Robert Dushenski, Executor of the Estate of Peter Dushinsky v. Minister of National Revenue, [1990] 2 CTC 2012, 90 DTC 1391

Bonner, T.C.J.:—This is an appeal from an asssessment of income tax for the 1984 taxation year. The issue is whether certain cattle which were “rights or things” to which subsection 70(2) of the Income Tax Act ("Act") would otherwise have applied were ”. . . transferred or distributed . . . ” to Mary Dush- insky within the meaning of subsection 70(3) of the Act.

On September 29, 1984, Peter Dushinsky, a farmer, died as a result of an accident while driving his tractor. Robert Dushenski was named executor of the last will and testament of the deceased. The will provided in part as follows:

4. I transfer unto my Trustee all my property and estate wherever situate upon the following trusts and conditions:

(a) To pay my just debts and funeral expenses.

(b) To transfer to my wife, MARY DUSHINSKY, the following:

(v) my interest in my herd of cattle and calves

In the event that my wife does not survive me for a period of Sixty (60) days following my death, or in the event that she predeceases me, the interest in my estate due to my wife, MARY DUSHINSKY, shall rever [sic] to and form part of the residue of my estate. . . .

At the time of death Peter Dushinsky owned a herd of cattle which were on pasture about two miles away from the home farm. Winter arrived early that year marked by a snowfall in mid-October. As a result it became impossible to continue to keep the cattle on pasture. The herd was moved to a yard on the home farm. There they were fed hay, straw and, in the case of young calves, grain. By mid-October of 1984 it became apparent that the available supply of feed would not last long. Furthermore, the widow, Mary Dushinsky was unable to drive the tractor as recquired to move bales of hay for the purpose of feeding the animals. She required the help of a nephew who was pressing for compensation for his services. The nephew and other family members interested in the residue were also pressing for the payment of compensation by the widow to the estate for hay and straw consumed by the animals.

Because of the evident difficulty of continuing to feed the cattle Mary Dushinsky approached the appellant in mid-November and asked him to arrange to sell the animals. Following a meeting between the appellant, Mary Dushinsky and the auctioneer, the herd was disposed of by auction. The arrangements for the auction were made informally and no written record of them exists.

Subsections (2) and (3) of section 70 of the Income Tax Act read:

(2) Where a taxpayer who has died had at the time of his death rights or things (other than any capital property, indexed security or any amount included in computing his income by virtue of subsection (1)), the amount whereof when realized or disposed of would have been included in computing his income, the value thereof at the time of death shall be included in computing the taxpayer's income for the taxation year in which he died, except that where his legal representative has, within one year from the date of death of the taxpayer or within 90 days after the mailing of any notice of assessment in respect of the tax of the taxpayer for the year of death, whichever is the later day, so elected, a separate return of the value shall be filed and tax thereon shall be paid under this Part for the taxation year in which the taxpayer died as if he had been another person entitled to the deductions to which he was entitled under section 109 for that year.

(3) Where before the time for making an election under subsection (2) has expired, a right or thing to which that subsection would otherwise apply has been transferred or distributed to beneficiaries or other persons beneficially interested in the estate or trust,

(a) subsection (2) is not applicable to that right or thing, and

(b) an amount received by one of the beneficiaries or other such persons upon the realization or disposition of the right or thing shall be included in computing his income for the taxation year in which he received it.

It was the position of the appellant, the Executor, that the cattle were transferred to Mary Dushinsky just prior to the sale when the appellant concurred in her proposal that the herd be sold. The sale was made, it was argued, by the executor as agent for the widow to whom the cattle had been transferred as beneficiary. Thus it followed by virtue of subsection 70(3) that the respondent erred in assessing tax as he did on the basis that subsection 70(2) required the inclusion of the value of the cattle in computing the income of the estate.

