Contonis v. The Queen, 95 DTC 511, [1996] 1 CTC 2118 (TCC)

Bowman J.T.C.C. These appeals are from assessments for the appellant’s 1984 and 1986 taxation years.

For 1984 the issue is the treatment of an amount forming part of his proceeds of disposition on the sale of a restaurant business in Guelph. In filing his return of income for 1984 the appellant claimed a capital loss of $9,500. On assessing, the Minister of National Revenue calculated the loss to be $4,944, decided that it had been incurred in 1983, determined that the allowable capital loss was $2,472 of which $2,000 could be deducted in 1983 and allowed the remainder, $472 to be carried forward to 1984. There is no issue with respect to the fact that the assessment for 1984 was made outside the normal three-year assessing period, or that the Minister included in the appellant’s income interest that had not been declared or that he imposed penalties.

The issue for 1986 relates to a disposition made in that year by the appellant of 10 shares of Bluewater Investments Ltd. (“Bluewater”). In that year the appellant sold his shares back to Bluewater for $75,000. Since it was a redemption of Bluewater’s own shares it gave rise not to a capital gain but to a deemed dividend under subsection 84(3) of the Income Tax Act to the extent that the amount paid by Bluewater for the shares exceeded their paid up capital. Mr. Contonis did not mention the sale of the shares in his return and stated that he believed that he did not need to do so because he believed that since the price paid to him, $75,000, exceeded what he thought was his cost, $25,000, this gave rise to a capital gain of $50,000 which did not exceed his lifetime capital gains exemption. The Minister reassessed the appellant for 1986 and added to his income the grossed up amount of the deemed dividend. In addition, penalties were assessed under subsection 163(2). The assessment was made outside the normal three year assessing period and accordingly, to permit the reopening of the year, the initial onus lay upon the respondent to establish that the appellant, in filing his return of income, made a misrepresentation of the type referred to in subparagraph 152(4)(a)(i) of the Act. It is admitted that there were other misrepresentations in 1986 relating to interest received by Mr. Contonis justifying the reopening of that year under subparagraph 152(4)(a)(i) and the imposition of penalties. Once the respondent’s initial onus is met the onus reverts to the appellant under subsection 152(5) to show that the failure to declare any other amounts added by the Minister was not attributable to negligence, carelessness or wilful default. It therefore falls to the appellant to establish that the failure to declare the sale of the Bluewater shares in 1986 was not attributable to negligence, carelessness or wilful default.

I shall deal first with the assessment for 1984. The question arises from a sale by Mr. Contonis in September 1983 of a restaurant in Guelph, Country Burger Restaurant. Mr. Contonis determined that the sale gave rise to a loss of $9,500 and claimed it as a deduction in 1984. The Minister determined that the loss was $4,944, that the allowable portion was $2,472, of which $2,000 was deductible in 1983 and $472 could be carried forward to 1984. It is admitted that the Minister erred in this treatment in assuming that the loss was an ordinary capital loss of which only $2,000 could be claimed in 1983 and the balance of $472 could be carried forward to 1984. It is now agreed that the “loss” [1] arose on the disposition of eligible capital property, and was not an ordinary capital loss.

The appellant’s position is that when he sold the restaurant business in September 1983 he was entitled under subsection 25(1) to elect that the fiscal period of the business ended in 1984, the year in which it would have ended had he not disposed of the business.

Subsection 25(1) reads as follows:

25(1) Where an individual was the proprietor of a business and disposed of it during a fiscal period of the business, the fiscal period may, if the taxpayer so elects, be deemed to have ended at the time it would have ended if the taxpayer had not disposed of the business during the fiscal period.

(2) An election under subsection (1) is not valid unless the taxpayer, at the time when the fiscal period of the business would, if the election were valid, be deemed to have ended, is resident in Canada.

(3) Where subsection (1) applies is respect of a fiscal period of a business of a taxpayer, for the purpose of computing his income for the fiscal period,

(a) section 13 shall be read without reference to subsection (8) thereof; and (b) section 24 shall be read without reference to paragraph (1)(d) thereof.

On the basis of this section, Mr. Ferguson contends that Mr. Contonis is entitled to elect that the fiscal period of the restaurant business be deemed to have ended on January 31, 1984, the date upon which it would have ended had Mr. Contonis not sold the business.

