Singleton v. Minister of National Revenue, (2001) 275 N.R. 133 (SCC)

• Judge: Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.
• Court: Supreme Court of Canada
• Case Date: March 19, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 275 N.R. 133 (SCC);2001 SCC 61;55 DTC 5533;[2002] 1 CTC 121;[2001] SCJ No 59 (QL);[2001] ACS no 59;108 ACWS (3d) 403;[2001] 2 SCR 1046;204 DLR (4th) 564;275 NR 133

Singleton v. MNR (2001), 275 N.R. 133 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2001] N.R. TBEd. SE.027

Her Majesty the Queen (appellant) v. John R. Singleton (respondent)

(27477; 2001 SCC 61)

Indexed As: Singleton v. Minister of National Revenue

Supreme Court of Canada

Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel, JJ.

September 28, 2001.

Summary:

Singleton was a partner in a law firm. He used $300,000 from his capital account at the firm to purchase a house and refinanced his law firm equity with money borrowed from a bank. He then deducted the interest payments made on the borrowed money pursuant to s. 20(1)(c)(i) of the Income Tax Act, claiming that the borrowed money now represented his investment in the law firm. The Minister of National Revenue denied the interest deduction on the ground that the borrowed money was used to purchase a house and was not a business investment. Singleton appealed.

The Tax Court of Canada, in a decision reported at [1996] 3 C.T.C. 2873; 96 D.T.C. 1850, dismissed the appeal. Singleton appealed.

The Federal Court of Appeal, Linden, J.A., dissenting, in a decision reported at 243 N.R. 110, allowed the appeal. The Minister appealed.

The Supreme Court of Canada, LeBel and Bastarache, JJ., dissenting, dismissed the appeal.

Income Tax - Topic 1129

Income from a business or property - Deductions - Requirement that expense be incurred for producing income - [See Income Tax - Topic 1130 ].

Income Tax - Topic 1130

Income from a business or property - Deductions - Expenses incurred in borrow­ing money - Singleton, a partner in a law firm, used $300,000 from his capital account at the firm to purchase a home and refinanced his law firm equity with money borrowed from a bank - The Supreme Court of Canada held that the borrowed money was used for the purpose of earning income from the law firm and that the interest paid on the borrowed money was there­fore deductible pursuant to s. 20(1)(c)(i) of the Income Tax Act - The issue to be determined was the direct use to which the borrowed funds were put and the court had to simply apply s. 20(1)(c)(i) rather than searching for the economic real­ities of the transaction - Singleton used the borrowed funds to refinance his capital account and that characterization of the use of the funds was not altered by the fact that Singleton used the money he withdrew from the firm to purchase a house - Nor was it altered by the fact that the transac­tions occurred on the same day - It was an error to treat this as one simultaneous transaction - In order to give effect to the legal relationships, the transactions had to be viewed independent­ly - Singleton did not have to demonstrate a bona fide pur­pose.

Cases Noticed:

Bronfman (Phyllis Barbara) Trust v. Min­ister of National Revenue, [1987] 1 S.C.R. 32; 71 N.R. 134; 87 D.T.C. 5059, refd to. [para. 16].

Continental Bank Leasing Corp. v. Minis­ter of National Revenue, [1998] 2 S.C.R. 298; 229 N.R. 58, refd to. [para. 17].

Minister of National Revenue v. Shell Canada Ltd., [1999] 3 S.C.R. 622; 247 N.R. 19, appld. [para. 24].

Trans-Prairie Pipelines Ltd. v. Minister of National Revenue (1970), 70 D.T.C. 6351 (Ex. Ct.), consd. [para. 36].

Ludco Enterprises Ltd. v. Minister of National Revenue (2001) 275 N.R. 90 (S.C.C.), refd to. [para. 40].

Tennant v. Minister of National Revenue, [1996] 1 S.C.R. 305; 192 N.R. 365, refd to. [para. 51].

Mark Resources Inc. v. Minister of Nation­al Revenue (1993), 93 D.T.C. 1004 (T.C.C.), refd to. [para. 51].

Backman v. Minister of National Revenue, [2001] S.C.R. 367; 266 N.R. 246, refd to. [para. 52].

Zwaig v. Minister of National Revenue, [1974] C.T.C. 2172; 74 D.T.C. 1121 (T.R.B.), refd to. [para. 56].

Stubart Investments Ltd. v. Minister of National Revenue, [1984] 1 S.C.R. 536, 53 N.R. 241; 84 D.T.C. 6305; [1984] C.T.C. 294, refd to. [para. 59].

Harris Steel Group Inc. v. Minister of National Revenue (1985), 57 N.R. 371; 85 D.T.C. 5140 (F.C.A.), refd to. [para. 59].

Golden et al. v. Minister of National Rev­enue, [1986] 1 S.C.R. 209; 65 N.R. 135; [1986] 3 W.W.R. 1; [1986] 1 C.T.C. 274; 25 D.L.R.(4th) 490; 86 D.T.C. 6138; 39 R.P.R. 297, refd to. [para. 60].

Symes v. Minister of National Revenue, [1993] 4 S.C.R. 695; 161 N.R. 243; 110 D.L.R.(4th) 470, refd to. [para. 60].

Quebéc (Communauté urbaine) v. Corpor­ation Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3; 171 N.R. 161; 63 Q.A.C. 161, refd to. [para. 60].

Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103; 186 N.R. 243, refd to. [para. 60].

Minister of National Revenue v. Alberta (Treasury Branches) et al., [1996] 1 S.C.R. 963; 196 N.R. 105; 184 A.R. 1; 122 W.A.C. 1, refd to. [para. 66].

Canada Safeway Ltd. v. Minister of Nat­ional Revenue, [1957] S.C.R. 717, refd to. [para. 73].

Sternthal v. The Queen (1974), 74 D.T.C. 6646 (F.C.T.D.), refd to. [para. 78].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 20(1)(c)(i) [para. 10].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Stat­utes (2nd Ed. 1983), p. 87 [para. 59].

Duff, D., Interpreting the Income Tax Act (1999), 47 Can. Tax J. 741, generally [para. 61].

Hogg, P.W., and Magee, J.E., The Prin­ciples of Canadian Income Tax Law, pp. 453, 454 [para. 65].

Counsel:

Donald G. Gibson and Deen C. Olsen, for the appellant;

John H. Saunders, for the respondent.

Solicitors of Record:

The Department of Justice, Ottawa, Ontario, for the appellant;

Davis & Company, Vancouver, British Columbia, for the respondent.

This appeal was heard on March 19, 2001, before Gonthier, Iacobucci, Major, Bastar­ache, Binnie, Arbour and LeBel, JJ., of the Supreme Court of Canada. The judgment of the Supreme Court was delivered in both official languages on September 28, 2001, including the following opinions:

Major, J. (Gonthier, Iacobucci, Binnie and Arbour, JJ., concurring) - see para­graphs 1 to 44;

LeBel, J., dissenting (Bastarache, J., concurring) - see paragraphs 45 to 88.