Greenwood Estate v. Canada
A-371-91
Robertson J.A.
9/12/93
7 pp.
Appeal from trial judgment [(1990), 90 DTC 6690] dismissing appeal from reassessment including $308,217.50 capital gain in terminal tax return -- Representing half capital gain deemed realized immediately before taxpayer's death on deemed disposition of shares -- Taxpayer entering agreement to sell shares to sons -- Sale not to be completed until after his death -- Purchase price secured by promissory note, interest on which payable to estate during lifetime of widow, on whose death principal falling due -- Agreement expressly binding on "successors and assigns" of parties -- Will devising all property to trustees upon certain trusts -- Residue of estate to be invested and annual net income paid to widow during her lifetime and "without any intention of imposing a trust on [his wife] with respect thereto" reminding her of opportunity conferred on their sons in connection with their right to acquire his common shares -- After taxpayer's death shares sold to sons pursuant to agreement -- Trial Judge holding shares not vesting indefeasibly as no discretion or control in trustees as to disposition of shares -- Executors compelled to sell shares -- Whether shares vested indefeasibly in spousal trust created under will -- Appellants relying on "bundle of rights" theory abstracted from Beament Estate v. M.N.R., [1970] S.C.R. 680 -- Arguing shares vesting indefeasibly as not condition subsequent specified in original grant which could operate to defeat or revoke interest granted -- Respondent maintaining promissory note, not shares, vesting in spousal trust -- Appeal dismissed -- Bundle of rights, i.e. shares subject to contractual obligations described in agreement with sons, passing on death -- Those obligations mandatory and binding upon legal personal representatives of deceased, as vendor, and upon sons as purchasers -- Legal personal representatives under obligation without discretion to sell and did sell shares, constituting principal asset in estate, to sons for consideration agreed upon -- Shares subject to obligation in agreement requiring sale to sons, not shares in specie, passing to legal personal representatives of deceased at death -- Under will, property passing first to legal personal representatives to be disposed of in accordance with terms of will, not to spousal trust -- Will creating spousal trust only with respect to residue of estate -- By necessary implication, shares subject to agreement and sold accordingly, never forming part of residuary estate and of spousal trust -- Fallacy in appellants' argument lying in belief shares transferred to spousal trust with no condition subsequent which could have defeated or revoked trust's interest in property -- Appellants confused as to what property passed to estate of deceased and what property vested in spousal trust created with residue of estate -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 40(1)(a), 70(5) (as am. by S.C. 1973-74, c. 14, s. 19), (6) (as am. idem; S.C. 1974-75-76, c. 26, s. 38), 104(23)(a).