T-210-88
Her Majesty the Queen (Plaintiff) (Appellant)
v.
Marcel Dumais (Defendant) (Respondent)
INDEXED AS: DUMAIS V. M.N.R. (T.D.)
Trial Division, Dubé J.—Québec, October 12;
Ottawa, November 23, 1989.
Income tax — Income calculation — Capital gains —
Effect of Civil Code art. 1292 on liability for taxable capital
gain from disposition of real estate part of common property
under Quebec matrimonial regime of community of moveables
and acquests — Under regime, husband and wife co-owners of
land — However, as husband administers community property
and has unlimited enjoyment of income produced by commu
nity, including capital gain, husband must pay taxes on all
capital gains — Wife not liable for tax on capital gain as
having no right to freely dispose of income made at time of
sale — 1961 Supreme Court of Canada decision in Sura v.
The Minister of National Revenue still applicable in spite of
1964 amendments to Civil Code — Taxes should affect all
Canadians equally; unfair for taxpayers in one province to be
favoured by provincial legislation when dealing with applica
tion of Income Tax Act.
The respondent was married in Quebec in 1950 under the
legal matrimonial regime of community of property, since
renamed community of moveables and acquests. In 1973, the
respondent acquired land, part of which he sold in 1982,
making a gain of $63,118, of which $31,559 was taxable. In his
1982 tax return, the respondent included only half this amount.
The Minister reassessed the respondent on the basis that he was
liable for taxes on all of the taxable capital gain. This was an
appeal from a Tax Court of Canada decision holding that the
respondent only owed taxes on half of the taxable capital gain.
Held, the appeal should be allowed.
The question was whether the concept of property in the Act
determined the outcome of the case, or whether the Civil Code
rules (especially article 1292 thereof) governing the community
of moveables and acquests took priority. The 1961 decision of
the Supreme Court of Canada in Sura v. The Minister of
National Revenue still applied. In that case, the question was
whether, for tax purposes, the income from the community of
property resulting from the taxpayer's salary and real estate
rentals was the taxpayer's income only, or whether half
belonged to his wife. It was first stated that the general policy
of the Income Tax Act was to impose income tax on the person
and not on the property, and that the only person liable to pay
tax on income was the person who had absolute enjoyment of it.
While it was recognized that the wife was the co-owner of the
community assets, the Court found that since she received
nothing from the community property before its dissolution, she
was not liable to tax on community income.
The issue herein was who made the capital gain and so who
was taxable. In spite of a 1964 amendment to the Civil Code
restricting the husband's power to dispose of common property,
he still had the administration of the community property and
the unlimited enjoyment of the income produced by the com
munity, including the capital gain. It followed that for a woman
married under the community of property, capital gains could
not be taxed against her simply because she was the co-owner
of property if she had no right to freely dispose of the income
made at the time of the sale.
It should also be noted that it would be unfair for taxpayers
in one province to be favoured by provincial legislation when
dealing with the application of the Act, which should affect all
taxpayers equally.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Civil Code of Lower Canada, arts. 1292 (S.Q. 1930-31, c.
101, s. 16; as am. by S.Q. 1964, c. 66, s. 12; 1974, c.
70, s. 443), 1268 to 1450.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 39, 40(4)(a),
54(c),(e),(f),(h).
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Sura v. The Minister of National Revenue, [1962]
S.C.R. 65; (1961), 32 D.L.R. (2d) 282; [1962] C.T.C. 1;
62 DTC 1005.
REVERSED:
Dumais (M.) v. M.N.R., [1988] 1 C.T.C. 2205; 88 DTC
1229.
DISTINGUISHED:
R. v. Poynton, [1972] 3 O.R. 727; (1972), 29 D.L.R. (3d)
389; 9 C.C.C. (2d) 32; [1972] CTC 412; 72 DTC 6329
(C.A.); R. v. Savage, [1983] 2 S.C.R. 428; [1983] CTC
393; 83 DTC 5409; 50 N.R. 321; Gagnon v. The Queen,
[1986] 1 S.C.R. 264; (1986), 25 D.L.R. (4th) 481;
[1986] 1 CTC 410; 86 DTC 6179; 65 N.R. 321; 1 R.F.L.
