Dmytro Ruzesky v. Minister of National Revenue, [1961] CTC 257, 61 DTC 1131

DUMOULIN, J.:—This is, in name only, an appeal from a decision of the Tax Appeal Board, dated the 20th day of November 1958, dismissing Dmytro Ruzesky’s objections to a re-assessment by the Minister of National Revenue of his taxable income for fiscal years 1949 to 1954 inclusively.

There was filed before the Tax Appeal Board ‘‘an agreement signed by the appellant to withdraw his notices of objection for the years 1949 and 1951 to 1954, conditionally upon his income for the year 1953 being reduced by $827. 90’’, hence the perfunctory dismissal.

At trial, the appellant struck out paragraph 1 of the statement of facts and subparagraphs (a) and (b) of paragraph 2; the respondent, conversely indicating his consent to have the matter ‘‘decided on the merits’’, and that ‘‘. . . the eleven items under section 2(c) were properly before the Court” (c/. Respondent’s Summary of Arguments, page 1). .

In the course of the hearing, appellant also deleted items (V), (VI) and (XI) of his stated facts; the respondent conceding item (X), viz.: ‘‘That the actual cost of Fargo truck in September 28, 1953. was $2,613.50 and not $2,952.40 since $260.50 represents the finance.’

For the six taxation years hereafter reviewed, net worth statements were drawn up by respondent’ S assessors.

The items left for determination are listed in the Statement of Facts, or Notice of Appeal, as (I), (II), (III), (IV), (VII),

(VIII) and (IX).

I must, at the outset, say that this litigation could have been avoided, had Ruzesky reasonably co-operated with the local income tax officials, or even at the very least, correctly informed his own advisers, legal and financial.

The only way of probing this more or less involved matter is to review in separate groups the seven items mentioned above.

Item (1)

Dmytro Ruzesky, the appellant, for the period extending from 1922 up to the latter part of 1954, owned and exploited a farm at Borden, Saskatchewan. He now resides in the city of Saskatoon. In a conflicting testimony, Ruzesky relates he borrowed from his brother John, prior to December 31, 1954, ultimate date of the net worth statement, exhibit 5, a sum of $2,500, that he repaid in the fall of 1955. In substantiation, a written statement; exhibit 6, is adduced, dated at Vancouver, June 15, 1956, with the signature of John Ruzesky, since deceased, the first and only relevant paragraph of which reads:

“To District—Tax Office

Saskatoon,—Sask.

To whomever it may concern.

For the information of Tax-Office in Saskatoon, Sask. here by I declare that in year 1954, in Month of Feb. when my brother Dmytro Ruzesky was visiting me in City of Vancouver B.C. with his wife, He asked for a small loan of sum $2,000 which he needed cash on hand to buy some property in province of Sask. I have complied with his recquest, loaned to him above- mentioned sum of money.’

In cross-examination, Ruzesky’s recollections seemed rather blurred since he inclined to hold that he owed his brother no money at the close of 1954. Some confusion may have crept in the witness’s mind between the initial $2,500 loan and a much smaller one of $350, again obtained from John Ruzesky in 1954, evidenced by a solemn declaration, as per March 5, 1957 (exhibit

C) about which the appellant writes: ‘‘I think I paid it off by the end of 1954.”

Another source of difficulty next appears in exhibit B, a balance sheet dated May 12, 1956, prepared either in the office of Mr. Hawrish, appellant’s solicitor, or in the Income Tax premises, and labelled thus: “The following are the changes which I submit on behalf of my proposed Net Worth Statement. 7 Duly signed by Dmytro Ruzesky and made out in accordance with information vouchsafed by him, it contains, inter alia, this entry: ‘‘Private loans to (2. e., due to) John Ruzesky is $1300 not $300.”

Those tentative changes though requested in May, 1956, relate to exhibit 5, the departmental net worth statement for the period December 31, 1948, to December 31, 1954.

