Brulé,
T.C.J.:—This
appeal
involves
the
taxation
years
of
1983,
1984
and
1985
in
which
the
appellant
disputes
reassessments
by
the
Minister
involving
the
nature
of
dispositions
of
securities
as
being
on
capital
or
income
accounts.
In
addition,
the
Minister
had
reassessed
interest
income
in
respect
of
what
was
called
the
Mied
Joint
Venture
for
the
1984
and
1985
taxation
years.
Facts
The
appellant
is
a
company
engaged
in
the
logging
business.
During
a
period
commencing
in
November
1980
and
ending
in
December
1984
the
appellant
engaged
in
several
purchase
and
sale
transactions
including
securities
and
commodities.
The
securities
were
shares
in
companies
involved
in
resource
industries,
all
of
a
speculative
nature.
The
commodity
trading
was
in
lumber
futures.
In
completing
financial
statements
for
its
August
31,
1985
year
end
the
appellant
took
the
book
value
of
its
holdings
in
the
trading
account
of
some
$259,869
and
reduced
this
to
$21,813
which
represented
the
fair
market
value
of
these
assets.
This
write-down
was
claimed
as
a
loss
on
income
account
but
denied
by
the
Minister
both
in
the
quantum
claimed
in
1985
and
that
any
loss
should
be
on
capital
account.
During
the
1984
and
1985
taxation
years
the
appellant
was
involved
in
a
joint
venture
known
as
Mied
Joint
Venture.
Income
received
from
the
joint
venture
during
the
relevant
years
was
reported
as
income
from
active
business
and
not
as
investment
income.
The
Minister
disputed
the
amount
of
interest
claimed
by
the
appellant.
Issues
The
matter
of
the
interest
received
from
the
Mied
Joint
Venture
was
explained
by
the
company's
chartered
accountant
and
the
Minister's
counsel
allowed
in
argument
that
this
was
correct.
The
main
issue
is
whether
the
amounts
received
or
the
losses
resulting
from
disposition
of
securities
in
the
years
in
question
were
correctly
calculated
and
allocated
as
to
capital
or
income
and
whether
the
commodity
losses
were
properly
reported.
Appellant's
Position
It
was
claimed
that
the
sole
objective
of
the
appellant
was
to
realize
gains
by
trading
various
securities
and
commodities
and
had
not,
and
in
fact
did
not,
receive
dividends.
The
intended
course
of
conduct
was
to
trade
and
thereby
earn
business
income.
In
evidence
the
appellant's
vice-president
who
was
responsible
for
the
trading
allowed
that
while
he
was
not
a
professional
securities
person
he
took
advice,
studied
the
market
and
spent
one
to
two
hours
each
day
in
the
securities
activities
of
the
company.
A
list
of
the
trading
was
given
to
the
Court
indicating
that
some
22
sales
had
taken
place
and
51
transactions
over
the
period.
As
a
result
of
this
activity
the
appellant
believed
his
actions
were
those
of
a
trader
and
the
resulting
losses
were
properly
claimed
on
the
income
account
of
the
company.
In
support
of
this
position
the
Court
was
referred
to
the
following
cases:
(1)
Canadian
Marconi
Co.
v.
The
Queen,
[1986]
2
C.T.C.
465;
86
D.T.C.
6526.
(2)
Admiral
Investments
Ltd.
v.
M.N.R.,
[1967]
2
Ex.
C.R.
308;
[1967]
C.T.C.
165;
67
D.T.C.
5114.
(3)
Wellington
Hotel
Holdings
Ltd.
v.
M.N.R.,
[1973]
C.T.C.
473;
73
D.T.C.
5391.
(4)
Dr.
Andrew
Tamas
v.
The
Queen,
[1981]
C.T.C.
220;
81
D.T.C.
5150.
(5)
Placements
Bourget
Inc.
v.
The
Queen,
[1988]
2
C.T.C.
8;
88
D.T.C.
6274.
(6)
Gerald
Armstrong
v.
The
Queen,
[1985]
2
C.T.C.
179;
85
D.T.C.