(3d) 113.
CONSIDERED:
Laporte, R. v. M.N.R. (1984), 84 DTC 1208; [1984]
CTC 2260 (TCC).
REFERRED TO:
MNR v. Faure F., Estate, [1975] CTC 136; 75 DTC
5076; 9 N.R. 61 (F.C.A.); Curlett v. Minister of Nation
al Revenue, [1962] S.C.R. vii; 62 DTC 1320; Minister of
National Revenue v. Simon et al., [1977] 2 S.C.R. 812;
(1977), 76 D.L.R. (3d) 562; [1977] CTC 340; 77 DTC
5228; 15 N.R. 589; 28 R.F.L. 363; Garant (I) v. The
Queen, [1985] 1 CTC 153; (1985), 86 DTC 6256
(F.C.T.D.); case on appeal A-287-85.
AUTHORS CITED
Baudouin, Jean-Louis. "Examen Critique de la Réforme
sur la Capacité de la Femme Mariée Québécoise"
(1965), 43 Can. Bar Rev. 393.
Beauregard, Pierre-Jean. "Interaction du droit civil et de
la Loi de l'impôt", Report of Proceedings of the
Thirty-seventh Tax Conference. Canadian Tax Foun
dation, 1985.
Caparros, Ernest. Les régimes matrimoniaux au Québec,
3rd ed., Montréal: Wilson & Lafleur, 1985.
Comtois, Roger. Traité théorique et pratique de la com-
munauté de biens, Montréal: Le Recueil de droit et de
jurisprudence, 1964.
Dionne, André and Turcot, Michel. "Aspects fiscaux des
diverses étapes de la vie conjugale selon le nouveau
droit familial: IV Imposition pendant la durée du
régime", [1981] C.P. du N. 401.
Mayrand, Albert. "Commentaires, Impôt sur le revenu—
Revenu du mari commun en biens—Nature du droit de
la femme sur les biens de la communauté" (1962), 40
Can. Bar Rev. 256.
Pineau, Jean et Burman, Danielle. Effets du mariage et
régimes matrimoniaux, Montréal: Thémis, 1984.
COUNSEL:
Roger Roy for plaintiff (appellant).
Daniel Dumais for defendant (respondent).
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff (appellant).
Daniel Dumais, Chicoutimi, Québec, for
defendant (respondent).
The following is the English version of the
reasons for judgment rendered by
DuBÉ J.: This appeal seeks to reverse a decision
of the Tax Court of Canada,' holding that the
respondent only owed tax on half the taxable
capital gain from the disposition in 1982 of real
estate which was part of the common property
under the Quebec matrimonial regime of commu
nity of moveables and acquests. 2
' Dumais (M.) v. M.N.R., [1988] 1 C.T.C. 2205; 88 DTC
1229.
2 Civil Code of Lower Canada, arts. 1268 to 1450.
In the appellant's submission, the respondent
should be taxed on all the taxable capital gain.
The facts are not in dispute. The respondent was
married in 1950 without a marriage contract,
when the legal regime was that of community of
property. This matrimonial regime has remained
unchanged. In 1973, the respondent acquired with
the proceeds of his work land, part of which he
resold in 1982, making a gain of $63,118 of which
$31,559 was taxable. In computing his income for
the 1982 taxation year, the respondent included
half this amount.
The appellant did not dispute that the land
should be treated as common property. 3
In the subject decision the Court considered that
the respondent's wife had become co-owner of the
land when it was purchased and still was at the
time it was sold. She should then have been taxed
on the other half of the taxable capital gain, in
accordance with sections 39 et seq. of the federal
Income Tax Act 4 ("the Act").
Paragraph 39(1)(a) in effect in 1982 read as
follows:
39. (1) For the purposes of this Act,
(a) a taxpayer's capital gain for a taxation year from the
disposition of any property is his gain for the year deter
mined under this subdivision (to the extent of the amount
thereof that would not, if section 3 were read without refer
ence to the expression "other than a taxable capital gain
from the disposition of a property" in paragraph (a) thereof
and without reference to paragraph (b) thereof, be included
in computing his income for the year or any other taxation
year) from the disposition of any property of the taxpayer
other than ... [My emphasis.]
