Citation: 2009 TCC 588
Date: 20091113
Docket: 2005-1566(IT)G
BETWEEN:
RICHARD BIBBY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bowie J.
[1] Richard Bibby appeals his income tax assessment for
the 2002 taxation year. With the minor exception of some interest that is not
in dispute, all of Mr. Bibby's income for the year in question came from a
family corporation, Rabco Marketing Ltd. (Rabco). At the material time, Rabco
carried on business as a supplier of electronic products to retail merchants.
Mr. Bibby was the driving force behind the company. He did the buying and
selling, and it appears from the evidence that his was the directing mind of
the corporation. His wife Camille ran the office and handled the data entry and
accounting functions for the company. Their son Jason handled the information
technology and catalogue functions, and acted as traffic manager. Their other
son, Christopher, was in charge of the warehouse and shipping operations,
assisted as required by temporary employees. Richard Bibby and Camille Bibby
each owned 50 common shares. Each family member also owned 50 preferred shares;
Richard’s were class A, Camille's were class B, and their sons’ were class C.
Mr. Bibby was the president and his wife was the secretary. The company’s year
end was January 31.
[2] None of the family
members were paid by way of salary. Their practice was to take drawings from
time to time throughout the year, and these drawings were accounted for in the
company's books by way of a debit to the shareholder loan account (owing to
shareholders). Only one shareholder loan account was maintained in the general
ledger and the drawings of all four family members were debited to that
account. At each year end a decision was made as to the appropriate
remuneration for each family member for the year, and the necessary year end
journal entries were posted to reflect the compensation for the shareholders.
The evidence was unclear as to the manner in which this decision was arrived
at, but it seems most likely that the appellant made the decision, perhaps with
advice from his accountant.
[3] One of Rabco's major
customers was the HMV chain of music stores, to which it supplied earphones,
cases, blank tapes and DVDs and similar accessory products. In 1990, Rabco
became the exclusive supplier of such products to HMV, at first under a written
contract, but after 1992 simply under an oral agreement. By 2000, HMV accounted
for fully 90% of Rabco's sales, and the business had grown to the point where
it rented a 13,500 square-foot warehouse and office building. Gross sales in
the year ended January 31, 2002 exceeded 3.5 million dollars.
[4] It was on October 22,
2002 that Mr. Bibby's problems began. He was advised by HMV that it would no
longer buy from his company. He had already placed orders for the product
required to supply HMV with merchandise for the coming Christmas season, and
those orders could not be cancelled. He attempted to find other customers for
that inventory, but without success. In the end it was sold to jobbers at
prices far below cost, with resulting large losses. With no alternative
customers, the business was for practical purposes destroyed. The company had
been profitable up to and including the year that ended January 31, 2002, but
the years ended January 31, 2003 and 2004 were years of substantial losses.
[5] In early 2003, the
appellant met twice with Mr. Bruce Davies, the accountant who had acted for the
company, and for the family, for many years. He prepared the company’s
statements annually, and prepared the income tax returns for the company and
for the family members. The first of these meetings took place in January 2003.
At that meeting, the appellant informed Mr. Davies of the fact that the company
had lost HMV as a customer, and that as a result the company was in serious
financial difficulty and would cease to be profitable. The second meeting took
place in March 2003. Mr. Bibby again told Mr. Davies of the serious
consequences resulting from the loss of HMV’s business, and Mr. Davies then
suggested “that we amend the 2002 tax return”
of Rabco. Specifically, his proposal was that the income tax return of Rabco
for the year ended January 31, 2002 be amended to decrease the management fees
that had been accrued to the appellant and the members of his family by the year
end journal entries on January 31, 2002, “because the company would not be
able to show the profit to handle those types of numbers.”
