The Queen v. Demco Management Ltd., 85 DTC 5603, [1986] 1 CTC 92 (FCA)

The Chief Justice (Mahoney, J. concurring):—In April 1975 the respondent sold the Aberdeen Hospital at Victoria, B.C. to the provincial government for $1,125,000. This amount was allocated by the agreement as follows:

In assessing the respondent's tax for the year 1976 the Minister accepted this allocation. He conceded at trial that the value of the hospital as a going concern was $1,100,000 as of Valuation Day, December 31, 1971. What he did not accept was that the value of the tangible assets of the hospital was $1,100,000 on December 31, 1971. In assessing the respondent he assumed those assets to have been worth $712,500 (later revised to $756,000) and that there had been a capital gain of $400,000 (less $14,152.41 for expenses), realized from the disposition of the hospital. Implicit in this is a further assumption that the hospital property as a whole on December 31, 1971 included goodwill and other intangible assets worth some $344,000. As I see it, whether that assumption is sound is the central issue in the case.

In the course of his reasons the learned trial judge said:

I accept the evidence of Marquardt that the Aberdeen operation was a good and efficient one; that the continuance of the licence on any change of ownership to a reputable buyer was almost a matter of course; the licence had little or no monetary value. I accept, also, the evidence of Marquardt and de Macedo that in their negotiations in 1972, they assigned little or no value to intangibles.

Marquardt was a person who in 1972 had offered the respondent $1,100,000 for essentially the same hospital property. A sale was close but was not completed because at that point the government changed and the purchaser became uneasy as to what the policies of the new government regarding private hospitals might be. Later in his reasons the learned trial judge said:

If an allocation were necessary, it seems to me the allocation suggested by the defendant is supported by the evidence. There is no difference between the package which existed in 1971, and that which was sold in 1975. In the arm's length transaction of 1975, the parties to the sale made an allocation of the purchase price as follows: . . .

Land	$ 662,500
Buildings and other improvements	$ 450,000
Personal property including furniture, furnishings, dishes,
linen, utensils, and similar equipment	$	12,500
	$1,125,000
Both parties, obviously, attached no value to so-called intangibles.

The evidence, earlier referred to, of de Macedo and Marquardt, supports that position. There was no real value in intangibles at either of the relevant dates. The land, improvements, and the remaining tangible assets, were all inter-related. They produced a gross overall value.

The finding of the learned trial judge that there was no real value in intangibles at either of the relevant dates is supported by the evidence. The evidence is that of the owner of the respondent company and the person who had been prepared to buy the property. The conclusion is obvious that these two witnesses regarded the combination of tangible assets of the hsopital as worth more than estimated by the several appraisers. It is not surprising that the evidence of such persons should be preferred to that of appraisers who did not value intangibles but arrived at a value for them by deducting their estimates, made some seven to eight years after the sale and some 11 to 12 years after Valuation Day, of the value of tangible assets from an estimated value of the whole. Supported as it is by the evidence, the finding of the learned trial judge, in my opinion, must stand.

Once that position is accepted the question whether for the purpose of computing capital gains separate Valuation Day values must be established for non-depreciable, depreciable and eligible capital properties comprised in a business entity by allocating an overall value among them appears to me on the facts of this case to be irrelevant and academic.

I would dismiss the appeal with costs.

Mahoney, J.:—The first issue is whether the Income Tax Act requires an allocation of the V-Day, December 31, 1971, value of a going concern, subsequently sold, as between goodwill and other assets comprised in it. We are not here concerned with the necessity of an allocation of the selling price as among depreciable and non-depreciable property or as among different classes of depreciable property. The second issue, to be answered if an allocation of V-Day value is required, is whether the learned trial judge was right to conclude on the evidence that, in any event, the allocation was the same on V-Day as on the date of disposition.

During the first half of 1972, the respondent negotiated, at arm's length, the sale of a private hospital, as a going concern, for approximately $1.1 million. In July, 1972, the purchaser backed out of the deal because of his concern for the policy the incoming provincial government might have as to private hospitals. On June 1, 1975, the respondent sold the hospital, as a going concern, to the provincial government for $1.125 million. Expenses of the sale were $14,152.41. In reporting his income, the respondent reported a V-Day value of $1.125 million and a capital loss of $14,152.41. The Minister accepted the respondent's allocation of the selling price: land $662,500, buildings, improvements and equipment $462,500. The Minister determined that land values had increased significantly between V-Day and the date of disposition.

