SURA v. MINISTER OF NATIONAL REVENUE 1
Jack R. Miller *
Taxes VIA – Husband and Wife IIC – Community of
property – Wife as co-owner – Husband having un-
restrained enjoyment of income – Husband’s income
for tax purposes –
Income Tax Act (Can.) Section 3
I – The Issues
Frank Sura was a taxpayer resident in the Province of Quebec
and married under its legal community of property matrimonial
regime. Income tax returns filed for each of the years 1947-1954
inclusive reported the income of the community, consisting of Sura’s
salary and rents from immoveables, as his personal income. Later,
the administration wished to review the original assessments for
reasons which do not concern us here. Sura took the opportunity to
raise an objection of his own to the assessments, namely that he and
his wife were entitled to file :separate returns for one-half of the
annual community income each, since under the Quebec Civil Code
husband and wife are co-proprietors of the community in equal shares.
The underlying assumption was that ownership of income is the
factor which attracts tax liability to a person under the Income Tax
Act’as well as under the Income War Tax Act. His objection was
taken before the Income Tax Appeal Board.
Aside from the fact that a basic proposition of Canadian income
tax law was under review, the importance of the case lies in the fact
that it was a test case: a great number of taxpayers could claim a
similar tax advantage were Sura successful. Still others would
wonder why a Quebec taxpayer, married under legal community of
property, should enjoy such a favoured position under the federal
Executive Editor of the McGill Law Journal, third year law student.
1 (1962) 32 D.L.R. 282 (English translation) or [1962) C.T.C. 1 (original
French judgment).
2 Hereinafter referred to as the Minister.
No. I
CASE AND COMMENT
tax legislation. Nonetheless, uniform treatment of taxpayers across
Canada was not a legal issue in this case, nor should it be the con-
sideration of any court in construing a taxing statute. In the event
that this problem arose, Parliament could easily amend the Income
Tax Act to deem the income of the community to be solely that of
the husband for tax purposes. Alternatively, the legislature could
extend such an advantage to the mass of taxpayers.
The issues before the Supreme Court were entirely questions of
law; the facts were not in dispute. It was common ground that the
salary and rents constituting the disputed income were assets of
the community under 1272 C.C., and that the community is neither
a legal person nor a person within s. 2(1) of the Income Tax Act.
Hence, community property could not belong to the community itself,
but ownership would have to vest in either the husband, wife, or in
both jointly in some proportion. The taxpayer was successful before
the Income Tax Appeal Board, but on appeal to the Exchequer Court
by the Minister, he lost. When the case reached the Supreme Court,
two basic questions had to be answered.
1. What relationship must exist between income and a taxpayer
so that tax may be validly assessed on that income in his hands under
the Income Tax Act?
2. During the existence of the community, what rights of owner-
ship obtain over the community property?
HI – The Legal Arguments
The appellant 3 tried to establish two propositions to the satisfac-
tion of the Supreme Court, that ownership of income is the only
quality which involves tax liability under the Income Tax Act, and
that the consorts are co-proprietors ‘of community prolperty during
the existence of the community under Quebec Jaw. Generally, support
for these propositions was derived from (i) Title Fourth of the
Quebec Civil Code, entitled Of marriage covenants and of the effect
of marriage upon the property of the consorts, (ii) French Commen-
tators of the Code Napoleon, (iii) relevant sections of the Income Tax
Act and (iv) decisions of the United States Supreme Court and of
the Tax Appeal Board allowing consorts married under community
of property matrimonial regimes to file joint or separate federal
income tax returns.
3 Hereinafter, where the designations, appellant and respondent, appear, they
will refer to Sura and the Minister respectively.
McGILL LAW JOURNAL
[Vol. 10
It was not disputed by Sura’s counsel that the husband has exten-
sive powers of administration. But, the right of ownership and the
power of administration must always be distinguished. There are
restrictions on the husband’s power of administration. For example,
he cannot give away the immoveable property or a universality of
the moveable property of the community without the wife’s consent,
except for the establishment of their common children (1292 C.C.).
