT-160R3, dated February 19, 1992, states, at paragraph 1, that the value of the benefit of using an aircraft owned or leased by the taxpayer’s employer for personal purposes is determined on the basis on what is reasonable in relation to the facts of each case and the purpose for which the aircraft was acquired. Paragraph 8 states that when the aircraft was acquired primarily for personal purposes, the value of the benefit enjoyed by the taxpayer for whom it was acquired is generally considered to be the applicable costs of operation.

Canadian courts too, counsel submitted, have held that in certain circumstances the value of a benefit is to be based on cost. He referred to cases dealing with subsection 15(1) of the Act in which the “amount or value” of the benefit is included in the income of a shareholder. In Youngman v. R. (sub nom. Youngman v. The Queen), [1990] 2 C.T.C. 10, 90 D.T.C. 6322 the Federal Court of Appeal held the fair market rent of a luxury home built by a corporation and inhabited by a shareholder may not always be appropriate as the starting point to calculate the benefit to the shareholder, particularly where it does not provide for a reasonable return on the value or cost of the property to its owner. The rate of return to the corporation, expressed as a percentage of its equity in the house, ought to be the initial figure. Pratte J.A. at page 6325, explained that in determining the value of a benefit its cost may be considered. “The market value, is not, in all circumstances the sole indication of real value”. In R. v. Houle (sub nom. The Queen v. Houle), [1983] C.T.C. 406, 83 D.T.C. 5430 (F.C.T.D.) and Wallace et al. v. Minister of National Revenue, [1986] 1 C.T.C. 2308, 86 D.T.C. 1228 (T.C.C.) the Courts recognized, on the facts of each case, the proper method of valuing a benefit for purposes of subsection 15(1) was to allocate operating costs.

M. Gauthier submitted that if I find the incremental approach not appropriate to the facts in this appeal, I ought to consider the value of the benefit to the recipients, that is, whether it was worth $9,355 and $16,116 to Detchon, for example, to send his children to BCS in 1985 and 1986 respectively. [3]

Counsel argued the value of a benefit to a taxpayer is the value of the benefit to that particular taxpayer. If a taxpayer receives something he cannot use that thing has no value to him, even though it may have a market value. Halsbury, L.C. stated in Tennant v. Smith (Surveyors of Taxes), [1892] A.C. 150, 3 T.C. 158 (H.L.), at page 167:

Even according to the Respondent’s argument the assessable value of a servant’s residence in premises which he does not occupy is not the price which other persons might be prepared to pay for the privilege, but the benefit which he personally derives from it estimated in money.

Appellants’ counsel submitted the value of the benefit to the appellants of sending their children to BCS is not the price other parents are willing to pay to send their children to BCS. In Wilkins (H.M. Inspector of Taxes) v. Rogerson, 39 T.C. 344 (C.A.), a company arranged for a tailor to provide a certain number of its employees with a suit, overcoat or raincoat up to a cost of 15 pounsa. The employees ordered the article of their choice and the tailor presented the bill to the company. The respondent ordered a suit costing 14 pounds 15 shillings, and this amount was paid to the tailor by the company. The Court of Appeal agreed with the High Court that the benefit which the taxpayer received was the value of the suit in his hands and the amount to be included in income was not the cost of the suit to the company but the price the employee would get for it if he sold it, that is 5 pounds.

In Canada the Federal Court, per Collier J., held in R. v. Ginter (sub nom. The Queen v. Ginter), [1977] C.T.C. 418, 77 D.T.C. 5274 (F.C.T.D.) that a taxpayer received no benefit from the construction of an addition to a building owned by him by a company of which he was the sole shareholder since the addition was temporary in nature and was intended to have been torn down by the company; the addition had no value to the taxpayer.

