Holizki v. Canada
T-2296-89
Rothstein J.
7/9/95
14 pp.
Action to set aside Minister's reassessment with respect to plaintiff's 1985, 1986 and 1987 taxation years-Case involving attribution rules of Income Tax Act intended to prevent taxpayer from splitting income or capital gains among family members and reducing total amount of tax otherwise payable-In 1985, 1986 and 1987, taxpayer's wife disposed of portion of shares in family corporation-Minister, by way of reassessment, attributed capital gain on disposition of wife's shares to plaintiff-Whether taxpayer and wife intended, in common, from commencement of electrical contracting business in 1973, for taxpayer to hold one half property of business in trust for wife-If so, subsequent legal transfers of shares not transfers of property within meaning of Act, s. 74(2) as wife always beneficial owner of shares and attribution rules not applicable-Resulting trust concerned with intention-Taxpayer's electrical contracting business incorporated in 1975-Taxpayer acquiring 99 shares of company, wife one share-Share split done by accountant-In 1978, redivision of shares in which taxpayer transferred 49 shares to wife so that each would hold 50 shares-In 1980, Holizki Electric Ltd. going into oil business-Holizki Holdings Ltd. incorporated in 1983-Taxpayer and wife each sold shares in Holizki Electric Ltd. to Holizki Holdings Ltd. for $775,000-Wife sold portion of shares in Holizki Holdings Ltd. in 1985, 1986 and 1987-Minister's reassessment attributing capital gain realized on disposition of wife's shares to taxpayer-Common intention for taxpayer to hold portion of property of business in trust for wife-At least in 1978 taxpayer and wife intended 50-50 sharing of property of business-Existence of resulting trust not impossible or unreasonable herein-Evidence consistent with resulting trust existing from commencement of sole proprietorship in 1973 whereby taxpayer held fifty percent of business for wife-No transfer of property within operation of Act, s. 74(2)-No attribution of taxable capital gains to taxpayer-Action allowed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 74(2) (as repealed by S.C. 1986, c. 6, s. 37(1)).