While the husband has considerable powers of administration over
the wife’s personal patrimony by virtue of Art. 1298 of the Code,
no one would suggest that he owns this property. The respondent
replied to the argument by suggesting that absolute ownership may
be subject to some restriction without losing that quality. Further,
the wife has no control over the husband’s administration of the
community during its existence. For example, she has no right to
demand an accounting. Her controls involve the dissolution of the
community,4 e.g; an action for separation of property.
Certain provisions of the Code assume that the wife has a right
of ownership in- community property. For example, Art. 1293 C.C.
provides that neither consort can bequeath more than “his share”
of the community. One cannot bequeath what one does not own. There-
fore, the wife must own a share of the community property. Again,
under Art. 1338 C.C., the wife has a right to renounce the community,
which the appellant contends necessarily assumes she possesses an
acquired right in the community property which she could renounce
if so motivated. The respondent suggested that what she renounces
accrues to her at the time of the dissolution of the community.
An important platform of the appellant’s case concerns the
property of the community which is reserved to the entire adminis-
tration of the wife. This is provided for in the Code under Articles
1425a – 1425i by amendment in order to ameliorate the powers of the
wife over community property. Previously, such monies now des-
cribed as reserved property of the wife were under the husband’s
administration as any other revenue of the community. The law
thus transferred the powers of administration over this property
to the wife, although the right of ownership remained divisible bet-
ween the consorts. Consequently, each consort has his own area of
community property vhich he administers. Therefore it is illogical
to reason that because the husband has such extensive powers of
administration over part of the community property, he owns that
4 In the case of Guerin v. Giroux, [1943] C.S. 323, it was held that a wife cannot
take an action to annul an illegal alienation of community property by the
husband until the community has been dissolved.
No. 1
CASE AND COMMENT
property. The wife does not own the reserve property which is under
her entire administration. 5
The Codifiers considered the Coutume de Paris to be the sire of
the community of property regime in the Province of Quebec. Art.
225 of the Coutume and a comment thereon by Pothier have inspired
the doctrine of the husband as sole owner of. community property.
The Codifier-s:’
“Aussi, d’aprbs le syst~me que nous adoptons et qui est celui de la Coutume
de Paris, sauf quelques exceptions indiqu6es… 6
Art. 225, Coutume de Pais:
“Le mar est seigneur des meubles et conqu~tes immeubles par lui faits durant
et constant le mariage de lui et de sa femme, en telle mani~re qu’il les peut
vendre, aligner ou hypoth~quer, et en faire et disposer par donation ou autre
disposition entre vifs, A son plaisir et volont6 sans le consentement de sa dite
femme A personne capable et sans fraude”.
Pothier:
“Le droit de la femme se r~duit donc, tant que la communaut6 dure, A une
simple esp~rance de partager les biens qui se trouveront la composer lots de
sa dissolution; ce n’est que par cette dissolution que le droit de la femme est
ouvert, et qu’il devient un droit vdritable et effectif de propri6t6 pour moiti6
de tous les biens qui se trouvent alors Ia composer”.”
An attempt was made by the appellant to minimize the influence
of the old French law on the Quebec Civil Code in this respect.
Authors were quoted as saying that the designation, “maitre et
seigneur”, was an exageration used to emphasize the unusual admin-
istrative powers entrusted to the husband. Pothier refers to the com-
munity as a type of partnership, which the appellant seized upon as
a connotation of common ownership in the community property.
5 There are those who would argue that the reserved property is not part of
the community, but is owned by the wife. The source of this opinion, which seems
to be held by Faribault (Trait6 de Droit Civil du Quibec, Vol. X, p. 439, 447)
appears to be the second paragraph of article 1425f which allows the wife to
retain her reserved property, subject to the payment of certain debts, if she
renounces to the community at the time of dissolution. However, the articles
1425a – 1425i mention only powers of administration and allow the creditors
of the community to proceed against the wife’s reserved property for debts con-
tracted “in the interest of the household”. It is submitted that these articles
should be amended to clarify the situation for its bearing not only on income tax
matters but also on the wife’s right to compensation in the event a community
debt is paid from her reserved property. For the purposes of this comment, it
will be assumed the reserved property is part of the community, i.e. community
revenue under the administration of the wife.
