Jason v. R., [1996] 1 CTC 2320, 96 DTC 1927

Mogan J.T.C.C.: — The primary issue in this appeal is whether a certain residential property in the City of Toronto, purchased and sold within a short period of time, was “personal-use property” within the meaning of paragraph 54(f) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the “Act”) or property acquired for resale as an adventure in the nature of trade. The appellant is an Ontario lawyer who was called to the bar in 1982. The appellant’s wife (Paula McPherson) is also an Ontario lawyer. On December 5, 1988, Paula McPherson entered into a written agreement to purchase for $585,000 the single family dwelling located at 102 Snowdon Avenue in the City of Toronto. The purchase transaction was completed on April 11, 1989. In order to purchase the property at 102 Snowdon Avenue, the appellant and his wife had borrowed approximately $565,000 by way of mortgages and personal loans.

On December 7, 1989, Paula McPherson entered into a written agreement to sell for $540,000 the property at 102 Snowdon Avenue. The sale transaction was completed on January 29, 1990. There was an obvious loss on the purchase and sale of the property because the purchase price exceeded the selling price by $45,000. The appellant claims that the loss was a business loss because the property was purchased for resale as a speculation. The Respondent claims that the property was “personal-use property” because the appellant and his wife (referred to herein as “Paula”) and their infant son resided at 102 Snowdon Avenue for approximately 8 months (late May 1989 to late January 1990). When computing his net income from all sources for 1989, the appellant deducted as a business loss the amount of $188,164 computed as follows:

As stated above, the primary issue is whether the amount of $188,164 is a business loss from an adventure in the nature of trade or a loss on the disposition of personal use property and therefore deemed to be nil under subparagraph 40(2)(g)(iii) of the Income Tax Act. If the appellant is successful on the primary issue, there are two important secondary issues: (i) whether the loss can be deducted in 1989 when the sale agreement was signed on December 7, 1989 but not completed until January 29, 1990; and (ii) whether all or any portion of the loss can be deducted by the appellant when the Snowdon Avenue property was registered only in his wife’s name.

On the primary issue, the evidence goes both ways. There is very strong evidence that the appellant and Paula intended to use 102 Snowdon Avenue as their principal residence. In 1988, the appellant was practising law with a large Toronto law firm and Paula was employed as an in-house lawyer at a large corporation. In 1986, they were living in a one-bedroom rental apartment/condominium at 35 Church Street, Toronto, having about 1,100 square feet. When that unit was sold, they rented a 1,600 square foot apartment/condominium at 80 Front Street having two bedrooms. They were living at 80 Front Street when their first child was born in May 1988. At the hearing, the appellant gave the following evidence on his own behalf (transcript page 20):

In 1988 we — the market was very good and we looked at purchasing a single family property with the thought that this would be a property that we would hold of (sic) for a short period. And that we would get into it, fix it up and sell it. And we began looking into the market.

Those statements are consistent with what the appellant stated on his Examination for Discovery in those parts which were read into evidence:

Q. Now how long did you intend to keep the property when you decided to purchase 102 Snowdon?

A. Hard to say. I think at one time, probably when we did the Agreement of Purchase and Sale, we hoped ... and entered into the original agreement, we hoped it was going to be a long time. Paula was going to get better and healthy, and sell The Esplanade, and hold 102 Snowdon for a long time.

The reference to Paula’s health is relevant. Their son Michael was born in May 1988. In August 1988, it was discovered that Paula had breast cancer. She underwent surgery in September 1988 when one breast was removed. She started chemotherapy in November 1988 for a six-month period - two weeks on and two weeks off. She was away from her employment about 12 months from May 1988 on a combined pregnancy/illness leave. In June 1989, she was able to return to her employment as an inhouse lawyer. It was while she was taking the chemotherapy treatment that she signed the agreement (Exhibit A-l) on December 5, 1988 to purchase 102 Snowdon Avenue. In that agreement, certain chattels which were the property of the vendors (refrigerator, stove, washer, dryer, dishwasher, track lighting, window coverings, fireplace accessories, three Chinese rugs and a 6-chair dining suite) were included in the purchase price.