The second step in the argument is that by claiming a loss of $9,500 in 1984 he in effect elected under subsection 25(1). On this point I am prepared to accept that he did elect under subsection 25(1). I do so on the basis that in filing his 1984 return Mr. Contonis included a profit and loss statement for the business of Country Burger Restaurant for the period February 1, 1983 to January 31, 1984. In that statement he shows not only the operating profit from carrying on the business but also the loss which he determined arose on the sale of the business. No form of election is prescribed and the manner in which the appellant filed his 1984 return constitutes in my view a sufficient election within the meaning of the subsection. [2]

The third branch of the appellant’s argument is that, assuming that, by his election under section 25 he has succeeded in moving the sale into 1984, the loss on the sale of the business is not, as the Minister has calculated it, $4,944 but rather $24,403.98 of which 50 per cent, or $12,201.99, is deductible in 1984.

Subsection 24(1) reads as follows:

24(1) Notwithstanding paragraph 18( 1 )(b), where a taxpayer has ceased to carry on a business, in computing his income for his taxation year in which he so ceased to carry on the business,

(a) there shall be deducted the amount of his cumulative eligible capital in

respect of the business at the time he so ceased to carry on the business;

(b) no amount is deductible by virtue of paragraph 20(1)(b) in respect of the business;

(c) notwithstanding paragraph 14(5)(a), his cumulative eligible capital in respect of the business immediately after the time he so ceased to carry on the business shall be deemed to be nil; and

(d) for the purposes of subsection 14(1), section 14 shall be read without reference to subsection (4) thereof.

Before analyzing the appellant’s submission on this point, it is as well that we start by getting the figures straight. The appellant accepts the Minister’s figures contained in the Department’s letter of July 11, 1986, Exhibit A-9, except for the calculation of the loss. Those figures are as follows:

The figure of $32,228 shown as proceeds is based on a sale price of $35,000 less expenses of $2,272. Also, it is common ground that the portion shown under “Business” is entirely in respect of goodwill.

The Minister treated $4,944 as a capital loss and moved it to 1983 on the assumption that the sale took place on January 12, 1983. It is now accepted by the Minister that the “loss” of $4,944 arose on the disposition of eligible capital property and that the sale took place not on January 12, 1983 but on September 12, 1983, which would have been in the 1984 fiscal period of the business if the election was effective.

On closing a $20,000 mortgage was taken back. It was payable in instalments over the last three months of 1983, and over 1984, 1985, 1986 and until August 12, 1987 when the balance fell due. The appellant contended that the “loss”, so called, should be calculated on the basis of the cost ($34,576.55) less the amount actually payable in the fiscal period ending January 31, 1984 which he says is $10,172.57. This figure is arrived at by deducting from the proceeds of $29,632.55 the $20,000 mortgage net of the $540 principal payments made to the end of January 1984.

I have accepted that the appellant did elect under subsection 25(1) to have the fiscal period end when it would otherwise have ended had no sale taken place, i.e. January 31, 1984. The sale took place on September 12, 1983, not, as erroneously assumed by the Minister, on January 12, 1983. Does the election move not only the operating income from the business but also the gain or loss from the sale of the business itself, including the fiscal consequences of the sale of goodwill, into 1984? I think that it does. Subsection 25(1) is a relieving section intended to permit an individual who sells a sole proprietorship to avoid having two fiscal periods end in the same calendar year by permitting, by an election, a notional extension of the fiscal period into the succeeding calendar year when it would otherwise have ended. The benefit of subsection 25(1) would be largely eroded if it excluded from its operation dispositions by the individual of eligible capital property forming part of the assets of the business that were sold, effec- lively leaving them behind in the calendar year in which the sale in fact took place. Additional support for this view is found in paragraph 25(3)(b) which excludes from the operation of section 24 paragraph 24(1 )(d). This exclusion, for the purposes of section 25, of paragraph 24(1 )(d) (which itself excludes, for the purposes of subsection 14(1), subsection 14(4)) has the effect, for the purposes of section 25, of reinstating subsection 14(4). Section 14 deals with the acquisition and disposition of eligible capital property. By declaring for greater certainty that taxation year means fiscal period for the purposes of section 14 where the business of an individual has a fiscal period that does not coincide with the calendar year, and by specifically providing that subsection 14(4) applies to section 25, Parliament appears clearly to have intended that the benefit of the extended fiscal period should include the disposition of eligible capital property of the individual within that notionally extended period, including the disposition of eligible capital property as part of the sale of the business. This interpretation, in addition to commending itself to one’s common sense, appears to be more consistent with the scheme of the Act and the object that subsection 25(1) is seeking to achieve. [3]