6 Report of the Codifiers of the Civil Code of Lower Canada, Vol. IV-V, p. 200.
7 Bugnet, Oeuzres de Pothier, Vol. VII, p. 270.
McGILL LAW JOURNAL
[Vol. 10
“Le mariage, en formant une soci~t6 entre le mart et la femme, dont le mart
est le chef, donne au mar, en sa qualit6 qu’il a de chef de cette socidt6, un
droit de puissance sur la personne de la femme, qui s’6tend aussi sur ses
biens”.s
The appellant went a step further to suggest that the medieval
community of property regime has undergone such a face-lifting in
its evolution to its present state in Quebec law that it is a different
animal. Restrictions on the husband’s power are more extensive and
sophisticated than they ever were under the Coutume de Paris. Certain
similarities in choice of words between the Code Napoleon and the
Quebec Civil Code are too striking in contrast to the Coutume de
Paris to be regarded as mere coincidence. For example, both Codes
use the word “administre” to describe the nature of the husband’s
powers,9 where the Coutume speaks of the husband as “maitre et
seigneur de la communaut6”. Further, the second paragraph added
to 1292 C.C. by amendment is virtually identical to 1422 C.N., which
itself was later amended (1942)
to confine the husband’s powers
still further. 10
In spite of the dissident voice of Toullier and several others, the
overwhelming majority of commentators on the Napoleonic Code “1
support the appellant’s contention that the consorts are co-owners,
assuming the French authors are a relevant authority for the Quebec
Civil Code on matrimonial regimes. Josserand is a recent example.
“On a soutenu que le patrimoine de la communaut6 serait en r6alit6 le patri-
moine du mart, propri~taire exclusif des biens dits communs, sur lesqucls la
femme n’aurait aucun droit effectif, au moins pendant la duree du r~gime.
On a appuy6 cette conception 6trange sur les pouvoirs tr~s 6tendus qui appar-
tiennent au mart sur les biens communs, dont il peut disposer librement, sauf
certaines rserves en mati~re de donation, et qui se confondent, en fait, avec
8 b1id, p. 1. A possible explanation of why such extensive powers were given to
the husband under the medieval customary law is offered by Prof. Baudouin.
“L’dtat des moeurs dans l’Ancien Droit pouvait justifier que dans cette association
]a gestion de la communaut6 fut confide au mar et exclusivement concentr~e
ehtre ses mains. Les femmes A cette 6poque n’avaient gu~re l’exprience des
affaires, .et restaient peut-6tre plus heureusement pour elles, attach~es A lour
foyer ne participant pas A ]a vie 6conomique.” (Le Droit Civil do la Province do
Qudbec (1953) at p. 1022).
9 1421 C.N. and 1292 C.C.
10 1422 C.N. “Le mar ne peut, m~me pour l’6tablissement des enfants communs,
disposer entre vifs A titre gratuit des biens de Ia communautd sans le consente-
ment de sa femme.”
11 Huc, Commentaire Thiorique et Pratique du Code Civil (1896), Vol. IX, p.
176; Aubry et Rau, Droit Civil Franais (1949), Vol. VIII, p. 10; Baudry-Lacan-
tinerie, Traitd Theorique et Pratique de Droit Civil du Contrat de Mariage (1906),
Vol. I, p. 581-3. For more complete list, see: Gertrude Wasserman, The Wife
Common as to Property: Co-proprietor in the Community (1955) 15 R. du B. 430.
No. I
CASE AND COMMENT
ses propres biens; sur l’effacernent de la femme, qui ne participe point h
l’administration de la communaut6; et aussi sur la tradition: ne disait-on
pas autrefois, dans nos anciennes coutumes: Uzor non est proprie socia, sed
speratur fore. Mais cette th6se devient de plus en plus paradoxale A mesure
que se d6veloppent les droits de la femme et que se restreignent ceux du
mar: elle n’explique pas que la femme qui exerce une profession distincte
ait l’administration et la disposition de ses biens r~servds; ni que le mari
vole ses pouvoirs limitds par certaines dispositions (1422, 1437); elle est
condamn~e par le texte de
‘art. 1492, d’apris lequel la femme renongant
“perd toute espace de droits sur les biens do la communauti”: c’est donc
qu’elle en avait jusque 1h; on ne perd que ce que l’on poss~dait. II faut donc
admettre, avec tous les auteurs r6cents que les biens de la communaut6
appartiennent au marl et A ]a femme.” 12
Concluding the appellant’s arguments in civil law is the respected
authority of Mignault.