In reassessing, the Minister assumed that, since the buildings and equipment had been worth about the same when sold as on V-Day, and since the value of the land had demonstrably increased in the interval, and since the value of the total package had not changed significantly, the value of the goodwill of the business must have fallen to nil by roughly the amount that the land’s value had risen. The gain on disposition of the land was taxable; the loss on disposition of the goodwill could not be claimed for tax purposes.

The effect of the reassessment was to segregate the disposition of the land from that of the going concern and to tax the gain on the land's disposition. The appellant says the Income Tax Act requires that. In so arguing, it relies on sections 13(1); 13(21)(b), (c), (d) and (f); 14(1) and (2); 39(1)(a) and (b); 53(1)(h) and 54(a) and (b) of the Income Tax Act and sections 20(1); 21(1); 26(1) and (3) and 26(12)(b) and (d) of the Income Tax Application Rules.

It is not necessary to recite those provisions; it is enough to recognize that they do provide differently for the tax treatment of gains and losses on the disposition of depreciable property, non-depreciable property and eligible capital property, the latter being a term that embraces goodwill. None, however, expressly requires that the acquisition and disposition values of a going concern be allocated among those categories. The question, then, is: does the fact that the Income Tax Act provides for different treatment of different categories of property comprised in a going concern lead to the conclusion that such an allocation is required by necessary inference? In my view, it does not.

A capital gain or loss is realized or incurred when a capital property is disposed of by a taxpayer. The amount of the gain or loss may or may not be taken into account in determining the taxpayer's taxable income. V-Day value is an amount required to be determined when the capital property disposed of was owned by the taxpayer at the inception of the legislative regime that brought capital gains and losses into the taxable income calculation. It is required exclusively for the determination of the quantum of the gain or loss; it has no relevance to the questions whether or how a gain or loss is to be treated for tax purposes.

Putting it somewhat tritely, a going concern is more than the sum of its parts. It is a distinct entity, not just an aggregate of individual elements. Just as an invention is found in a useful combination of well-known components, so a going concern is to be found in a useful combination of ele- ments, some tangible, some not; some capital in character, some not. A wagon is not merely a box, four wheels, two axles, a tongue and assorted nuts, bolts and washers; it is wagon: a distinct physical entity different from its parts. Likewise, the private hospital in this case was not, on V-Day or in 1975, just a parcel of land plus a building plus equipment plus consumable inventories plus a licence to operate plus reputation plus experienced management and staff, etc.; it was an operating business entity: a going concern, a tangible capital property different from its constituent parts.

The V-Day value required to be determined is the V-Day value of the Capital property disposed of. The sale of a going concern is a commonplace commercial event. There was ample evidence upon which the learned trial judge could conclude, as he did, that the property sold was the going concern. Having reached that conclusion of fact, he rightly decided that the V-Day value to be determined was that of the going concern as an entity, not a list of the V-Day values of components segregated according to the various treatment afforded the disposition of each by the Act.

That is enough to dispose of the appeal but I should also say that, in my opinion, the learned trial judge had ample evidence upon which to base his conclusion that:

There was no real value in intangibles at either of the relevant dates. The land, improvements, and the remaining tangible assets, were all inter-related. They produced a gross overall value.

Both the respondent's sole shareholder and his proposed purchaser testified that they had placed no value on goodwill in the 1972 negotiations and the proposed purchaser, Siegfried Marquardt, explained why.

Q. Well you’re the buyer, what went on in your mind?

A. But certainly I like the land and I have a passion for land, so the location means a great deal to me personally. Because the facility was very good and it means a lot to me; what means very little to me is the value of furniture or cars or goodwill, or something of that nature.

Q. What about the licence that lets you operate the place?

A. I would presume a legitimate, a hospital should always get legitimately a licence and it has great value because without it you can’t operate.

Q. . . . can you tell us what value you ascribed in your mind to the licence or do I gather from what you say, that the licence wasn’t really a problem; that you being an operator in the business, felt confident that you could get it assigned and carry on and it wouldn’t be a big problem?

A. Well, I think that the licence costs very little and one should be able to obtain the licence if one is an honest operator of a facility and is respected in the community, or one would have to transfer the assets to such person who would have those or would qualify.

