Bueti v. R. - TCC: Tax Court takes midpoint of two opposing valuations

Bueti v. R. - TCC:  Tax Court takes midpoint of two opposing valuations


Bueti v. The Queen (October 29, 2015 – 2015 TCC 265, Owen J.).

Précis:   Mrs. Bueti’s father died in 1999.  In 2000 she and her husband acquired his home from his estate.  In 2004 they gave the property to their son and daughter-in-law.  CRA reassessed the gift transaction lowering the adjusted cost base (ACB) and increasing the deemed proceeds of disposition.

The Tax Court agreed with CRA’s computation of the ACB but reduced the deemed proceeds of disposition by taking a median between the valuation evidence of the taxpayer’s expert valuator and that of the Crown.  No costs were awarded.

Decision:   The home at issue in this appeal had been the residence of Mrs. Bueti’s father, who died in 1999.  She was one of the beneficiaries of his estate and acquired the property in 2000 along with her husband.  (The will however did not leave the property to her directly;  she was given a 1/3 interest in the residue.)  In 2004 they gave the property to their son and his wife.  The issues were: 

(a) what was the ACB of the property in 2004;  and

 (b) what was the fair market value of the property in 2004;

for the purposes of the deemed disposition on the gift to the son and his wife.

Mrs. Bueti and her husband had reported an ACB of $150,000.  The Court did not accept that figure:

[59]        In light of the terms of the will in the present case, the rule in subsection 2(1) of the EAA and the foregoing case law, I have no difficulty concluding that, on the death of Domenico Papalia, the Property devolved upon and vested in Diego Papalia and Serafina Bueti in their capacity as trustees and executors of the Estate.[32] However, Serafina Bueti and the other beneficiaries identified in paragraph 3(b) of the will did not acquire the Property as a consequence of Domenico Papalia’s death. I therefore reject the Appellants’ argument that paragraph 70(5)(b) of the ITA deemed Mrs. Bueti to have a cost of the Property, as she did not, in her personal capacity, acquire the Property on the death of Domenico Papalia.

[74]        Accordingly, the only credible evidence of consideration having been paid for the Property is the $50,000 consideration identified on the Deed and the contemporaneous payment of $50,000 to Diego Papalia funded by the mortgage. I find that these are one and the same payment. Accordingly, the cost of the Property to the Appellants was $50,930, being the $50,000 identified on the Deed plus the expenses of $930 associated with the acquisition (i.e., the legal fees of $630, the land transfer tax of $250 and the registration fee of $50).

On the question of fair market value the Court essentially split the difference between the expert witnesses called by the parties:

[78]        Notwithstanding my concerns regarding Mrs. Bueti’s description of the house, I will accept that it may have been on the low side of average condition. Accordingly, I conclude that the value should be fixed at $236,500, which reflects what I consider to be the mid-point of the two valuations by the appraisers. Given the fact that neither appraiser had an opportunity to see the house and that the valuations as adjusted by me are quite close, I believe this is a fair conclusion in the circumstances.

As a result the appeals of Mr. and Mrs. Bueti were allowed, without costs, to reduce the value of the property from $260,000 to $236,500 but without any adjustment to the ACB of the property.