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Date: 20001115 Docket: 1999-4448-EI BETWEEN: 9033-9979 QUÉBEC INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and ROBERT VIGNEAULT, Intervenor. Reasonsfor Judgment Archambault, J.T.C.C. [1] The corporation 9033-9979 Québec Inc. (Location) is appealing from a decision by the Minister of National Revenue (Minister) under the Employment Insurance Act (Act). In his decision, the Minister concluded that Robert Vigneault did not hold insurable employment within the meaning of the Act from May 4, 1998, to January 20, 1999 (relevant period). Robert Vigneault is an intervenor in Location's appeal. The Minister's position is that Mr. Vigneault's employment is excluded from insurable employment because of the non-arm's-length relationship between him and Location. According to the Minister, a similar contract of employment would not have been entered into if they had been dealing with each other at arm's length. Facts [2] In making his decision, the Minister relied on the following assumptions of fact as set out in paragraph 5 of the Amended Reply to the Notice of Appeal: [TRANSLATION] (a) The appellant, 9033-9979 Inc., operates a car rental business under the firm name Location d'Autos M.C.R.; (b) since February 28, 1998, Mario Poirier, Robert Vigneault (the worker) and Mr. Vigneault's daughter, Céline Vigneault, have each owned one third of the appellant's voting shares; (c) during the period at issue, the appellant owned between 13 and 15 rental vehicles; (d) the business was open seven days a week; (e) summer was the busiest season; (f) the worker's duties mainly involved cleaning, refuelling and parking the vehicles; he occasionally replaced Mario Poirier at the rental counter at the airport; (g) he worked five days a week for an average of eight hours a day; (h) he cleaned between two and six vehicles a day; (i) he was paid $450 a week; (j) the worker provided services to the appellant without pay in January 1998 and for four weeks in April 1998; (k) he also continued to provide services to the appellant until January 20, 1999, even though rental contracts had decreased considerably since November; the period during which he worked does not coincide with the business's busy period. [3] Mr. Poirier (Location's president) and counsel for Mr. Vigneault both admitted all the above facts except those stated in subparagraphs (f), (h), (j) and (k). [4] The only witnesses for Location and Mr. Vigneault were Mr. Poirier, Mr. Vigneault and Mr. Vigneault's daughter, Céline Vigneault. Denis Tremblay, an insurability officer, was the only person who testified for the respondent. Though present at the hearing, the appeals officer who recommended the decision to the Director of Appeals did not testify. [5] The evidence adduced by the witnesses for Location and Mr. Vigneault does not contradict the facts set out in subparagraphs (f) and (h) of paragraph 5 of the Amended Reply to the Notice of Appeal. Their testimony and the documents filed at the hearing prove the following additional facts. [6] Mr. Poirier started up Location in May 1996. The company operated a car rental business primarily at the Îles-de-la-Madeleine airport. Mr. Poirier was the company's sole shareholder until February 1998, when he sold two thirds of his shares to Mr. Vigneault and Céline Vigneault. Until that time, he was also Location's only employee. Before starting his own business, Mr. Poirier had run the Budget car rental agency on the Îles-de-la-Madeleine for about 10 years. That agency had as many as 50 rental cars and three employees. The employees were paid perhaps $400 for 40 hours of work. For a while, they were hired only for the period from May to November. Mr. Poirier left Budget when it stopped operating on the Îles-de-la-Madeleine. [7] At first, Location received financial assistance from the Department of Human Resources Development. Mr. Poirier was able to continue receiving his employment insurance benefits for 12 months under the Self-Employment Assistance Program (SEA Program), even though he worked about 50 hours a week for Location. Location paid him a salary of $100 a week from July to November 1996. No other salary seems to have been paid to him for 1996. For 1997, a lump sum salary amount of $6,000 was paid on December 31, 1997. [8] Mr. Vigneault (who, at the date of the hearing, had more than 20 years of experience in the car rental business) managed the Tilden agency on the Îles-de-la-Madeleine for at least about 15 years. He was paid entirely on a commission basis. He was the one responsible for hiring the staff needed to run the agency. For about 10 years, his daughter worked for him as a counter clerk while he mainly looked after the maintenance of the cars. The wages of his daughter and the other employees he hired were deducted from his commission income. The Tilden agency on the Îles-de-la-Madeleine was transferred to another resident of the islands, and Mr. Vigneault and his daughter lost their jobs around the end of 1997. [9] Since the Budget agency and the Tilden agency each had its rental counter at the Îles-de-la-Madeleine airport, Mr. Poirier and Mr. Vigneault knew each other very well. According to Ms. Vigneault, it was Mr. Poirier who, in February 1998, offered her and her father