Immediately after the closing on April 11, 1989, the appellant and Paula hired a contractor (John O’Hara) to do repairs and renovations. Exhibit A-10 is a letter from Mr. O’Hara dated June 14, 1989 and hand-delivered to Paula in which he sets out (i) work originally contracted at $16,500; (ii) changes and extensions to original work at $23,600; and (iii) work still outstanding at $2,500. Mr. O’Hara testified at the hearing and explained that, after stripping and refinishing a hardwood floor with a particular stain, the appellant and Paula required him to strip the new stain and redo the floor a second time with a lighter stain. Similarly, he was required to paint and then repaint certain walls not to change the colour but only to change the shade or tone of the colour first chosen by Paula. Mr. O’Hara

concluded his letter to Paula (Exhibit A-10) with the following words:

On a separate issue, you and Robert Jason have complained about the disruption to your scheduled occupation, of the Property and, subsequently, to your enjoyment, of the Property, due to the ongoing renovations. Your frustrations and discomfort are understandable, but the underlying problems stem directly from your changes and extensions to the originally-planned work.

Even as recently, as yesterday, Robert Jason left a written message, for me, to do additional work not previously discussed .... which, under the circumstances, I am not prepared to commence.

The appellant explained the changes to Mr. O’Hara’s original work in the following way (transcript page 48):

Now, talking about the work being done, we did encounter some problems with Mr. O’Hara and his work and that necessitated things to be redone and corrected. In particular, there were some painting problems and some floor problems. Now, it was intended that we were going to live in this premises for some period of time before it was going to be resold. Although we didn’t expect it to be a long time. And we had certain furniture, et cetera, that had to go with the items in the property and so where the colour was way off, it was important that the thing was corrected. And also as we were trying to make the property as to a first class property for resale, it was also important that these things be done right. So the floors in particular, we had a major problem and ended up, I guess, being the reason, the major reason, why we terminated our relationship with Mr. O’ Hara ...

The direct evidence summarized above indicates an intention on the part of the appellant and Paula to use 102 Snowdon Avenue as their principal residence. There is other indirect evidence from which such an intention may be inferred. The appellant is both a chartered accountant and a lawyer. From 1986 to 1990 he specialized as an income tax lawyer. He is knowledgeable and sophisticated in income tax matters. He would know about the possibility of a tax-free capital gain from the sale of a principal residence under paragraph 40(2)(b) of the Income Tax Act. He would also know that he and Paula had to reside in the house for a reasonable length of time to qualify the property as a principal residence. The appellant and Paula were caught up in the excitement of a rising and overheated real estate market which affected many parts of southern Ontario in the period from 1984 through to the winter of 1988/89. The market was particularly active in Metropolitan Toronto. Many people reacted to the market as if the rising prices would never end. I say they were “caught up in the excitement” of the market because they assumed that any sale of 102 Snowdon Avenue after moderate renovations and a brief period of residence would trigger a capital gain, and they had also speculated on the purchase of a residential condominium apartment. It appears that Paula purchased 102 Snowdon Avenue at the peak of the market just before it went into decline.

In August 1986, the appellant and Paula had entered into an agreement to purchase for $175,000 a condominium apartment known as Suite 2605, 25 The Esplanade, Toronto. That address was close to the two apartments at 35 Church Street and 80 Front Street which the appellant and Paula rented; and all three addresses adjoined the business district in downtown Toronto. The appellant described their intention with respect to the condominium apartment in the following words (transcript page 18):

The condominium building was being built. We stayed in the rental accommodations. However, I don’t think it was ever our intention to live in the condo. It was going to be resold. It was a small unit, 1,100 square feet.

In the late 1980s, this was considered a “hot” area in Toronto’s real estate market. In 1988, the developer at 25 The Esplanade offered to buy back their unit (Suite 2605) for $275,000 even though the building had not been completed at that time. This offer would have given them a $100,000 gain on a property in which they had invested only a small amount by way of down payment. The appellant and Paula did not accept the developer’s offer because they thought that the market would continue to rise.

The appellant and Paula turned down the offer and easy gain on the condo (Suite 2605) before they signed the agreement in December 1988 to purchase 102 Snowdon Avenue. They thought that the registration of the condo would happen soon; they would put the condo up for sale, and use any resulting gain to pay down the financing on 102 Snowdon Avenue.

There was a delay in registering the condo and they could not sell it because there was no document of title which could be delivered. On March 9, 1989, the appellant and Paula entered into an agreement (Exhibit A-2) with the developer of the condo which authorized them to list with a real estate agent their agreement to purchase Suite 2605. The authorization of the developer was required because the condo was still not registered and all they could assign was their rights under the purchase agreement with respect to Suite 2605. The real estate market in Metro Toronto had started to decline in the early months of 1989. They could not sell the condo and ended up owning it throughout 1989.

