Brouillette v. Canada
A-1019-96 / A-1020-96
Décary J.A.
29/6/99
11 pp.
Appeals from two Tax Court of Canada decisions pursuant to Income Tax Act, s. 73(5)-Appellants had appealed from assessments made by MNR in respect of their 1987, 1988 and 1989 taxation years-Son, Thierry, born in 1973-In 1978 they founded company specializing in sale of coffee, Orient Express Café Ltée, in which they held all shares-In December 1987, A.L. Van Houtte Ltée undertook to purchase almost all shares in Orient Express for $1,810,500-Appellants wished to minimize tax liability and at same time confer benefit on son-By notarial deed dated December 23, 1987, appellants transferred 400,000 shares to "Fiducie de Thierry Nicolas de Ruelle" (Fiducie Thierry)-On same day appellants and Fiducie Thierry sold Van Houtte almost all shares in Orient Express for $1,810,500-Appellants claimed capital gains exemptions worth $50,000 each in tax return-Minister disallowed claim for exemption-Case at bar resulted from misunderstanding of meaning to be given to words "transferred to child" in Act, s. 73(5) and scope of judgment of Supreme Court of Canada in Royal Trust Co. v. Tucker, [1982] 1 S.C.R. 250-Prima facie word "transfer" not presupposing any particular form and may be made indirectly-S. 73(5) applying once action taken (here creating Fiducie Thierry) which initiates process by which property will ultimately be included in child's estate-Not possible to say no transfer to child because if Tucker strictly applied, child would only be contingent owner of property transferred-No doubt shares transferred by parents and transfer irrevocable-Nothing to indicate trustee did not act in best interests of beneficiary child by selling, as soon as acquired, shares in family business which parents had chosen to sell-When they created trust for child's benefit in manner prescribed by Quebec law, parents transferred shares to child within meaning of Act, s. 73(5) and could make use of tax benefit conferred by subsection-Appeals allowed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 73(5) (am. by S.C. 1977-78, c. 42, s. 6; 1979, c. 5, s. 24(1); rep. by S.C. 1986, c. 6, s. 36).