a chance to join him in Location. They each paid $7,000 to purchase one third of Location's shares from Mr. Poirier. [10] Mr. Poirier decided at that time to increase the number of cars owned by Location from nine to fifteen, and Mr. Vigneault became involved in negotiating the purchase of the cars. Mr. Vigneault and Ms. Vigneault, like Mr. Poirier, had to provide security for the loan granted by a credit union to finance the purchase of the six new cars. The amount of the security was limited to $22,440. [11] The three shareholders also had to invest an additional $9,066 to finance Location's working capital. Mr. Poirier and Ms. Vigneault borrowed $10,000 from the Îles-de-la-Madeleine Community Futures Development Corporation. Only Ms. Vigneault and Mr. Poirier met the age requirement to be eligible for the loan, on which no interest had to be paid or principal repaid for two years. [12] Mr. Poirier testified that he did not feel like a minority shareholder when decisions were made by Location's board of directors. The decisions were generally made unanimously. However, Mr. and Ms. Vigneault did not always agree, as shown by a resolution of the board of directors dated March 28, 2000. At the directors' meeting held that day, it had to be decided whether Location was going to bid to renew its lease at the Îles-de-la-Madeleine airport for five years. Robert Vigneault's view was that they had to put in a bid. Mr. Poirier and Ms. Vigneault disagreed with him, and their opinion prevailed. [13] Although Mr. Vigneault became a shareholder in Location in February 1998, he did not begin his employment there until May 4, 1998. The insurability officer, Mr. Tremblay, said he was told that Mr. Vigneault did some work for Location before the relevant period. However, Mr. Tremblay did not ask for any details in that regard, being content to confine his questions to the relevant period. Mr. Vigneault did not work without pay before May 1998 (this was confirmed by Mr. Poirier and the Vigneaults). Mr. Vigneault did not do any work at Location's counter or any car cleaning or maintenance before May 1998. He was merely involved in purchasing the six cars, negotiating the purchase of Mr. Poirier's shares in Location and taking the necessary steps to obtain financing to purchase the cars. It should also be noted that Mr. Poirier did not receive any remuneration for the period from January to April 1998. [14] Starting in May 1998, Mr. Poirier's work involved serving customers at the counter and keeping the books, while Mr. Vigneault focused on car maintenance. Mr. Vigneault cleaned the cars inside and out, made sure they were in good condition, did minor repairs and went to the garage if more substantial work was necessary. [15] Mr. Vigneault testified that it is difficult to quantify the hours he spent cleaning the cars, since they could vary from season to season. During the company's busiest period, he could clean between five and eight cars a day. Outside that period, there were more short-term rentals (one or two days), which, he said, meant less cleaning. During the busy season, if someone with children leased a car for a week, much more sand was generally found in the car when it came back, which consequently required more cleaning time. [16] Mr. Vigneault also had to replace Mr. Poirier at the counter when he was away. Location's business hours could extend from 6:00 in the morning until midnight. Mr. Vigneault was therefore regularly there early in the morning—between 6:00 a.m. and 8:00 a.m.—and in the evening. He also sometimes had to go and pick up customers or take them a car. Around 15 percent of Location's customers did not come to the airport. [17] In May 1998, Location did not have enough work to be able to hire Ms. Vigneault. However, the goal of each of the three shareholders was for Location to be able to create a full-time job for each of them throughout the year. Unfortunately, that goal was never achieved. In the fall of 1998, the shareholders realized that Location was still operating at a loss and that it was not even possible to maintain two full-time jobs. At the end of January 1999, Mr. Vigneault had to be laid off.[1] Mr. Poirier kept his job because he was the only one who could do Location's bookkeeping. Mr. Poirier therefore took over Mr. Vigneault's work but had to cut back the business's hours so that he would be limited to working 40 hours a week. [18] Location rehired Mr. Vigneault on June 6, 1999, and he worked 40 hours a week until November 27, 1999. He was unemployed again from November 27, 1999, to June 11, 2000, when he was rehired by Location. At the time the appeal was heard, he was still working for Location. [19] It should be noted that Mr. Poirier kept his job with Location through all of 1999 and, in 2000, up to the time the appeal was heard. However, he reduced his working hours from January 2 to June 10, 2000: he worked on a part-time basis according to Location's needs, putting in between five and fifteen hours a week. Like Mr. Vigneault, Mr. Poirier began working 40 hours a week again the week commencing on June 11, 2000. [20] Céline Vigneault worked for Location only from June 20[2] to November 27, 1999. For her work, she was paid the same salary as Mr. Poirier and her father. She was hired to take