5396.
Respondent's
Position
Apart
from
commenting
on
the
cases
presented
by
the
appellant,
counsel
for
the
respondent
mentioned
seven
factors
of
importance:
(1)
Question
of
Fact:
this
governs
the
decision
in
each
such
case
and
in
the
present
case
the
facts
point
to
investments.
(2)
Frequency
of
Transactions:
while
there
were
a
number
of
trades
there
were
really
only
eight
securities
involved
pointing
to
an
investment
portfolio.
There
were
no
"quick
flips”.
(3)
Knowledge
of
Market:
it
was
claimed
that
the
vice-president
of
the
appellant
had
no
knowledge
of
the
securities
market
and
was
only
acquiring
shares
on
behalf
of
his
company
as
investments.
(4)
Part
of
Taxpayer's
Ordinary
Business:
this
appellant
was
in
the
logging
business
and
some
real
estate
projects
but
trading
in
securities
was
not
a
normal
part
of
its
business.
(5)
Time
Spent:
the
vice-president
of
the
appellant
company
spent
a
minimum
amount
of
time
dealing
in
securities.
(6)
Financing:
the
company
carried
on
with
its
usual
operation
and
did
not
leverage
its
securities
account.
(7)
Advertising:
there
was
no
advertising
or
other
means
of
making
it
known
that
the
company
was
willing
to
purchase
securities.
The
above
criteria
are
discussed
in
Interpretation
Bulletin
IT-479R.
In
addition
to
this
the
Court
was
referred
to
the
following
cases:
Irrigation
Industries
Ltd.
v.
M.N.R.,
[1962]
S.C.R.
346;
[1962]
C.T.C.
215;
62
D.T.C.
1131
Imperial
Stables
(1981)
Ltd.
v.
Canada,
[1990]
1
C.T.C.
213;
90
D.T.C.
6135
Phyllis
Barbara
Bronfman
Trust
v.
The
Queen,
[1987]
1
S.C.R.
32;
[1987]
1
C.T.C.
117;
87
D.T.C.
5059
Considering
all
of
the
above
the
Minister
reassessed
on
the
basis
that
the
security
dealings
were
investments
of
the
appellant
until
the
portfolio
was
finally
liquidated
and
a
write-down
on
the
company
books
was
sought.
Analysis
The
appellant
company
was
engaged
in
several
undertakings.
Besides
logging
and
road
building
as
is
shown
in
its
year
end
financial
statement
for
1984
it
held
shares
in
speculative
companies,
held
land
for
development,
had
interests
in
joint
ventures
and
had
an
interest
in
a
Vancouver
property.
In
subsection
248(1)
of
the
Income
Tax
Act
("Act")
the
definition
of
"business"
is
very
broad
and
in
the
case
of
Canadian
Marconi
Co.
v.
The
Queen,
supra,
the
Court
held
that
there
was
no
reason
why
any
income
earned
by
a
company
incorporated
for
the
general
purpose
of
earning
income
by
doing
business
should
not
be
presumed
to
be
business
income.
Although
the
taxpayer's
main
business
was
in
logging
this
does
not
preclude
the
fact
that
its
activities
in
securities
might
not
be
viewed
as
being
income
from
business.
There
were
a
number
of
dealings
in
speculative
securities
and
commodities
futures
and
this
would
help
lead
to
the
conclusion
that
the
appellant's
intention
was
not
one
of
mere
investment
but
rather
of
speculation.
A
similar
set
of
facts
was
present
in
Wellington
Hotel
Holdings
Ltd.
v.
M.N.R.,
supra,
where
the
Court
concluded
that
the
share
transactions
carried
on
by
the
taxpayer,
which
was
in
the
hotel
business,
were
adventures
in
the
nature
of
a
trade.
The
securities
traded
being
of
a
highly
speculative
nature
were
made
in
the
hope
of
a
capital
appreciation
rather
than
dividend
earnings.
The
value
of
the
trade
consisted
of
approximately
16
per
cent
of
the
gross
sales
of
the
company
and
the
taxpayer
spent
about
ten
per
cent
of
his
time
in
the
trading
of
securities.
