Staltari – Tax Court of Canada finds that a property which otherwise might have been held as an adventure in the nature in trade was converted to capital property on donation

A commercial real estate broker donated land to the City of Ottawa, received a charitable receipt for its appraised value and claimed that his (substantial) gain was exempted under s. 38(a.2) (respecting "ecological gifts" of capital property).

Owen J found that the taxpayer’s application for subdivision approval before donating suggested that a secondary intention of developing and selling the land may have partly motivated the taxpayer’s original purchase. However, per Zelinski, "a secondary intention to resell at a profit only acquires importance where a taxpayer follows through on that intention," whereas the land was donated instead, i.e., "any secondary intention to profit that he may have had became irrelevant once he chose to donate the Land."

This suggests that real estate whose sale would be on income account potentially is converted to capital property if it is donated instead.

Neal Armstrong. Summaries of Staltari v. The Queen, 2015 TCC 123 under s. 9 – capital gain v. profit – real estate, General Concepts – Evidence, and s. 39(1)(a).