“La femme qui renonce perd touLe espbce de droit sur les biens de la commu-
naut6. Perd: car elle avait pendant le mariage des droits sur les biens de la
communaut6. Elle dtait co-propridtaire avec le mar, non pas sous la condi-
tion suspensive de son acceptation, mais sous la condition r~solutoire de sa
renonciation.” Is
The essence of the respondent’s submission was that income tax
is imposed by the Income Tax Act on the person who receives the
benefits of income, which does not necessarily entail ownership of
that income. In the Minister’s opinion, a definite distinction is to be
drawn between the ownership and the absolute enjoyment of income.
As long as the husband receives the full benefit of community income,
he is liable to pay tax on the total community income, whether he
owns the income or not.
The clearest enunciation of the principle applicable under the
Income Tax Act is to be found in a decision of the Exchequer Court
of Canada, Robertson v. M.N.R.,’4
involving an insurance agent’s
appeal from an assessment of some commissions in his hands. A
distinction was drawn between premiums which were not refundable
and advance premiums which might be repayable if the policies were
cancelled before the expiry of their term. Thorson, J. laid down the
following test which the respondent maintains is the basis of the
assessment of tax under the Income Tax Act.
“Did such amounts have, at the time of their receipt, or acquire, during the
year of their receipt, the quality of income, to use the phrase of Mr. Justice
Brandeis in Brown v. Helvering. In my judgment, the language used by him,
to which I have already referred, lays down an important test as to whether
an amount received by a taxpayer has the quality of income. Is his right to
22 Cours de Droit Civil Positif Franfais (1933), Vol. III, p. 9.
13 Droit Civil Canadien (1902), Vol. VI, p. 337.
14 [1944] C.T.C. 75. No pronouncement was made in this judgment whether
absolute enjoyment and ownership are synonymous.
McGILL LAW JOURNAL
(Vol. 10
it absolute and under no restriction, contractual or otherwise, as to its
disposition, use, or enjoyment?” 15
Applying this principle
to the husband under community of
property in Quebec, if he had the absolute disposition, use or enjoy-
ment of the community’s revenues at the time of their receipt, not-
withstanding a contingent liability to the wife to repay misused
funds at the dissolution of the community, he would be liable to pay
income tax on such amounts. The respondent suggested that this was
indeed the case as far as salaries and rents, which constituted the
income in dispute, were concerned. The appellant did not agree that
the Code permits this segregation of the community’s assets, since
all revenues melt into the pot losing their identity.
–
The appellant denied the existence of this distinction by submit-
ting that ownership is the only basic criterion of assessment under
the Income Tax Act, although there may be exceptional cases where
this criterion is not applied. While the Act does not contain an explicit
statement, the use of the words “of” and “his” indicate ownership.
“An income tax shall be paid as hereinafter required upon the
S. 2(1)
taxable income for each taxation year of every person resident in Canada
at any time in the year.”
S. 2(3) –
income for the year minus the deductions permitted by Division C.”
S. S –
“The income of a taxpayer for a taxation year for the purpose of
this Part is his income for the year from all sources inside or outside Canada
and, without restricting the generality of the foregoing, includes income for
the year from all (a) businesses, (b) property, and (c) offices and employ-
ment.” 16
It is an axiom of tax law that liability can only be imposed by
the strict wording of the statute, and not by speculation as to Par-
liament’s intention.
“The taxable income of a taxpayer for a taxation year in his
“If the person sought to be taxed comes within the letter of the law he must
be taxed, however great the hardship may appear to the judicial mind to be.
On the other hand, if the Crown, seeking to recover the tax cannot bring
the subject within the letter of the law, the subject is free, however appar-
ently within the spirit of the law the case might otherwise appear to be. In
other words, if there be admissable, in any statute, what is called an equitable
construction, certainly such a construction is not admissable in a taxing
statute, where you can simply adhere to the words of the statute.” 1 7
15 Ibi, p. 91.
10 Italics added.
17 Partington v. Attorney-General (1869-70) L.R., 4 H.L. 100 at 122. Beneficial
–
receipt too has its roots in the wording of the Income Tax Act, e.g., s.5(1)
“Income for a taxation year from an office or employment is the salary wages
and other remuneration, including gratuities, received by the taxpayer In the
year plus … “. The ambiguity of the meaning of income in the Income Tax Act
arises from the absence of any comprehensive definition in the Act.
