P.R.
Dussault
J.T.C.C.:-These
are
appeals
from
assessments
made
for
the
appellant’s
1987,
1988
and
1989
taxation
years,
according
to
which
the
Minister
of
National
Revenue
(the
"Minister")
determined
that
transactions
in
1987
and
1988
concerning
a
lot
situated
in
Drummondville
gave
rise
to
business
income
and
not
to
capital
gains
as
the
appellant
contended.
Moreover,
the
Minister
disallowed
the
appellant’s
claim
for
a
reserve
with
respect
to
these
transactions.
However,
with
regard
to
this
aspect
of
the
case,
counsel
for
the
respondent
admitted
at
the
beginning
of
the
hearing
that
the
appellant
was
entitled
to
a
reserve
under
the
provisions
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
and
that
the
reserve
would
be
established
by
the
Minister
in
accordance
with
the
decision
of
the
Court
concerning
the
nature
of
the
transactions
in
question.
The
main
events
which
gave
rise
to
the
transactions
at
issue
are
described
in
the
notice
of
appeal
as
follows:
7.
On
April
25,
1985,
the
appellant
and
Fernand
Levesque
agreed
to
form
a
partnership
to
operate
a
garage
in
the
Drummondville
region,
and
for
that
purpose
to
acquire
an
immovable
owned
by
the
Caisse
d’Entraide
Economique
de
Drummondville
to
operate
the
business,
the
whole
as
it
appears
in
a
copy
of
the
agreement
between
the
appellant
and
Fernand
Lévesque
produced
in
support
hereof
as
Exhibit
A-5,
to
be
read
as
if
it
were
recited
in
full
herein;
8.
For
that
purpose,
an
offer
to
purchase
in
the
amount
of
$40,000
was
submitted
by
the
appellant
and
Fernand
Lévesque
to
the
Société
d’Entraide
Économique
du
Centre
du
Québec
Inc.
on
August
5,
1985,
which
offer
to
purchase
was
accepted
by
the
representatives
of
the
owner
on
August
16,
1985,
the
whole
as
it
appears
in
a
copy
of
that
offer
to
purchase
produced
in
support
hereof
as
Exhibit
A-6,
to
be
read
as
if
it
were
recited
in
full
herein;
9.
Upon
acceptance
of
the
offer
to
purchase
by
the
owner,
the
latter
authorized
the
appellant
and
Fernand
Lévesque
to
take
possession
of
the
premises
on
August
27,
1985,
so
that
they
could
proceed
to
clear
the
lot
and
repair
the
building,
the
whole
as
it
appears
in
a
copy
of
a
letter
sent
by
a
representative
of
the
owner
and
produced
in
support
hereof
as
Exhibit
A-7,
to
be
read
as
if
it
were
recited
in
full
herein;
10.
Upon
acceptance
of
their
offer
and
receipt
of
authorization
to
take
possession
of
the
premises,
the
appellant
and
Fernand
Lévesque
retained
Robert
Talbot
to
appraise
the
repairs
to
be
done
on
the
building
acquired
from
the
Société
d’Entraide
Économique
du
Centre
du
Québec
Inc.,
which
appraisal
disclosed
that
work
on
the
order
of
$57,275
had
to
be
done
to
put
the
building
into
good
condition,
the
whole
as
it
appears
in
an
appraisal
dated
September
8,
1985,
a
copy
of
which
is
produced
in
support
hereof
as
Exhibit
A-8,
to
be
read
as
if
it
were
recited
in
full
herein;
11.
Given
the
extent
of
the
repairs
to
be
done
on
the
building,
the
appellant
and
Fernand
Lévesque
decided
not
to
proceed
with
those
repairs;
12.
For
reasons
beyond
the
control
of
the
appellant
and
Fernand
Lévesque,
the
contract
for
the
acquisition
of
the
immovable,
which
was
referred
to
above,
was
not
signed
until
September
30,
1985,
before
Mr.
Michel
Giguere,
a
notary
in
Drummondville,
and
the
act
was
registered
in
the
office
of
the
registry
division
of
Drummond
on
September
30,
1985
as
number
291716,
the
whole
as
it
appears
in
a
copy
of
the
contract
produced
in
support
hereof
as
Exhibit
A-9,
to
be
read
as
if
it
were
recited
in
full
herein;
13.
As
a
result
of
the
decision
not
to
make
the
repairs
on
the
building
described
above,
the
appellant
and
Fernand
Lévesque
decided
by
mutual
agreement
to
acquire
another
building
which
had
previously
been
used
as
a
warehouse
and
was
situated
on
the
same
street
as
the
building
previously
acquired,
which
building
required
only
little
or
no
repairs
in
order
to
be
used
for
operating
the
planned
business;
14.
Unlike
what
had
happened
with
the
first
immovable,
the
acquisition
of
the
second
one
proceeded
rapidly,
even
without
the
need
for
signing
an
offer
to
purchase,
and
was
done
for
the
price
of
$60,000;
15.
Moreover,
a
contract
of
acquisition
of
that
immovable
was
signed
on
September
25,
1985,
before
Mr.