The appellants could have sent their children to public schools or a subsidized private school in Quebec at cost lower that those charged by BCS. The education received at these schools and BCS is the same. BCS follows the Quebec education program and differs from other private schools only with respect to language instruction. Had the children gone to subsidized private schools, it was suggested the annual tuition in the years of appeal would have been in the neighbourhood of $500 to $600. If one examines the financial situation of the appellants, counsel stated, the tuition charged by BCS cannot be the criterion to determine value for purposes of paragraph 6(1 )(a) since this would lead to an absurd situation; the appellants do not have the money to pay the tuition or the tax.

The word “value” in paragraph 6(1 )(a) may have more than one meaning. It may mean “fair market value”, or “cost” or something else. Counsel referred to the advice of Lord Hobhouse in Simms v. Registrar of Probates, [1990] A.C. 323 at 335, quoted in Craies on Statute Law, 7th edition, London: Sweet & Maxwell 1971 at page 87:

Where there are two meanings, each adequately satisfying the meaning (of a statute), and great harshness is produced by one of them, that has a legitimate influence in inclining the mind to the other ...it is more probable that the legislature should have used the word (“evade”) in that interpretation which least offends our sense or justice.

Counsel added that a court ought to adopt an interpretation which is just, reasonable and sensible rather than that which is none of those things: Holmes v. Broadfield R.D.C., [1949] 2 K.B. 1, 7 cited in Craies, page 86. Angers J. cited Maxwell on the Interpretation of Statutes, 8th ed., page 169 in R. v. Dominion Engineering Co. Ltd., [1943] 2 D.T.C. 602 at 606-607 to the same effect. See also Jay-Zee Food Products Ltd. v. Deputy Minister/Minister of National Revenue (Customs & Excise), [1965] C.T.C. 336, 65 D.T.C. 5179 at page 5189 (Ex. Ct.).

M. Gauthier concluded that the policy of BCS to allow its staff to send their children to the school at no cost was for the advantage and benefit of BCS and not its employees. If there was any benefit to the employees, the value of the benefit was the incremental cost of having these children attend BCS, which was nil. Finally, he submitted that if I conclude the value of the benefit is not related to the incremental cost, the value of the benefit is the value of obtaining equivalent education elsewhere in Quebec.

Me Lefebvre, counsel for the respondent, argued that the appellants did receive a benefit from BCS in 1985 and 19866 and the value of the benefit was equal to the tuition charged by BCS. She added there was no other evidence of value other than the tuition at BCS.

Respondent’s counsel questioned her confrere’s view that the language of paragraph 15(l)(c) is similar to that of paragraph 6(1 )(a). The cases considering a benefit under paragraph 15(l)(c), she stated, frequently distinguish between personal and business use of property owned by the corporation. Often the issue is whether the property was acquired by the corporation for the personal use of the shareholder or for the purpose of earning income. These are not questions raised in paragraph 6(1 )(a) assessment.

Paragraph 6(1 )(a) refers to “benefits of any kind whatever received or enjoyed by the taxpayer ... in respect of, in the course of, or by virtue of an office or employment”. The meaning of “benefits of whatever kind” is clearly quite broad: Dickson J., as he then was, in R. v. Savage (sub nom. The Queen v. Savage), [1983] 2 S.C.R. 428, [1983] C.T.C. 393, 83 D.T.C. 5409 at page 440 (C.T.C. 399; D.T.C. 5414). Thurlow J., as he then was, was of the view that if a taxpayer received something of value in the material or economic sense it would contribute a benefit for the purposes of paragraph 6(1 )(a): Philp v. Minister of National Revenue, [1970] C.T.C. 330, 70 D.T.C. 6237 at page 6243. See also Phillips v. Minister of National Revenue, [1994] 1 C.T.C. 383, 94 D.T.C. 6177 at page C.T.C. 385-86 (D.T.C. 6179).

The appellants were not obligated to pay for their children’s education at BCS, declared counsel, because of their position at BCS. Tuition is a personal expense. When one’s employer pays tuition that person gains an advantage from employment. When one does not pay for something one also receives an advantage. The free tuition was a benefit received by the appellants in 1985 and 1986 in respect of, in the course of, or by virtue of their employment.

