http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/181415/index.do
McKay v. The Queen (October 17, 2016 – 2016 TCC 233, D’Arcy J.).
Précis: The appellant was assessed pursuant to subsection 160(1) of the Income Tax Act with respect to the transfer of a 2008 Cadillac Escalade to her by Mr. Henry Wetelainen. The sole question before the Court was whether the taxpayer and Mr. Wetelainen were in a common law relationship that would be subject to the provisions of subsection 160(1). After a lengthy review of the facts and the law the Court concluded that they were in a common law relationship and dismissed the taxpayer’s appeal with costs to CRA.
Decision: This case boiled down to a simple question of fact:
[50] The Appellant testified that she does not know why the change was made on the insurance certificate issued in 2011; she claimed that she did not provide instructions to do so to the insurance company. I do not accept the Appellant’s testimony on this point. She was the named insured on the certificate of insurance. The insurance company would have to have received instructions from the Appellant before making the change in marital status on the certificate of insurance.
[51] On the above evidence, I have concluded that at some point in time prior to August 2011 the Appellant and Mr. Wetelainen were living in a common-law relationship.
[52] In addition, it is my view that, regardless of whether the Appellant and Mr. Wetelainen were living in a common-law relationship, they were not, as a question of fact, dealing at arm’s length at the time the Cadillac Escalade was transferred by Mr. Wetelainen to the Appellant.
[53] I do not accept Mr. Wetelainen’s testimony that he gave the Cadillac Escalade to the Appellant as a gift for all she had gone through during the audit of the Association. The Appellant testified that she was well compensated for her work at the Association, earning $60,000 to $100,000 per year. In my view, based upon the evidence before me, Mr. Wetelainen transferred title to the Cadillac Escalade in order to avoid the collection efforts of the CRA.
[54] As I have just discussed, Mr. Wetelainen and the Appellant had a close personal relationship. Sometime prior to the summer of 2008, Mr. Wetelainen had lost his only vehicle, a Cadillac Escalade, as a result of its repossession by the bank. He clearly required a vehicle to carry out his duties as president of Bending Lake Corp. and Iron Group Ltd. The mine was located over two and half hours from the corporations’ offices in Thunder Bay. Faced with a tax debt of over $900,000, he had to find a way to obtain a vehicle without it being subject to CRA collection actions.
[55] In my view, based on the evidence before me, he and the Appellant accomplished this goal by carrying out the transactions that resulted in funds flowing from Bending Lake Corp. to the car dealership and title to the new Cadillac Escalade ending up with the Appellant. The Appellant then added Mr. Wetelainen as a driver on her insurance policy, thus allowing him to use the vehicle on a regular basis.
[56] In my view, Mr. Wetelainen was the controlling mind behind all of these transactions. He and, at his direction, the Appellant carried out the transactions in an attempt to remove an asset that Mr. Wetelainen intended to use on a regular basis, the Cadillac Escalade, from the collection efforts of the CRA. This is the very evil that subsection 160(1) is intended to prevent from occurring.
As a result the Court dismissed the taxpayer’s appeal with costs to CRA.