Michel
Giguère,
a
notary
in
Drummondville,
by
the
appellant,
Fernand
Lévesque
and
Line
Coulombe,
who
became
the
purchasers
of
the
said
immovable,
the
whole
as
it
appears
in
a
copy
of
the
contract
produced
in
support
hereof
as
Exhibit
A-10,
to
be
read
as
if
it
were
recited
in
full
herein;
16.
Subsequently
to
the
acquisition
of
the
immovable,
Fernand
Lévesque
acted
on
his
undertaking
of
April
25,
1985
to
operate
a
garage
in
the
building
acquired
from
Société
de
Gestion
J.N.G.
Inc.
on
the
terms
of
the
contract
produced
as
Exhibit
A-10,
at
about
the
beginning
of
November,
1985,
the
whole
as
will
be
more
fully
proved
at
trial;
17.
Moreover,
in
view
of
the
danger
and
the
dilapidated
condition
of
the
building
situated
on
the
land
which
was
the
subject
of
the
contract
produced
as
Exhibit
A-9,
the
appellant
and
Fernand
Lévesque
agreed
between
themselves
to
demolish
the
building,
upon
issuance
of
a
demolition
permit
by
the
municipality
on
January
20,
1986;
18.
As
a
result
of
approaches
made
by
a
representative
of
Actimum
Services
Immobiliers
Inc.
to
the
appellant
and
Fernand
Lévesque,
negotiations
were
undertaken
for
the
resale
of
the
immovable
which
was
the
subject
of
the
contract
produced
as
Exhibit
A-9;
19.
Under
the
terms
of
the
agreements
negotiated
with
Actimum
Services
Immobiliers
Inc.,
the
appellant
and
Fernand
Lévesque
had
to
obtain
a
zoning
change
from
the
municipality
of
St-Nicéphore
so
that
the
zone
in
which
the
immovable
described
in
the
contract
produced
as
Exhibit
A-9
was
situated
would
be
changed
from
"industrial"
to
"residential";
20.
Actimum
Services
Immobiliers
Inc.
was
acting
as
the
real
estate
developer,
since
the
appellant
and
Fernand
Lévesque
had
no
experience
in
that
field;
21.
Moreover,
the
appellant
and
Fernand
Lévesque
never
had
the
intention
of
acting
as
real
estate
developers
nor
of
engaging
in
the
real
estate
business;
22.
As
a
result
of
the
negotiations
with
Actimum
Services
Immobiliers
Inc.,
a
contract
of
sale
was
entered
into
on
May
5,
1987
before
Mr.
Pierre
Fradette,
a
notary
in
Drummondville,
which
bill
of
sale
was
registered
in
the
office
of
the
registry
division
of
Drummond
on
May
26,
1987,
as
number
304863,
the
whole
as
it
appears
in
a
copy
of
the
contract
of
sale
produced
in
support
hereof
as
Exhibit
A-11,
to
be
read
as
if
it
were
recited
in
full
herein;
23.
As
attested
by
the
contract
produced
as
Exhibit
A-l
1,
the
appellant
and
Fernand
Lévesque
were
required
to
bear
substantial
costs
in
order
to
give
effect
to
the
agreement
with
Actimum
Services
Immobiliers
Inc.,
such
as
fees
and
expenses
for
an
engineer
and
a
surveyor,
the
cost
of
installing
services
and
special
municipal
taxes;
24.
As
a
result
of
financial
difficulties
experienced
by
Actimum
Services
Immobiliers
Inc.,
it
defaulted
on
the
obligations
it
had
contracted
under
the
contract
produced
as
Exhibit
A-11,
so
that
the
parties
were
obliged
to
agree
on
new
terms
and
conditions
for
payment
of
the
purchase
price,
the
whole
as
it
appears
in
an
agreement
signed
before
Mr.
Pierre
Fradette,
a
notary
in
Drummondville,
on
November
2,
1987,
a
copy
of
which
is
produced
in
support
hereof
as
Exhibit
A-12,
to
be
read
as
if
it
were
recited
in
full
herein;
25.
Because
Actimum
Services
Immobiliers
Inc.
was
unable
to
meet
the
obligations
it
had
contracted
under
the
acts
produced
as
Exhibits
A-11
and
A-12,
Actimum
Services
Immobiliers
Inc.
agreed
to
return
possession
of
the
immovables
previously
acquired
from
the
appellant
and
Fernand
Lévesque
voluntarily,
after
the
appellant
and
Fernand
Lévesque
had
given
them
60
days’
notice,
the
whole
as
it
appears
in
the
60
days’
notice
and
the
act
of
voluntary
reconveyance
signed
on
April
21
and
27,
1988,
respectively,
before
Mr.
Denis
Gariépy,
a
notary
in
Drummond
ville,
and
registered
in
the
office
of
the
registry
division
of
Drummond
on
April
22,
1988
as
number
312307
and
on
April
28,
1988
as
number
312487,
these
acts
being
both
produced
in
support
hereof
as
Exhibit
A-13,
to
be
read
as
if
they
were
recited
in
full
herein;
26.
