Jeannine Bédard v. Minister of National Revenue, [1984] CTC 2239

St-Onge, TCJ [TRANSLATION]:—The appeal of Mrs Jeannine Bédard came before me on November 28, 1983 in Rouyn, Quebec.

The issue is whether the appellant operated a farming business with her husband during the 1978, 1979 and 1980 taxation years.

The facts of this appeal are set out in paragraphs 2, 3, 4, 5, 6 and 8 of the reply to the notice of appeal, which read as follows:

2. In computing her income for the 1978, 1979 and 1980 taxation years, the appellant reported the following gross income and expenses from a farm.

	Gross farm	Expenses	Farm loss
	income	reported	claimed
1978	0	$ 8,983.66	($8,983.66)
1979	$4,285.00	$11,730.21	($4,544.74)
1980	$3,676.60	$18,853.49	($7,588.45)

3. At the same time Mr Claude Bédard, who is the appellant’s husband, in computing his income for the 1978, 1979 and 1980 taxation years, reported the following gross income and expenses from a farm:

	Gross farm	Expenses	Farm loss
	income	reported	claimed
1978	$ 876.67	$ 5,607.55	($4,730.88)
1979	$2,139.14	$ 3,872.04	($1,732.90)
1980	$3,676.60	$18,853.49	($7,588.45) (sic)

4. After investigation, the Minister of National Revenue’s officers determined that the total gross income and total expenses with regard to the farm were as follows:

	Total gross	Total Total	Total Total
	income	expenses	losses losses
1978	$ 876.67	$14,591.21	($13,714.54)
1979	$6,424.87	$14,747.25	($ 8,322.38)
1980	$6,150.64	$18,853.49	($12,702.85)

5. In reassessments issued on September 8, 1982, the Minister of National Revenue attributed to Mr Claude Bédard all the income and losses mentioned in paragraph 4, and after taking his income from various sources into account, the Minister of National Revenue determined the farm losses that could be carried over to be $6,033.13 in 1978, $4,568.34 and $12,072.86 in 1980;

6. With regard to the appellant, the Minister of National Revenue issued reassessments on September 7, 1982 disallowing her claim of farm losses of $8,983.66 in 1978, $4,544.74 in 1979 and $7,588.45 in 1980;

8. [sic] In reassessing the appellant for her 1978, 1979 and 1980 taxation years, the Minister of National Revenue relied on the following facts, inter alia:

(a) During the years in question the appellant was, and still is, the lawful wife of Mr Claude Bédard;

(b) The Bédards were married with a marriage contract at a time when the legal régime was community of property;

(c) The Bédards has seven children, at least six of whom, if not all seven, were living with their parents;

(d) During the taxation years in question, appellant’s principal activities were teaching for the Val D’Or school board and being a mother; as a result she devoted little or no time to the farm;

(e) The Bédards live on a property they purchased in 1966 of approximately 400 acres, 80 of which are under cultivation;

(f) The appellant’s husband devotes almost all his time to improving and farming his land and raising a herd of cattle;

(g) Between 1976 and 1980, the herd increased from 9 to 40 animals;

(h) The assets, including the equipment and machinery used on the farm, are in Mr Bédard’s own name;

(i) The Office du crédit agricole does not recognize the existence of a partnership to operate the farm;

(j) During the taxation years in question, the Bédards did not register a declaration of firm name establishing the existence of a partnership;

(k) A “husband-and-wife partnership” is not the same as a “partnership” for purposes of operating a farm;

(l) The couple‘s respective tax returns, in particular those for 1978 and 1979, indicate clearly that there was never an agreement with regard to the operation of a farm respecting the division of income and expenses since this division was neither reasonable nor consistent over the years, and if there was an agreement between the two, it was to allow the appellant to use the losses incurred by her husband to reduce her tax payable;

(m) Mr Claude Bédard operated his livestock farm alone and not in partnership;

(n) The total gross income and total expenses are those indicated in paragraph 4.

The appellant admits paragraphs 2, 3, 4, 5 and 6 of the reply to the notice of appeal, as well as subparagraph 8(h).

The respondent proved subparagraphs 8(a) and (b), with the following change:

8. ...

(b) The Bédards were married with a marriage contract under the separation of property régime;

as well as subparagraphs (c), (d), (e), (f), (g), (h), (i), (j), (k), (1), (m) and (n).

The preponderance of the evidence indicates fairly convincingly that there was no partnership between the appellant and her husband for the operation of a farming business. Moreover, this fact was admitted by the appellant and her husband in their testimony. They both admitted that in 1977 they were advised by a lawyer, Dame France Dufour, that it would be preferable not to sign a partnership agreement. All that existed between them was a joint account; this account was used to pay certain expenses. It was not established that these expenses were incurred in connection with the farm operations.

Because of the special status that exists between a husband and wife, it is very difficult to prove for past years that a partnership existed between them for the operation of a particular business, unless there is a document to that effect. there is no document to prove the existence of a partnership in the present case. The appellant simply paid money into a joint account.

The Revue du Notariat, at page 141, says the following about the intention of the parties:

Legal theory and case law in Quebec — following French law in this regard — require, in addition to participation in the profits and losses of the business, the intention to enter into a partnership©, or affectio societatis. In the absence of one of these elements, there is no partnership contract between the parties. Partnership is not presumed; all the constituent elements of the partnership contract must be alleged and proved by the person relying on its existence. This rule is justified owing to the consequences attached to a partnership contract in terms of the personal liability of the members.

Consequently, for the reasons I have just mentioned and in light of this passage, the appeal is dismissed.

Appeal dismissed.