Minister of National Revenue v. Chambers, (1996) 107 F.T.R. 70 (TD)

• Judge: Tremblay-Lamer, J.
• Court: Federal Court (Canada)
• Case Date: November 21, 1995
• Jurisdiction: Canada (Federal)
• Citations: (1996), 107 F.T.R. 70 (TD)

MNR v. Chambers (1996), 107 F.T.R. 70 (TD)

MLB headnote and full text

Her Majesty the Queen (plaintiff) v. John M. Chambers (defendant)

(T-1418-93)

Her Majesty the Queen (plaintiff) v. Kenneth J. Wilson (defendant)

(T-1420-93)

Her Majesty the Queen (plaintiff) v. Peter Foreman (defendant)

(T-1421-93)

Indexed As: Minister of National Revenue v. Chambers

Federal Court of Canada

Trial Division

Tremblay-Lamer, J.

January 15, 1996.

Summary:

Three taxpayers, in calculating and reporting their 1986 and 1987 income for tax purposes, included in income amounts of loans from their RRSPs as nonqualified investments and deducted the repayments as dispositions of nonqualified investments. The Minister claimed that the disbursements artificially reduced the taxpayers' income. The Minister reassessed the taxpayers. The taxpayers appealed. The Tax Court of Canada allowed their appeals. The Minister of National Revenue appealed.

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

Income Tax - Topic 9543

Tax evasion and tax avoidance - Artificial transactions - What constitutes an artificial transaction - In 1986 and 1987, a taxpayer borrowed money from his RRSP, giving promissory notes guaranteed by a bank for the amount of the loans, and repaid the promissory notes by the end of the taxation year - In calculating and reporting his 1986 and 1987 income for tax purposes, the taxpayer included in income the amounts of the loans from his RRSP as nonqualified investments and deducted the repayments of the promissory notes as dispositions of nonqualified investments - The Federal Court of Canada, Trial Division, allowed the deductions, where they were not outside the scope of the section permitting the scheme and did not artificially reduce income.

Cases Noticed:

Irving Oil Ltd. v. Minister of National Revenue (1991), 126 N.R. 47; 91 D.T.C. 5106 (F.C.A.), refd to. [para. 6].

Spur Oil Ltd. v. Minister of National Revenue (1981), 42 N.R. 131; 81 D.T.C. 5168 (F.C.A.), refd to. [para. 6].

Minister of National Revenue v. Fording Coal Ltd. (1995), 190 N.R. 186 (F.C.A.), refd to. [para. 12].

Alberta and Southern Gas Co. v. Minister of National Revenue (1977), 16 N.R. 220; 77 D.T.C. 5244 (F.C.A.), refd to. [para. 13].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536; 53 N.R. 241, refd to. [para. 24].

West End Investment Co. v. Commerce & Industry Insurance Co. et al., [1977] 2 S.C.R. 1036; 11 N.R. 541, refd to. [para. 27].

Industry Insurance Co. v. Commerce and West End Investment Co. - see West End Investment Co. v. Commerce & Industry Insurance Co. et al.

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 146(10) [para. 15]; sect. 245(1) [para. 8].

Authors and Works Noticed:

Black's Law Dictionary (5th Ed. 1979), p. 416 [para. 10].

Counsel:

Max Weder, for the plaintiff;

Kim Hansen, for the defendant.

Solicitors of Record:

George Thomson, Deputy Attorney General of Canada, Vancouver, British Columbia, for the plaintiff;

Thorsteinssons, Vancouver, British Columbia, for the defendant.

These appeals were heard on November 21, 1995, at Vancouver, British Columbia, before Tremblay-Lamer, J., of the Federal Court of Canada, Trial Division, who delivered the following decision on January 15, 1996.