Q. Yes and at the time you were looking at the Aberdeen, you are a person who would fit that description, I think, am I right in that?

A. Well, I would hope so.

Q. Yes, and you had operated a couple of other private hospitals up till 1972. Had you ever had any trouble about the licence?

A. No, but there are regulations which are not anywhere found, I think, but there are some policies which one sort of understands in the trade.

A. Pardon me, it’s not the concern of value, it’s a concern of qualifying for a person who may sit in judgment and say I think he’s a good person or bad person.

Q. I understand that, and your prefacing remark was, it’s not a question of value; that’s what I’m trying to get at.

Would I be right in assuming from what you tell me that there's not much value to be ascribed to the licence as such. That’s a part of the package of the Aberdeen Private Hospital, from your point of view?

A. I think the licence goes with the facility and you must have a licence otherwise you can't operate it and it should not be withheld if the commitment has been made to purchase a site to build a facility, to equip it and do the whole thing, it would be terrible if a government would think that it’s not obligated to licence it.

The government has only the right in my opinion, to limit the person who's not qualified, to exclude that person of operating and having that facility, and have a person installed into a facility which will do the right care as government and society has an expectation to be delivered.

Q. Well, you have two hospitals still and I take it you have these annual licences to allow them to operate?

A. It’s an annual licence.

Q. Are you free to transfer your hospital licence to me if you wanted to?

A. I don't think so.

Q. Thank you. Now, in terms of goodwill in the normal sense of the word, Mr. Marquardt, you say that the Aberdeen was a good operation.

Is there any scope in your industry or in the private hospital industry for the Aberdeen to charge more than competing facilities to their patients or to their customers?

A. I think our rates were very similar.

Q. Some of them were regulated by the government, were they not, for some of the patients?

A. The patients at that time who ran out of money, were then — the patients, his care costs were then compensated through the Social Assistance programs, Welfare programs.

That evidence, as I appreciate it, established that a licence was necessary, was not transferable and did not cost much. Given the need for hospital facilities, a good operator could be confident of obtaining a licence. The proposed purchaser was a good operator and had two licences to prove it. There was no room for one private hospital operator to charge significantly more than others.

I accept that goodwill is “a thing very easy to describe, very difficult to define", C.I.R. v. Muller & Co.’s Margarine Ltd., [1901] A.C. 217 at 223, per Lord Macnaghten, who went on:

. . . It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, gooodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates.

It does seem to me that, if one is going to ascribe over $340,000 value to the goodwill of a 77-bed private hospital, which value, it is agreed, was nonexistent less than three and one-half years later, difficult as it may be, one ought to be prepared to define the nature of the goodwill. Such definition should bear in mind that the basis of its worth was its power to attract custom.

In my respectful opinion, the learned trial judge was right when he accepted the direct evidence he had as to the V-Day value of the goodwill. The alternative was to prefer the result of an arithmetic calculation founded on the opinion of a real estate appraiser predicated on partial rezoning and a highest and best use different from that to which the land in issue was, in fact, being put.

I would dismiss this appeal with costs.

Marceau, J. (dissenting):—My brother Mahoney, J. sees no error in the judgment rendered by Mr. Justice Collier in disposing of this income tax case, and I have had the advantage of reading the reasons he prepared in support of his conclusion. Unfortunately, I am unable to share his opinion and will endeavour to explain, with respect, my own views of the matter.