Paragraphs 40(4)(a) and 54(e) and (f) referred
to by the decision are also concerned with the ideas
of capital gain and ownership.
Capital gains were not taxable before the new
1972 Act.
Essentially the question is whether the concept
of property in the Act in fact determines the
outcome of the case, or whether the rules govern
ing the community of moveables and acquests take
3 Art. 1272 C.C.
4 S.C. 1970-71-72, c. 63, as amended.
priority over it. For these purposes the most impor
tant of these rules is contained in article 1292
C.C., which since 1974 5 reads as follows:
Art. 1292. The husband alone administers the property of
the community subject to the provisions of article 1293 and
articles 1425a and following.
He cannot sell, alienate or hypothecate without the concur
rence of his wife any immoveable property of the community
but he can, without such concurrence, sell, alienate or pledge
any moveable property other than a business or than household
furniture in use by the family.
The husband cannot, without the concurrence of his wife,
dispose by gratuitous title inter vivos of the property of the
community, except small sums of money and customary
presents.
This article does not limit the right of a husband to name an
owner under article 2540 or to name a third person beneficiary
of annuities, retirement pensions or life insurances, and no
compensation is due by reason of the sums or premiums paid
out of the property of the community if the beneficiary or
owner be the spouse or the children of either the husband or the
spouse. [My emphasis.]
The Supreme Court rendered the leading deci
sion on this matter in Sura v. The Minister of
National Revenue, 6 which was cited by both par
ties in support of their respective arguments.
In that case the question was whether, for tax
purposes, the income from the community of prop
erty resulting from the taxpayer's salary and real
estate rentals was the income only of the taxpayer,
or whether half the income was the taxpayer's and
the other half belonged to his wife.
Speaking for the Court, Taschereau J. revised
the definition of the term "income" in the federal
statute in effect at that time. He concluded (at
page 284 D.L.R.):
Nothing in subsequent amendments of the statute has
changed the principle that it is not the ownership of a thing
which is taxable but the tax is imposed on a taxpayer and is
determined by the income that he receives from his employ
ment, his business, his property, or the property of which he is
the legal beneficiary. As Mignault, J., said in McLeod v.
Minister of Customs and Excise, (1917-27) C.T.C. 290, at
page 296:
All this is in accord with the general policy of the Act which
imposes the income tax on the person and not on the
property.
5 [Art. 1292 C.C. as am. by] S.Q. 1974, c. 70, s. 443.
6 [1962] S.C.R. 65; (1961), 32 D.L.R. (2d) 282; [1962]
C.T.C. 1; 62 DTC 1005.
That proposition cannot be doubted and without any hesita
tion or reservation it must be accepted that only the person who
has the absolute enjoyment of the income is liable to pay the
tax without any regard whatsoever to any restraint that there
might be on his right to free disposition of the income (Vide
Robertson Ltd. v. M.N.R. ([1944] Ex.C.R. 170 at p. 180, 2
D.T.C. 655, [ 1944] C.T.C. 75)):
On the nature of the community of property,
Taschereau J. said (at pages 285-286 D.L.R.):
This system of community recognizes that the husband is
paramount in the administration of the property. It is the
intention of the Legislature under art. 1292 that the husband is
the sole administrator of the community property. He can sell
it, alienate it and hypothecate it without the concurrence of his
wife.
He alone can dispose of this income, he alone has the unre
strained enjoyment thereof and nothing can go out of the
common fund except at his behest. He receives for himself and
not as a mandatary or trustee for the benefit of his wife. The
latter does not obtain any income therefrom and the benefit to
her results from the increase of the community of which she is
a co-owner and in which she has an eventual right on its future
distribution.