The
Court
in
that
case
expressly
rejected
the
respondent's
submission
that
the
case
of
Irrigation
Industries
Ltd.
v.
M.N.R.
(S.C.C.),
supra,
stood
for
the
principle
that
securities
traded
by
persons
engaged
only
incidentally
in
that
business
represent
an
investment
in
that
company,
any
expression
of
intention
not
to
invest
but
to
trade
notwithstanding.
Upon
citing
the
case
of
Californian
Copper
Syndicate
v.
Harris
(1904),
5
T.C.
159,
the
court
emphasized
at
page
5396:
”.
.
.
whether
a
series
of
transactions
results
in
a
capital
gain
or
loss
or
a
trading
profit
or
loss
is
a
question
of
fact
to
be
determined
after
considering
all
of
the
surrounding
circumstances".
The
Court
distinguished
the
Wellington
Hotel
case
with
the
set
of
facts
presented
in
Irrigation
Industries,
supra,
where
the
Court
had
been
reluctant
to
associate
the
purchase
and
selling
of
corporate
shares
to
be
a
trade
stating
that
shares
are
not
in
themselves
articles
of
commerce
but
an
investment.
In
Irrigation
Industries
the
company
had
engaged
in
an
isolated
transaction
while
being
widely
inactive.
In
the
Wellington
Hotel
case,
Urie,
J.
emphasized
that
this
was
not
an
isolated
purchase
and
while
the
two
businesses
of
the
appellant
were
not
related,
that
fact
alone
did
not
preclude
the
possibility
of
the
appellant
engaging
in
a
business
other
than
its
main
business.
He
said
at
page
482
(D.T.C.
5398):
The
additional
facts
in
evidence
upon
which
I
rely
to
support
my
views
are
that
the
securities
bought
and
sold
were
speculative
in
nature,
were
non-income
producing,
were
held
for
relatively
short
periods
of
time
and
formed
a
substantial
portion
of
the
total
business
of
the
appellant.
The
fact
that
it
was
not
part
of
the
main
business
of
the
appellant
is
of
no
particular
significance.
Cattanach,
J.
in
Admiral
Investments
Ltd.
v.
M.N.R.,
supra,
well
summa
rized
the
proper
test
in
ascertaining
the
speculative
or
investment-like
nature
of
the
transactions.
At
page
175
(D.T.C.
5121)
we
find:
What
must
be
looked
at
is
what
was
done
by
the
appellant
with
a
view
to
asking
the
question
in
Lord
President
Clyde's
words
in
C./.R.
v.
Livingston,
11
T.C.
538,
at
p.
542:
.
.
.whether
the
operations
involved
(in
the
transactions
of
the
company)
are
of
the
same
kind,
and
carried
on
in
the
same
way,
as
those
which
are
characteristic
of
ordinary
trading
in
the
line
of
business
in
which
the
venture
was
made.
While
the
appellant
was
not
a
trader
in
securities
in
the
sense
of
that
term
that
it
was
an
underwriter
and
held
a
seat
on
a
stock
exchange,
but
rather
made
its
purchases
and
sales
through
a
stock
exchange
in
the
usual
manner,
nevertheless,
the
acts
of
the
appellant
were
just
the
ordinary
transactions
of
a
person
who
deals
in
shares.
In
Dr.
Andrew
Tamas
v.
The
Queen,
supra
the
taxpayer,
a
radiologist
had
speculated
in
convertible
debentures,
commodity
futures
and
stock.
The
taxpayer
bad
borrowed
money
and
when
the
bank
recalled
the
loans,
the
taxpayer
had
to
sell
the
debentures
incurring
a
loss
of
$233,094.
The
taxpayer
engaged
thereon
in
commodity
futures
and
stock
and
incurred
more
losses.
The
taxpayer
claimed
a
deduction
for
all
the
losses
on
the
basis
that
he
was
in
the
business
of
trading
in
securities.
The
Court
allowed
the
appeal
on
the
basis
that
the
taxpayer
had
devoted
much
time
and
effort
to
his
trading
activities
and
that
the
investments
were
in
fact
highly
speculative.