No. I
CASE AND COMMENT
Finally, the appellant cited as a persuasive authority the decisions
of the United States Supreme Court allowing consorts married under
state community of property matrimonial regimes to file joint federal
income tax returns. 5 Also tendered for the Court’s consideration
was a decision of the Income Tax Appeal Board which granted an
appeal from an assessment of income in the hands of a taxpayer
domiciled in the State of California where he was married under
community of property on the ground that the income was only half
his, the other half belonging to his wife.19
III – The Ratio Decidendi of the Supreme Court
In an elaborate judgment,20 Mr. W. S. Fisher of the Income Tax
Appeal Board held Sura’s wife to have a vested one-half interest in
the community revenue during the regime’s existence. Hence Sura
was liable to tax only on what he owned, viz. one half of the com-
munity’s annual revenue. As Mr. Fisher put it:
“I could find nothing in the Canadian income tax legislation which, since I
am of the opinion that the wife under legal community of property has a
vested interest in one-half of the income of the community, would enable the
taxing authorities to impose a tax upon the husband in respect of the whole
of the income from the community property when he does not own all the
property, and, in my opinion, he is liable to tax in respect only of the income
which is his own, namely, one-half of the community property income.” 21
On appeal to the Exchequer Court,22 Fournier, J. reversed the
decision of the Board, upholding the assessment on the following
reasoning. During the existence of the community, the wife has
none of the rights which characterize ownership. Therefore, the
husband is sole owner. Pothier, Toullier, and the Coutume de Paris
are the principal authorities for this proposition.
Consequently, the learned judge interpreted the issue in pure civil
law terms, implicitly assuming ownership to be the basis of assess-
ment under the Income Tax Act, to which he makes no reference of
any significance in his opinion. He concludes by stating:
“Le revenue dont il est question dans ce d6bat est un actif de la communaut6
au sens de l’article 1272 du Code Civil et provient des salaires de l’intim6 et
de loyers d’immeubles. Ces revenus sont donc les revenus de l’intim6, le marl
6tant seul propriftaire de ‘actif de la communaut6.” 23
18 Bender v. Pfaff 282 U.S. 127 or 75 L. ed. 252; U.S.A. v. Malcolm 282 U.S.
792 or 75 L. ed. 714; Poe v. Seaborn 282 U.S. 101 or 75 L. ed. 239.
(1955) 13 Tax A.B.C. 379.
16 Reese V. M.N.R.
20 No. 445 v. M.N.R. (1957-58) 18 Tax A.B.C. 65. The case was heard in camera.
21 Ibid., p. 86. Note that Mr. Fisher assumed that the general principle upon
which tax is assessed under the Income Tax Act is ownership of the income taxed.
22 [1960] Ex.C.R. 83.
23 Ibid., p. 119.-
100
McGILL LAW JOURNAL
[Vol. 10
The ratio decidendi of the Supreme Court is that the husband
has the absolute enjoyment of all the community’s revenues and is
therefore liable to income tax thereon, notwithstanding the Quebec
Civil Code wherein the provincial legislature has enacted that the
husband owns only one-half of the community property, of which
the revenues are a part. Before assessing the implications of this
ratio, the process by which the Court arrived at this perplexing
decision is now outlined.
Speaking on behalf of the Court, whose members were unanimous
in concurring with his opinion, Taschereau, J. begins by indicating
the general approach under the Income Tax Act. The Act “looks”
at a person and determines what benefits he has received. It does not
commence with a piece of property and attempt to ascertain its
owner. This is what is meant by the income tax axiom that persons
not property are the subjects of income taxation.