steps to increase Location's turnover. She submitted proposals to insurance brokers and targeted a new clientele; in addition, she helped Mr. Poirier at the counter. Unfortunately for Location, Ms. Vigneault's efforts were unsuccessful, and she was not rehired. [21] Location paid Mr. Vigneault and Ms. Vigneault $450 because they had a great deal of experience. Mr. Poirier is not related to the Vigneaults. At the hearing, when Mr. Poirier was asked why Location kept Mr. Vigneault on as an employee after the busy season in the summer of 1998, he answered that Location's goal was to create permanent employment for Mr. Vigneault and himself. According to Ms. Vigneault's testimony, one reason Mr. Vigneault was kept on was that the cars had to be prepared for the winter. She pointed out that the cars were not all available at the same time, since they were rented out. [22] According to Mr. Tremblay, Mr. Poirier told him that, if Location had had to hire a third party to replace Mr. Vigneault, it would not have offered the same terms and conditions of employment. However, Mr. Tremblay said that he did not ask Mr. Poirier to specify under what terms and conditions such an employee would have been hired. [23] From the time it was established, Location did nothing but incur losses in operating its business. The evidence adduced at the hearing reveals the following figures:
[24] This table shows that Location had financial problems even though the salary it paid Mr. Poirier before the Vigneaults became shareholders was very low. The company incurred after-tax operating losses of $12,927 in 1997 and before-tax losses of $7,077 in 1998. [25] According to Mr. Poirier and the Vigneaults, one reason for the poor results was the arrival of a new competitor. Like Tilden, that competitor had a fleet of about 25 cars but, unlike Tilden and Location, it did not have a counter at the airport. Rather, its place of business was very close to the airport. According to Mr. Poirier and Mr. Vigneault, the fact that the competitor did not have to pay rent to Transport Canada created unfair competition. [26] Some of Location's accounting records provide monthly data on its income and the number of rental contracts from May 1998 to January 1999. Those data are shown in the following table, which also indicates, in percentage terms, the decrease in monthly income and in the monthly number of rental contracts from October 1998 to January 1999 as compared to the average income for the best two months of the year, namely July and August 1998. The average monthly income for those two months was $20,048, and the average number of rental contracts was 89.
[27] This table shows that there was a significant decrease in rental income for the period from October to January in comparison with the busiest period. As for the number of rental contracts, the decrease occurred from November to January. Thus, in December and January, the number of rental contracts was less than half the number there had been during the busier July-August period, while rental income dropped by 56 percent, 67 percent and even 76 percent during the last three months. Analysis [28] Mr. Vigneault and his daughter formed a related group that controlled Location.[8] As a result, Mr. Vigneault and Location were related persons and are deemed not to have dealt with each other at arm's length.[9] Under paragraph 5(2)(i) of the Act, a person's employment is excluded from "insurable employment" if the person and his or her employer are not dealing with each other at arm's length. That paragraph reads as follows:
(i) employment if the employer and employee are not dealing with each other at arm's length. [29] Even though Mr. Vigneault's employment is excluded employment because of his non-arm's-length relationship with Location, it is within the Minister's discretion to treat Mr. Vigneault and Location as if they had dealt with each other at arm's length if he is satisfied that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. Only the Minister may exercise that discretion, as provided in subsection 5(3) of the Act: (3) For the purposes of paragraph (2)(i),
(a) the question of whether persons are not dealing with each other at arm's length shall be determined in accordance with the Income Tax Act; and
(b) if the employer is, within the meaning of that Act, related to the employee, they are deemed to deal with each other at arm's length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. [Emphasis added.] [30] However, this Court has a duty to ensure that the Minister's decision resulted from the proper exercise of his discretion. The Federal Court of Appeal has had on a number of occasions, inter alia in Attorney General of Canada v. Jencan Ltd., [1998] 1 F.C. 187, [1997] F.C.J. 876, the opportunity to state the Tax Court of Canada's role. In Jencan, Isaac C.J. wrote the following in paragraph 31: The decision of this Court in Tignish, supra, requires that the Tax Court undertake a two-stage inquiry when hearing an appeal from a determination by the Minister under subparagraph 3(2)(c)(ii). At the first stage, the Tax Court must confine the analysis to a determination of the legality of the Minister's decision. If, and only if, the Tax Court finds that one of the grounds for interference are established