The
obtaining
of
interest
income
was
therefore
not
the
taxpayer's
objective.
The
taxpayer
intended
to
sell
at
a
profit
and
his
activities
were
speculative
in
nature.
In
Tamas
the
Court
referred
at
some
length
to
the
case
of
James
A.
Taylor
v.
M.N.R.,
[1956-60]
Ex.
C.R.
3;
[1956]
C.T.C.
189;
56
D.T.C.
1125.
There
the
court
set
out
general
criteria
to
assist
in
the
determination
as
to
whether
transactions
are
in
the
nature
of
a
speculation
or
an
investment.
In
the
D.T.C.
headnote
there
is
the
following
comprehensive
analysis:
(1)
The
terms
"trade"
and
"adventure
or
concern
in
the
nature
of
trade"
are
not
synonymous
expressions.
A
transaction
which,
by
itself,
does
not
constitute
a
trade
may
still
be
an
adventure
in
the
nature
of
trade.
(2)
The
question
whether
a
particular
transaction
is
an
adventure
in
the
nature
of
trade
depends
on
its
character
and
surrounding
circumstances
and
no
single
criterion
can
be
formulated.
(3)
If
a
person
deals
with
the
property
purchased
in
the
same
way
that
a
regular
trader
in
property
of
the
same
kind
would
ordinarily
do,
such
a
dealing
may
fairly
be
called
an
adventure
in
the
nature
of
trade.
(4)
The
nature
and
quantity
of
the
subject
matter
of
the
transaction
may
be
such
as
to
exclude
the
possibility
that
its
sale
was
the
realization
of
an
investment
or
that
it
could
have
been
disposed
of
otherwise
than
as
a
trade
transaction.
(5)
If
the
element
of
speculation
is
present,
the
sale
of
a
property
that
is
productive
of
income
and
might
be
regarded
as
an
investment,
can
be
a
trade
in
the
property
rather
than
the
realization
of
an
investment.
(6)
The
intention
to
resell
at
a
profit
may
well
be
an
important
factor
in
determining
that
a
transaction
is
an
adventure
in
the
nature
of
trade,
but
its
presence
is
not
an
essential
prerequisite
to
such
a
determination
and
its
absence
does
not
negative
the
idea
of
an
adventure
in
the
nature
of
trade.
The
considerations
prompting
the
transaction
may
be
of
such
a
business
nature
as
to
invest
it
with
the
character
of
an
adventure
in
the
nature
of
trade
even
if
there
is
no
intention
of
making
a
profit
on
the
sale
of
the
purchased
commodity.
(7)
The
fact
that
the
transaction
is
totally
different
in
nature
from
any
of
the
other
activities
of
the
taxpayer
and
that
he
has
never
entered
upon
a
transaction
of
that
kind
before
or
since
does
not,
of
itself,
take
it
out
of
the
category
of
being
an
adventure
in
the
nature
of
trade.
(8)
It
is
not
essential
to
a
transaction
being
an
adventure
in
the
nature
of
trade
that
an
organization
be
set
up
to
carry
it
into
effect
or
that
some
operation
be
performed
on
the
subject
matter
of
the
transaction
to
make
it
saleable.
1
do
not
consider
it
necessary
to
refer
to
the
other
cases
advanced
by
both
parties.
The
conclusion
which
emerges
is
that
the
Court
has
considerable
discretion
in
determining
a
taxpayer's
intentions,
especially
when
he
entered
into
this
type
of
transaction.
While
no
single
factor
is
determinative
a
consideration
of
all
leads
to
the
appellant
having
embarked
on
a
program
to
produce
in
a
short
term
amounts
of
income
and
not
a
long
term
investment
program.
The
result
is
that
the
appellant
is
entitled
to
deduct
its
losses
as
business
losses
and
on
income
account.
The
appeal
is
allowed
with
costs
and
the
matter
is
referred
back
to
the
Minister
for
reconsideration
and
reassessment.
Appeal
allowed.
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