The second question is whether the Minister’s calculation of the so- called loss is correct or whether the appellant is entitled to take into account the proceeds from the sale of goodwill in the years only when the amounts fall due under the mortgage and move the recognition of the proceeds of the disposition of eligible capital property into subsequent taxation years. As noted above the Minister proceeded upon the erroneous premise that the sale gave rise to an ordinary capital loss of $4,944 and that it was to be recognized in 1983.

The appellant, correctly in my view, says that the sale was of eligible capital property and that the election made by him permits him to treat the sale as having occurred in the fiscal period which was notionally extended to January 31, 1984. Up to that point I agree. The appellant further says, however, that in computing his “loss” in 1984, he is entitled to treat the proceeds as $10,172.57, the amount payable in the year, and exclude from the sale price of $29,632.55 the sum of $19,459.98, the amount not payable under the chattel mortgage until after January 31,1984. Setting the admitted cost of the eligible capital property of $34,576.55 against the figure of $10,172.57 gives him $24,403.98, 50 per cent of which, according to the appellant, $12,201.99, is deductible in 1984. As further proceeds in subsequent years become payable under the mortgage, 50 per cent thereof is, on the appellant’s interpretation, to be included in income in the year when they become payable. It is an interesting, albeit irrelevant observation, that 1985 is statute-barred. 1986 is of course before me, but if, as the result of the appellant’s contentions additional amounts should have been added to his income for 1986 I do not think that it is within this court’s power to order that they be included (see Harris v. Minister of National Revenue, [1964] C.T.C. 562, 64 D.T.C. 5332 at page 571 (D.T.C. 5337), affirmed [1966] S.C.R. 489, [1966] C.T.C. 226, 66 D.T.C. 5189). In fact, the debt secured by the chattel mortgage became bad in 1986 and the Minister has taken the loss into account in computing the appellant’s capital loss for that year.

Counsel relies upon the decision of the Federal Court of Appeal in R. v. Timagami Financial Services Ltd. (sub nom. The Queen v. Timagami Financial Services Ltd.), [1982] C.T.C. 314, 82 D.T.C. 6268. That case held that the words “payable to a taxpayer in a taxation year” in section 14 of the Act as it read prior to its amendment in 1977 meant “due” in the taxation year and did not include amounts that were not payable until a later year.

Under the amendments to section 14, for taxation years ending after March 31, 1977, a somewhat different régime prevailed from that with which the Court of Appeal was concerned. Subsections 14(1), (2),(4) and

(5) in 1983 and 1984 read as follows:

14(1) Where, at the end of a taxation year, the aggregate of all amounts each of which is an amount determined under subparagraph (5)(a)(iii) in respect of a business or an amount determined under subparagraph (5)(a)(iv) in respect of the business (the latter amount hereinafter referred to as an “eligible capital amount”) exceeds the aggregate of all amounts determined under subparagraphs (5)(a)(i) and (ii) in respect of the business of the taxpayer, the excess shall be included in computing the taxpayer’s income from that business for that taxation year.

(2) Where any amount is, by any provision of this Act, deemed to be a taxpayer’s proceeds of disposition of any property disposed of by him at any time, for the purposes of this section, that amount shall be deemed to have become payable to him at that time.

(4) Where a taxpayer is an individual and his income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, for greater certainty a reference in this section to a “taxation year” or “year” shall be read as a reference to a “fiscal period” or “period”.

(5) In this section,

(a) “cumulative eligible capital” of a taxpayer at any time in respect of a business means the amount by which the aggregate of

(i) half of the aggregate of the eligible capital expenditures in respect of the business made or incurred by the taxpayer before that time, and

(ii) all amounts included by virtue of subsection (1) in computing the taxpayer’s income from the business for a taxation year ending prior to that time,

exceeds the aggregate of

(iii) all amounts each of which is an amount in respect of any taxation year of the taxpayer ending before that time, equal to the amount deducted under paragraph 20(1 )(b) in computing the taxpayer’s income for that year from the business, and

(iv) the aggregate of all amounts each of which is half of the amount, if any, by which