Evidence was given at the hearing of the appeal by the appellant. He described the events leading up to the sale of the cattle. He did not suggest that he made any sort of conscious decision to turn the cattle over to Mary Dushinsky in satisfaction of the bequest. He indicated that there were no formalities surrounding the sale. No bill of sale was delivered. At or after the auctions some pedigree papers were turned over to purchasers of the animals which were registered but he did not recall signing any such documentation. The proceeds of sale were paid into the bank account of the estate. The appellant explained that he had received legal advice that he could not disburse the proceeds until probate was granted. That did not happen until March of 1985. Payment of the proceeds to the widow was then further delayed pending resolution of an application made by the widow to the Court of Queen's Bench under the Family Relief Act of Alberta.

Both counsel were in agreement that the 60 day survival clause in the will was repugnant to the gift to the widow, was inoperative and thus did not stand in the way of a transfer of the cattle to her. In argument in support of the proposition that title to the cattle passed to the widow prior to the auction, counsel for the appellant referred to Fasken v. M.N.R. [1] and in particular to the following passage in which Thorson P. dealt with the meaning of the word "transfer":

In Gathercole v. Smith (1880-81) 17 Ch. D. 1 at 7, James L.J. spoke of the word “transfer” as "one of the widest terms that can be used," and Lush L.J. said, at page 9:

The word “transferable,” I agree with Lord Justice James, is a word of the widest import and includes every means by which the property may be passed from one person to another.

The word "transfer" is not a term of art and has not a technical meaning. It is not necessary to a transfer of property from a husband to his wife that it should be made in any particular form or that it should be made directly. All that is required is that the husband should so deal with the property as to divest himself of it and vest it in his wife, that is to say, pass the property from himself to her.

Counsel referred as well to the decision of the Income Tax Appeal Board in Executors of the Estate of Hugh Hawk v. M.N.R. [2] as an example of a case in which cattle were held to have been transferred within the meaning of the Income Tax Act even though no bill of sale was delivered. He pointed out that in the present case the sale took place at the request of Mrs. Dushinsky and that the proceeds were eventually paid to her with interest to the date of payment. Finally counsel submitted that it would be unfair to the residuary legatees if the respondent's assessment against the estate were allowed to stand and Mrs. Dushinsky were thus to receive the deceased's cattle free of the corresponding tax liability.

It is clear that a transfer of the herd to Mary Dushinsky was not effected by operation of the will alone. The law as stated in Halsbury [3] is:

para. 1345 The bequest of a legacy, whether general or specific, transfers only an

inchoate property to the legatee: the executor's assent is necessary to render it complete and perfect.

para. 1347 An assent to the vesting of personal estate or of an equitable interest in

real estate may be express or implied; it need not be in writing, nor need it be given in any particular form. Informal expressions, if sufficiently clear to indicate intention, may amount to an assent. The assent may also be implied from the executor's conduct.

In Attenborough v. Solomon [4] Viscount Haldane L.C. stated:

The general principles of law which govern this case are not doubtful, The position of an executor is a peculiar one. He is appointed by the will, but then, by virtue of his office, by the operation of law and not under the bequest in the will, he takes a title to the personal property of the testator, which vests him with the plenum dominium over the testator's chattels. He takes that, I say, by virtue of his office. The will becomes operative so far as its dispositions of personal property are concerned only if and when the executor assents to those dispositions.

Here the appellant did not expressly assent to the vesting of the property in the herd in Mary Dushinsky. As to implied assent, the appellant's conduct in retaining the proceeds of the sale of the herd in the estate account is quite inconsistent with the assertion that the herd had already been transferred to Mrs. Dushinsky. In the circumstances subsection 70(3) of the Income Tax Act does not apply.

As to the fairness argument I note firstly that the widow's views as to fairness and the views of the residuary beneficiaries are likely to be different. Counsel did not refer in argument to clause 4(a) of the will but it would seem, at least at first blush, that the will contemplates payment of the tax liability out of the estate as a whole. What is "fair" in the circumstances is not as clear as counsel seems to suggest. Secondly, and in any event, the statutory provisions to which I have referred govern the result. The appeal will therefore be dismissed.

Appeal dismissed.