Cullen, J.:—Mary Finochio, hereinafter referred to as “the taxpayer"', is a resident of Hamilton, Ontario. The defendant, represented by the Minister of National Revenue, shall hereinafter be referred to as “the Minister".
This is an appeal by the taxpayer from the decision of Taylor, T.C.J. dismissing the appeal of the taxpayer from a reassessment by the Minister wherein he reduced the 1978 income of the taxpayer by $167,898.47 and treated that amount as income for the 1977 taxation year.
Commencing in 1970, the taxpayer acquired a number of properties, namely: 1073 West 5th Street, 185 Stonechurch Road, 832 West 5th Street, 1220 Upper Wentworth, 227 Stonechurch Road, 607 Upper Wentworth, 106 Brucedale Avenue, and 80 Herkimer (260 Bay Street), all in the City of Hamilton.
In 1977, the taxpayer agreed to sell 1220 Upper Wentworth to Di Cenzo Construction Co. Ltd. for a purchase price of $405,000 with the purchase price to be based on $45,000 per acre and “to be adjusted upward or downward if different" (see Exhibit P-10). The same firm of solicitors was retained by the vendor and the purchaser, and on November 30, 1977 the taxpayer and the president of Di Cenzo Construction Co. Ltd. signed a consent acknowledging this fact and which showed the possible repercussions in the event of a conflict of interest (see Exhibit P-2).
On November 30, 1977 a deed was registered conveying title to the said property to Di Cenzo Construction Company Limited (Di Cenzo).
However, on December 1, 1977, Mr. S.R. Scrinivasan, the lawyer, wrote a letter to the vendor/taxpayer (see Exhibit P-4). It is obvious that the vendor- /taxpayer knew there were problems and these were explained prior to the signing of the deed. It was clearly accepted by the vendor/taxpayer to permit the deal to close on the understanding that the “entire balance on closing had been received from the purchaser" and “can be released to you once the cloud on title is cleared”. The vendor/taxpayer also was advised, "We are quite confident that the items outlined below can be completed without too much difficulty." It had also been explained to the vendor orally and "you have agreed to allow us to do so". The cloud on the title was minor and easily remedied.
As a matter of fact, so confident was the solicitor for the parties, that on December 7, 1977, he billed Di Cenzo (see Exhibit C-1). This account states the services performed and, inter alia, states: "To attending at Registry Office to close transaction” (emphasis mine). Di Cenzo would have no doubt the deal was completed. The title was not certified although Mr. John Ross, a law student at the time, did in fact search the title and discovered the "cloud" on the title.
It is also significant, I believe, that immediately on closing, the balance of cash on closing was transferred from the solicitor's account where it had been held in trust for Di Cenzo to a purchase deposit certificate in trust by Ross Vasan for the taxpayer, and interest was earned from November 30, 1977 until January 4, 1978 when the money was paid out to the taxpayer. I am satisfied on the evidence that this was not a deliberate attempt to put the income into the 1978 taxation year; rather it was caused by the solicitors who acted for both parties who wanted a quit claim deed, and two declarations of possession before releasing the money. The evidence, in my view, points to the documents being signed prior to January 4, 1978 and after December 31, 1977. Although Mr. John Ross, the law student who secured the signatures required, said it was "possible" they had been signed in December 1977 it was “highly unlikely". Once the signatures were obtained the money was released; the documents, however, were not registered prior to January 4, 1978. The quit claim deed (Exhibit P-5) from James Janus was not registered until March 21, 1978, and a declaration by Marie Janus (Exhibit P-6) was also registered at that time. There is no indication on the evidence whether the declaration of the taxpayer was ever registered.
Mr John Ross foresaw no difficulty getting the signature from James Janus and Mary Janus because they were receiving money pursuant to a mortgage on the property and would want the title in "good shape" to protect their security, the mortgage. Needless to say, getting the taxpayer's signature would also pose no problem because of her interest in getting the balance due on closing. In evidence she said she was prepared to sign anything to get the matter finished so she could get her money.
In my view the taxpayer had two options right at the beginning and she did not exercise either one. First, it would have been the wiser move to secure a solicitor other than Ross Vasan who she knew was acting for the purchaser. This taxpayer is not naive about real estate having purchased, rented and sold various properties. By using the same lawyer she hoped to "save time". I do not accept Mr. Ross' evidence that she meant to make it easier for the lawyer.
Next, when the cloud or title difficulties were explained to the taxpayer she had every right to insist that the purchaser take the property as is or extend the closing date until the problem had been resolved or to terminate the agreement of purchase and sale.
The taxpayer wanted the money and accepted the risks, confident that she would eventually get it. There were financial difficulties faced by her husband and so, in addition, it’s fair to comment she needed the money.
Several factors point to the fact that this transaction “closed” on November 30, 1977:
1. Exhibit C-1 — the December 7, 1977 account of the solicitor.
2. From November 30, 1977 money was transferred to the credit of the taxpayer.
3. Interest was paid to the taxpayer from November 30, 1979.
4. The taxpayer was advised prior to the registration of the deed about the cloud and the procedure to be followed and she accepted that.
5. Litigation about the amount actually owing on the sale shows in the statement of defence, "Messrs. Ross & Vasam completed the sale of the property on or about November 30, 1977" (Exhibit D-2).
6. When funds were held in trust for the taxpayer there was a "constructive receipt" of the money, through the transfer to an interest-bearing account.
It should also be noted that the onus is on the taxpayer to prove her submission that the transaction closed in 1978. That onus has not been satisfied. I found it somewhat surprising that in a transaction involving in excess of $400,000 the taxpayer could not produce from her records or her solicitor's records a copy of the reporting letter. This transaction resulted in a lawsuit by the purchaser, a possible lawsuit against the solicitors (Mr. Ross indicated they were concerned and contacted their insurers) and income tax considerations, all of which would benefit from seeing the letter.
Also, we did not have the evidence of the solicitor who handled the transaction to know what he told the taxpayer and the purchaser. We do know he billed the purchaser on December 11, 1977 so in his view the deal certainly closed November 30, 1977.
For all reasons cited above I find the sale of 1220 Upper Wentworth, Hamilton, Ontario, was completed on November 30, 1977.
The taxpayer's purchase of an income averaging annuity contract and benefitting from that purchase was of course contingent on a finding that the sale of the property took place in 1978. Accordingly, I am not required to deal with that matter.