[6] Mr. Bibby accepted
this advice, and Mr. Davies prepared an amended T2 income tax return for Rabco
for the taxation year ended January 31, 2002. A second amended return for the
2002 taxation year of Rabco was also prepared by Mr. Davies. Unfortunately many
of the documents entered into evidence by the parties are incomplete and
undated copies, and both Mr. Bibby and Mr. Davies were vague in their evidence
about what was done and when. It is clear, however, that Rabco, through the
combined efforts of Mr. Bibby and Mr. Davies, filed an income tax return for
the 2002 year on May 7, 2002 which showed that it had incurred management fees
to the shareholders in the total amount of $322,000, and that its net income
for the year was $152,753. It later filed an amended return for 2002 that
showed management fees of $98,000 and a net income of $376,753, against which
was applied a non-capital loss carried back from the 2003 taxation year of
132,397, leaving a net income of $244,356.
It appears that Mr. Davies prepared this return in March 2003, probably about
the time that he prepared the individual returns of the appellant and the other
family members. Again, the evidence was vague, but it seems that this amended
return was filed by Mr. Bibby, by registered mail, probably in November 2003.
There is no explanation in the evidence for this delay.
[7] Rabco then filed a
second amended return for the 2002 year showing management fees which were now
reduced to $71,000, and a net income of $403,742, against which were applied
non-capital losses of $132,397 from the 2003 taxation year and $170,000
from the 2004 taxation year, leaving a net income of $101,345. Mr. Davies’ evidence was
that this second amended return was filed on, or close to, March 1, 2004.
[8] These amended T2
returns were not accepted by the Minister of National Revenue, insofar as the
changes to the management fees and the operating income of Rabco for 2002 were
concerned. However Rabco was reassessed for the 2002 year to effect the
requested carry-backs of its losses from 2003 and 2004.
[9] Mr. Davies gave his explanation for the preparation and
filing of these amended T2 returns for Rabco. He said that it had been the
practice of the company for some years to accrue management fees at the year
end. The decision as to the amount of the management fees was implemented by a year
end journal entry debiting administration fees
expense, and crediting the shareholder loan account. As the company maintained
only one shareholder loan account for the four shareholders, the remuneration
of all four shareholders was established by one journal entry for the amount of
their total remuneration. In January 2002, the company was at the end of a
profitable year and the decision was made to accrue management fees for the
four family members in the total amount of $322,000. There was no suggestion in
the evidence that this decision was made contingent on there being future
profits sufficient to pay the amounts accrued, nor was the accrual accounted
for as a contingent liability.
[10] Mr. Davies went on to
explain that he advised Mr. Bibby about the loss carry-back provisions in the Act,
and that it was possible to file amended income tax returns. On the basis of
that advice, and the obvious reality that Rabco would have a substantial loss
in its 2003 year, the appellant decided that Rabco should file an amended
return for 2002. The first amendment simply purported to reduce the management
fees from $322,000 to $98,000, with a concomitant increase in the profit. It is
no coincidence that the increased profit was more than offset by the losses
carried back from 2003, and later from 2004. The second amended return that Rabco
filed for 2002 purported to reduce the administration fee expense for 2002 by
an additional $27,000. Mr. Davies’ explanation of this change was that $27,000
was an approximation of the amount of deemed income attributable to Mr. Bibby
in 2002 under subsection 15(2) and section 80.4 of the Income Tax Act as
a result of his shareholder loan activity.
[11] The T1 income tax
returns of the appellant and the other family members for 2002 were prepared by
Mr. Davies. The signatures on them are all dated April 28, 2003, except that of
the appellant, which is dated April 28, 2002. This was an error on his part, as
the form itself clearly shows that it was his return for 2002. The four family
members declared the following amounts as professional income, the only source
of which is their Rabco management fees:
Richard Bibby $27,000
Camille Bibby $27,000
Christopher Bibby $20,000
Jason Bibby $24,000
The
aggregate of these four amounts is $98,000, the amount to which Rabco’s first
amended T2 purported to reduce its management fee expense for the year ended
January 31, 2002. Mr. Davies’ evidence made it clear that he was of the view
that the decision made in January 2002 that the remuneration of the family
members would be an aggregate of $322,000 was one that could later be changed
at will when it became apparent that it would have been to the advantage of
both the company and its shareholders to fix the remuneration at a much lesser
amount, because there were losses in later years to set off against the higher
corporate income, and the revised incomes of the individuals would be subject
to much lower taxes in their hands.