The controversy in these proceedings relates to the validity of a reassessment for capital gains tax issued by the Minister of National Revenue against the respondent company following the sale by the latter, in 1975, of a private hospital, the Aberdeen Private Hospital, it had owned and operated in Victoria since 1965. This sale to the Province of British Columbia had been of the assets of the hospital as a going concern and the price had been set at $1,125,000 for the whole, this sum being allocated in the agreement partly to land, $662,500, partly to buildings and improvements, $450,000, partly to equipment, $12,500. Relying on the opinion of its expert valuator that the market value of its hospital, on Valuation Day, December 31, 1971, a value established on the basis of an earnings approach, was the same as the amount it had received on disposing of it, the respondent submitted at trial that there had been no capital gain on which it could be liable to tax. The appellant, through her representative, did not dispute that the value of the Aberdeen Private Hospital as a going concern, on V-Day, was $1,125,000; the position taken on her behalf was that the value of the land at V-day and that of the improvements and equipment, based on a cost approach, were respectively $286,000, $470,000 and $43,000, the difference between those values and the value of the business as a going concern $311,000, having to be allocated to goodwill, which meant, after having excluded equipment where a loss had been sustained, that a capital gain of $356,500 had been realized on disposition of the tangible assets, more precisely on disposition of the land. The learned trial judge whose judgment is now reported at [1983] C.T.C. 419; 84 D.T.C. 6065 denied the validity of the reassessment. The Minister could not, in his view, “isolate or extract out of the overall value of the business and its assets a breakdown of the package into various components" (at C.T.C. 423; D.T.C. 6068); the scheme of the Act did not imply that such allocation should be made; the question was the value of the gain on the disposition of the hospital as a going concern, "not the value of the components of the gain” (at C.T.C. 423; D.T.C. 6069). Moreover, added the Judge, even if an allocation was necessary, on the evidence, "there is no difference between the package which existed in 1971 and that which was sold in 1975" (at C.T.C. 423; D.T.C. 6069) as there was no value to be attributed to goodwill or intangibles as of December 31, 1971.

There are therefore, on this appeal, as there were before the trial judge, two issues to be determined and they both raise, I think, important questions about the exact meaning and the proper application of the provisions of the Income Tax Act relating to capital gains tax. I will consider them in turn.

The first issue is whether there is a requirement under the Income Tax Act to allocate the value, as of December 31, 1971 and as of the date of sale, of the component parts of the various assets of a business entity sold as a going concern in order to establish the capital gain or loss arising from the disposition of such entity. The learned trial judge and those who support a negative answer say that a requirement to that effect has not been expressly established by any provision of the Income Tax Act and does not have to be inferred by the scheme of the Act. They contend that it would be unrealistic to so allocate among its various components the price given for a business sold as a going concern. The capital property disposed of is the business entity having a character of its own, not of each component isolated from one another.

It may be that, in the eyes of a businessman and as a commercial event taking place in the market place, the disposition of a business as a going concern is that of an entity with an identity of its own. But I think, with respect, that in the scheme of the Income Tax Act the disposition has to be seen otherwise. As I read all of the provisions of the Act and the regulations relating to the computation of capital gains or losses, which treat differently depreciable property, non-depreciable property and eligible capital property, I, for my part, simply do not see how they can be applied without looking at the transaction as one disposing not of an entity but of various assets or various types of property. In fact, the very sections of the Act defining capital gain and capital loss, sections 38 and 39, do not permit, it seems to me, that it be otherwise. These sections read in 1976 (and still read in part) thus:

38. Meaning of taxable capital gain and allowable capital loss.—For the purposes of this Act,

(a) a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is /2 of his capital gain for the year from the disposition of that property; and

(b) a taxpayer’s allowable capital loss for a taxation year from the disposition of any property is /2 of his capital loss for the year from the disposition of that property.

39. Meaning of capital gain and capital loss.—(1) For the purposes of this Act,

(a) a taxpayer’s capital gain for a taxation year from the disposition of any property is his gain for the year determined under this subdivision (to the extent of the amount thereof that would not, if section 3 were read without reference to the expression “other than a taxable capital gain from the disposition of a property” in paragraph (a) thereof and without reference to paragraph (b) thereof, be included in computing his income for the year or any other taxation year) from the disposition of any property of the taxpayer other than

(i) eligible capital property,

(i.1) an object that the Canadian Cultural Property Export Review Board has determined meets all criteria set out in paragraphs 23(3)(b) and (c) of the Cultural Property Export and Import Act and that has been disposed of to an institution or public authority in Canada that was at the time of the disposition, designated under subsection 26(2) of that Act either generally or for a purpose related to that object,

(ii) property referred to in any of paragraphs 59(2)(a) to (e),

(iii) a life insurance policy within the meaning of section 138 (except an annuity contract), or

(iv) a timber resource property; and

(b) a taxpayer’s capital loss for a taxation year from the disposition of any property is his loss for the year determined under this subdivision (to the extent of the amount thereof that would not, if section 3 were read in the manner described in paragraph (a) of this subsection, be deductible in com- puting h is income for the year or any other taxation year) from the disposition of any property of the taxpayer other than

(i) depreciable property, or

(ii) property described in subparagraph (a)(i), (ii) or (iii).

