Tremblay,
T.C.J.:
—[Translation]:
This
appeal
was
heard
in
Québec,
Quebec
on
December
19,
1986.
1.
Issue
The
issue
is
whether
the
appellant
is
justified
in
including
only
half
the
taxable
gain
of
$31,559
or
$15,779.50,
in
computing
his
income
for
the
1982
taxation
year.
The
appellant
maintains
that
his
wife,
the
co-owner,
should
be
taxed
on
half
of
this
taxable
capital
gain,
a
gain
resulting
from
a
sale
of
land
to
the
Aluminum
Company
of
Canada
Ltd.
The
appellant
maintains
that
since
he
was
married
under
the
community
of
property
regime
in
1950,
and
acquired
the
land
in
question
in
1973
with
the
proceeds
from
his
work,
his
wife
thus
became
a
co-owner.
The
respondent
maintains
that
since
the
appellant
is
the
sole
legal
administrator
of
the
community's
property,
he
is
the
sole
owner
of
it,
and
that
he
must
accordingly
be
taxed
on
the
total
taxable
gain.
2.
Burden
of
Proof
2.01
The
burden
is
on
the
appellant
to
show
that
the
respondent's
reassessment
is
incorrect.
This
burden
of
proof
derives
from
a
number
of
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
Johnston
v.
M.N.R.,
[1948]
S.C.R.
486;
[1948]
C.T.C.
195;
3
D.T.C.
1182.
3.
Facts
The
allegations
of
the
parties
are
not
in
dispute.
They
can
be
summarized
as
follows.
3.01
The
appellant
married
Thérèse
Verreault
on
November
14,
1950
under
the
community
of
property
regime.
3.02
Since
there
is
no
marriage
contract,
the
matrimonial
regime
has
not
been
changed
in
any
way.
3.03
On
November
16,
1973
the
appellant
purchased
a
piece
of
land
in
Laterrière
township,
Chicoutimi
county,
Quebec,
with
the
proceeds
from
his
work.
3.04
On
June
22,
1982
he
sold
the
said
land
to
the
Aluminum
Company
of
Canada
Ltd.
3.05
The
appellant
included
half
the
taxable
capital
gain
in
his
income
when
filing
his
income
tax
return.
His
wife
did
likewise.
3.06
The
figures
for
the
different
transactions
and
for
calculating
the
capital
gain
and
the
taxable
capital
gain
are
as
follows:
(a)
The
land
the
appellant
purchased
in
November
1976
was
110
acres
in
area
and
in
June
1982
he
sold
49.77
acres
for
$72,000.
(b)
The
adjusted
cost
base
of
the
land
sold
in
June
1982
was
calculated
as
follows:
|
Cost
of
land
|
$17,000
|
|
Notarial
fees
|
$
|
190
|
|
Surveying
costs
|
$
2,442
|
|
$19,632.
|
|
ACB
(45.24%
of
$19,632)
|
$
8,882
|
(c)
The
capital
gain
realized
was
$63,118
and
the
taxable
capital
gain
$31,559.
(d)
The
appellant
included
only
a
taxable
capital
gain
of
$15,779.50
in
computing
his
income
because
in
his
opinion
the
other
part
of
the
$31,559
was
to
be
included
in
computing
his
wife’s
income.
4.
Act,
Case
Law,
Analysis
4.01
Both
parties
referred
mutatis
mutandis
to
the
arguments
presented
in
Roger
Laporte
v.
M.N.R.,
[1984]
C.T.C.
2260;
84
D.T.C.
1208.
That
case
involved
the
sale
of
63
shares
of
St
Lambert
Drilling
Co
Ltd.
The
issue
was
stated
as
follows
at
page
2260
(D.T.C.
1208):
The
point
is
whether
the
appellant
was
correct
in
not
including
in
his
income
for
the
1976,
1977
and
1978
taxation
years
half
the
capital
gain
made
on
the
sale
of
63
ordinary
shares
in
the
capital
stock
of
St-Lambert
Drilling
Co
Ltd,
and
half
the
interest
resulting
from
the
said
sale,
made
on
or
about
April
30,
1976.