[12] The other effect of
retroactively decreasing the shareholders’ remuneration, of course, would be to
increase their liability to Rabco. In fact, when Mr. Bibby accepted Mr. Davies’
advice and instructed him to prepare the amended 2002 return for Rabco, and
later the second amended return, no entry was made in the Rabco general ledger
to reflect the supposed transactions reversing in part the January 31, 2003
journal entry. The only record of it, other than in the amended tax returns, is
in certain handwritten notations made by Mr. Davies on a copy of Rabco’s
Statement of Income and Retained Earnings for the year ended January 31, 2002. This document is
reproduced as Appendix 1 to these Reasons.
[13] I
have no doubt that Mr. Davies was incorrect when he advised the appellant in
2003 that he could reduce, with retroactive effect, the amount of remuneration
that had been allocated to the family members by Rabco, and recorded in its
books of account, more than a year before. Counsel for the appellant argues
that section 111 of the Act entitles a corporate taxpayer that has
suffered unexpected losses to go back and recompute its profit for an earlier
fiscal year, changing such items as management and administration expenses. For
this proposition he relied principally on the decision of the Tax Review Board
in Brazelot Construction Limited v. M.N.R. In that case the appellant,
as was its custom, established accrued remuneration for the president at the
end of 1976. The amount of the accrual was $195,000. The business took a
severe downward turn in 1977, and the president signed a letter foregoing
$150,000 of that amount, which had not at that time been paid to him. The
company reported its income on the basis that the accrual at the end of 1976
was a deductible expense, and that upon the president in 1977 foregoing the
payment of $150,000 outstanding, that amount was income in the 1977 taxation
year. The Minister appears to have taken the position in assessing that only
the amount actually paid could be treated as an expense in 1976, and that no
amount should be taken into income in 1977. The company’s appeal was allowed by
the Board, on the basis that there were two genuine transactions: one an
expense in the 1976 year and the other a revenue in the following year. The
distinctions between that case and the present one are that in Brazelot
the $150,000 that the president relinquished when the business declined in 1977
had not been paid to him; by relinquishing the outstanding balance in 1977 he
extinguished a liability of the company, and it was accounted for on that basis
in the year that it happened. In the present case Rabco purported to undo a
transaction that had taken place in a previous fiscal period. In Brazelot,
two transactions took place. In 1976, the company agreed to make future
payments to its president totaling $195,000; in 1977 the president agreed to
forgive $150,000 of the debt. Each transaction was properly accounted for in
the year in which it took place. Here, Rabco had only had one transaction. It
declared the management fees, and it made a corresponding credit to the
shareholder loan account. All this occurred in its 2002 fiscal year. Much
later, during its 2004 fiscal year, Rabco purported to change the original
transaction by a few penciled notations on a financial statement. Bookkeeping
entries cannot change history, they are only a way of recording events that have
taken place, when they take place. This truism was perhaps expressed best by M.
J. Bonner, when he was a member of the Tax Review Board, in Brum v M.N.R., where he said:
Generally
speaking, bookkeeping entries do not create reality. They are useful only to
the extent that they record or reflect reality.
In the present case reality lies in the entries
made at the 2002 year end of Rabco. The remuneration decision having been made
and executed at that time, it was not susceptible of change simply because to
do so would be more advantageous to the company and its shareholders.