There is very strong evidence that the appellant and Paula intended to resell 102 Snowdon Avenue for profit at the first opportunity. The property was heavily financed. The Royal Bank loaned $411,000 on the security of a first mortgage. The Royal Bank also made a joint and several personal loan of $154,000 to the appellant and Paula to help them close the purchase of 102 Snowdon. The Royal Bank therefore provided total financing of $565,000 to help in the purchase of a property which cost $585,000. The joint and several personal loan was secured in part by (i) a second mortgage of $45,000 on the Muskoka cottage of the appellant and Paula, subject to a first mortgage of $90,000 in favour of another creditor; and (ii) a second mortgage of $27,750 on 102 Snowdon Avenue. In summary, the appellant and Paula purchased 102 Snowdon with only $20,000 of their own money and $565,000 borrowed from the Royal Bank.

The appellant and Paula had virtually no equity in the property at 102 Snowdon. They had very little equity in their cottage. The only way they could hope to pay down a portion of the $565,000 borrowed for the purchase of 102 Snowdon was to sell their condominium (Suite 2605) at a significant profit and apply that profit to their borrowing. This may have appeared as a realistic possibility in December 1988 when Paula signed the agreement to purchase 102 Snowdon because she and the appellant had, earlier in 1988, turned down an easy profit of $100,000 on the condo when they declined the developer’s offer to buy it back for $275,000. It was not, however, a realistic possibility in April 1989 when they completed the purchase of 102 Snowdon because the market was in decline and they had already listed for sale their agreement to purchase Suite 2605.

Under that agreement, the developer of 25 The Esplanade could not require any purchaser to pay the purchase price until the condominium was registered. The building itself, however, was available for occupancy many months prior to registration. As of the occupancy date (June 1, 1989) each purchaser was required to pay to the developer a monthly “occupancy charge” which was like rent because the unit could be occupied although the purchase price had not been paid but which was, in reality, to reimburse the developer for his carrying costs until such time as he could obtain registration and then receive his selling price. As of June 1, 1989, the appellant and Paula were required to pay a monthly occupancy charge of approximately $1,800. On September 1, 1989, that occupancy charge was increased to $2,029 per month.

The appellant described the monthly financing costs which he and Paula had to bear as of June 1, 1989. They may be summarized as follows:

Occupancy charge (Suite 2605): $1,800

First Mortgage on cottage: $1,068

First Mortgage on 102 Snowdon: $4,636

Personal Loan (re 102 Snowdon): $1,900

Automobile lease: $542

Total: $9,946

As stated above, Paula had returned to work in June 1989 from her pregnancy/illness leave. The combined disposable income of the appellant and Paula in June and July 1989 was $10,400 per month which was only $500 per month more than the above monthly financing costs. In August 1989, Paula was ill again and had to take further disability leave from her employer. As of that time, their combined disposable income (the appellant’s income plus Paula’s disability allowance) dropped to $9,300 per month which was less than the above financing costs. They had tried to rent their condo Suite 2605 for $1,650 per month in June to offset part of the occupancy charge but found no tenant. The appellant stated that they decided in late July or early August 1989 to sell 102 Snowdon but the first extrinsic evidence of that decision is an advertisement which appeared in The Globe and Mail on September 18, 1989 offering the property for sale privately. When they could not sell 102 Snowdon privately, they listed it on September 26, 1989 with a real estate agent.

The agreement to sell 102 Snowdon was signed on December 7, 1989 (Exhibit A-15) and the sale for $540,000 was completed on January 29, 1990. At that time, the appellant and Paula and their son moved to their condo Suite 2605 which had not been sold and was still vacant because they had not been able to find a buyer or a tenant. In the summer of 1990, the appellant and Paula decided to leave Toronto in order to live in a smaller city in southern Ontario. On September 20, 1990, they sold the condo Suite 2605 for $195,000. Their purchase price of $175,000 had been 100 per cent financed by the Royal Bank (Exhibit A-18). After deducting the real estate commission and certain other expenses, there was a net loss on the sale of the condo which the appellant reported as a business loss on his 1990 income tax return.