(A) an amount that, as a result of a transaction occurring after 1971, became payable to the taxpayer before that time in respect of a business carried on or formerly carried on by him where the consideration given by the taxpayer therefor was such that, if any payment had been made by the taxpayer after 1971 for that consideration, the payment would have been an eligible capital expenditure of the taxpayer in respect of the business,

exceeds

(B) any outlays and expenses to the extent that they were made or incurred by him for the purpose of giving that consideration; and

(b) “eligible capital expenditure” of a taxpayer in respect of a business means the portion of any outlay or expense made or incurred by him, as a result of a transaction occurring after 1971, on account of capital for the purpose of gaining or producing income from the business, other than any such outlay or expense

(i) in respect of which any amount is or would be, but for any provision of this Act limiting the quantum of any deduction, deductible (otherwise than under paragraph 20(1 )(b)) in computing his income from the business, or in respect of which any amount is, by virtue of any provision of this Act other than paragraph 18(l)(b), not deductible in computing such income,

(ii) made or incurred for the purpose of gaining or producing income that is exempt income, or

(iii) that is the cost of, or any part of the cost of,

(A) tangible property of the taxpayer,

(B) intangible property that is depreciable property of the taxpayer;

(C) property in respect of which any deduction (otherwise than under paragraph 20(1 )(b)) is permitted in computing his income from the business or would be so permitted if his income from the business were sufficient for the purpose, or

(D) an interest in, or right to acquire, any property described in any of clauses (A) to (C),

but, for greater certainty and without restricting the generality of the foregoing, does not include any portion of

(iv) any amount paid or payable, as the case may be, to any creditor of the taxpayer as, on account or in lieu of payment of any debt or as or on account of the redemption, cancellation or purchase of any bond or debenture,

(v) where the taxpayer is a corporation, any amount paid or payable, as the case may be, to a person as a shareholder of the corporation, or

(vi) any amount that is the cost of, or any part of the cost of,

(A) an interest in a trust,

(B) an interest in a partnership,

(C) a share, bond, debenture, mortgage, hypothec, note, bill or other similar property, or

(D) an interest in, or right to acquire, any property described in any of clauses (A) to (C).

The system that prevailed in the years in question was, simply put, this: paragraph 20(1 )(b) permitted a limited deduction of the cost of acquiring such intangibles as goodwill, essentially 10 per cent per year, on a declining balance basis, of the taxpayer’s “cumulative eligible capital” (“CEC”). This figure was 50 per cent of the cost of acquiring such intangibles as goodwill and all amounts included under subsection 14(1) less the aggregate of amounts deducted under paragraph 20(1)(b) and 50 per cent of amounts payable to the taxpayer on the sale of eligible capital property. When the taxpayer ceased to carry on business the balance of his CEC was deductible in that year under paragraph 24(1 )(a).

In the present case, I should have thought that it ought to work as follows. The appellant’s CEC immediately before the sale of the restaurant was 50 per cent of $34,576.55 = $17,288.27. Upon the sale it became $17,288.27 minus [half of $29,632.55 i.e. $14,816.27] = $2,472.00. Thus, under subsection 24(1), his remaining CEC of $2,472 is deductible in 1984, the year in which his extended fiscal period under subsection 25(1) ended.

It remains for me to consider whether this conclusion is consistent with the Timagami decision. Neither in the judgment at trial nor in the judgment of the Federal Court of Appeal was subsection 14(2) referred to.

Under that subsection any amount deemed by any provision of the Act to be a taxpayer’s proceeds of disposition of any property disposed of by him at that time shall be deemed to have become payable to him at that time. “Proceeds of disposition” is defined in at least two provisions, paragraphs 13(21)(d) and 54(h) and it includes “the sale price of property that has been sold.”

It will be noted however that paragraphs 13(21)(d) and 54(h) do not deal with dispositions of eligible capital property. Paragraph 13(21)(d) is part of a subsection that defines words used in sections 13, 20 and regulations made under paragraph 20(1 )(a). Paragraph 54(h) is found in subdivision c of Division B which deals with capital gains and losses. Neither paragraph, strictly speaking, “deems” anything to be proceeds of disposi tion. They merely provide that “proceeds of disposition” includes certain amounts. While it may well be that the use in subsection 14(2) of the words “any property disposed of by him” was intended to incorporate the provisions of paragraph 13(21)(d) or 54(h), it seems to have been a most infelicitous way of saying so. Nor can I assume that subsection 14(2), following as it does immediately upon subsection 14(1) which was being considered by the Federal Court of Appeal, could have been overlooked by both the court and by counsel. It is not, after all, as if there were not plenty of sections of the Act to which the words “deemed to be a taxpayer’s proceeds of disposition” in subsection 14(2) cannot precisely apply ., I have in mind, for example, sections 68, 69, 85, 88 and 97. Accordingly, subsection 14(2) does not expand the meaning of the word “payable” in clause 14(5)(a)(iv)(A) to cover amounts that are not due until a subsequent year.