In reproducing the text, I emphasized words as a way of introducing the observations I wished to make. The first is with respect to the clearly stated principle that a taxable capital gain may result “from the disposition of any property”, the word "property” being defined at subsection 248(1) as follows:

“Property”.—“property” means property of any kind whatever whether real or personal or corporeal or incorporeal and, without restricting the generality of the foregoing, includes

(a) a right of any kind whatever, a share or a chose in action,

(b) unless a contrary intention is evident, money, and

(c) a timber resource property;

I would have thought that to apply the rules relating to capital gains or losses to a group of properties taken as a whole, however related to one another these properties may be in the market place, would be directly contrary to that principle. It may be that, in common language, the word "property” can be used to designate collectively all the different assets of a going concern, that is to say a collection of properties, but it does not seem to me that such an extended use is to be found in the language of the Act, where from section 3 on, the word "property” is never confused with the word "business”*. [1] Moreover, the French word for property, bien, does not, I believe, lend itself to such an extended meaning even in common parlance. As I read sections 38 and 39, it is not the breakdown of a package of assets sold as a whole into its components that requires express authority, it is the opposite, namely the taking of the package as one property only.

My second observation is with respect to the exceptions to the principle. It is made clear from the outset that some types of property are excluded completely from the rules of capital gain, the most notable thereof being the so-called “eligible capital property” which encompasses all intangible assets such as patents, copyrights, trade-marks, leasehold rights, government rights and licences and, primarily, goodwill. Properties of that type will attract tax on disposition if a gain is realized but on the basis of special rules and on a different scale. That being so, I fail to see how, on the disposition of a group of properties, like the assets of a going concern, in which there obviously may be intangibles, one can determine whether a capital gain or loss was realized without breaking down the whole into its components so as to set apart the portion of the transaction relating to the intangibles, if indeed some were present. The scheme of the Act, with respect to capital gains and losses, as I undertand it, simply does not permit that entities or groups of different types of properties be considered as such.

So, as I see it, the very wording of the applicable provisions of the Act and the whole scheme set up thereby require that, on disposition of a group of properties sold as a whole, in order to compute the capital gain or loss realized by the seller, the proceeds of disposition must be allocated between the depreciable, non-depreciable and eligible capital properties comprised in the whole, and compared with the cost of acquisition of each type of property. I, therefore, with respect, disagree with the position taken by the trial judge on the first issue respecting the principle of allocation.

The second issue to be determined is whether, in the case at bar, the evidence presented is capable of supporting a finding that the allocation made by the parties in their 1975 agreement between the component parts of the whole disposed of, — an allocation which acknowledged in the package the presence of tangible properties only, — was also an appropriate allocation of the value of the Aberdeen Private Hospital as of December 31, 1971, because in that value there was then no part to be attributed to intangibles or goodwill.

I hasten to say that my intention, in looking into this second issue, has never been to dispute the findings of facts of the learned trial judge or to proceed with a rereading and a re-evaluation of the expert evidence presented to him. As I indicated at the outset I do not accept the determination of the judgment a quo which means, of course, that I do not share the appreciation of the trial judge as to what was contained in that expert evidence. The point is however that this disagreement does not arise from a different reading of the testimonies but rather from a completely different approach as to what is to be looked for in the information provided by the appraisers. This is due to a different perception of this intangible property called goodwill. The learned trial judge's position in his judgment is that even if the value of the Aberdeen Private Hospital, on an income or going concern approach, exceeded in 1971 the cost value of its tangible properties, that is to say the land, the improvements and the equipment, there was no goodwill attached to the business. And, support for this position is found by him in the testimony of the expert witness called by the respondent and in the acceptance, on cross-examination, by a businessman who had made an ultimately abortive purchase offer in July 1972, that the licence to operate might not have been a significant consideration. From my understanding of goodwill in the context of the Income Tax Act, such a position appears to me untenable.

