Gamble v. The Queen, 79 DTC 5397, [1979] CTC 463 (FCTD)

Grant, DJ:—This is an appeal from a decision of the Tax Appeal Board dated the 21st day of March, 1975 whereby such Board dismissed the appeal of the plaintiff from assessment to income tax for the appellant’s 1971 taxation year. By such assessment the Minister of National Revenue had assessed the appellant with profits realized by him on the sale of an apartment building in which he had an interest. In 1967 the appellant was a partner in a firm of five barristers and solicitors practising in Metropolitan Toronto. In that year the plaintiff and his law partners acquired a one-third interest in St. Clair and Warren Road Construction Company. It was a partnership engaged in the construction of an eighty suite apartment building. The cost of the building was $1,164,864. The total amount paid by the legal partnership for such one-third interest was $6,333 and the assumption of certain liabilities. The appellant paid $633 for a one-tenth interest in the partner’s [sic] share or a one-third share in the whole enterprize.

The owners sold such building in 1971 for a net profit of $235,281 and the plaintiff’s share of such profit was $7,842.71. The plaintiff contends that he acquired his interest in such partnership for the sold purpose of establishing a capital asset which would provide income by way of rental and that he intended to retain such investment until 1998 when the mortgage would be paid off and he would then be 65 years of age. He contends that this share of the profits on the sale of the building represented a capital accretion of the sale thereof and that no part thereof should be included in computing his income for such year. The Minister made such assessment on the finding or assumption that at the time of the acquisition of their share in such building the plaintiff and his partners intended to sell the same at the first favourable opportunity of realizing a suitable profit therefrom and at all material times they still retained such intention and finally acted thereon.

In attempting to solve the problem herein I have considered the plaintiff taxpayer’s testimony and his operations in relation to this particular transaction and compared them with other similiar purchases and sales of real estate entered into by him in or about the same period of time. Having done so I have come to the conclusion that at the time of the plaintiff’s purchase of a share in the apartment building he and his partners did so with the intention of selling the same at such time as they could realize a profit thereon which was satisfactory to them.

In making such decision I have found the following facts to be relevant:

1. As a solicitor the plaintiff and the other partners in his firm acted for many clients in the sale and purchase of real estate in and about the City of Toronto and he became particularly knowledgeable concerning the value thereof and learned of opportunities to make profit thereby.

2. He and his wife personally and through companies incorporated and owned by him or them purchased and resold for the purpose of gain many real estate properties in various places in and about the time of the purchase and sale of the property in question.

3. He secured only an one-tenth interest in an one-third share of the partnership which constructed the apartment building.

4. He had no agreement, written or otherwise, with his legal partners or the partners in the St. Clair and Warren Road Construction Company partnership as to whether they would retain or sell such building and so any of the partners were free to force a sale of the property at any time.

5. It is inconceivable that a knowledgeable solicitor intending to retain his share in the building as an investment to yield income for a long period of time would purchase such a fractional share thereof without a definite agreement as to the terms on which the same would be retained by them.

6. It was the firm of solicitors who purchased the one-third interest in the partnership and the plaintiff had no control as to how long it would be retained.

7. The plaintiff stated the building was sold in 1971 because of problems that arose with the manager Hiller but this can not be correct because he was kept on as manager of two other apartment buildings in which such firm of solicitors had an interest after the sale of the building in question.

8. At the time that the plaintiff purchased such interest in the partnership he was motivated to such purchase by prospects of an early sale at a profit.

9. His purchase thereof amounted to speculation.

10. He did not call as witnesses either his wife or any of his partners all of whom were knowledgeable in the issues involved.

The plaintiff has failed to discharge the onus. On all the evidence it is clear that the Minister was correct in his assessment that the profits realized by the plaintiff on the sale of such property was as a result of an adventure in the nature of trade and he should be taxed on his share of the profits realized therefrom.

The appeal should therefore be dismissed with costs.