Respondent’s counsel acknowledged there is no statutory provision setting out how a benefit is to be calculated. She admitted that a benefit may be calculated at its fair market value or something else and in many cases the cost to an employer of a benefit is its fair market value. Where cost has been applied to calculate the value of a benefit to a person who used a corporation’s property, an employee, for example, the cost of using the airplane was determined and its cost was awarded by the number of days the taxpayer used the airplane. She submitted that the value of the benefit to the appellants is its fair market value, that is, the normal cost of tuition at BCS. In the appeal at bar there is a big difference between the cost of the benefit to the employer, which is nothing, and fair market value. The benefit to the appellants, counsel suggested is how much they did not have to pay to send their children to BCS.

Analysis

It is quite a stretch to consider that only BCS obtains a benefit when its teachers’ children attend the school. While it may be useful for its purposes to have its teachers’ children attend BCS, it is no less an advantage for the employees of BCS to avail their children of a product that demands a good amount of money in the education marketplace.

There is simply no evidence that the appellants were legally obligated to send their children to BCS or horrendous consequences would ensure. The appellants would not have been discharged from their teaching positions. There may have been professional and community pressure to send the children to BCS, but nothing more. The appellants may have been obligated under their contract with BCS to do certain things, such as live on campus, eat in the cafeteria, be available at all times, but sending their children to BCS was not one of the obligations.

I agree with Me Lefebvre that the free tuition was a benefit for purposes of paragraph 6(1 )(a). The free tuition represented something of value in a material or economic sense to the appellants. The appellants, as a result of the free tuition, were not being returned to a previous economic state, as in Huffman v. R. (sub nom. Huffman v. Canada), [1990] 2 C.T.C. 132, 90 D.T.C. 6405 (F.C.A.), at page 6407, for example. To put it succinctly: the appellants got something for nothing.

The free tuition arose by virtue of the contract of employment; the circumstances here are different from those in McNeill v. R. (sub nom. McNeill v. The Queen), [1987] 1 C.F. 119. The arrangement for free tuition was part of the terms of employment. The tuition was received by the appellants by virtue of their employment with BCS. The employer was in fact paying for an ordinary personal expense of the appellants: Krull v. Canada (Attorney General) ( sub nom. Canada (Attorney General) v.

Hoefele), [1996] 1 C.T.C. 131, 95 D.T.C. 5602 (F.C.A.) per Linden J.A., at page 8. Were they not employees of BCS they would have to pay the regular tuition fees for their children to attend the school. The free tuition offered by BCS is no different from a manufacturer, for example, giving a product to an employee. The employer is giving something of value to its employee at no cost. If another employer in Lennoxville offered its employees free tuition at BCS for their children, such advantage would surely be a benefit to the employees. I see no reason why the appellants should be treated differently. It is clear the free tuition was a benefit from employment contemplated by paragraph 6(1 )(a) of the Act.

I do not agree with appellants’ counsel that the value of the benefit is the additional or incremental cost to BCS of having the appellants’ children attend the school. In cases such as Houle, supra, and Wallace, supra, the courts recognized the value of a benefit to the shareholder to be the operating costs of the boat to the corporation and the operating costs incurred by the corporation were market costs. I have been cited no Canadian authority permitting me to value the benefit to the appellants at BCS’s incremental cost of having additional students and ignore both the average cost to BCS of teaching a student and the price paid to BCS.

I do not agree with Me Gauthier that the value of the benefit is the cost of obtaining education elsewhere in Quebec. The evidence of Sakamoto was that the tuition fee at BCS would be significantly reduced if it had received provincial grants. Other private schools in Quebec receive provincial government grants which permit them to charge low tuition fees. The appellants educate their children at BCS and it is the value of the benefit at BCS which is to be considered. One must consider facts as they exist. For example, to reduce the value of the benefit to the difference between the average cost per student at BCS and the grant per student other private schools receive is a hypothetical exercise.

