Besse v. Canada
A-183-95
Rothstein J.A.
11/5/99
11 pp.
Appeal from trial judgment ((1995), 92 F.T.R. 225) disallowing deduction of appellant's share of expenses pursuant to Income Tax Act, s. 20(1)(e) in relation to multiple unit residential building (MURB) acquired by syndicate of which appellant member-S. 20(1)(e) permitting deduction of expense incurred in year (i) in course of issuing or selling interests in syndicate by syndicate, (ii) in course of borrowing money used by taxpayer for purpose of earning income from business or property, including commission, fee or other amount paid or payable for or on account of services rendered by person as salesman, agent or dealer in securities in course of issuing or selling units, interests or shares or borrowing money-Investors' agreement providing syndicate only formed if 100% of units offered subscribed for by December 18, 1979-On that date, 100% of units offered had been subscribed for, and syndicate formed-Expenses incurred on or after December 18, 1979 by syndicate deductible-Trial Judge holding expenses at issue not incurred by syndicate, but by manager of MURB; at time expenses incurred, no syndicate formed; appellant having no legal obligation to pay expenses-Appeal allowed-Syndicate group of persons agreeing to pool resources of money, specific assets for common purpose: Romano v. Minister of National Revenue (1966), 66 DTC 490 (T.A.B.)-Syndicate formed here-Expenses incurred in course of issuing, selling interests in syndicate by syndicate, including fees for borrowing of money deductible by members of syndicate-As syndicate not separate entity at law, any reference to expense incurred by syndicate meaning expense payable by members of syndicate in accordance with investors' agreement-Each investor initially liable in proportion to units held, although could become jointly, severally liable for obligations of MURB-Resolution of issues dependent upon interpretation of relevant documents-On basis of documentary evidence, sales commissions, expenses of offering incurred by syndicate, fees charged by management company for arranging mortgages, working capital commitment, prospectus preparation fee, deductible under s. 20(1)(e)-Even if pre-syndicate liabilities by management company incurred, not at issue-Income Tax Act, S.C. 1970-71-72, c. 63, s. 20(1)(e) (as am. by S.C. 1979, c. 5, s. 7).