I am not oblivious of the fact that the concept of goodwill, which is not defined in the Act, has given rise, in the case law, to considerable controversy. It is no doubt a concept which is difficult to apply in practice whenever it is necessary to go beyond elementary accounting. But, from what I have retained from my reading of the judges' and authors' comments, for a business with no other intangible assets, goodwill can be said to be its market value as a going concern in excess of the value of its net tangible assets; put another way, it is what a purchaser would be willing to pay for that established business which he will be able to carry on, over and above what it would cost him, to acquire the tangible assets necessary to start a similar business himself. These definitions of goodwill are strictly concerned, it is true, with one aspect of the concept, the economic aspect; they say nothing of the nature of goodwill, and more particularly they do not indicate the possible sources of that economic value goodwill represents. But, for our present purposes, there is no need to go further. (On the concept of goodwill, see the article of J. W. Durnford, "Goodwill in the Law of Income Tax, in Canadian Tax Journal, Vol. 29, No. 5, p. 759; see also R. F. Mason, in Income Taxation in Canada, (Toronto: Prentice-Hall) No. 49,011; C. T. Grant, The Valuation and Tax Treatment of Goodwill, Toronto: Canadian Tax Foundation 1973, p. 467; I. R. Campbell, Canada Valuation Service,

1984, Richard De Boo Publishers, p. 4-20 to 4-20A, 12-16 to 12-25; and also: Hosey v. M.N.R., 57 D.T.C. 1098 (Ex. Ct.); Erenberg et al. v. M.N.R., [1981] C.T.C. 2138; 81 D.T.C. 96 (T.R.B.)).

That the going concern value of the Aberdeen Private Hospital as of December 31, 1971 exceeded the cost value of its tangible assets is confirmed by all of the evidence. While the highest values attributed to land and improvements by any of the valuators are respectively $298,000 (evidence of D. J. Clark) and $470,000 (evidence of W. H. Southward) and the only direct and uncontested appraisal of the equipment was that of J. Hombards at $43,000, the lowest going concern value of the whole was that of W. H. Southward in the amount of $1,110,000. I know that the trial judge was opposed to the use of a cost approach to assess the value of the tangible assets of the business in 1971 and expressed the view that the income approach adopted by the evaluator of the respondent was the only acceptable one; it is however clear that if the concept of goodwill is to be given the meaning I just indicated such a view was not open to him; the question sought to be answered being whether, in the value of a business as a going concern, there is a part to be attributed to intangibles, it would be begging the question to decide in advance that the income value of the going concern must be attributed to the tangible assets alone. Each tangible asset of a business has an independent existence of its own; it is true that a particular one may have less value when considered apart from the group; but this does not take away from the fact that each exists independently and can be assessed separately. So, on the evidence before the trial judge, it is clear that between the value of the tangible assets and that of the going concern a difference of $299,000 existed, a difference which, in the absence of any other intangibles, must necessarily be allocated to goodwill. (Cf. Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101). The trial judge saw no positive evidence as to where the goodwill attributed by the Minister could come from. In my respectful opinion, such evidence as to the sources of the goodwill was wholly unnecessary; only the existence and value thereof had to be established.

The second issue must therefore be resolved in the negative: the evidence before the trial judge was not capable of supporting a finding that in the value of the Aberdeen Private Hospital as of December 31, 1971, no part had to be attributed to goodwill.

The parties in their agreement in 1975 allocated no part of the sale price to goodwill. Had the 1971 goodwill all disappeared? It may be that the respondent as seller insisted on an allocation on those terms, because of its particular situation with respect to tax; or it may be that the Government of British Columbia, as purchaser, had actually taken absolutely no account of profitability in fixing the price it was willing to pay. The evidence does not give the answer. But, in any event, the Minister was obviously entitled to accept the position arrived at by the parties, at the end of serious arm's length negotiations; and he was also entitled to conclude, in view of the value that the tangible assets sold had in 1971, that a capital gain had been realized by the respondent, a conclusion quite in keeping with the obvious reality since, while the value of the building and the equipment had more or less stayed unchanged between 1971 and 1975, the value of the land had considerably increased. On the basis of the evidence adduced at trial and taking as explained above and as suggested by counsel the most favourable land value to the taxpayer, this capital gain was in the amount of $344,500.

My own views of the matter are therefore that the learned trial judge erred in dismissing the action of the appellant. I would allow the appeal with costs and quashing the judgment a quo and the judgment of the Tax Review Board pronounced on June 5, 1981 in which the Board allowed the appeal of the respondent in respect of its 1976 taxation year, I would refer the matter back to the Minister for reassessment on the basis that the capital gain realized by the respondent, on disposing of its assets in the Aberdeen Private Hospital in 1975, was $344,500.

Appeal dismissed.