Dorrine L Payette v. Minister of National Revenue, [1979] CTC 2052, 79 DTC 81

Roland St-Onge:—The appeal of Mrs Dorrine L Payette came before the late A W Prociuk, Esq, QC in Vancouver, British Columbia on April 6, 1978 and the issue was the assessment of Mrs Payette regarding her 1973 taxation year in accordance with section 160 of the Income Tax Act.

Counsel for the appellant made a motion so that the appeal be allowed on the grounds that section 160 did not apply to the appellant and also because the assessment was statute-barred by virtue of subsection 152(4).

Because of the death of my colleague, this case was referred to me by the Chairman of this Board, the Honourable Lucien Cardin and in a reported judgment dated October 5, 1978, I have dismissed the motion.

The following is the substance of the judgment which should be an integral part of my present decision:

This assessment was effectuated in accordance with section 160 of the new Income Tax Act.

At the hearing, counsel agreed on the following facts:

1. the appellant entered into a marriage contract with her husband, Joseph W L Payette, on October 15, 1961, pursuant to which he became obligated to transfer certain assets to her;

2. on November 11, 1967, the appellant’s husband registered the family residence in the appellant’s name in Montreal, Quebec, in satisfaction of the obligations arising from the marriage contract contained in paragraph 2 of the said contract;

3. that the transfer of the husband’s equity in the family residence to the appellant to satisfy the donation under the marriage contract is a transfer of property within the meaning of paragraphs 160(1)(a) and (b) of the Income Tax Act;

4. the transfer took place on November 11, 1967;

5. the family residence was not an income-producing property.

Counsel for appellant made a motion so that the appeal be allowed on the following grounds, based on the decision in A J Craig v MNR, [1973] CTC 2119; 73 DTC 116.

1. that the liability of a transferee spouse resulting from the application of paragraphs 160(1)(a) and (d) is limited to tax on income from the transferred property and since the property in question did not produce income, Mrs Payette is not liable for any portion of her husband’s tax;

2. that since the assessment of Mrs Payette pursuant to subsection 160(2) was made more than four years after the date the property was transferred, it is statute-barred by virtue of subsection 152(4).

I have read the transcript and studied very carefully the written submissions prepared by both counsel.

The Board is unable to decide on the merits of this appeal because there are still too many unanswered questions. Furthermore, the Board is convinced that section 160 was enacted to prevent a taxpayer from avoiding payment of tax for which he may be liable by transferring property. Whether the property in question is income producing (apartment building, saving bonds) or not (a residence, a Car) is immaterial because the purport of the section is to prevent transfer of property by a taxpayer who wants to avoid payment of the tax.

The fact that the Minister ‘‘may at any time assess a transferee in respect of any amount payable by virtue of this section” precludes any contention by the appellant that the Minister’s assessment is statute-barred. Since the appellant’s assessment under review is the original assessment, the four-year limitation period imposed by subsection 152(4) which relates to the reassessment or additional assessment has no application. The Board agrees with most of the submissions presented by the respondent. Consequently this Motion is denied and the question of quantum raised during the hearing is to be settled by the parties.

If this is not done before December 11, 1978, this case will be heard during my December sittings in Vancouver, British Columbia.

On December 14, 1978, this case came before me in Vancouver, British Columbia and the Board has to decide on the merits of this appeal.

At the hearing, counsel agreed on the following facts:

1. The appellant presently resides at 15818 North Bluff, White Rock, B.C. 2. On October 15, 1961, the appellant entered into a marriage contract with her husband, Joseph W L Payette, pursuant to which he was allowed to transfer to her certain assets.

3. On November 11, 1967, the appellant’s husband registered the family residence in the appellant’s name in Montreal, Quebec, pursuant to the terms of the marriage contract dated October 15, 1961.

4. On November 16, 1973, the Department of National Revenue assessed the appellant for the amount of $15,000, payable in respect of her said husband’s income tax liability, pursuant to section 160 of the Income Tax Act.

5. Counsel agreed that on November 11,1967, the appellant’s husband’s tax liability amounted to $7329.

Consequently the appellant, who has paid the $15,000, has the right to recuperate [sic] the difference, being $7671.

The appeal is allowed in part and the matter referred back to the respondent for reassessment in accordance with the above reasons for judgment.

Appeal allowed in part.