Jones v. Canada
A-185-95
Décary J.A.
11/12/95
10 pp.
Judicial review of Tax Court's decision upholding Minister's assessment of fair market value of property; requiring applicant to include in income $26,200 on ground desired to confer benefit on father-Income Tax Act, s. 56(2) providing payment or transfer of property made pursuant to taxpayer's direction to some other person as benefit taxpayer desired to have conferred on other person shall be included in computing taxpayer's income as if payment or transfer made to him-Applicant sole shareholder, director of Ascot Enterprises Ltd.-In July 1987 Ascot buying property at request of applicant's father who wanted it as part of large development pursuing, but unable to finance, at time-Ascot paying $59,900-Selling property to father in 1990 for $61,800-At time of sale property assessed at $59,750; fair market value $61,800-Ascot reporting disposition in 1991 showing no recaptured depreciation, capital gain, non-capital loss carried back to 1990-Minister reassessing on basis fair market value $88,000, requiring applicant to include in income $26,200-Application allowed-S. 56(2) wrongly invoked-Purpose of s. 56(2) to ensure payments which would otherwise have been received by taxpayer not diverted to third party as anti-avoidance technique-"Desire" to confer benefit key element of provision-S. 56(2) not applicable where no intention to avoid receipt of funds in his hands by arranging payments to be made without adequate consideration to third persons-Onus on taxpayer to explain why transactions made-Because s. 15(1) not applicable, s. 56(2) coming into play-Application of s. 56(2) not leading to double taxation-That single transaction generating income tax under different provisions in hands of more than one taxpayer not double taxation-S. 56(2) not mandating Court to find applicant not undertaking reasonable approach in determining value of property prior to transfer-Not enough to find applicant's approach in determining property value unreasonable-Required to find such approach amounting to desire to have benefit conferred-Tax Court Judge failing to do so-No evidence from which such inference could have been made-That applicant not taking reasonable steps to ascertain true value of property not leading to conclusion applicant desiring to confer benefit on father within s. 56(2)-No indication applicant knew or should have known property worth more than price actually paid for it-Applicant genuinely believing property sold at fair market value-Impossible to infer applicant "desired" to confer on father benefit within s. 56(2)-Income Tax Act, S.C. 1970-71-72, c. 63, ss. 15(1) (as am. by S.C. 1988, c. 55, s. 8), 56(2) (as am. by S.C. 1987, c. 46, s. 15), 69(1)(b)(i).