Canada ( Attorney General ) v. Kubicek Estate
A-671-96
MacGuigan J.A.
26/9/97
7 pp.
Kubicek, U.S. resident, and wife buying cottage in Ontario in 1967-Upon wife's death in 1981 Kubicek becoming sole owner-On his death in 1992 deemed to have disposed of cottage for face market value-Canada-United States Income Tax Convention, Art. XIII(9) providing amount of gain liable to tax reduced by proportion of gain attributable on monthly basis to period ending on December 31 of year in which Convention entering into force, or such greater portion of gain as is shown to be reasonably attributable to that period-December 31, 1971 reference point for determining Canadian tax consequences of disposition of capital property-Tax Court holding, as "gain" defined in neither Convention nor Income Tax Act, deductions from capital gain should run from date of original purchase of property-Application for judicial review allowed-In interpreting treaty, paramount goal to find meaning of words in question-Involves looking to language used, intentions of parties-Convention, Art. III(2) and Income Tax Conventions Interpretation Act, s. 3 providing when term not defined in Convention, i.e. "gain", should be given meaning in tax legislation of taxing state-Meaning not same as definition-Meaning of "gain" from Income Tax Act, s. 40(1), setting out method to be used by taxpayer for calculating capital gain for Canadian income tax purposes-Concept of gain in Art. XIII(9) falling to be determined by domestic Canadian law-Tax Court relying on Technical Explanation of Convention produced by United States Treasury Department-Technical Explanation domestic American document of interest to Court, but not necessarily decisive of issue-Should not be treated as if treaty or statute-Tax Court's interpretation of Explanation erroneous-Ordinary meaning of "gain" for purposes of Art. XIII gain subject to tax-Calculation of reduction in capital gain tax beginning when gain first began to accrue for Canadian income tax purposes i.e. December 31, 1971 starting date-More consistent with purposes behind Convention, avoidance of double taxation and proper allocation of tax between Canada and U.S., than literal meaning advanced by Tax Court Judge-Applicant correct in reassessment-Income Tax Conventions Interpretation Act, R.S.C., 1985, c. I-4, s. 3-Canada-United States Tax Convention, 1984, S.C. 1984, c. 20, Schedule I, Arts. III(2), XIII(9) (as am. by Schedule II, s. 3)-Income Tax Act, S.C. 1970-71-72, c. 63, s. 40(1) (as am. by S.C. 1980-81-82-83, c. 140, s. 19).