[OFFICIAL ENGLISH TRANSLATION]
97-1199(IT)I
BETWEEN:
HÉLÈNE THOMASSIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on February 23, 1998, at Québec, Quebec, by
the Honourable Judge Alain Tardif
Appearances
Agents for the Appellant: Gaétan Roy
Alexis-François Charette
André Côté
Counsel for the Respondent: Pascale O'Bomsawin
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1989, 1990, 1991, 1992 and 1993 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 31st day of March 1998.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 19980331
Docket: 97-1199(IT)I
BETWEEN:
HÉLÈNE THOMASSIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] In 1988, Luc Thomassin, the appellant's son, took steps with a view to the purchase of a business operating under the firm name Alimentation Chanoine-Scott Enr. To that end, he prepared documentation and set up the company 2551-6279 Québec Inc., in which he held all the issued capital stock.
[2] In order to carry out his plan, Luc Thomassin had to get the involvement of the appellant, his mother, as guarantor. On June 30, 1988, she provided her son with mortgage security to guarantee a loan of up to $62,000.
[3] After becoming the owner of the business he wanted, Luc Thomassin invested in modernizing it. He also acquired a competitor in order to boost the sales figures of his new business. All his endeavours and initiatives aimed at straightening out the financial situation proved unsuccessful. After a few months of operations, business did not improve and the new company was no longer able to meet its financial obligations; as a result, the appellant was turned to.
[4] Relying on the terms of the security contract, the lender, the Caisse Populaire St-Yves, thus required that the appellant repay the money owed by her son and his company. The evidence has established that it was the appellant who made the monthly payments from August 1989.
[5] Having lost all hope of making the business profitable, the appellant's son, the sole shareholder in the company that owned the business, decided on the bulk sale of the company's assets. In accordance with the Civil Code, Luc Thomassin had to list all the creditors and indicate how much was owed to each. Although he admitted and acknowledged that the appellant was at that time a creditor, her name and the amount owed to her did not appear on the list attached to the bulk sale contract respecting the company's assets.
[6] Once the assets were sold, the company ceased all activity. Two or three years later, Luc Thomassin decided to declare personal bankruptcy.
[7] Throughout that period, the appellant did not undertake or initiate any proceedings or take any action to be reimbursed for the amounts she had paid out. On the contrary, she assumed fully the obligations under the security contract.
[8] Harassed by the Caisse Populaire St-Yves, the appellant, having become worried and nervous, decided to reimburse by means of loans obtained from the National Bank all the money owed to the credit union.
[9] The loans obtained from the National Bank also allowed the appellant to repay debts affecting the real property which had been provided as security and which generated rental income. At that point, the balance owed under the security contract was between $45,000 and $47,000.
[10] When asked why she had provided the security, the appellant said that she trusted her son, who was responsible, experienced and hardworking. She stated that, as well, she did not want him to end up on welfare.
[11] Roughly speaking, those are the facts giving rise to the dispute involved in this appeal. The issue was stated as follows:
[translation]
Did the appellant suffer a business investment loss in any of the 1989, 1990, 1991, 1992 and 1993 taxation years?
[12] The evidence has clearly established that the security document provided by the appellant was not motivated by any thought of profit. Essentially, it was a noble and generous gesture of support by a mother toward her son. The appellant never had any idea or intention of profiting or benefiting from her involvement as guarantor.
[13] The sole motivation for the appellant's action was the desire to help her son, to make a sort of disinterested contribution to his greater well-being. After thinking things over and assessing the situation, she wanted to enable her son to build a future for himself. As a mother, she wished through this magnanimous act to help support an initiative of her son's, believing that he would be equal to the challenge.
[14] Having become a victim of her own generosity, the appellant realized that her contribution might have harmful effects on her own financial situation by jeopardizing the very source of some of her income, since she had had to mortgage a number of her properties when she provided the security.
[15] In order to keep and safeguard the source of that income, the appellant consolidated the debts relating to the properties she had provided as security, in order to render her obligations-considerably increased by the payments resulting under the security contract-more realistic and reasonable.
[16] The payments made under the security contract during the years at issue were not expenses that could be considered business investment losses.
[17] The appellant's financial assets were never linked with those of her son's business. In other words, regardless of the outcome of the son's venture, there were only two possibilities: either the son successfully met the challenge and the appellant had the satisfaction of having contributed to his success without, however, deriving any financial benefit or gain therefrom; or her son failed and she was simply obliged to repay the loan from the financial institution on his behalf.
[18] Unfortunately for the appellant, the second possibility materialized and, as a result, she was obliged to repay considerable amounts of money because of the guarantee she had provided. This fact does not suffice for her appeal to be allowed, since the payments made do not satisfy the conditions for being considered and treated as business investment losses.
[19] Therefore, the appeal is dismissed.
Signed at Ottawa, Canada, this 31st day of March 1998.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 10th day of June 2003.
Erich Klein, Revisor