Ann Craig Dupuis v. Her Majesty the Queen, [1993] 2 CTC 2032, 93 DTC 723

Lamarre Proulx, T.C.C.J. (orally):—This is an appeal from an assessment by the Minister of National Revenue (the "Minister"), made under subsections 160(1) and 160(2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

The question at issue is whether amounts of money paid by the appellant's husband to the appellant in the years 1985, 1986, 1987 and 1988 were transfers of the husband’s property to the appellant within the meaning of subsection 160(1) of the Act.

In assessing the appellant, the Minister relied on the facts described in paragraph 6 of the reply to the notice of appeal, which reads as follows:

6. In assessing the appellant in accordance with section 160 of the Income Tax Act, the Minister of National Revenue, relies, inter alia, upon the following facts:

(a) during the 1985, 1986, 1987 and 1988 taxation years, the appellant was married to Mr. Jean Dupuis;

(b) during those same taxation years, Mr. Jean Dupuis transferred to the appellant, his spouse, the following amounts of money for no consideration;

Taxation Year	Amounts Transferred
1985	$ 5,860
1986	$ 1,700
1987	$ 4,548
1988	$ 2,995
	$15,203

(c) during those years the appellant’s spouse was liable to pay to the Minister of National Revenue, the following amounts: [not reproduced].

The evidence showed that the appellant's husband, Mr. Dupuis had made four bankruptcies in 1972, 1980, 1983 and 1988, where the Receiver General of Canada was always a creditor, for unpaid income tax. Each time, the bankrupt was discharged a year or two after the bankruptcy. There was no evidence as to what action was taken by the Minister as a creditor at the time of the bankruptcies and before the discharges. The tax owed by the appellant’s husband was assessed by way of assessments made by the Minister under subsection 152(7) of the Act where no returns have been filed.

The appellant has had, for over 30 years, and still has, an employment with Northern Telecom. She has always, in a timely manner, paid her income tax. In 1974, she married Mr. Dupuis, who, at the time, was 44 years of age and had three children. Before their marriage, they entered into an agreement whereby the family charges were to be borne equally by both spouses. This is shown by Exhibit A-1.

The amounts transferred described in paragraph 6(b) of the reply are composed, for the year 1985, of three cheques of $70, eight cheques of $100, two cheques of $200, two cheques of $300, one cheque of $150, one cheque of $1,200, one cheque of $1,000 and one cheque of $1,500. For the year 1986, the amount transferred is composed of two cheques of $50, eight cheques of $100 and one cheque of $700. The pattern is similar for the years 1987 and 1988.

In 1975, the appellant purchased a house. The land taxes are in the appellant's name. The appellant’s spouse said that he would write cheques to the appellant's order for various reasons: sometimes to repay loans made by the appellant to him, sometimes to participate in the family charges, sometimes to obtain cash.

Mr. Dupuis is a sales representative for building materials since 1982. In order to travel or make purchases, he needed cash. Because of his numerous bankruptcies, Mr. Dupuis did not have any credit line with the banks. His wife had to loan him money from time to time. He could not obtain credit cards. He would sometimes ask the appellant to cash cheques for him to obtain cash.

The appellant said that she did not keep records to ascertain that she was not paying more than half her share of the expenses inherent to running a house and a household because she did not know that she had to. Her husband testified that she was always paying much more than he in these charges.

Mr. Dupuis had given as an explanation to the Minister's agent, for the cheques in question, that they were repayments of loans. The appellant had, just before the hearing, found four cheques made by her to her husband in the total amount of $7,120 for the year 1987. These cheques, the originals were produced as exhibits, had been processed by the banks. The appellant said that she did not remember the purpose of these cheques made by her to her husband.

The spouses, during these years, often lived apart. The appellant said that the cause of the disputes was usually a matter of money, because her husband did not provide his share of the household expenses.

Counsel for the appellant referred the Court to Boisselle v. M.N.R., [1989] 1 C.T.C. 2385, 89 D.T.C. 269 (T.C.C.), Miller v. M.N.R., [1988] 2 C.T.C. 2106, 88

D. T.C. 1488 (T.C.C.) and to articles 441 and 446 of the Civil Code, respecting the rights and duties of spouses.

Counsel for the respondent referred the Court to D'Aoust v. M.N.R., [1990] 1 C.T.C. 2360, 90 D.T.C. 1253 (T.C.C.), Gentile v. M.N.R., [1988] 1 C.T.C. 253, 88 D.T.C. 6105 (F.C.T.D.) and Fisher v. M.N.R., [1979] C.T.C. 2771, 79 D.T.C. 661 (T.R.B.).

Counsel for the appellant raised three points: the first one being that the assessment was outside the time limits set out in subsection 152(4) of the Income Tax Act; the second one, that not enough details were given in the Notice of Assessment to allow the appellant to defend herself properly; and the third, that no property was transferred without a valid consideration of an equal if not greater value, this valid consideration being debts owed to the appellant and participation in the household charges.

Respecting the first point, I would say that it comes out clearly from the text of subsection 160(2) of the Act that this provision is not subject to the time limit set out in subsection 152(4) of the Act.

On the second point, as I read the appellant's notice of objection, dated August 30, 1990 and written by her, she seems to have well understood the nature of her assessment. She refers to cheques from her husband and explains their purposes. However, it is not clear whether she was given the chance to give any explanation before she was assessed. There is evidence that her husband was contacted. There is no evidence that she was. I do not however want to decide on the point of whether the Minister's position was clearly stated in the appellant’s assessment in view of my finding on the third point, and also in view that this ground was not raised in the notice of appeal nor in a rejoinder.

On the third point, that is that the moneys received by the appellant from her husband, were received for a valid consideration, I am of the view that the evidence showed that it is true. I find plausible that the payments were the appellant’s husband contributions towards the charges of the house and family, and in some occasions, were repayments of loans, or a way to obtain cash.

Counsel for the respondent submits that it is scarcely plausible that the appellant did not keep proper records of the house expenses and the propor tion of what was paid by whom, where she saw fit to enter into a premarital agreement and that it was also strange that she did not keep a record of the loans that she made to her husband. I am not aware that there is a legal requirement to keep such records in a family. Having said this, I also say that no taxpayer should use the pretext of fulfilling his legal obligations towards his spouse to deplete his liquid assets in order to evade the payment of tax. But this improper transfer of liquid assets should be evidenced otherwise than by cheques of small amount. It is no doubt easier to identify a transfer of property when the property is a real property, be it movable or immovable. In matters of personal property, as is money, especially where the amounts are small, the assumptions of the Minister in assessing a transfer are more difficult to uphold where the only evidence adduced are cheques. One way of proving that a transfer of property took place would have been to show that the appellant had assets that she could not have earned alone, after having paid her own expenses and her share of the household expenses.

On the evidence before me, I conclude that the payments in question were payments made by the appellant's spouse to assume his legal obligations regarding the payment of his share of the family charges and the reimbursement of the loans made to him by the appellant and for the other factual reasons already described, and not a transfer of property to the appellant within the meaning of subsection 160(1) of the Act, that is a transfer of property without a valid consideration.

The appeal is therefore allowed with costs.

Appeal allowed.