The fact that the husband has a leading part to
play does not give him a sole right of ownership
over the community property. Indeed, Taschereau
J. expressly rejected this theory.' In common with
various writers cited, he considered (at pages 286-
287 D.L.R.):
Under the authorities, that the husband and wife are co-
owners of the assets of the community admits of no doubt and
despite the doubts that some authors may entertain, I think
that it is now universally recognized that that is the rule which
must now govern us.
If it were otherwise, and if the wife was not the co-owner of
the common property, she would have to pay on the dissolution
of the community succession duty because in that case there
would be a passing of property coming to her from her hus
band. But that is not so because there is not passing of property
but a division under which she takes the part belongs to her,
and which belongs to her from the time of the marriage. What
she receives does not come from the estate of her husband. See
also the following authorities to the same effect: 21 Laurent,
Civil Law, pp. 224-5; 8 Planiol & Ripert, Civil Law (1957), pp.
328, 331, 704; 3 Josserand, Civil Law (1933), No. 14; 9 Huc,
Civil Code (1896), No. 72; 5 Marcade, Civil Law, 7th ed., p.
444; 14 Duranton, French Law, p. 105.
However, the fact that the wife was co-owner of
the common property is not conclusive as to
income from the community for tax purposes.
At pages 288-289 D.L.R.
Taschereau J. explained this apparent dichotomy
as follows [at page 288 D.L.R.]:
... it is equally true that she has not got the ordinary rights
that attach to ownership: art. 406 C.C. Her right is unformed,
dismembered and inferior to that which a person who has the
bare right of property and another the beneficial right. Her
right is stagnant and almost sterile because no benefit accrues
therefrom during the joint lives of the parties. It is not until the
dissolution of the community that the wife is vested with the
full power of ownership which includes the jus utendi, fruendi
et abutendi, of which her married status temporarily deprives
her.
That is why the wife gets no revenue from the community
property of which the husband is the sole administrator (art.
1292), without the necessity, generally speaking, of obtaining
her husband's consent. All the income belongs to them but he
has the right to dispose of it and alienate it even by way of gift
subject to the restraint of the law: art. 1292. It therefore
follows that the wife obtains no income from the community
property. She has no "salary", wages or other remuneration"
and nothing accrues to her from "businesses, property and
offices and employments". That of course is exactly what is
taxable.
The Act, as I have already stated is not concerned with the
capital or ownership of things, it is directed at the person and
the amount of tax is determined by the benefits that are
received. If the wife receives nothing coming from the commu
nity property it follows that the treasury cannot claim anything
from her.
According to counsel for the respondent, the
conclusions in Sura were influenced by article
1292 C.C., the version of which was in effect in
1962 8 provided that the husband was completely
free to dispose of community property without the
concurrence of his wife. These conclusions were
limited by the amendment introduced in 1964, 9
which is included in the wording set out above,
because the disposition of community property was
made conditional on concurrence by the wife. He
concluded that Sura accordingly only applies to
income from property or a business, not to a
capital gain.
Counsel also pointed out that when this judg
ment was rendered the concept of the right of
ownership of property did not exist in the Act.
Capital gains were not taxable. However, since
1972 federal tax legislation has clearly taxed the
owner of a capital gain made on the sale of
property disposed of. In his submission, concluding
otherwise would deprive of all meaning the words
"of the taxpayer" in paragraph 39(1)(a) and
8 S.Q. 1930-31,c. 101,s. 16.
9 [Art. 1292 C.C. as am. by] S.Q. 1964, c. 66, s. 12.
"acquire" throughout the part of the Act dealing
with capital gains: it would therefore be wrong in
law to argue that taxation of a capital gain is to be
determined in accordance with the right to the
proceeds of disposition of the property, rather than
the right to ownership of the property.
In support of his arguments he cited Laporte, R.
v. M.N.R., 10 an earlier decision of the same judge
of the Tax Court of Canada on which the decision
which is the subject of the appeal at bar was
based. In that case it was held that the shares on
which the capital gain was made were common
property and so jointly owned by husband and
wife. After reviewing paragraph 39(1)(a) et seq. of
the Act, the Court concluded (at page 1218 DTC):
It seems clear from reading these provisions, and others not
cited, that the taxpayer, in order to be subject to taxation for a
capital gain, must be the owner of the property of which there
was a disposition (real or presumed).
