Dallaire v. The Queen
(October 23, 2014 – 2014 TCC 306) was a decision dealing with the alleged unreported income of the appellant in 2007-2009 and an alleged capital gain arising in 2008:
 These are appeals filed by the appellant under the informal procedure from the reassessments dated March 12, 2012, made by the Minister of National Revenue (the Minister) under the Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.), as amended (the Act) for the 2007, 2008 and 2009 taxation years. These appeals were heard on common evidence with the appeals of Simon Pépin (Docket 2013 3319(IT)I).
 In making the reassessments dated March 12, 2012, the Minister made the following adjustments to the appellant’s income tax returns for the 2007, 2008 and 2009 taxation years:
|Taxable capital gain
|Change in net income
|Amount subject to penalty pursuant to section 163(2)
|Penalty imposed pursuant to 163(2)
Most of the outstanding issues were settled on consent:
 At the outset of the hearing, the parties filed a Partial Consent to Judgment dated July 8, 2014, the terms of which are as follows:
The parties consent to the Court rendering judgment, allowing in part the appeal from the assessments for the 2007, 2008 and 2009 taxation years with respect to the issue of unreported income and referring the matter back to the Minister of National Revenue for reconsideration and reassessment as follows:
1. For the 2007 taxation year, the total adjustments to the appellant’s income shall be (set at) $21,080 (decrease of $59,372).
2. No penalty under subsection 163(2) of the Income Tax Act shall be applied.
3. For the 2008 taxation year, the total adjustments to the appellant’s income (excluding any taxable capital gain) shall be set at $16,115 (decrease of $14,500).
4. No penalty under subsection 163(2) of the Income Tax Act shall be applied to the amount of $16,115.
5. For the 2009 taxation year, the total adjustments to the appellant’s income shall be set at $21,078 (decrease of $9,628).
6. The penalty under subsection 163(2) of the Income Tax Act shall be applied and calculated accordingly.
Ms. Dallaire testified that she had acquired a 50% interest in the property in question as a nominee for a friend, Simon St-Pierre:
 During her testimony, Sabrina Dallaire revealed that she had known Alexandre St‑Pierre for about ten years and that he was a friend. However, she was very vague about the circumstances of their initial encounters and frequency of their subsequent encounters. She stated that Alexandre St-Pierre asked her to purchase the immovable because he did not have the financial resources to purchase it himself. She also indicated that she did not owe Alexandre St-Pierre any money and that he was not a biker or a drug dealer.
 With respect to the acquisition, management and sale of the immovable, Sabrina Dallaire revealed that she did not visit the immovable prior to acquiring it, that she did not negotiate the hypothecary loan, that she did not sign the tenants’ leases and collect the rents, and that she did not take steps to sell the immovable. More specifically, she indicated that Alexandre St-Pierre collected the rents paid by cheque or in cash and that he gave her the cheques and cash so that she could deposit them in her bank account to make the payments on the hypothec. The net proceeds from the sale of the immovable were also deposited in her own bank account.
Ultimately the Tax Court accepted her evidence:
 I do not believe that a young waitress in a bar or restaurant, who was 21 years of age when the immovable was acquired, had the financial ability with her spouse, an autobody repairman in 2007, to qualify on their own for a hypothecary loan of $264,836.25, that is, 98% of the immovable’s purchase price and make monthly hypothecary payments of $1,664.42 when the amount of the gross monthly rents was only $2,145.00.
 In my view, someone else had to have intervened to negotiate the terms of the hypothec and guaranteed the repayment and that someone could very well be a person who received a portion of the net proceeds from the sale of the immovable. However, I need not decide this issue in the resolution of these appeals.
 For these reasons, the appeals are allowed.