Millward v. Minister of National Revenue, (1986) 7 F.T.R. 45 (TD)

• Court: Federal Court (Canada)
• Case Date: January 20, 1986
• Jurisdiction: Canada (Federal)
• Citations: (1986), 7 F.T.R. 45 (TD)

Millward v. MNR (1986), 7 F.T.R. 45 (TD)

MLB headnote and full text

Millward v. Minister of National Revenue

(No. T-37-84)

Indexed As: Millward v. Minister of National Revenue

Federal Court of Canada

Trial Division

Jerome, A.C.J.

October 24, 1986.

Summary:

The Minister reassessed a taxpayer's 1975 income, including as taxable income $10,800.00 that was invested in a registered retirement savings plan (R.R.S.P.), which acquired an alleged non-qualified investment (mortgage). The Tax Court of Canada dismissed the taxpayer's appeal. The taxpayer again appealed.

The Federal Court of Canada, Trial Division, dismissed the appeal.

Income Tax - Topic 3444

Computation of income - Non-arm's length transactions - "Arm's length" - What constitutes - Section 146(10) of the Income Tax Act provided that where an R.R.S.P. acquired a non-qualified investment, the cost of the investment was to be included in income - Section 4900(1)(g) of the Income Tax Regulations made a mortgage a qualified investment where, inter alia, the mortgagor and mortgagee dealt at arm's length - Two law firm partners each loaned the other $10,800.00 out of their respective R.R.S.P.'s - The loans were secured by mortgages at interest rates well below the market rates - One partner dictated the terms of the agreement on behalf of both - The other partner had complete faith in him - The Federal Court of Canada, Trial Division, held that the transaction was not at arm's length, there fore the mortgage was not a qualified investment and s. 146(10) applied to include the $10,800.00 in income.

Cases Noticed:

M.N.R. v. Sheldon's Engineering, Ltd., 55 D.T.C. 110 (S.C.C.), refd to. [para. 9].

Tremblay et al., Re, 36 C.B.R. 110 (Que. S.C.), refd to. [para. 9].

Stubart Investments Limited v. Minister of National Revenue (1984), 53 N.R. 241; 84 D.T.C. 6305 (S.C.C.), refd to. [para. 10].

Swiss Bank Corp. et al. v. M.N.R., 71 D.T.C. 5235, affd. 72 D.T.C. 6470 (S.C.C.), refd to. [para. 13].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 146(10) [para. 8].

Income Tax Regulations, sect. 4900(1)(g) [para. 8].

Counsel:

George F. Jones, for the plaintiff;

Luther P. Chambers, Q.C., for the defendant.

Solicitors of Record:

Jones, Emery & Macdonald, Victoria, B.C., for the plaintiff;

Frank Iacobucci, Q.C., Deputy Attorney General of Canada, for the defendant.

This appeal was heard on January 20, 1986, at Victoria, B.C., before Jerome, A.C.J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on October 24, 1986.