INCOME TAX |
Income Calculation |
Biderman v. Canada
A-535-98
Létourneau J.A.
4/2/00
25 pp.
Appeal from T.C.C. decision dismissing appeal from assessments pursuant to ITA, s. 160(1)(c) (tax liability re property transferred not at arms's length)--In October 1991, five days prior to wife's death, father of three appellants disclaimed inheritance under wife's will (leaving husband all assets, including family home in London, Ontario) and renounced right to act as executor, trustee or administrator of wife's will or estate--However, did act as executor of wife's estate and continued to live in family home with appellants after death of wife and still lives there today--Father indebted to Revenue Canada since 1988, owing $74,823.97--In September 1994, father executed formal disclaimer of interests as beneficiary of wife's estate and family home transferred by father, in capacity as executor of estate, to Earl Biderman as trustee for appellants--Transfer avoided vesting of real property in favour of father pursuant to Ontario Estates Administration Act--MNR assessed each of appellants pursuant to ITA, s. 160(1)(c) on basis father had interest in estate assets when he signed formal disclaimer and that he directly or indirectly transferred property to appellants with whom he was not dealing at arm's length--Appellants unsuccessfully challenged assessment before Tax Court--T.C.J. found even if disclaimer valid, nonetheless had right derived from will which corresponded to net value of family home and by disclaiming that right, transfer of property occurred within ITA, s. 160--Also found father had not truly disclaimed under will as benefited from assets for almost 3 years by having home for himself and children and as used assets to negotiate deal with Revenue Canada with respect to debt--Issues whether father validly disclaimed inheritance to family home; if so, whether appellants nonetheless jointly and severally liable pursuant to ITA, s. 160(1)(c), to pay taxes owed by father because property in form of right to inherit family home, which had allegedly been vested in their father, was transferred to them for value less than fair market value by person not dealing at arm's length with them--Appeal dismissed--First, informal disclaimer made in 1991 legally ineffective and of no avail to him as made before death of legator--Furthermore, subsequent conduct of father wholly inconsistent with disclaimer--Second attempt to disclaim inheritance came too late as evidence establishing acquiesced to will--Formal disclaimer in fact surrender or release--Therefore, estate had vested in him beneficially, and appellants received family home directly from father--Case of tax debtor transferring property to non-arm's length persons for less than fair market value--Appellants therefore jointly and severally liable with father for income taxes owed--Obiter: ITA, s. 248(8) not applicable herein as, in combination with ITA, s. 70, aimed at recognition of liability for capital gains tax and determines when and in whose hands liability arising--On other hand, ITA, s. 160 anti-avoidance provision with respect to transfers--Literal interpretation of ITA, s. 248(8)((b) would appear to render ITA, s. 160 inapplicable to devise under will where devise has been disclaimed, released or surrendered--No basis to respondent's argument through combined effect of ITA, s. 160 and broad definition of property in ITA, s. 248(1), even if father had made valid disclaimer, would have transferred to appellants not family home but right to inherit or interest in property derived from will, value of which corresponded to net value of family home--In case of valid disclaimer, no transfer of property, direct or indirect, and ITA, s. 160(1)(c) cannot apply to person who so disclaims--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 70, 160(1)(c), 248(1) "property", (8)(b)--Estates Administration Act, R.S.O. 1990, c. E-22.