can it then consider the merits of the Minister's decision. [Emphasis added.] [31] Further on, in paragraph 37 of the decision, the same judge sets out the specific reasons that justify the Tax Court of Canada's interference: The Tax Court is justified in interfering with the Minister's determination under subparagraph 3(2)(c)(ii)—by proceeding to review the merits of the Minister's determination—where it is established that the Minister: (i) acted in bad faith or for an improper purpose or motive; (ii) failed to take into account all of the relevant circumstances, as expressly required by paragraph 3(2)(c)(ii); or (iii) took into account an irrelevant factor. [32] Even if some of the facts on which the Minister may have relied in exercising his discretion turn out to be unfounded and even if certain facts were not brought to the Minister's attention, that does not necessarily mean that the Minister exercised his discretion improperly and that this Court may therefore decide itself whether the parties would have entered into a substantially similar contract of employment if they had been dealing with each other at arm's length. It must first be determined whether the Minister's decision can still be justified in light of the evidence adduced in this Court. This is what we learn from the Federal Court of Appeal's decision in Jencan. Isaac C.J. wrote as follows in paragraph 50: The Deputy Tax Court Judge, however, erred in law in concluding that, because some of the assumptions of fact relied upon by the Minister had been disproved at trial, he was automatically entitled to review the merits of the determination made by the Minister. Having found that certain assumptions relied upon by the Minister were disproved at trial, the Deputy Tax Court Judge should have then asked whether the remaining facts which were proved at trial were sufficient in law to support the Minister's determination that the parties would not have entered into a substantially similar contract of service if they had been at arm's length. If there is sufficient material to support the Minister's determination, the Deputy Tax Court Judge is not at liberty to overrule the Minister merely because one or more of the Minister's assumptions were disproved at trial and the judge would have come to a different conclusion on the balance of probabilities. [Emphasis added.] [33] Paragraph 41 of the same decision also specifies on whom it falls to challenge the assumptions of fact on which the Minister relied in making his decision: Although the claimant, who is the party appealing the Minister's determination, has the burden of proving its case, this Court has held unequivocally that the claimant is entitled to bring new evidence at the Tax Court hearing to challenge the assumptions of fact relied upon by the Minister. [Emphasis added and footnotes omitted.] [34] Unfortunately, the appeals officer who reviewed the files of Location and Mr. Vigneault and who made a recommendation to the Minister for the purposes of paragraph 5(3)(b) of the Act did not testify, nor was that officer's report filed. Consequently, we do not know precisely which facts the Minister took into account in exercising his discretion. We must therefore rely on the facts set out in paragraph 5 of the Amended Reply to the Notice of Appeal and make assumptions about the Minister's assessment thereof. [35] Given that the burden is on Location and Mr. Vigneault to prove that the Minister exercised his discretion improperly, it is rather surprising that they did not call the appeals officer as a witness. I have trouble understanding how employment insurance claimants can come before this Court without summoning and calling as a witness the appeals officer who played an important role in the Minister's exercise of his discretion. It seems to me that doing so would make it easier to prove the errors, if any, made in exercising that discretion. [36] Here, it seems to me that two of the facts that may have accounted for the Minister's decision are set out in subparagraphs (j) and (k) of paragraph 5 of the Amended Reply to the Notice of Appeal. As well, subparagraph (h) could imply that there was not enough work to keep Mr. Vigneault busy for 40 hours a week. [37] The evidence shows that the facts set out in subparagraph (j) are unfounded. The Minister assumed that Mr. Vigneault had provided services to Location without pay for four weeks in April 1998. The evidence shows the contrary. He did not actually start working until May 4, 1998. [38] Counsel for Mr. Vigneault argued, rightly in my view, that a distinction must be drawn between the work done by a person as a company shareholder and the work done by the same person as an employee of the company. The activities associated with the negotiations for the purchase of Location's shares and with the provision of security for the benefit of Location by its shareholders cannot be considered normal activities of an employee. [39] The activity that could be considered characteristic of an employee is that relating to Location's purchase of six cars. However, it is inconceivable here that that unpaid activity could have kept Mr. Vigneault busy enough to make it an important factor to take into account in assessing the terms and conditions of his employment. [40] The main