Maxine Fine v. Minister of National Revenue, [1990] 2 CTC 2620, 91 DTC 133

Beaubier, T.CJ.:—This matter was heard in Ottawa, Ontario, on November 8, 1990.

The appellant, Maxine Fine, was assessed by the Minister of National Revenue for a total of $34,915.11 in respect to alleged transfers of funds to her by her husband in the years 1982 to 1986 inclusive, while her husband owed that much in income tax during the years 1982 to 1985 inclusive. The assessment is pursuant to section 160 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). Mrs. Fine was the principal witness.

Mr. and Mrs. Fine are residents of Aylmer, Quebec.

Mrs. Fine and her husband, Ray Fine, were married in 1965. They have three children aged 14, 16 and 18. Their home was purchased at 731 Pink Road, Aylmer, Quebec in 1973. The purchase price was $80,000 and consisted of a down payment of $20,000, one half of which was paid by Mrs. Fine from her own funds. The balance of $60,000 was financed by a mortgage.

When Mr. and Mrs. Fine married, Mrs. Fine was an elementary school teacher. She left her full-time employment with the Ottawa Board of Education in 1969 and remained part-time until their first child was born in February 1972. Since that date, she has stayed home, taking care of the home and her three children and her husband. It should be noted that in Exhibit R-4, Mrs. Fine's occupation is not shown as homemaker or housekeeper. Rather, she is shown as "merchant".

Ever since Mr. and Mrs. Fine were married, Mr. Fine has given his paycheque to his wife and she pays for everything. This was done because "he is not organized". Mrs. Fine has at least one account in her own name and at least one other account in the joint name of herself and Mr. Fine. The funds paid in and out and which are the subject matter in dispute were in the account which is in the sole name of Mrs. Fine.

In 1982 Mr. Fine transferred his entire interest in the family home at 731 Pink Road, Aylmer, Quebec, to Mrs. Fine. The price was $100,000. Mrs. Fine paid $10,000 of her own money, and the balance of $90,000 consisted of assumed mortgages. The purchase price of $100,000 was the approximate value of the house at that time. Mrs. Fine states that she purchased the home at that time for "safety", as Mr. Fine was in business. In 1986, Mr. Fine became bankrupt. When Mrs. Fine assumed the mortgages with the purchase of the house, the practice which Mr. Fine had of delivering his paycheque to Mrs. Fine so that she could put it in her account and pay the bills, including the mortgage payments, continued and it so continued throughout the entire period which is the subject matter of this action.

Mrs. Fine testified that the funds coming into the household for the years 1982 to 1986 inclusive were limited. As a consequence of which she borrowed $10,000 plus $3,000, remortgaged her house for another $60,000, and sold her car for $11,400. All of the moneys in question went into the account in her name.

The evidence is that Mrs. Fine did not know anything about Mr. Fine's income tax returns. However, she did see his mail coming in and she had an idea that Mr. Fine was in arrears on his taxes during the period in question.

On January 13, 1984, Mrs. Fine remortgaged the house for $105,000 out of which she paid $90,000 in previous mortgages; Mr. Fine co-signed this mortgage which was filed as Exhibit R-3. On May 23, 1985, Mrs. Fine once again remortgaged the house with the Royal Bank of Canada for $150,000 and paid out the mortgage filed as Exhibit R-3. Mr. Fine co-signed this mortgage. It should be noted that in the 1985 mortgage, filed as Exhibit R-4, Mr. and Mrs. Fine are both described as the "borrower". In addition, clause 21(C) on page 8 of Exhibit R-4 reads as follows:

The matrimonial status of the Borrower is as follows:

Married to one another, separate as to property, according to the laws of the Province of Ontario and that the said matrimonial status and regime have not been modified since their marriage.

Mrs. Fine did not testify as to whether her marriage was under the Regime of the Civil Code of the Province of Quebec or not. However, both she and Mr. Fine signed the mortgage described as Exhibit R-4 containing the above quoted warranty. A similar warranty is contained in the mortgage to CIBC Mortgage Corporation filed as Exhibit R-3 at page 7 subparagraph (e), which was also signed by both Mr. and Mrs. Fine.

The following are the statistics respecting the years 1982 to 1986 inclusive which were established in Court:

The appellant testified herself and in addition called Dr. Gilles Grenier, economist who is an assistant professor of the Department of Economics at the University of Ottawa. The appellant testified as to her various household and family duties. The economist testified as to the approximate value of these household and family duties for the years in question. The economist had the three values based upon assumptions. In the first assumption that Mrs. Fine did household work as to an alternative to her role as a teacher, he valued her services at $169,200. In the second assumption where he valued her services as a domestic person, he determined a value of $68,544. In the third assumption, he attempted to divide the services between the two foregoing occupation alternatives and arrived at a value of $118,872. Generally, Mr. Grenier was of the view that Mrs. Fine's services in her various capacities at home should be closer to the higher of the three values. This evidence was not disputed by the Minister of National Revenue.

It should be noted from the foregoing facts, that Mrs. Fine was the writer of cheques and the distributor of all of the funds coming into the home. She had some knowledge of Mr. Fine’s income tax problems. She knew Mr. Fine was not an organized person and due to that she assumed the management of the household funds. Moreover, the evidence is that she increased the amount mortgaged against the house from $90,000 in 1982 to $150,000 in 1985. She also borrowed an additional $13,000, making a total of $73,000 acquired over and above her husband's income during the years 1982 to 1985 in question of $260,886.06, for a grand total exceeding $333,000 in four years, against which $34,915.11 was owed in income tax during the same four years by Mr. Fine. The evidence is that Mrs. Fine had unrestricted control over these funds to use them for whatever purpose she wished, whether it consisted of mortgage payments, paying income tax, or whatever she desired in her sole discretion. No effort was made by any party to the case to trace the moneys paid by Mr. Fine to Mrs. Fine or to trace the moneys gathered by Mrs. Fine through her borrowing either in or out of the account.

The argument of the appellant is first that there was no transfer of property by Mr. Fine to Mrs. Fine during the years in question; rather Mr. Fine provided support. Secondly, Mrs. Fine's family services and the value thereof were consideration for the funds given to her by Mr. Fine; thus, the marriage constituted a contract between Mr. and Mrs. Fine for support in return for services of which the value was determined on the basis of assumptions by an economist.

With respect to the argument that Mr. Fine merely provided support, it is to be noted that Mr. Fine provided Mrs. Fine with an average income in excess of $65,000 per year for the years 1982 to 1985 inclusive with which to care for a family of five, pay the bills, and pay the taxes, which amounted to an average of less than $9,000 per year. No evidence was called to indicate what a family of five required for "support" in Canada during the years in question. Evidence was called to indicate the value of Mrs. Fine's services based upon the assumptions of the economist. Suffice it to say that marriage is not a contract quid pro quo.

The result is that this Court finds that in fact there was a transfer of property by Ray Fine to the appellant in the amount of at least $67,908.96 and that during the time when the transfer occurred Ray Fine was liable to pay $34,915.11 under the Income Tax Act in respect to his taxation years in which the property was transferred or any preceding tax year. The assessment is therefore confirmed.

For these reasons, the appeal is dismissed.

Appeal dismissed.