Victor Maggiori v. Minister of National Revenue, [1981] CTC 2916, 81 DTC 820

D E Taylor:—This appeal was heard in Toronto, Ontario, on September 22, 1981 and is against income tax assessments for the years 1974 and 1975 In which the Minister of National Revenue taxed the profits from a business as a sole proprietorship, not as a partnership between the appellant and his wife. The agent for the appellant, a chartered accountant, had described in the notice of appeal the points which he believed would support the contention that such a partnership did exist.

I have .. . discovered further evidence not available to the tax department and Victor Maggiori . .. that suggests that the partnership between Victor and Alida Maggiori (his wife) was a legitimate one and should not have been disallowed by the tax department. The tax department at that time contended that since the investment in Jayland Homes was paid out of Victor Maggiori’s bank account, all of the income from that venture was his and not of Alida Maggiori as well. They contended that Alida Maggiori had no capital with which to invest with Victor Maggiori. However, this fact is not true based on the evidence I have obtained. Alida Maggiori had the capital at that time and it is irrelevant from where this capital was paid out from. Alida Maggiori immigrated to Canada in 1953 where she married Victor Maggiori. There were wedding gifts and cash given to which she received one half. After her marriage she subsequently worked for approximately one and one half years. In 1967 she loaned Milton Masonry Co Ltd $5,000 which was then subsequently repaid to her. I have in my possession both the records of Milton Masonry and the cancelled cheque. This fact, let me emphasize, occurred in 1967. The partnership in Jayland occurred in 1973 and 74. Alida Maggiori also throughout her marriage to Victor Maggiori owned one half of all of the principal residences which they resided in. All of these principal residences were sold for a profit and never a loss. All of these facts except for the $5,000 repayment by Milton Masonry to Alida Maggiori are traced through in an affidavit prepared by Victor and Alida Maggiori’s lawyer, Mr Ned Lorenzetti. I believe that all of the above facts prove that Alida Maggiori did have the capital with which to invest with Victor Maggiori in Jayland Homes.

The appellant did not testify and while the agent made reference to the existence of a cheque in the amount of $5,000 (presumably that noted above), counsel for the respondent properly noted that presentation and confirmation of its relationship to the matter in dispute would be necessary in order that it be used as support for the partnership contention. It was agreed between the parties that in 1974 the appellant had indicated in filing his tax return that only 50% of the disputed income should be for his account — again presumably the balance belonging to his wife. There was no other evidence or testimony which would substantiate the appellant’s contention — a point underscored forcibly by counsel for the respondent. In the appellant’s tax return for 1974, the following information was included:

JAYLAND HOMES

SCHEDULE OF TAXABLE INCOME

MARCH 31, 1974

				Add		Deduct
				Reserve		Reserve
				20(1)(n)		20(1)(n)
		Net Income	Income Tax		Income Tax
		For	Act	Act	Act	Act	Taxable
	%	Year		1973		1974	Income
Jetland Construction Limited	50	$242,076	$ 22,114		$ 51,839		$212,351
Vittorio Maggiori, Trustee	10	48,416		4,423		10,367	42,472
Northdown Drywall &
Construction Limited	10	48,415		4,423		10,367	42,471
Jay-Win Investments Limited	10	48,416		4,423		10,367	42,472
Mark-Malcom Limited	10	48,415		4,423		10,367	42,471
Robland Estates Limited	10	48,415		4,422		10,367	42,470
	100	$484,153	$ 44,228		$103,674		$424,707

As noted above, the taxpayer had included only the amount of $21,236 as such income from Jayland Homes. A further examination of the return, however, does not indicate that the appellant declared his wife as a partner.

Counsel for the respondent pointed out that the apparent lack of funds with which Mrs Maggiori could have made a capital contribution to a partnership would undoubtedly be a hurdle to overcome, and that may have influenced the Minister’s view on the assessment. Nevertheless, merely establishing that Mrs Maggiori did have funds available to use for that purpose would not of itself transform the arrangement (if indeed one existed) into a partnership. It could just as easily have been that a loan was made to the appellant, if any such contribution at all was provided.

While there is a limited indication that a partnership might have existed (the 1974 tax return of the appellant), the specific evidence which would substantiate the validity of Mr Maggiori even filing in this way has not been provided to the Board.

The appeal is dismissed.

Appeal dismissed.