The
appellant
based
his
argument
on
the
fact
that
half
the
63
shares
belonged
to
his
wife,
since
she
had
paid
for
half
of
them,
and
in
any
case
the
said
shares
were
part
of
the
community
of
property.
The
respondent
maintained
that
the
shares,
which
are
capital
assets,
were
registered
in
the
appellant's
name
in
the
company's
minute
book
in
1976.
The
appellant
transferred
31.5
of
the
said
shares
to
his
wife
on
or
about
April
30,
1976.
He
concluded
from
this
that
all
of
the
taxable
gain
and
all
the
interest
income
resulting
should
be
taxed
in
the
hands
of
the
appellant,
the
transferor,
pursuant
to
section
74
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63,
as
amended.
4.02
Subsection
74(1)
relied
on
by
the
respondent
reads
as
follows:
74
(1)
Where
a
person
has,
on
or
after
August
1,
1917,
transferred
property
either
directly
or
indirectly,
by
means
of
a
trust
or
by
any
other
means
whatever
to
his
spouse,
or
to
a
person
who
has
since
become
his
spouse,
the
income
for
a
taxation
year
from
the
property
or
from
property
substituted
therefor
shall,
during
the
lifetime
of
the
transferor
while
he
is
resident
in
Canada
and
the
transferee
is
his
spouse,
be
deemed
to
be
income
of
the
transferor
and
not
of
the
transferee.
4.03
The
primary
ratio
decidendi
in
Laporte
is
set
out
in
paragraph
4.03.13
of
the
reasons
for
judgment.
It
reads
as
follows:
4.03.13
With
regard
to
the
appellant's
first
argument,
summarized
in
para.
4.03.9
—
and
of
the
provisions
to
which
he
refers,
it
is
most
important
to
cite
the
following
provisions:
39(1),
40(4)(a)
and
54(e)
and
(f),
underlining
the
words
which
indicate
the
necessity
of
owning
property
for
it
to
be
taxed
as
a
capital
gain:
39.
(1)
For
the
purposes
of
this
Act,
(a)
a
taxpayer's
capital
gain
for
a
taxation
year
from
the
disposition
of
any
property
is
his
gain
for
the
year
determined
under
this
subdivision
(to
the
extent
of
the
amount
thereof
that
would
not,
if
section
3
were
read
without
reference
to
the
expression
"other
than
a
taxable
capital
gain
from
the
disposition
of
a
property"
in
paragraph
(a)
thereof
and
without
reference
to
paragraph
(b)
thereof,
be
included
in
computing
his
income
for
the
year
or
any
other
taxation
year)
from
the
disposition
of
any
property
of
the
taxpayer
other
than
.
.
.
40.
(4)
Where
a
taxpayer
has,
after
1971,
disposed
of
property
to
an
individual
who
is
deemed
by
subsection
70(6)
or
73(1)
to
have
acquired
it
for
an
amount
equal
to
its
adjusted
cost
base
to
the
taxpayer
immediately
before
the
disposition,
for
the
purposes
of
computing
the
individual’s
gain
from
the
disposition
of
the
property
under
paragraph
(2)(b)
or
(c),
as
the
case
may
be,
(a)
the
individual
shall
be
deemed
to
have
owned
the
property
throughout
the
period
during
which
the
taxpayer
owned
it.
54.