Although there is strong evidence both ways on the primary issue, I have concluded that there was a secondary intention to sell for profit at the first opportunity; that the purchase of 102 Snowdon was an adventure in the nature of trade; and that the appellant should succeed on this issue. The best statement of the concept of secondary intention was made by Nol J. (as he then was) in Racine, Demers and Nolin v. Minister of National Revenue, [1965] C.T.C. 150, 65 D.T.C. 5098 (Ex. Ct.) at page 159 (Fr.), (D.T.C. 5103):

To give to a transaction which involves the acquisition of capital the double character of also being at the same time an adventure in the nature of trade, the purchaser must have in his mind, at the moment of the purchase, the possibility of reselling as an operating motivation for the acquisition; that is to say that he must have had in mind that upon a certain type of circumstances arising he had hopes of being able to resell it at a profit instead of using the thing purchased for purposes of capital.

This statement was cited with approval by LeDain J. delivering judgment for the Federal Court of Appeal in De Salaberry Realties Ltd. v. R. (sub nom. De Salaberry Realties Ltd. v. The Queen,), [1976] C.T.C. 656, 76 D.T.C. 6408 (F.C.A.) at page 658-60, (D.T.C. 6411). I am satisfied that the first intention of the appellant and Paula when purchasing 102 Snowdon was to use that property as a principal residence. I am also satisfied, however, that at the moment of purchase the appellant and Paula had in mind the possibility of reselling as an operating motivation for the purchase. This finding brings them under the umbrella of secondary intention as expressed in Racine.

The following evidence leads me to the finding that there was a secondary intention “at the moment of the purchase”. The appellant and Paula borrowed $565,000 to purchase 102 Snowdon. Most people do not borrow 96.5 per cent of the cost of a permanent home in that price range; they would have more equity at the time of purchase. Their speculation in the condominium (Suite 2605) and their refusal to accept a quick profit of $100,000 shows that they were following the Toronto real estate market and confident (mistakenly) of its continued upward spiral. The ability of the appellant and Paula to retain 102 Snowdon and to reduce their debt load was totally dependent upon their ability to sell their condo Suite 2605 in the immediate future at a reasonable profit. The chances of a quick profit on the condo may have looked rosy in the fall of 1988 when they had turned down the developer’s offer to buy it back and were about to sign the agreement to purchase 102 Snowdon but the bloom was off the rose in the Toronto real estate market by April 1989 when they completed that purchase. They owned three residential properties in 1989 (102 Snowdon, condominium Suite 2605 and the Muskoka cottage) but had virtually no equity in any of them.

The primary intention of the appellant and Paula to retain 102 Snowdon as a principal residence was frustrated by two events: their inability to reduce their debt load through the sale of the condo at a reasonable profit, and Paula’s failing health which required her to give up her full-time employment in August 1989. Both of these events were foreseeable at the time of purchase (December 5, 1988) because (i) Toronto was near the peak of an overheated real estate market in which condominiums in particular were in over-supply; and (ii) Paula had already had surgery and was receiving chemotherapy over a six-month period from November 1988 to May 1989. When the frustrating events are foreseeable at the time of purchase, it is easier to conclude that the purchaser had a secondary intention at that time to resell for profit if the declared or apparent primary intention could not be achieved. I find that the appellant and Paula had such a secondary intention.

Having decided that the appellant is successful on the primary issue, I am required to consider the secondary issue as to whether the loss of $188,164 can be deducted in 1989. At the conclusion of the hearing, I informed the parties of my decision that the loss could not be deducted in 1989 because it was not incurred in 1989; and I stated that I would later give reasons for that decision. I thought that by stating my decision at that time, the appellant may have been able to take steps to keep open his 1990 taxation year in case he should be successful (as he is) on the primary issue.

The sale agreement (Exhibit A-15) was signed on December 7, 1989 but the sale itself was not completed until January 29, 1990 when Paula delivered a deed transferring title to 102 Snowdon and the purchaser paid the purchase price. The appellant argued strongly that he should be permitted to deduct the loss in 1989 because the sale agreement was actually signed in 1989 and the sale was completed early in 1990, long before the time when he would have prepared and filed his 1989 income tax return. In other words, he knew before he prepared his 1989 income tax return that the sale had been completed and that a significant loss had occurred. The appellant also argued that he should be able to value the property like inventory on December 31, 1989 at $540,000 (being the price in the sale agreement) and deduct a loss in 1989 with respect to that value because the amount had been crystallized in the sale agreement.