If the Federal Court of Appeal’s decision in Timagami applies to this factual situation I am bound to follow it, however unsatisfactory the result may be. [4] I am, therefore, faced with two interpretations. One interpretation conforms in my view to the scheme of the Act and results in what I believe is a reasonable result, i.e. a recognition in the year of sale (or at all events in the year into which the sale is notionally projected under subsection 25(1)) of the sale of goodwill on the cessation and sale of the business. This interpretation would permit the deduction in 1984 of $2,472 and not $472 which has been allowed as a carry-forward from 1983.

The second interpretation is based upon the Federal Court of Appeal’s decision in Timagami and is premised upon the view that the word “payable” in section 14 as it then read means “payable in the year”. The words in clause 14(5)(a)(iv)(A) in the definition of “cumulative eligible capital” are “an amount that, as a result of a transaction occurring after 1971, became payable to the taxpayer before that time in respect of a business carried on or formerly carried on by him....”

The Federal Court of Appeal in Timagami has authoritatively decided that “payable” in subsection 14(1) as it read then means “payable in the year”. Notwithstanding the extensive amendments to section 14 after the years considered in that case, notwithstanding the fact that the Federal Court of Appeal was dealing with a simple inclusion in income under subsection 14(1) as it then read and not with a computation of “cumulative eligible capital” in the context of a sale and cessation of an entire business to which subsection 24(1) applies, notwithstanding the fact that the interpretation creates a deduction in 1984 that exceeds by many multiples the economic loss actually suffered by the appellant on the sale of the goodwill and projects income into later years long after the business has ceased (and into years that, incidentally, are statute-barred) I am bound under the rule of stare decisis to apply and follow the Federal Court of Appeal’s decision. [5] No distinction between that case and this one, either in the legislation or in the facts, would justify my attempting to find a basis of distinguishing it in order to achieve a reasonable result.

I am bound to apply the first sentence of Lord Esher’s statement in light of the interpretation given to the word “payable” in Timagami. Nothing in the amendments to section 14 would indicate a legislative intent that differs from that ascribed to Parliament by the Federal Court of Appeal, and, for what it is worth, the administrative practice seems consistent with that interpretation: see IT-123R4 and IT-123R5, paragraphs 22 and 23.

The result of this interpretation is as follows. The computation of the appellant’s CEC immediately after the sale is as follows: half of $34,576.55 (under subparagraph 14(5)(a)(i)) less half of $10,172.57 (the amount payable in the fiscal period ending January 31, 1984 - clause 14(5)(a)(iv)(A)) = $12,201.99. This amount is deductible under paragraph 24(1 )(a) in 1984, the year into which the appellant’s fiscal period is notion- ally extended by reason of his election under subsection 25(1) and thereafter his CEC is deemed to be nil under paragraph 24(1 )(c). The period from February 1, 1984 to December 31, 1984 does not fall within any fiscal period that extends into 1985 and accordingly there should also have been included under subsection 14(1) in the appellant’s income for 1984, 50 per cent of the principal amounts that fell due under the mortgage in that period, i.e. $1,580.94 divided by 2 = $790.47 based upon the figures in Exhibit A-4, the schedule of mortgage payments. For the calendar year 1985, if that year were open, which it is not, there should have been included under subsection 14(1) 50 per cent of the principal payable under the mortgage in that year, $1,897.50, or $948.75. In 1986 he should have included under subsection 14(1) 50 per cent of the principal amounts payable under the mortgage in that year, i.e. half of $2,096.21 or $1,048.10. At some point in the year, it seems in June, the debt became bad. Subsection 20(4.2), which permits a deduction of the taxable portion of the debts relating to proceeds of eligible capital property that have been included in income in the year or a previous year and have gone bad did not exist in 1986 and accordingly the only relief available is paragraph 20(1 )(p), which, with a bit of stretching, permits a deduction of bad debts that have arisen on the sale of eligible capital property. [6] Obviously I cannot direct that additional amounts be included in Mr. Contonis’ income for 1986 and, since nothing was in fact included under subsection 14(1) for that year there can be no deduction under paragraph 20(1 )(p). Accordingly the Minister’s calculation of a capital loss in 1986 must stand. Similarly, I do not think that I can direct that additional amounts be included under subsection 14(1) in the appellant’s income for 1984. That year is closed, except to the extent that it is within the jurisdiction of this court to refer the matter back for reassessment under section 171 of the Act. Neither that section nor any other section of the Act would permit me to direct that additional amounts be added in respect of the period February 1, 1984 to December 31, 1984. See Harris v. Minister of National Revenue, supra.