Additionally, in the submission of the respondent, in deter
mining taxable income s. 3(b) establishes that a capital gain is
considered as income, just as any other income. The respondent
further alleged, relying on Sura and James B. McLeod, that
the Income Tax Act does not seek to tax ownership, but the
beneficiary of the property.
When in 1972 the legislator, in the new Income Tax Act, laid
down as the fundamental rule for taxing a capital gain that the
taxpayer must be the owner of the property which was disposed
of, did he not lay down a sine qua non condition?—and should
the Court not take this into account in interpreting the Act?
The Court is strictly bound by the wording of the Act, and
must conclude that under these sections the capital gain result
ing from the disposition of common property must be taxed in
the hands of the owners of the property, that is the two spouses.
Although s. 3(b) determines taxable income, ss. 39(1)(a),
40(4)(a) and 54(c) and (f) determine who should bear the
burden of the tax, namely the owner. In fact, s. 3(b) assumes
that the taxpayer who is taxed on a capital gain was the owner
of the property which was disposed of. In interpreting s. 3(b),
reference must be had to ss. 39 et seq., including the condition
of ownership of the property.
Counsel for the respondent also cited a scholarly
article" which concludes that Sura is not appli
cable to a capital gain (at page 420):
10 (1984), 84 DTC 1208; [1984] CTC 2260 (TCC), case on
appeal T-959-84.
" André Dionne and Michel Turcot, "Aspects fiscaux des
diverses étapes de la vie conjugale selon le nouveau droit
familial: IV Imposition pendant la durée du régime", [1981]
C.P. du N. 401, at p. 411.
119.... The capital gain should be adjusted in accordance
with the right of ownership as determined by the rules of the
Civil Code. As Taschereau J. very clearly stated that at that
period husband and wife were already regarded as co-owners of
the common property, it follows that the capital gain should be
divided between them.
For all these reasons, he doubted that Tas-
chereau J. would come to the same conclusions
today as he did in 1962. He argued that the
respondent should be given the benefit of this
doubt and urged the Court to be cautious before
applying Sura to the case at bar.
Counsel for the appellant, for his part, contend
ed that the conclusions in Sura are as applicable
now as they were in 1962. In the case at bar, as in
Sura, the fact that the spouses may be designated
co-owners of the common property is not conclu
sive. Further, not all courts have so designated
them. 12 The point at issue is not whether there was
co-ownership, but rather to determine who has
enjoyment of the property and can dispose of it.
In his submission, the change made to article
1292 C.C. in 1964 does not have the effect of
reducing the husband's powers. The situation as to
common property was only altered in relation to
the disposition of real property. It is still the
husband who has the right and power to sell
common property and to administer income result
ing from its sale by himself. It is still he who is the
legal beneficiary in the sense mentioned in Sura.
As he saw it, the central point is whether the
addition of capital gains to the Act altered the
system of taxation existing at the time of Sura. He
suggested that a negative answer may be inferred
from the fact that the Act then in effect contained
several provisions relating the concept of acquisi
tion to the allocation of capital cost, depreciation
and so on. By failing to divide the (presumed)
depreciation between the spouses who were co-
owners of the property, Sura implicitly recognized
that income from the property belonged solely to
the administrator of the community.
He considered that although paragraph
39(1)(a) speaks of property "of' the taxpayer, the
12 MNR v. Faure F., Estate, [1975] CTC 136; 75 DTC 5076;
9 N.R. 61 (F.C.A.), at pp. 146-147 CTC (reasons of Pratte J.).
most important aspect of the section is that the
person who makes a capital gain is the one who
derives benefit or gain from the sale. Further, as
the respondent was at least co-owner of the prop
erty, it was his within the meaning of paragraph
39(1)(a): 100 per cent of the gain made on the sale
must accordingly be assessed, because he alone
had enjoyment and the free right to dispose of it.