“La loi… ne recherche pas le capital ou la propri6t6 d’un bien. Elle s’adresse
A la personne, et le montant de l’imp~t est d~termin6 par les b6n6fices qu’elle
recueille. Comme la femme n’en retire aucun, ddrivant des biens communs,
il s’ensuit que le fisc ne peut rien lui r&lamer.” 24
Note from the statement quoted that the wife is held to receive
no taxable benefits from the community revenues, even though she
is regarded as co-owner of community property during the duration
of the community. This is explained in two steps.
Taschereau, J. defines the issue: should some of the income of
the community be treated as her income for purposes under the
Income Tax Act. The first step is constituted by the holding that the
husband’s powers of administration over both community and per-
sonal property stem from “la volont6 du lgislateur”, not an implied
mandate emanating from the will of the wife. Consequently:
“I1 regoit pour lui, et nullement comme mandataire ou fiduciaire pour le
b~nfice de son 6pouse. Cette dernibre ne retire aucun revenu, et son b~n~fice
consiste dans I’augmentation des biens communs dont elle est propri6taire
et dans lesquels, elle a un droit 6ventuel du partage futur”.25
The learned judge pauses to recognize an exception to the general
rule, where the wife is allowed to receive the benefit of revenues
which for some purposes belong to the community. The reference
is to the wife’s rights over her reserve property, an example of the
24 [1962] C.T.C. 1 at 8-9.
25 Ibid., 6. i.e. the husband receives the community revenue in his own right,
and not as agent for the wife. The Court thus regards any amount given to the
wife as an application, and not an alienation, of income by the husband for which
he remains liable to tax.
No. 1
CASE AND COMMENT
exception proving the rule. Presumably, it follows that the wife would
be liable to income tax on her reserve property, even though the
community might receive the benefit of some of its revenues. Sura’s
wife had no reserve property nor personal property, so this possible
complication was not present.
The second step is formed by the distinction drawn between
holding a right and exercising that right. While the law may
permit a person
to possess a right, it may forbid its exercise
until the happening of a certain future event. It was held that the
wife cannot exercise her right of ownership until the dissolution
of the community, which means she has no control over the disposi-
tion of community revenues. Consequently, they cannot be said to
be in part her income for tax purposes. The husband alone receives
the benefit of community revenues.
“Tous les revenus sont les siens dont il peut disposer, qu’il peut aligner, mame
A titre gratuit, sauf les restrictions impos~es par la loi. I1 r~sulte que la
femme ne touche aucun revenu des biens communs, qu’elle n’a “aucun trai-
tement, salaire, ou r~mun~ration”, que rien ne lui “provient d’entreprises
de biens, de charges ou d’emplois”. Or c’est prcis~ment ce qui est taxable.” 26
Mr. Justice Taschereau consolidates the explanation by suggesting
that to tax the wife would be to impute to her an annual personal
gain, which does not accrue to her. She does not receive a taxable
benefit from the community. It is inferred in the judgment that
the tax consequences might be different under conventional commu-
nity, presumably if there was a provision conferring annual benefits
upon the wife. Such benefits as the wife may receive pursuant to
the obligations arising out of marriage are not taxable in the hands
of the wife according to this decision.
At the end of his opinion, Taschereau, J. removes a few loose
threads. The holding of Fournier, J. in the Exchequer Court is
explicitly rejected in so far as he states the husband alone to be
sole owner of community property. Secondly, the American juris-
prudence is rejected as an authority on the basis of differences in the
comparative civil law systems. It is submitted that the only relevant
difference would be if the foreign community of property
laws
provided for the wife to receive taxable benefits, which the Quebec
civil law does not allow. In any case, American jurisprudence is
never binding on Canadian courts.
26 Ibid., 8. Italics added.
McGILL LAW JOURNAL
[Vol. 10
IV – The Perspectives
What principle of income tax law are we to derive from this case?
Has the Supreme Court in effect equated absolute enjoyment of
income and ownership? If a distinction has been drawn, is it mean-
ingful? Has the Supreme Court ignored the law of Quebec and relied
upon a common sense approach to determine who shall be taxed on
a given income? What are the consequences of the reasoning which
underlies the ratio?
After agreeing with the appellant that the consorts own the com-
munity property in equal shares, which includes the community’s
revenues, the Supreme Court held that no tax consequences flow
from rights of ownership. Instead, persons are taxed on income when
their right to that income is “absolute and under no restriction,
contractual or otherwise, as to its disposition, use or enjoyment”.