fact that might justify the Minister's decision is that Mr. Vigneault's employment continued during the period when Location was not busy. Subparagraph 5(k) of the Amended Reply to the Notice of Appeal states that the number of rental contracts had fallen considerably since November. This implies that, if Mr. Vigneault had not been related to Location but had been an outsider, his employment would have been terminated because of a lack of work, especially given the company's financial situation. [41] Counsel for the intervenor argued that there are new facts that were not taken into account by the Minister in exercising his discretion. One such fact is the importance attached by the shareholders to the creation of permanent, full-time jobs. As well, the Minister allegedly failed to take account of the fact that the business was a new one just starting up. However, counsel for the intervenor can scarcely argue that the Minister was not aware of those facts as she did not call as a witness the appeals officer, who could have enlightened us in that regard. On the other hand, the facts relating to that point are not set out in the Reply to the Notice of Appeal and it might be assumed that if they are not stated there, the Minister did not take them into account. [42] In my view, even if all the new facts are considered and the mistaken facts taken into account by the Minister are disregarded, the Minister's decision still seems to me to be justifiable. It may be considered justifiable on the basis that Mr. Vigneault's employment would not have lasted until January 1999 if he had not been related to Location. [43] When Mr. Poirier testified, I asked him whether Location's two competitors kept two or three employees all year long—it should be remembered that those competitors each had a fleet of about 25 cars—and he did not know. It is rather surprising that he did not know, since he associated with the Tilden agency's employees at the Îles-de-la-Madeleine airport and the other competitor had its offices very close to the airport, a few hundred metres from Location's garage. According to the official Îles-de-la-Madeleine tourist guide, the islands had a population of just 13,802 in 1996. It should be added that Mr. Poirier has been working in the car rental business since 1985 and that it would be quite normal in the circumstances for him to have such information on his competitors. [44] Even if Location's goal was to create two or three full-time jobs, it was open to the Minister, in exercising his discretion, to conclude that the employment would not have lasted as long as it did if Mr. Vigneault had not been related to Location. [45] That intention to create permanent jobs does not strike me as very reasonable. It must be borne in mind that Location had only 15 cars during the relevant period. Moreover, before Mr. Vigneault's employment began, Location was unable to pay a reasonable salary to just one employee throughout the year. Mr. Poirier's salary was subsidized for a year through the SEA Program. The salary paid for the first fiscal period was $2,100. Even after the first year of operations, Mr. Poirier was not paid a weekly salary. He was given $6,000 at the end of December 1997. That lump sum represents 13 weeks of pay at $450 or a weekly salary of $115 for 52 weeks. Finally, in 1998, Location did not pay Mr. Poirier any salary from January to May. [46] In such circumstances, how could Location hope to pay two employees salaries of $450 throughout the year? Even if account is taken of the fact that there were six additional cars at the time Location began paying Mr. Vigneault and Mr. Poirier $450 a week, it is hard to imagine that such a business could pay such salaries all year long. The fact of the matter is that Location had always incurred losses since it began operating. Even if the salaries of Mr. Vigneault and his daughter are not included in calculating the losses for the 1999 and 2000 fiscal years, Location would still have incurred an after-tax loss of $5,447 for 1999 and $1,549 for 2000.[10] [47] In her argument, counsel for Mr. Vigneault submitted that, to determine whether Location was operating at a loss, its profits must be calculated before capital cost allowance. However, in Moldowan v. The Queen, [1978] 1 S.C.R. 480, 77 DTC 5213, a decision by the Supreme Court of Canada, Dickson J. stated that, to determine whether an activity is a business and thus a source of income, profit must be calculated after capital cost allowance. Moreover, it seems quite reasonable to me to take account of capital cost allowance in determining whether Location made a profit. That company's main asset was its fleet of cars. To take no account of capital cost allowance when calculating its profit would be to ignore an item that, along with salaries, was one of its most substantial expenses. It is well known that the value of cars decreases significantly after they are purchased. This is even more true of cars belonging to a rental agency. [48] It is true that depreciation does not necessarily correspond to an outlay. However, it must be remembered that it represents the deduction of part of the acquisition cost, which cost represents an outlay even if it was incurred during a previous year. [49] Mr. Poirier admitted that, when he