The true value of the benefit received by the appellants a year is the economic value of the one year’s education at BCS. This, of course, is difficult, if not impossible to determine. Who can say what a year’s education is worth? That is an exercise for economists and educators. I am left with a more mundane challenge: to value for tax purposes the value of the free tuition.

There is no evidence before me that parents who are not employed by BCS, but who earn similar income to the appellants, may send their children to BCS for free or reduced tuition. If there was such evidence, I would be inclined to value the benefit to the appellants at the amount of fees, if any, paid by such parents.

There is no obligation for an employer to charge its employees for a good or service any more than its actual costs of the good or service. The employer need not add any profit element and indirect overhead costs to any good or service it provides to its employees: ABC Steel Buildings Ltd. v. Minister of National Revenue, [1974] C.T.C. 2176, 74 D.T.C. 1124 (T.R.B.). Respondent’s counsel stated that an analysis of the financial statements of BCS suggest the average cost per student for fiscal years 1985, 1986 and 1987 was $5,013, $5,504 and $5,023 respectively. (Each fiscal year of BCS straddles two taxation years of the appellants.) These amounts are close to the amounts applied by the Minister in valuing the benefits and, in the circumstances, valuing the benefit at the average cost per student is an appropriate method of valuation. My conclusion may appear harsh to the appellants. Unfortunately education is not a product, such as a suit, that is to be valued in the hands of the recipient of the gift and not what it cost the donor: Rogerson, supra. In Pepper v. Hart, supra, Lord Griffiths, at page 618, noted:

it is surely common knowledge that the provision of free or subsidised education for the children of those teaching in independent schools was part of their usual terms of employment and that the salaries paid would be wholly insufficient to meet a charge to tax based on the full fees of the school.

Here, too, it is obvious that the salaries of the appellants are insufficient to meet the tax assessed on the value of the benefit added to their incomes. However, it would not be just and reasonable to other Canadian taxpayers that employees, solely because of their occupations and low level salaries, obtain a tax free benefit from an employer who does not pay a higher wage. To permit such a tax advantage to one group of taxpayers is not within the object and spirit of the Act. The average cost to BCS of educating a student is a sensible method of valuing the benefit.

The Minister assessed all of the benefits to the fathers of the children, although their mothers were also employed at the school as teachers during the years in appeal. I mentioned this during the trial and noted it was not raised in the pleadings. This question was not pursued to any degree by either counsel. There may be good reason the appellants did not pursue this question. To my mind the allocation of the benefit to one parent only is wrong and should be righted. [4] I realize the assessments of the mothers for 1985 and 1986 may be statute barred.

I propose to allow the appeals only for the purposes of referring the assessments back to the Minister to reassess on the basis the value of the benefits was the lower of the average cost per student to BCS for each year and the value actually assessed. I think this is fair in the circumstances. If counsel require assistance in determining these comments they may make further representations. The appellants and their spouses shall have 45 days from the date of these reasons to make a request in writing to the Registrar of this Court for Judgment allocating the benefits equally between the spouses. If such request is received the appeals will be allowed reducing the benefits by 50 per cent. Otherwise, there will be no allocation between parents. The respondent shall have her costs, if requested, in either event.

I wish to make one more comment. I do not know whether it was administrative practice of Revenue Canada before 1985 not to assess teachers whose children received free or reduced tuition at the schools or colleges at which they taught. Paragraph 19 of Bulletin IT-470, dated February 16, 1981, provided for the assessment of a benefit in these circumstances. If it was the practice of Revenue Canada not to enforce its published policy and therefore gave some comfort to taxpayers like the appellants, the Minister should recommend, pursuant to the Financial Administration Act, remission of the tax and interest assessed on the benefits.

Appeals allowed.