[14] The appellant
also relied on several other cases dealing with the deductibility by employers
of remuneration which was accrued but not paid, generally for reasons relating
to the employer’s ability to pay. None of them, however, support the
appellant’s proposition that adjustments to the expenses of a previous fiscal
period, and concomitant changes to the income of the employee for a previous
year, may be made on a retroactive basis as Rabco and Mr. Bibby sought to do in
this case. It is, of course, permissible to enter into a second transaction of
the kind dealt with by the Board in Brazelot, so long as it is accounted
for in the fiscal period when it takes place. What is not permissible is
retroactive implementation of tax planning by purporting to undo, or change,
transactions that took place in an earlier period.
[15] Following
an audit, Mr. Bibby was reassessed for the 2002 taxation year to add to his
income for the year the following amounts:
|
Unreported income
|
$224,000
|
|
Unreported benefit pursuant to
subsection 15(2) of the ITA
|
29,767
|
|
Unreported benefit pursuant to
subsection 80.4(2) of the ITA
|
6,642
|
|
Total
|
$260,409
|
He also was assessed a gross negligence penalty
under subsection 163(2) of the Act. The notice of reassessment did not
specify the basis upon which the unreported income was being assessed. On
October 20, 2003 the assessor, Mr. Ghambir had written to Mr. Bibby to advise
him of the reassessment he proposed to make. In that letter he said this:
Dear Sir:
Re: Income
tax returns for 2002, 2001 and 2000
As a result of
our recent review of the corporate tax returns of Rabco Marketing Limited, we
are now proposing the following adjustments to your taxable income:
2002 2001 2000
1) Unreported
Income $224,000
2) Subsection
15(2) Income 29,767
3) Subsection
80.4(2) Benefit 6,642 25,936 16,589
1) The
unreported income represents the balance of the amalgamated fees expense of
Rabco Marketing Limited that was credited to the shareholders loan account in
2002 and not reflected on your personal return.
2) This
amount represents income by virtue of subsection 15(2) of the Income Tax Act
and pertains to your indebtedness to Rabco Marketing Limited.
3) This taxable
benefit results from loans you received from Rabco Marketing Limited by virtue
of your indebtedness. Pursuant to subsection 80.4(2) of the Income Tax Act,
you are deemed to have received a benefit equal to the amount by which interest
on the loan computed at the prescribed rate for the period in the year it was
outstanding exceeds interest paid on the loan in the year or within thirty (30)
days thereafter.
[16] The
assessment was reviewed following the filing of a notice of objection, and on
December 29, 2004 a further reassessment was issued, the only effect of which
was to reduce the shareholder benefit assessed under subsection 80.4(2) by
$1,859. At that time the Minister also decided to cancel the penalty previously
assessed, but through inadvertence the amount of the penalty was not deleted
from the assessment.
[17] Mr.
Bibby filed a notice of objection to this reassessment on January 12, 2005, and
on February 28, 2005 the Minister confirmed the December 29, 2004 reassessment,
in the following terms:
NOTIFICATION OF CONFIRMATION BY THE MINISTER
Your Notice of Objection to the income tax
assessment for the 2002 taxation year has been carefully reviewed under
subsection 165(3) of the Income Tax Act.
The Minister of National Revenue has considered the
reasons set out in your objection and all the relevant facts. It is hereby
confirmed that the assessment has been made in accordance with the provisions
of the Income Tax Act on the basis that:
The benefits conferred on you by Rabco Marketing
Ltd. amounting to $224,000 have been included in computing your income in
accordance with the provisions of subsection 15(1) of the Act.
The amount of $29,767 has been included in your
income in accordance with the provisions of subsection 15(2) of the Act.
When you were a shareholder of Rabco Marketing Ltd.,
you received a loan or otherwise incurred a debt from the corporation because
of or as a consequence of such shareholding. The interest you paid on such
loans and debts was less than the interest computed at the prescribed rate. A
benefit of $4,783 has been calculated according to subsection 80.4(2) and
section 4301 of the Income Tax Regulations. It has been included in
your income as a benefit conferred on a shareholder under subsections 15(1) and
15(9).