The appellant referred also to a judgment of the
Ontario Court of Appeal, R. v. Poynton, 13 where
the Court had to determine whether money
obtained by fraud was taxable as income. The
Court concluded that the fraudulent party should
be taxed. It gave the word "income" the following
meaning (at page 732 O.R.):
The question is what quality must be attached to a profit,
gain or benefit before it can be characterized as "income" for
the purpose of taxation? There is no doubt that the word
"income" in the Income Tax Act is sufficiently wide to include
money other than that received from bona fide transactions.
The same Court also held that it was not owner
ship of the income that was conclusive, but enjoy
ment of it. Referring to Curlett, 14 a judgment of
the Supreme Court of Canada, it noted (at page
736 O.R.):
The Court in holding that the moneys constituted income in the
hands of Curlett did so in the face of his defence that he was
under a duty to account and that his entitlement was not
absolute. The principle to be elicited from the judgment, as I
apprehend it, is that strict legal ownership is not the exclusive
test of taxability but that a Court in determining what is
income for taxation purposes must have regard to the circum
stances surrounding the actual receipt of the money and the
manner in which it is held.
The appellant contended that the reasoning in
Poynton has been approved by the Supreme Court
of Canada at least twice. 15 It should however be
noted that the circumstances of these two cases
and of Poynton are considerably different from
those of the case at bar.
13 [1972] 3 O.R. 727; (1972), 29 D.L.R. (3d) 389; 9 C.C.C.
(2d) 32; [1972] CTC 412 72 DTC 6329 (C.A.).
14 Curlett v. Minister of National Revenue, [1962] S.C.R.
vii; 62 DTC 1320.
15 R. v. Savage, [1983] 2 S.C.R. 428; [1983] CTC 393; 83
DTC 5409; 50 N.R. 321, at p. 441, S.C.R.; Gagnon v. The
Queen, [1986] 1 S.C.R. 264; (1986), 25 D.L.R. (4th) 481;
[1986] 1 CTC 410; 86 DTC 6179; 65 N.R. 321; 1 R.F.L. (3d)
113, at p. 275, S.C.R.
In my opinion, the question here is not as to
whether income exists within the meaning of the
Act. No one disputes that the capital gain is
income. The issue is to determine who made this
gain, and so who is taxable. In order to resolve this
issue, it is not necessary to reopen the discussion of
the right of ownership of common property. Even
if it is true that this discussion is not entirely
closed, 16 I think it is clear that the weight of
judicial' 7 and academic 18 authority concludes that
there is co-ownership of common property. I see no
need to reach a different conclusion, in view of the
decision toward which I am tending.
As regards article 1292 C.C., I do not see the
1964 amendment as conclusive. I agree that when
the Supreme Court of Canada handed down its
judgment in Sura, the scope of the husband's
power to dispose of common property was wider
than it now is after that amendment. However,
neither the amendment nor the original version
dealt with the right of ownership. Quebec writers
are agreed that the legislator's purpose was actual
ly to remove the husband's leading role and to
require that both spouses participate in the disposi
tion of certain types of property, all in the interests
of the community. 19
16 MNR v. Faure F., Estate, supra, note 12; Comtois, Roger,
Traité théorique et pratique de la communauté de biens,
Montréal, Le Recueil de droit et de jurisprudence, 1964, at pp.
23-56; J. Pineau and D. Burman, Effets du mariage et régimes
matrimoniaux, Montréal, Thémis, 1984, at pp. 229-230.
" Sura v. The Minister of National Revenue., supra, note 6;
Minister of National Revenue v. Simon et al., [1977] 2 S.C.R.
812; (1977), 76 D.L.R. (3d) 562; [1977] CTC 340; 77 DTC
5228; 15 N.R. 589; 28 R.F.L. 363, at pp. 813-814 S.C.R.;
Laporte, R. v. M.N.R., supra, note 10; Garant (I) v. The
Queen, [1985] 1 CTC 153; (1985), 86 DTC 6256 (F.C.T.D.),
at p. 6258 DTC, case on appeal A-287-85.