managed the Budget agency, employees were hired only during the busiest period of the year. At certain times, employees were taken on for the entire year, but it should be noted that Budget had as many as about 50 cars. Finally, I would add that the fact that Tilden had a full-time employee throughout the year at the time Mr. Vigneault managed it cannot be used as a precedent, since that employee was his daughter and he himself bore the cost of her wages. Given the non-arm's-length relationship between Mr. Vigneault and his daughter, it cannot be concluded that the duration of her employment at Tilden was reasonable. [50] It must be borne in mind that Mr. Poirier, Mr. Vigneault and Ms. Vigneault are people who have a great deal of experience in running a car rental business. Thus, they are very aware of the fluctuations in the volume of business for a rental agency in their area. [51] I am unable to conclude on the evidence as a whole that it can reasonably be thought that, with a fleet of 15 cars, Location could offer Mr. Vigneault year-round employment given the economic conditions on the Îles-de-la-Madeleine during the relevant period. [52] Location's financial situation in the fall of 1998 must also be borne in mind, as must the significant decrease not only in the number of rental contracts but also in rental income. In light of these facts, I consider it reasonable to believe that the Minister could have concluded that a company operating its business efficiently would have laid Mr. Vigneault off at the end of the busy season if he had not been related to that company. [53] In conclusion, Location and Mr. Vigneault have not been able to prove that the Minister's decision resulted from the improper exercise of his discretion. Location's appeal is therefore dismissed. Signed at Ottawa, Canada, this 15th day of November 2000. "Pierre Archambault" J.T.C.C. Translation certified true on this 13th day of December 2001. [OFFICIAL ENGLISH TRANSLATION] Erich Klein, Revisor [OFFICIAL ENGLISH TRANSLATION] 1999-4448(EI) BETWEEN: 9033-9979 QUÉBEC INC., Appellant, and THE MINISTER OF NATIONAL REVENUE, Respondent, and ROBERT VIGNEAULT, Intervenor. Appeal heard on August 11, 2000, on the Îles-de-la-Madeleine, Quebec, by the Honourable Judge Pierre Archambault Appearances Agent for the Appellant: Mario Poirier Counsel for the Respondent: Alain Gareau Counsel for the Intervenor: Manon Dubé JUDGMENT The appeal is dismissed and the Minister's decision confirmed.
Signed at Ottawa, Canada, this 15th day of November 2000.
J.T.C.C. Translation certified true on this 13th day of December 2001. Erich Klein, Revisor [1] It should be noted that the payroll indicates that Mr. Vigneault worked until January 30, 1999, whereas the Minister's decision concerns the period ending on January 20, 1999. No explanation was given for this 10-day difference. [2] On cross-examination, Mr. Vigneault acknowledged his signature on a statutory declaration given to an officer from the Department of Human Resources Development. In that declaration, Mr. Vigneault stated that his daughter began working for Location on January 31, 1999, and was paid $250 net a week. However, the testimony of Mr. Poirier, Mr. Vigneault and Ms. Vigneault indicates that she did not begin working for Location until June 1999. Also filed were resolutions of Location's board of directors dated January 22 and March 5, 1999, confirming that Location had started repaying the loan made by Ms. Vigneault. In all likelihood, Mr. Vigneault was mixing up the repayment of the loan with the payment of a salary. [3] It should be noted that the first fiscal period lasted just 10 or 11 months, depending on whether the business began operating in May or in June 1996. [4] This is an 11-month fiscal period. Location no doubt changed its fiscal year when the Vigneaults became shareholders. [5] The financial statements indicate $6,183, while the payroll indicates $6,000. [6] According to the financial statements. [7] According to the financial statements. [8] The relevant provisions of the Income Tax Act (ITA) are as follows: 251(2) Definition of "related persons". For the purpose of this Act, "related persons", or persons related to each other, are (a) individuals connected by blood relationship, marriage or adoption; (b) a corporation and (i) a person who controls the corporation, if it is controlled by one person, (ii) a person who is a member of a related group that controls the corporation, or (iii) any person related to a person described in subparagraph (i) or (ii); and . . . 251(4) Definitions concerning groups. In this Act, "related group" means a group of persons each member of which is related to every other member of the group; . . . 251(6) Blood relationship, etc. For the purposes of this Act, persons are connected by (a) blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other. [Emphasis added.] [9] Paragraph 251(1)(a) of the ITA states: 251. (1) Arm's length. For the purposes of this Act, (a) related persons shall be deemed not to deal with each other at arm's length. [10] In 1999, $22,997 - $17,550 = $5,447. In 2000, $23,149 - $21,600 = $1,549. |
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| SOURCE: http://decision.tcc-cci.gc.ca/en/2000/html/2000tcc19994448.html | Generated on 2003-05-08 |