Thus a distinction is made.
As a distinction between two rights in rent, it is meaningless
since the concepts are synonymous. Compare the definition of absolute
enjoyment given above and the definition of ownership given in
Article 406 C.C. As a distinction between a right in ren and a legal
capacity to act, it is meaningful but leads to anomalous results in
the context of income tax law. If we take the Supreme Court to intend
this distinction, we arrive at the conclusion that the administrator
of the property of an incapable is personally liable for income tax
on the revenues of that property. While the administrator has the
obligation to file income tax returns and to pay the assessed tax on
behalf of the incapable, it does not follow that the income is his.
Therefore, it is submitted that for the purpose of the Income Tax
Act ownership and the absolute enjoyment of income are synonymous.
The distinction appears to have been employed to avoid drawing the
obvious conclusions from the. Court’s holding that the consorts each
own one-half of community property. This would have led to the
result that the husband would be liable for income tax on one-half
of the wife’s reserved property, which violates a common sense
approach. This was the dilemma of the Supreme Court: to find a
consistent criterion which would allow a taxation of all community
revenues in accordance with common sense principles.
The solution was to assimilate extensive powers of administra-
tion over community revenues to a right to those revenues which is
“absolute and under no restriction, contractual or otherwise, as to
its disposition, use, or enjoyment”, and hence, it is submitted, to a
right of ownership. The Supreme Court has said in effect that because
No. 1
CASE AND COMMENT
the wife is unable to exercise her right of co-ownership, she loses it
in so far as community revenues are concerned. For tax purposes,
the income under the administration of the husband is his income,
although under the Civil Code he only has a one-half undivided
interest therein. Thus, by adopting this assimilation, the Supreme
Court was able to find the husband liable for income tax on com-
munity revenues, over which he had the administration. Similarly,
had Sura’s wife received reserved property, the Court would have
been able to hold her liable for tax on community revenues under
her administration, i.e. treat her as if she were the owner of those
revenues. Both these statements conform to what is currently under-
stood to be departmental practice. However, it has also been depart-
mental practice to tax the wife on the revenues from her personal
property. In the light of the Sura case, this would no longer be
possible since they are community revenues under the administration
of the husband. Whether the community’s revenues come from the
husband’s earnings or the wife’s personal property, the husband’s
powers of administration are identical.
While there are exceptions, it is submitted that the basic prin-
ciple under the Income Tax Act is that income tax is a personal debt
of the person who owns the income which is being taxed. Influenced
by the departmental practice to tax the person whose revenue it is as
a matter of fact, thus ignoring the Quebec Civil Code, the Supreme
Court attempted to find a rationale which would sanction this practice
in law. However, it is respectfully submitted that the rationale used
is based on a fiction of law, namely that the power of administration
over community revenues is synonymous to ownership. This has the
anomalous result that the rights of ownership of the consorts over
community property, of which the revenues are a part, assume a
schizophrenic character: under the Civil Code, the husband owns
one-half of the broad range of community revenues, irregardless of
the allocation of administrative functions by the Code between the
consorts; for the purposes of federal tax law, each consort owns the
community revenus which he is charged with administering. In other
words, the federal law provides for a different scheme of ownership
of community property than does the Quebec Civil Code. Because
of the peculiar nature of the community of property matrimonial
regime in Quebec, it is suggested that the problem requires special
legislative attention in the Income Tax Act to provide that, in this
instance only, income tax would be a personal debt of the adminis-
trator and not the owner. This would still have the result of taxing
in the husband’s hands revenues from the wife’s personal property.
Perhaps the Quebec Legislature might consider placing these rev-
104
McGILL LAW JOURNAL
[Vol. 10
enues under the wife’s administration, as it did in the case of
reserved property.
In summary, the Supreme Court realized at the outset that to
tax the consorts on the basis of their rights of ownership in the
community property would be unrealistic because the wife would
be called upon to pay tax on monies over which she had little control
in fact. However, their attempted rationalization of departmental
practice has led to legal fictions and anomalies. It is therefore res-
pectfully suggested that the Income Tax Act be amended to deal
with this peculiar problem, thus maintaining the integrity of the
Act as a whole.
