Bell T.C.J.:
1 The evidence in the case of Robert W. Billingsley (“Billingsley”) applies in this case.
Issues
2 The issues are:1. Whether the Appellant should have a taxable capital gain included in its income for its 1987 taxation year,
2. Whether the Appellant is entitled to carry forward non-capital losses computed by the Appellant in computing its taxable income for its 1988 year, and
3. Whether the penalties are properly imposed pursuant to subsection 163(2) of the Income Tax Act (“Act”).
3 As can be determined from reading the Reasons for Judgment in the case of Robert W. Billingsley, the Appellant, which is a corporation formed by virtue of the amalgamation on January 14, 1993 of Billvest Ltd. (“Billvest”) and Sunroot Energy Ltd. was entitled, in accordance with its shareholdings of BCM Technologies Ltd. (“BCM”) to receive the sum of $1,859,439 for the sale of same. The reassessment appealed from added an additional taxable capital gain in the amount of $654,602, computed by reducing the amount of $1,859,439 by the adjusted cost base of those shares, a sum of approximately $550,000, one-half of that result being $654,602. This evidently reduced the amount of non-capital losses in the Appellant's 1987 taxation year with the result that they were not available to be applied to the 1988 taxation year.
4 I decided in the Billingsley case that Billvest Ltd. a predecessor corporation of the Appellant, had conferred a benefit on Billingsley.
5 I have concluded that Billvest had no reason to agree to the direction to Canadian Occidental Petroleum Limited (“COPL”), the purchaser of its shares of BCM, to pay the amount of $1,309,243 of the total proceeds it was entitled to receive, to Billingsley, other than to benefit him with that amount. Subsection 56(2) of the Act reads in part as follows:
A payment or transfer of property made pursuant to the direction of, or with the concurrence of, a taxpayer to some other person for the benefit of the taxpayer or as a benefit that the taxpayer desired to have conferred on the other person ... shall be included in computing the taxpayer's income to the extent that it would be if the payment or transfer had been made to him.
Given the findings made in the Billingsley appeal, I conclude that the payment by COPL of the aforesaid sum of $1,309,243 to Billingsley was made pursuant to the concurrence of Billvest as a benefit that it desired to have conferred on Billingsley. In these circumstances, the reassessment is correct and the Appellant cannot succeed.6 This conclusion seems to remove the problem of the non-capital losses assuming my understanding that they would be annihilated by this finding is correct.
7 As to the imposition of penalties, I adopt the comments in the Billingsley case and say further that the imposition of a penalty of this nature in this case where all amounts were disclosed in the returns of the Appellant and Billingsley is wholly inappropriate.
8 The appeal is allowed to the extent of the deletion of penalties assessed.
Email this Content