Now the statement of facts, in Section 2(c) (I), flatly ignores Ruzesky’s suggested correction on exhibit B, estimating at $1,300 his indebtedness to John, and bluntly asserts: ‘‘that there was a liability of $2,500 to John Ruzesky of Vancouver,

B. C., as of December 31, 1954.”

I incline to believe that appellant could have elucidated the approximate date on which the $2,500 debt was extinguished. He stated this advance of money, in February 1954, was intended to facilitate the purchase of a house in Victoria, B. C., a project that did not eventuate and possibly brought about an immediate reimbursement. At all events, the appellant shoulders the onus of disproving in law and fact the presumed correctness of the assessment, an obligation he completely failed to discharge. Consequently, the loan owing to John Ruzesky remains at the figure of $300 listed on page 5 of exhibit 5.

Item (IT)

This section of the notice of appeal, claiming there were no receivable notes totalling $1,900, as of December 31, 1954, was settled by the testimony of Mr. Latimer S. MacMillan, a departmental assessor, who remembered seeing a $900 note, payable to Dmytro Ruzesky within the material period, signed by Eddie and George Ruzesky, two of the appellant’s sons.

I was told in Court by respondent’s counsel, Mr. Hughes, Q.C., that a re-assessment on May 21, 1957, reduced this entry to $900 entailing a $1,000 rebate of the calculated net income set out in exhibit 5 at $42,861.42.

Items (III) and (IV)

The respondent, on page 3 of his summary of argument, submits both these items can be considered together, an opinion in which I readily concur.

It appears in the net worth memorandum (exhibit 5) that during 1949, appellant would have made to his son, Napoleon, a gift of land and farm buildings worth $4,565 and, in 1950 or thereabouts, another donation, valued at some $1,200 to his daughter, Sophie, since married.

Dmytro Ruzesky unabashedly spun a most contradictory tale with the expectation, one might presume, of affording these presents the unassessable rating of salaries. He claims that Sophie, now Mrs. Webb, attended to the daily chores on the paternal farm. Each year, in the fall, he allegedly put aside $200 in Sophie’s name for wages to be paid when she married, an event occurring in 1950. Napoleon Ruzesky is also supposed to have worked on the farm from 1947 to 1952 without any remuneration. On May 20, 1957, a $5,000 farm, purchased in the name of Napoleon Ruzesky, was paid for by his father, Dmytro, so the latter tells us. But that is far from ending the matter. In 1952, the appellant asserts he bought back this land from his son, allowing him $2,900 in lieu of wages. In cross- examination, Ruzesky cuts down to $1,600 instead of $2,900 the wages thus allotted. He must also agree that from 1949 onwards, Napoleon became a full time clerk in a local branch of the Nova Scotia Bank, and is at a loss to explain why he should have subsequently allotted to this boy $400 in yearly wages. Still, more is to come. Cited by the respondent, Donald M. Ackerman, an income tax assessor for the preceding twelve years, relates an interview, occurring at his office, April 26, 1957, between himself, the appellant and his daughter, Mrs. Sophie Webb, an intelligent young woman, pursues the witness, and perfectly conversant with English. At this conference, Ruzesky wished the land grants to his children to be considered payments for farming operations carried on by both of them, an interpretation strenuously opposed by Mrs. Webb “so as to leave undisturbed her husband’s Income Tax exemptions’’. The moot question of wages or gifts was discussed also in the Ukrainian language, continues Mr. Ackerman. Eventually, Dmytro Ruzesky yielded to Sophie’s insistence and consented to look upon the matter as outright donations. Ackerman’s suggestion to type an instrument relating the agreement was accepted.

The appellant and his daughter affixed their signatures to this document, now exhibit D, hereunder recited:

Statement

Of Dmytro Ruzesky, Farmer, Borden and Saskatoon

and

daughter Mrs. Sophie Webb, Housewife, Shaunavon.

Be it known that Dmytro Ruzesky purchased the SW 12-42-10 W3 in or about the year 1934 for approximately $900.00 and that additional breaking and brushing as well as fencing brought the cost of this land in total up to the sum of $1200.00. In 1950, shortly after her marriage daughter Sophie was given this quarter section of land outright as a gift without reservation, by her father Dmytro Ruzesky. The land was subsequently sold by Mrs. Sophie Webb in 1951.”

Mr. Latimer MacMillan, the other assessor, who is quite familiar with the Ukrainian vernacular, asserted Ruzesky definitely told him those real estate grants were made to Sophie as a wedding present and as a donation to Napoleon. It is hardly necessary to note that Walter Ruzesky’s corroboration of the wage version does not refute the overwhelming evidence to the contrary.