[18] At
the conclusion of the trial, I invited counsel to make further submissions in
writing in relation to the unreported management fee issue, which they both
did. The appellant took a number of objections to the assessment under appeal
and to the position now advanced by the respondent, which is that the
assessment, insofar as it relates to the remuneration, can be sustained under
section 15 of the Act, or alternatively, under either subsection 5(1) or
6(1). The appellant’s first objection is that it is not open to the Minister, even
if he assessed under section 6, having confirmed the assessment relying solely
on section 15, to argue that the assessment is justified under section 5 or 6.
He goes on to argue in the alternative that in any event, the respondent has
not pleaded section 5 or 6 in the Reply to the Notice of Appeal, and therefore
may not now rely on them. The remuneration portion of the assessment cannot be
supported under section 15, he argues, because any benefit to Mr. Bibby resulting
from the accrual of management fees was not a benefit conferred on him qua
shareholder, but qua manager of the company and its trading operations.
[19] I
do not find any merit in the first of these arguments. Since the decision of
the Supreme Court of Canada in Continental Bank, and the subsequent
enactment of subsection 152(9), there has been considerable debate about the
reach of that subsection. The Federal Court of Appeal has now made it clear,
however, that subsection 152(9) permits the Minister to raise a new
argument, based upon different provisions of the Act, at any stage prior
to trial, so long as that new argument is based upon the same transactions that
gave rise to the assessment that is before the court, and provided that the new
argument would not call for the introduction of relevant evidence that may no
longer be adduced without the leave of the court, which leave it is not
appropriate for the court to give in the circumstances of the particular case. In this case that
requirement is met, as the respondent relies only on the 2002 year end journal
entries that created the accrual of management fees, and on the drawings by the
appellant and his family members that took place throughout 2002.
[20] However,
I am of the view that the appellant’s alternative submission must prevail. It
is well-settled that subsection 15(1) does not operate to tax all payments made
to shareholders by a corporation, only those made outside the ordinary course
of business. The applicable principle is expressed this way by professor
Krishna:
Payments to
shareholders are taxable as shareholder benefits only if they are made outside
the ordinary course of business. Thus, a payment to a shareholder in the
ordinary course of, and pursuant to, a bona fide business transaction
does not trigger a benefit under this rule. Such payments are taken into
account in the normal accounting for profit. For example, a person who rents a
building to a corporation of which he or she is a shareholder does not
necessarily receive shareholder benefit in respect of the rental. If the
shareholder rents in his or her capacity as a landlord and charges a fair
rental value for the building, the shareholder is taxable on the rental income.
The payment to the shareholder is made to him or her not qua shareholder,
but qua landlord.
…
Section 15 is
directed towards benefits conferred on a shareholder in his or her capacity as
shareholder. It is not concerned with benefits conferred on a taxpayer in his
or her capacity as an employee. … (footnotes
omitted)
In the present case, the management fees that
were the subject of the assessment were amounts earned by the appellant, and
also by the other members of his family, in the normal course of carrying on
the company’s business. For purposes of section 15, it is immaterial whether
the amounts were salary, or, as in this case, management fees. What matters is
that the payment was made as remuneration, not simply to benefit a shareholder.
Indeed, it has never been disputed by the respondent that the company had the
right to a deduction from income for the payments, in 2002 and in earlier
years.
[21] The
amount of the fees not declared by Mr. Bibby would have been taxable in his
hands under paragraph 6(1)(c), but only to the extent that they were
actually received by him during the year. The specific language of that
provision taxes “… fees received by the taxpayer in the year …”. It is not
clear whether Mr. Bibby was told that paragraph 6(1)(c) was invoked by
the Minister in assessing him. It is clear, however, that if it had been then
it was abandoned at the time the second reassessment was confirmed. That notice
of confirmation is in evidence, and it clearly limits the Minister’s reliance
to section 15. As I have said, it would have been open to the respondent to
rely on paragraph 6(1)(c) if that had been done in a timely way, and if the
assessment were confined to amounts received in 2002 by Mr. Bibby and not by
other members of his family.
