Date: 20010330
Docket: A-687-99
Neutral citation: 2001 FCA 99
CORAM: ROTHSTEIN J.A.
MALONE J.A.
BETWEEN:
ARNOLD MURRAY NUSSEY and
GEORGE ALFRED NUSSEY, Executors of the
Estate of the Late Arnold William Nussey
Appellants
- and
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on Friday, March 30, 2001.
Judgment delivered from the Bench on Friday, March 30, 2001.
REASONS FOR JUDGMENT OF THE COURT BY: EVANS J.A.
Date: 20010330
Docket: A-687-99
Neutral citation: 2001 FCA 99
CORAM: ROTHSTEIN J.A.
EVANS J.A.
MALONE J.A.
BETWEEN:
ARNOLD MURRAY NUSSEY and
GEORGE ALFRED NUSSEY, Executors of the
Estate of the Late Arnold William Nussey
Appellants
- and
HER MAJESTY THE QUEEN
Respondent
(Delivered from the Bench at Toronto, Ontario
on Friday, March 30, 2001)
[1] On March , 1, 1991, two sons of the late A.W. Nussey transferred to him shares in a family owned business. The purpose of the transaction was to enable the sons to crystallise their capital gains and to take advantage of certain capital gains exemptions then applicable, without unduly disadvantageous tax consequences for their father.
[2] The shareholders' agreement provided that, on the death of a shareholder, his shares were deemed to have been redeemed by the company on the day preceding the shareholder's death. A.W. Nussey died on April 1, 1991. No redemption of the shares transferred to A.W. Nussey had in fact occurred during his lifetime.
[3] The executors of A.W. Nussey's estate invoked the redemption provision in order to remove the shares from the reach of subsection 70(5) of the Income Tax Act, which provides that a deceased taxpayer is deemed to have disposed of all of his assets at fair market value immediately prior to his death.
[4] Despite counsel's able argument, we are not persuaded that the Tax Court Judge erred when he held that, for tax purposes, the deemed redemption provision in the agreement did not effect a retroactive disposition of the shares the day before A.W. Nussey's death. By its terms, the agreement could only operate once the taxpayer had died, by which time subsection 70(5) of the Act would have applied.
[5] Nor are we persuaded that the contract underlying the transfer of the shares to A.W Nussey was void for mistake because it did not have one of its intended tax consequences. The mistake of law concerning the tax consequences of the redemption provision in the shareholders' agreement was not such as to a render the contract, and hence the transfer, null and void from the beginning.
[6] For these reasons the appeal will be dismissed with costs.
"John M. Evans"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-687-99
STYLE OF CAUSE: ARNOLD MURRAY NUSSEY and GEORGE
ALFRED NUSSEY, Executors of the Estate of the
Late Arnold William Nussey -and- HER MAJESTY
THE QUEEN
PLACE OF HEARING: Toronto
DATE OF HEARING: March 30, 2001
REASONS FOR JUDGMENT
OF THE COURT Rothstein, Evans and Malone, JJ.A.
RENDERED FROM
THE BENCH BY: Evans, J.A.
APPEARANCES:
Mr. David McNevin FOR THE APPELLANT
Mr. Ernest Wheeler FOR THE RESPONDENT
SOLICITORS OF RECORD:
Wilson, Walker, Hochberg, Slopen FOR THE APPELLANT
Windsor, Ontario
Morris Rosenberg, Ottawa FOR THE RESPONDENT