The second issue for 1986 is quite different. In 1986 the appellant sold his 10 shares of Bluewater back to the company for $75,000. He received a trust cheque in this amount from the law firm of Pearson, Flynn, Sturdy & Lennox on April 16, 1986 and acknowledged receipt thereof. He signed a release of the officers and the company, and an assignment of the shares to the company.

The Minister assessed him on a deemed dividend equal to the difference between the paid up capital ($10.00) of the shares and the redemption price under section 84(3) and has allowed him a capital loss based on an adjusted cost base (V-day value) of the shares of $12,500.

Mr. Contonis did not declare any amount in his 1986 return in respect of the shares. His explanation is that he thought he was selling the shares to a Mr. Zaduk, not to the company, that he believed his cost of the shares was $25,000, that he understood that his lifetime capital gains exemption of $50,000 covered the capital gain of $50,000 that he assumed he was realizing, and that in any event he told his bookkeeper Mr. Vander Griendt about the sale, and Mr. Vander Griendt told him it was exempt and need not be reported. It is now agreed that his adjusted cost base of the shares was $12,500.

Mr. Vander Griendt testified that Mr. Contonis did not tell him about the sale of shares. I think his evidence is more reliable. I cannot accept the hypothesis that a bookkeeper, experienced in preparing tax returns, would simply ignore, without even making notes, a $75,000 sale of shares. I can easily understand how a taxpayer, untutored in the complexities of the Act, might not know the difference between a capital gain on the sale of shares and a deemed dividend on the redemption of shares. I cannot accept that a taxpayer, experienced in business, even with a less than perfect command of the English language, could simply ignore a $75,000 sale of shares. There are altogether too many inconsistencies in Mr. Contonis’ testimony. He admits that it is his signature appearing on the receipt for the cheque and on other documents relating thereto, but says that he does not remember signing them. He admits that when questioned initially by an official of the tax department about the sale of the shares he denied all knowledge of it, but that he subsequently remembered.

Mr. Lennox, the solicitor for Bluewater whom Mr. Contonis met when he received the cheque and signed the various documents involved in the transaction, testified that he explained to Mr. Contonis the contents of the documents that he was signing.

It is true Mr. Contonis did not receive the T-5 summary prepared by Bluewater because he had moved, but I think he was grossly negligent in failing to tell his bookkeeper about the sale and ensuring that it was mentioned in the return. I am reluctant to make findings of credibility where I do not need to, particularly where a witness is not completely familiar with one of Canada’s two official languages (Mr. Contonis testified through an interpreter), but I have to decide the case on the basis of the evidence before me and I find the evidence of Mr. Lennox and Mr. Vander Griendt credible.

The appellant has not established that the failure to report the sale at all in his 1986 return was not attributable to negligence, carelessness or wilful default under subsection 152(5). The respondent has established in my view that the omission of the sale in the return was made by the appellant either knowingly or in circumstances amounting to gross negligence. Gross negligence is descriptive of an exceptionally high degree of negligence, amounting almost to recklessness. It goes well beyond mere inadvertence. Mr. Contonis appeared to me to be an intelligent man and the complete omission of any mention in his return of the sale of the shares was at least reckless, if not deliberate.

The appeal from the assessment for 1986 is dismissed. The appeal from the assessment for 1984 is allowed and the assessment referred back to the Minister for reconsideration and reassessment to allow the appellant an additional deduction of $12,201.99 in the computation of his income.

Success being divided, the parties should bear their own costs.

Appeal allowed in part.