[22] The
Reply
specifically pleads that the $224,000 that represents the difference between
the $322,000 management fees credited to the shareholder loan account and the
$98,000 reported as income by the four family members “… is a benefit conferred
by Rabco Marketing Ltd. on the Appellant in his quality of principal
shareholder for the 2002 taxation year.”
It is not explicitly pleaded that Mr. Bibby received that amount in 2002. Part
C of the Reply, which is titled statutory
provisions, grounds relied on and relief sought, makes no mention of section
5 or 6 of the Act, and suggests no other argument but that the amount is
a shareholder benefit. There was no motion to amend the Reply before, or even
at, the trial.
[23] Subsection
49(1) of the General Procedure Rules requires that every Reply shall
state:
(a) the statutory
provisions relied on; [and]
(b) the
reasons the respondent intends to rely on
The purpose of these requirements is to ensure
that the issues are properly defined for the purposes of discovery and trial,
and so that the appellant will know what arguments he must meet, and so that he
will be able to marshal and lead his evidence accordingly. This is not a mere
formality that may be overlooked when it has not been complied with; it is a
core component of the trial process, and to ignore non‑compliance would
undermine the integrity of that process: see Glisic v. The Queen.
[24] For
these reasons the appellant must succeed in his appeal insofar as it concerns
the inclusion in his income of the management fee amount.
[25] The
appellant did not really contest the inclusion in his income of a benefit under
subsection 15(2) arising out of indebtedness to Rabco that was not repaid by
the end of the following taxation year. The relevant provisions of the Act
are subsections 15(2), (2.3), (2.6) and 80.4(2).
15(2) Where a person (other than
a corporation resident in Canada) or a partnership (other than a partnership each member of which
is a corporation resident in Canada) is
(a) a shareholder of a particular
corporation,
(b) connected with a shareholder of a
particular corporation, or
(c) a member
of a partnership, or a beneficiary of a trust, that is a shareholder of a
particular corporation
and the person or partnership has in
a taxation year received a loan from or has become indebted to the particular
corporation, any other corporation related to the particular corporation or a
partnership of which the particular corporation or a corporation related to the
particular corporation is a member, the amount of the loan or indebtedness is
included in computing the income for the year of
the person or partnership.
15(2.1) …
15(2.3) Subsection
15(2) does not apply to a debt that arose in the ordinary course of the
creditor’s business or a loan made in the ordinary course of the lender’s ordinary
business of lending money where, at the time the indebtedness arose or the loan
was made, bona fide arrangements were made for repayment of the debt or
loan within a reasonable time.
15(2.6) Subsection
15(2) does not apply to a loan or an indebtedness repaid within one year after
the end of the taxation year of the lender or creditor in which the loan was
made or the indebtedness arose, where it is established, by subsequent events
or otherwise, that the repayment was not part of a series of loans or other
transactions and repayments.
80.4(2) Where a person (other than a corporation resident
in Canada) or a partnership (other than a partnership each member of which is a
corporation resident in Canada) was
(a) a shareholder of a corporation,
(b) connected with a shareholder of a
corporation, or
(c) a member of a
partnership, or a beneficiary of a trust, that was a shareholder of a
corporation,
and by virtue of that shareholding that person or
partnership received a loan from, or otherwise incurred a debt to, that
corporation, any other corporation related thereto or a partnership of which
that corporation or any corporation related thereto was a member, the person or
partnership shall be deemed to have received a benefit in a taxation year equal
to the amount, if any, by which
(d) all interest
on all such loans and debts computed at the prescribed rate on each such loan
and debt for the period in the year during which it was outstanding
exceeds
(e) the amount of
interest for the year paid on all such loans and debts not later than 30 days
after the later of the end of the year and December 31, 1982.