Having regard to recent cases in the Federal Court of Appeal, I find very little merit in the appellant’s argument on this question of whether there was a loss to deduct in 1989. In Friesen v. R. (sub nom. Friesen v. Canada), [1993] 2 C.T.C. 113,93 D.T.C. 5313 (F.C.A.), the taxpayer and others had purchased in 1982 a parcel of raw land for resale as an adventure in the nature of trade. The value of the land went down in the next two years and the taxpayer (Friesen) attempted to deduct in 1983 and 1984 as business losses the decreased value of his interest in the land assuming that it was inventory which could be valued at the lower of cost or market. The Federal Court of Appeal held that when a taxpayer’s business consists of a single parcel of land held for speculation as an adventure in the nature of trade, the value of the land as inventory was not relevant until the taxation year in which it was sold. L tourneau J.A. delivering judgment for himself and Linden J.A. stated at page 117, (D.T.C. 5316):

In cases where the business itself consists in the buying and reselling of a parcel of land as in the present case, there are no business receipts or proceeds, and therefore no possible determination of a business profit or loss within the terms of subsection 9(1), unless and until the land bought is disposed of. The valuation of inventory property according to subsection 10(1) then becomes relevant in assessing the profit, i.e., the business income, for that year because it determines the cost of the sale.

Marceau J.A. delivered concurring reasons but held that section 10 had no application at all to an adventure in the nature of trade involving a single property. He stated at pages 118-119, (D.T.C. 5317-18):

To me, the provision does not apply, either in the year of disposition, when, in any event, it would, as I see it, be too late and of no use, or in the intervening years between acquisition and disposition.

The valuation of inventories in a trading business flows naturally from the carrying on of the business; the same can obviously not be said for an adventure in the nature of trade involving a single property. In other words, section 10, in the case of a trade, necessarily implies writing up and writing down inventory values, where the market value of the inventories are used in computing the cost of goods sold year after year, but not so in the case of a so-called adventure in the nature of trade, involving a sole property.

The appellant attempted to distinguish Friesen on the basis that he and Paula had a bona fide sale agreement in place on December 31, 1989 which was completed on January 29, 1990 and which, in effect, disposed of the property in 1989. On this attempted distinction, the appellant runs into the decision of the Federal Court of Appeal in Imperial General Properties Ltd. v. R., (sub nom. The Queen v. Imperial General Properties Ltd.), [1985] 1 C.T.C. 40, 85 D.T.C. 5045 (F.C.A.). In that case, the corporate taxpayer was attempting to accelerate the recognition of a profit on the sale of land in order to apply that profit against prior losses which would disappear after a pending amalgamation. MacGuigan J.A. delivering the judgment of the Court summarized the transaction at page 44, (D.T.C. 5048):

The Agreement of Purchase and Sale was dated October 29, 1968, for a closing date of October 31, with payments of $20,000 on execution of the agreement and $50,000 on closing. The purchaser had until December 15 to search title. In rough order of chronology, the soil tests were carried on in 1968 and 1969, the consent of the Committee of Adjustment to the issuance of the deeds was issued on August 8, 1969, the subdivision agreement was entered into in 1970 and the plan of subdivision was registered on July 8, 1970, the servicing of the land was completed in the middle of 1970, the building permits for the proposed buildings were issued in September, 1970, the statement of adjustments was calculated as of September 10, 1970, and the deeds of title were registered at about the same time.

At page 42-43, (D.T.C. 5047) he had stated the issue as follows:

... the issue is whether or not the Trial Judge erred in holding that the profit realized by Brampton on the disposition of the property was properly included in its income for its 1968 taxation year. The determination of that issue necessitates a finding as to the time of completion of the sale. The respondent argues that the property was sold on October 31, 1968, and that it rightly included in its 1968 income both the $70,000 it had received in 1968 and the balance of $774,240 receivable from Mendlewitz on account of the property.

Having regard to the agreement of purchase and sale, the Federal Court of Appeal concluded that the sale was not completed until 1970 when the conditions precedent had been satisfied and the deeds of title were registered. In other words, the sale was not completed until the vendor had an unconditional right to receive the purchase price.

Any agreement or contract brings into existence both rights and obligations between the contracting parties. If the agreement relates to the sale of land, each of the parties may acquire a right to specific performance but the agreement itself does not transfer legal ownership of the land or give the vendor an immediate and unconditional right to receive the proceeds of sale. In my opinion, Paula did not dispose of the property at 102 Snowdon in 1989 and the sale was not completed until January 29, 1990.