Items (III) and (IV) must stand in the exact amounts of respectively $4,565 and $1,200 and with the qualifications appearing in the net worth statement, exhibit 5.

Items (VII), (VIII), (IX)

These sections can be disposed of together; item (VIII), furthermore, having no material significance in the case.

To begin with, reference should be had to Mr. Robert J. Webb’s evidence for the respondent. A practising public accountant in Saskatoon, Mr. Webb’s professional services were retained by Dmytro Ruzesky at whose request he prepared exhibit E, a '■ net worth statement of appellant’s assets for the period December

31, 1941 to December 31, 1948. The list of properties, real and personal, and all information pertaining thereto, specifies the witness, were given him by his client aforesaid.

On page 2 of exhibit E, appellant’s accountant affixed, as of December 31, 1948, a $540 book value to a truck purchased in 1945 for $2,700, and also an $800 residuary value, on the same closing date, to a ‘combine” bought in 1945 for a price of $4,000.

Exception is now taken to this statement (exhibit E) by Ruzesky who contends (statement of facts), Section 2(c) (IX) that: ‘‘the truck listed on the net worth statement as purchased in 1945 for $2,700 was actually purchased on November 8, 1948, for $2,697.13, and the book value as of December 31, 1948, shall be $2,623 (as amended) and not $540.’’

A like challenge is directed against the ‘‘combine’’, which, allegedly, was bought on April 8, 1948, for $3,845.90 (cf. Section 2(c) (VII)), traded for a new one on October 30, 1950 for $3,100 (cf. Section 2(c) (VII)), with a book value of $1,113 on December 31, 1948, the closing day of exhibit E (J. R. Webb’s net worth statement), but also the opening one of exhibits 5 and 11, the two departmental net worth estimates.

In despite of the book value, $800, attributed to this combine, on December 31, 1948, by his own accountant (7.e., R. J. Webb in exhibit E), the notice of appeal lays claim to a book value of $3,269 on December 31, 1948, thereby considerably increasing the initial capital assets at the start of the official net worth statements.

The evidence submitted in support of such a change of front consisted in two sale slips, exhibits 7 and 9, respectively dated April 8 and November 8, 1948, relating the first to a “combine” priced at $3,845.90, the second to a Reo L.B.D. 114 ton truck the ‘‘full price” of which reads $2,697.13. Since then, the two firms concerned have discontinued business operations. Serious. doubts arising from the tardiveness of these submissions and the irreconcilable information previously proffered by appellant, were aired at page 6 of the respondent’s written argument in the following self-explanatory words:

‘When the suggested schedule of changes was submitted by the appellant to the Department of National Revenue no mention was made that there was anything wrong in the schedule of assets relating to the combine and the truck. Likewise when the Notices of Objection were filed nothing was mentioned to suggest that these two assets were not in existence.

Once these proceedings were launched in the Exchequer Court of Canada the appellant came forward with invoices to show that a combine was purchased in April, 1948, and that the truck in question was purchased in November, 1948. These documents were not produced to the assessors at any time prior to the appeal being launched in the Exchequer Court. The two companies from whom the alleged purchases were made in 1948 are no longer in business.’’

Intrinsically, this belated proof may after all suffice since it met with no rebuttal, but the lateness of its production is far from satisfactory, and albeit corresponding rectifications of exhibit o seem in order, no costs will be allowed the appellant.

Item (X)

As noted above, respondent conceded this claim. giving rise to a $338.90 rebate of the over-all income, the difference between $2,952.40 and $2,613.50.

The partial revisions allowed of the “calculated Net Income for years 1949 to 1954 inel.’’ figured at $42,861.42 in exhibit 5, may be summarized in the breakdown hereafter:

When subtracted from $42,861.42, the deductions above leave an assessable revenue of $36,970.50 for the material period in question.

Again, I feel convinced that the appellant has none but himself to blame if these rectifications necessitated such time and trouble; therefore, he will not be entitled to costs.

For the reasons outlined, this Court orders the appellant’s net calculated income of $42,861.42 be reduced to $36,970.50; directs the record of the case be returned to the Minister and a re-assessment made in keeping with the decisions herein.

Judgment accordingly.