18 Sura v. The Minister of National Revenue, supra, note 6
at pp. 286-287 D.L.R.; J.-L. Baudouin, "Examen Critique de la
Réforme sur la Capacité de la Femme Mariée Québécoise"
(1965), 43 Can. Bar Rev. 393, at p. 409; A. Mayrand "Com-
mentaires"—Impôt sur le revenu—Revenu du mari commun en
biens—Nature du droit de la femme sur les biens de la com-
munauté (1962), 40 Can. Bar. Rev. 256, at pp. 258-259; P.-J.
Beauregard, "Interaction du droit civil et de la Loi de l'impôt",
Report of Proceedings of the Thirty-seventh Tax Conference,
1985.
19 J.-L. Baudouin, op. cit., note 18, at pp. 408-409; E. Capar-
ros, Les régimes matrimoniaux au Québec, 3rd ed., Montréal,
Wilson & Lafleur, 1985, at p. 235.
Having said that, it is worth repeating the fol
lowing observations of Taschereau J., which con
vince me that the express introduction of the con
cept of ownership into tax legislation does not
affect the application of his conclusions about
capital gains. He said (at pages 284-288 D.L.R.):
... the tax is imposed on a taxpayer and is determined by the
income that he receives from his employment, his business, his
property or the property of which he is the legal beneficiary.
... only the person who has the absolute enjoyment of the
income is liable to pay the tax without any regard whatsoever
to any restraint that there might be on his right to free
disposition of the income.
He alone can dispose of this income, he alone has the unre
strained enjoyment thereof and nothing can go out of the
common fund except at his behest.
All the income belongs to them. It therefore follows that the
wife obtains no income from the community property. She has
no "salary, wages or other remuneration" and nothing accrues
to her from businesses, property and offices and employments".
That of course is exactly what is taxable. [My emphasis.]
These remarks by the learned judge are directed
in the clearest possible way at the legal beneficiary
of the income, not the owner or owners of the
property from which that income is derived. None
of the amendments made to article 1292 C.C. has
altered the identity of the person who has this
function: it is still the husband who administers the
community property, and it is therefore still the
husband who has the unlimited enjoyment of the
income produced by the community, including the
capital gain. It follows that for a woman married
in community of property, a capital gain cannot be
taxed simply because she is co-owner of property,
if she has no right to freely dispose of the income
made at the time of sale.
This conclusion is strengthened by a close read
ing of paragraphs 54(c) and (h) of the Act, which
reads as follows:
54....
(c) "disposition" of any property, except as expressly other
wise provided, includes
(i) any transaction or event entitling a taxpayer to pro
ceeds of disposition of property,
(h) "proceeds of disposition" of property includes,
(i) the sale price of property that has been sold,
It should be noted that in the community of
property regime article 1292 C.C. gives the hus
band the right to the proceeds of a disposition of
property; and it is not the property that is subject
to the tax, but the taxpayer, and in the case at bar,
the person who has the proceeds of disposition of
the property in his possession.
Finally, it is worth noting certain observations of
Albert Mayrand taken from his "Commentaires"
on Sura: 2°
[TRANSLATION] ... in Sura our courts and commentators were
guided above all by a rule of equity: in a federation, the tax
imposed by the central government should affect taxpayers in
the various states or provinces equally, regardless of the special
features of local legislation. This rule has already been stated
by the Privy Council in Minister of Finance v. Cecil R. Smith:
Moreover, it is natural that the intention was to tax on the
same principle thoughout the whole of Canada, rather than to
make the incidence of taxation depend on the varying and
divergent laws of the particular provinces.
The Tax Appeal Board was more explicit in a recent case (No.
676 v. M.N.R. (1959), 23 Tax A.B.C. 263, at p. 266):
The judgment in the Sura case, decided in favour of the
Minister, sets at rest any suggestion that certain taxpayers in
the Province of Quebec, for instance, who are subject to the law
of community of property, may be taxed differently from those
in any other province.
It would be quite unfair for taxpayers in one
province to be favoured by provincial legislation
dealing with the application of the Act, which
should affect all Canadian taxpayers equally.
For these reasons, the apeal is allowed with
costs.
20 Op. cit., note 18, at pp. 260-261. _
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