http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/126737/index.do
Kuchta v. The Queen (November 19, 2015 – 2015 TCC 289, Graham J.).
Précis: The appellant’s spouse, Matthew Juba, died in 2007. Some time prior to his death he had designated the appellant as the sole beneficiary of his RRSPs and, as a result, she received roughly $305,000 after his death from the RRSPs. At the date of his death Mr. Juba owed roughly $55,000 in income tax for his 2006 taxation year. CRA assessed Ms. Kuchta pursuant to subsection 160(1) of the Income Tax Act (the “Act”) in respect of the transfer from the RRSPs.
There were two questions before the Court: (1) At what date should the relationship between the transferor and transferee be determined for the purposes of subsection 160(1)? and (2) Does the word “spouse” used in subsection 160(1) include a person who was, immediately before a tax debtor’s death, his or her spouse?
The Court concluded that the relationship must be determined at the date of the transfer in question. The Court went on to conclude that a textual, contextual and purposive interpretation of subsection 160(1) resulted in a finding that the word “spouse” included a person who was the tax debtor’s spouse immediately prior to his or her death.
As a result the appeal was dismissed with costs.
[In its decision the Court rejected a recent of the Tax Court in Kiperchuk v. The Queen, 2013 TCC 60. As a consequence this decision may make its way to the Federal Court of Appeal.]
Decision: In determining that the relationship for the purposes of subsection 160(1) of the Act had to be determined at the date of the transfer the Court relied upon the Kiperchuk decision (which, however, it ultimately rejected in the end result):
[17] In my view, subsection 160(1) is not silent as to when the relationship between a transferor and a transferee is to be determined. As Justice Lamarre stated:
There is nothing in the wording of that subsection that relates the relationship between the transferor and the transferee to any moment other than that of the transfer of the property (or a moment after the transfer in a case where the transferee has since become the transferor’s spouse). The subsection refers throughout to the act of transferring and the time of transfer, without specifying that other moments in time, previous to the transfer, could be contemplated for the purpose of its application to the transferee.
[18] Having determined that the relationship between Mr. Juba and Ms. Kuchta must be determined when the transfer occurred, I must now determine whether the word “spouse” in subsection 160(1) is broad enough to catch Ms. Kuchta.
[Footnote omitted]
The Court then went through an extremely detailed and complex textual, contextual and purposive interpretation of the Act and concluded that the word spouse in subsection 160(1) included a person who was the tax debtor’s spouse immediately prior to his or her death:
[75] In summary, there are two different meanings of the word “spouse”: one legal and one colloquial. A contextual analysis shows that Parliament has used both the legal and colloquial meanings in provisions of the Act involving transfers of property on death. This use of the both meanings demonstrates that there is textual ambiguity in the meaning of the word “spouse” in subsection 160(1). Given that ambiguity, it is appropriate to give weight to the purpose of the subsection. The purposive analysis points strongly in favour of an interpretation of “spouse” in subsection 160(1) that includes widows and widowers. Accordingly, I find that the word “spouse” in subsection 160(1) includes a person who was, immediately before the tax debtor’s death, his or her spouse.
As a result the appeal was dismissed with costs.
Comment: In light of the fact that this decision rejects another recent Tax Court decision in Kiperchuk v. The Queen, 2013 TCC 60 it would likely benefit from a review by the Federal Court of Appeal.