I am reinforced in this opinion by three considerations. Firstly, from a practical point of view, there are any number of circumstances which may arise between the signing date of the agreement and the closing date and may make it impossible for either vendor or purchaser to enforce its right to specific performance. There have been countless actions in the various provincial courts to determine the rights and obligations of vendors and purchasers in a contract for the sale of land. In Ontario, these actions come under the Vendors and Purchasers Act, 1990 R.S.O. chapter V.2 which provides in subsection 3:

3.(1) A vendor or purchaser of real or leasehold estate or the vendor’s or purchaser’s representative may at any time and from time to time apply to the Ontario Court (General Division) in respect of any requisition or objection or any claim for compensation or any other question arising out of or connected with the contract, except a question affecting the existence or validity of the contract, and the court may make such order upon the application as may be considered just. R.S.O. 1980, c. 520, s.3(l), revised.

Notwithstanding the existence of a binding agreement with respect to the sale of land giving rise to rights of specific performance, there may never be an actual transfer of the subject land between the particular vendor and purchaser. As I see it, this is the danger in relying upon a “binding agreement” to conclude that any property has been disposed of or acquired until the purchaser has acquired title or the normal incidents of title like possession, use and risk.

Secondly, following the principle in Minister of National Revenue v. Wardean Drilling Co. Ltd., [1969] C.T.C. 265, 69 D.T.C. 5194 (Ex. Ct.), the purchaser of 102 Snowdon would not be regarded as having acquired the property until legal title had passed or until the purchaser had the normal incidents of title such as possession, use and risk. None of these events had occurred in 1989. The principle in Wardean Drilling has been applied to cases involving real property in the Federal Court Trial Division Olympia & York Developments Ltd. v. R. (sub nom. Olympia & York Developments Ltd. v. The Queen), [1980] C.T.C. 265, 80 D.T.C. 6184, and in this Court Schneider v. Minister of National Revenue, [1989] 1 C.T.C. 2295, 89 D.T.C. 198 (T.C.C.) and McKervey v. Minister of National Revenue, [1992] 2 C.T.C. 2015, 92 D.T.C. 1570 (T.C.C.).

And thirdly, I infer from the statements of the Federal Court of Appeal in Friesen (above) that the accounting for an adventure in the nature of trade would not be on the accrual basis but on some modified cash basis, not recognizing a profit or loss until a sale had been completed. In Ken Steeves Sales Ltd. v. Minister of National Revenue, [1955] C.T.C. 47, 55 D.T.C. 1044, the Exchequer Court held that a trader could not use the “cash method” of accounting but was required to use the accrual method. Cameron J. stated at page 62, (D.T.C. 1050):

In my opinion, therefore, when trading stocks are sold and delivered, the full price should be brought into account in the year in which the delivery is made irrespective of the time of payment. The trader in such cases has the right to take advantage in proper cases of the statutory provisions regarding bad and doubtful debts to which I have referred above.

When this statement is contrasted with what Marceau J.A. said in Friesen (quoted above), it appears to me that the accounting for an adventure in the nature of trade involving a single property may well be on the cash basis because there is no day-to-day trading business which is being “carried on” as that term is ordinarily understood.

The third and last issue is whether all or any portion of the loss can be deducted by the appellant when 102 Snowdon Avenue was registered only in Paula’s name. I find that the property was owned equally by the appellant and Paula. The persuasive evidence on this issue is Exhibit A- 5 being a letter dated April 24, 1989 from the Royal Bank to the law firm representing Paula on the purchase of 102 Snowdon. The reference line in the letter is “Robert Jason & Paula McPherson”. That letter states in part:

We are pleased to confirm that the Royal Bank of Canada has approved a Joint and Several Personal Loan for the above captioned in the amount $154,000 to assist with the closing of 102 Snowdon Avenue, Toronto. In support of this Mr. Jason & Ms. McPherson have agreed to provide the following security:

The appellant provided significant security to facilitate the purchase. Also, I believe the appellant when he states that the property was registered only in Paula’s name because he was engaged in the public practice of law and subject to liability for any professional negligence of his partnership, whereas she was employed as in-house counsel by a corporation and not subject to such liability. Therefore, although the property was registered only in Paula’s name, I find that they owned it on a 50-50 basis and the appellant is entitled to deduct one-half of the loss in computing his income for 1990.

In conclusion, the appellant succeeds on the primary issue that the purchase of 102 Snowdon Avenue by him and Paula was an adventure in the nature of trade. He loses on the second issue because the loss on sale was not realized until 1990 and so he had no loss to deduct in 1989. And he succeeds in part on the third issue in claiming that one-half of the loss was realized by him. Because the only taxation year under appeal was 1989, the appeal will be dismissed. In all of the circumstances, each party will bear its own costs.

Appeal dismissed.