In
this
subdivision,
(e)
"listed
personal
property"
of
a
taxpayer
means
his
personal-use
property
that
is
all
or
any
portion
of,
or
any
interest
in
or
right
to,
any
(i)
print,
etching,
drawing,
painting,
sculpture,
or
other
similar
work
of
art,
(ii)
jewellery,
(iii)
rare
folio,
rare
manuscript,
or
rare
book,
(iv)
stamp,
or
(v)
coin;
(f)
"personal-use
property"
of
a
taxpayer
includes
(i)
property
owned
by
him
that
is
used
primarily
for
the
personal
use
or
enjoyment
of
the
taxpayer
or
the
personal
use
or
enjoyment
of
one
or
more
individuals
each
of
whom
is
(A)
the
taxpayer,
(B)
a
person
related
to
the
taxpayer,
or
(C)
where
the
taxpayer
is
a
trust,
a
beneficiary
under
the
trust
or
any
person
related
to
the
beneficiary,
(ii)
any
debt
owing
to
him
in
respect
of
the
disposition
of
property
that
was
his
personal-use
property,
and
(iii)
any
property
of
the
taxpayer
that
is
an
option
to
acquire
property
that
would,
if
he
acquired
it,
be
personal-use
property
of
the
taxpayer,
and
"personal-use
property"
of
a
partnership
includes
any
partnership
property
that
is
used
primarily
for
the
personal
use
or
enjoyment
of
any
member
of
the
partnership
or
for
the
personal
use
or
enjoyment
of
one
or
more
individuals
each
of
whom
is
a
member
of
the
partnership
or
a
person
related
to
such
a
member;
It
seems
clear
from
reading
these
provisions,
and
others
not
cited,
that
the
taxpayer,
in
order
to
be
subject
to
taxation
for
a
capital
gain,
must
be
the
owner
of
the
property
of
which
there
was
a
disposition
(real
or
presumed).
Just
as
a
person
who
is
not
an
owner
of
property
subject
to
depreciation
cannot
in
calculating
his
income
deduct
the
amount
of
depreciation
calculated
on
the
cost
of
the
said
property,
so
a
person
who
is
not
the
owner
of
property
of
which
there
was
a
disposition
cannot
be
taxed
on
the
profit
as
a
capital
gain.
The
respondent
further
argued
that
in
the
Income
Tax
Act
the
basis
of
the
taxation
is
subsection
2(1):
2
(1)
An
income
tax
shall
be
paid
as
hereinafter
required
upon
the
taxable
income
for
each
taxation
year
of
every
person
resident
in
Canada
at
any
time
in
the
year.
It
is
a
person
who
is
taxed,
not
capital.
Additionally,
in
the
submission
of
the
respondent,
in
determining
taxable
income
paragraph
3(b)
establishes
that
a
capital
gain
is
considered
as
income,
just
as
any
other.
The
respondent
further
alleged,
relying
on
Sura
and
James
B.
McLeod,
that
the
Income
Tax
Act
does
not
seek
to
tax
ownership,
but
the
beneficiary
of
the
property.
When
in
1972
the
legislator,
in
the
new
Income
Tax
Act,
laid
down
as
the
fundamental
rule
for
taxing
a
capital
gain
that
the
taxpayer
must
be
the
owner
of
the
property
which
was
disposed
of,
did
he
not
lay
down
a
sine
qua
non
condition?
—
and
should
the
Court
not
take
this
into
account
in
interpreting
the
Act?
The
Court
is
strictly
bound
by
the
wording
of
the
Act,
and
must
conclude
that
under
these
sections
the
capital
gain
resulting
from
the
disposition
of
common
property
must
be
taxed
in
the
hands
of
the
owners
of
the
property,
that
is
the
two
spouses.
Although
paragraph
3(b)
determines
taxable
income,
paragraphs
39(1)(a),
40(4)(a)
and
54(e)
and
(f)
determine
who
should
bear
the
burden
of
the
tax,
namely
the
owner.
In
fact,
paragraph
3(b)
assumes
that
the
taxpayer
who
is
taxed
on
a
capital
gain
was
the
owner
of
the
property
which
was
disposed
of.
In
interpreting
paragraph
3(b),
reference
must
be
had
to
section
39
et
seq,
including
the
condition
of
ownership
of
the
property.
4.04
I
rendered
the
decision
in
Laporte.
I
believe
that
these
reasons
also
apply
in
the
present
appeal.
Under
the
matrimonial
regime
in
effect,
the
appellant's
wife
became
a
coowner
of
the
property
acquired
in
November
1973
upon
its
purchase.
She
was
still
a
co-owner
when
it
was
sold
in
1982.
5.
Conclusion
The
appeal
is
allowed
with
costs
and
the
matter
referred
back
to
the
respondent
for
reconsideration
and
reassessment
in
accordance
with
the
above
reasons.
Appeal
allowed.
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