[26] The Notice of Appeal
puts in issue the inclusion by the Minister of benefits under subsections 15(2)
and 80.4(2) in the appellant’s income. The Minister’s assumptions giving rise
to these inclusions were pleaded very precisely in subparagraphs 23(k) to (r)
and Schedule “A” of the Reply, which are reproduced as Appendix 2 to these
reasons. The appellant did not lead any evidence that rebuts these assumptions.
In fact, the evidence of Mr. Davies tends to confirm them. He testified
that the reason for filing a second amended T2 for Rabco’s 2002 taxation year
was that reducing the company’s management fee expense by $27,000, and
therefore Mr. Bibby’s management fee income by the same amount, would in effect
offset these benefits, which he said he estimated to be about that amount.
Counsel for the appellant submitted in argument that the extracts from the
shareholder loan account in Exhibit R-2 were not properly proved and ought not
to be relied on. However, the material information from the account was assumed
by the Minister in assessing, and was properly pleaded as such. In the absence
of any rebutting evidence, the appeal must fail with respect to those two
amounts.
[27] In the result,
then, the appeal is allowed and the reassessment is referred back to the
Minister for reconsideration and reassessment on this basis that the amount of
$224,000 included in the appellant’s income and the penalty assessed under
subsection 163(2) are to be deleted from the assessment. The appellant has been
substantially successful and is entitled to his costs.
Signed at Ottawa, Canada, this 13th day of November, 2009.
“E.A. Bowie”
APPENDIX 1
APPENDIX 2
Subparagraphs 23(k) to
(r) and Schedule “A” of the Reply:
(k) During the 2002 taxation
year, the Appellant, his wife Camille and their sons Christopher and Jason were
indebted to Rabco Marketing Ltd. as outlined in the Schedule “A” attached to
the present Reply.
(l) 72% of the indebtedness
mentioned in subparagraph 23(k) and outlined in Schedule “A” is owed by the
Appellant.
(m) No interest was paid by the
Appellant, his wife Camille and their sons Christopher and Jason to Rabco
Marketing Ltd. during the 2002 taxation year in relation to their indebtedness.
(n) The Appellant, his wife
Camille and their sons Christopher and Jason, and Rabco Marketing Ltd. are
Canadian residents.
(o) Rabco Marketing Ltd. is not in the
business of lending money.
(p) The Appellant, his wife
Camille and their sons Christopher and Jason, were indebted to Rabco Marketing
Ltd. because of their shareholding.
(q) At the time the debt was
incurred, no bona fide arrangements were stated for the repayment of the
debt within a reasonable time.
(r) The following indebtedness
of the Appellant arising during the 2002 taxation year, was not repaid prior to
the end of the 2003 taxation year of Rabco Marketing Ltd.:
|
Rate
|
Indebtedness
|
|
January 1, 2002
|
$2,700
|
|
January 1, 2002
|
8,066.96
|
|
January 1, 2002
|
3,000
|
|
January 1, 2002
|
2,000
|
|
January 1, 2002
|
3,000
|
|
January 1, 2002
|
1,000
|
|
January 1, 2002
|
2,000
|
|
January 31, 2002
|
8,000
|
|
|
$29,766.96
|
CITATION: 2009 TCC 588
COURT FILE NO.: 2005-1566(IT)G
STYLE OF CAUSE: RICHARD BIBBY and
HER
MAJESTY THE QUEEN
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: July 23, 24 and 25, 2008
REASONS FOR JUDGMENT BY: The
Honourable Justice E.A. Bowie
DATE OF JUDGMENT: November 13, 2009
APPEARANCES:
|
Counsel for the
Appellant:
|
Howard J. Alpert
|
|
Counsel for the
Respondent:
|
H. Annette Evans
|
COUNSEL OF RECORD:
For the Appellant:
Name: Howard J. Alpert
Firm: Alpert
Law Firm
For the
Respondent: John H. Sims, Q.C.
Deputy
Attorney General of Canada
Ottawa, Canada
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