As
attested
by
the
documents
produced
together
as
Exhibit
A-13,
Actimum
Services
Immobiliers
Inc.
reconveyed
to
the
appellant
and
Fernand
Lévesque
the
lots
that
had
not
yet
been
the
subject
of
a
resale
to
third
parties,
including
both
the
vacant
ones
and
those
on
which
houses
had
already
been
constructed
or
were
being
constructed,
the
whole
as
will
be
more
fully
proved
at
trial;
27.
Because
the
appellant
and
Fernand
Lévesque
had
no
experience
in
the
real
estate
field
and
they
did
not
intend
to
venture
into
the
field
of
real
estate
development,
on
May
5,
1988,
nine
days
after
the
voluntary
reconveyance
to
them,
they
resold
the
land
as
a
whole,
except
for
certain
commercial
lots
excluded
by
the
purchaser,
to
Les
Construction
Gaétan
Brochu
(1984)
Inc.,
by
bill
of
sale
signed
before
Mr.
Denis
Gariépy,
a
notary
in
Drummondville,
and
registered
in
the
office
of
the
registry
division
of
Drummond
on
May
6,
1988
as
number
312763,
which
contract
of
sale
is
produced
in
support
hereof
as
Exhibit
A-14,
to
be
read
as
if
it
were
recited
in
full
herein;
[Translation.]
Counsel
jointly
produced
a
book
containing
part
of
the
relevant
documentary
evidence.
Other
documents
were
also
produced
by
each
party.
Fernand
Lévesque,
Yvon
Coulombe,
Denis
Gariépy
and
the
appellant,
Gilles
Coulombe,
testified.
The
testimony
of
Fernand
Lévesque
dealt
first
with
his
business
activities
as
the
operator
of
a
general
mechanical
work
and
bodywork
garage
and
a
business
selling
used
cars
and
car
parts
in
Amqui,
Quebec,
in
the
early
1980s.
That
business
was
also
connected
with
the
operation
of
a
motor-racing
track
in
the
same
place.
When
those
businesses
went
bankrupt
in
1983,
Mr.
Lévesque
had
the
idea
of
opening
a
garage
again
in
Rimouski,
with
the
participation
of
the
appellant
and
the
appellant’s
father,
Yvon
Coulombe,
but
gave
up
the
idea
because
of
the
bankruptcy,
in
view
of
the
proximity
of
the
two
towns.
Then
he
moved
to
Drummondville
where,
after
several
months
of
inactivity,
when
he,
as
tenant,
and
his
sons
decided
to
operate
a
Sunoco
service
station
and
general
mechanical
shop.
After
a
few
months,
they
added
the
more
specialized
business
of
repairing
and
installing
radiators.
One
year
after
he
started
the
business,
Mr.
Lévesque
was
compelled
to
leave
the
premises
because
of
the
rental
cost
which
the
Sunoco
company
had
then
set
at
double
the
initial
cost.
At
the
beginning
of
1984,
he
set
up
business
in
a
garage
in
a
town
close
by
in
order
to
carry
on
there
his
business
of
general
mechanical
work,
bodywork
and
radiator
repairs
and
also
sell
used
cars.
However,
according
to
him,
there
was
not
very
much
business,
so
about
six
months
later
he
agreed
to
operate
again
a
service
station
in
Drummondville,
this
time
for
the
Ultramar
company,
while
at
the
same
time
carrying
on
his
business
of
repairing
and
installing
radiators.
Mr.
Levesque
stated
that
while
he
was
operating
that
business,
representatives
of
Ultramar
let
him
know,
at
some
point,
that
the
company
was
considering
getting
rid
of
the
garage
for
$295,000,
failing
which
they
would
simply
demolish
it;
this
is
what
in
fact
happened
later,
in
1985,
as
the
company
had
been
unable
to
sell
either
to
Mr.
Lévesque
or
to
anyone
else.
While
Mr.
Lévesque
had
until
then
carried
on
his
various
business
activities
in
Drummondville
and
the
surrounding
area,
it
does
seem
that
it
was
the
difficulties
he
encountered
as
a
tenant,
particularly
with
the
oil
companies,
that
prompted
him
to
look
for
a
lot
and
a
building
which
he
would
own
himself.
At
that
point,
Mr.
Lévesque
was
also
planning
to
form
a
partnership
with
the
appellant,
his
nephew.
The
appellant,
who
was
then
a
student
in
Rimouski,
had
for
several
years
indicated
his
interest
not
only
in
mechanical
work
and
the
reconditioning
of
old
and
used
cars,
but
also
in
joining
Mr.
Lévesque
and
his
sons
in
order
to
operate
a
garage
and
a
car
sales
business.
The
agreement
referred
to
in
paragraph
7
of
the
notice
of
appeal,
which
was
signed
by
Mr.
Lévesque
and
the
appellant
in
Rimouski
in
April
1985,
was
a
result
of
the
discussions
with
the
appellant
and
with
the
appellant’s
father,
Mr.
Y
von
Coulombe.
That
agreement
refers
to
a
desire
by
the
two
parties
to
enter
into
a
partnership
to
operate
a
garage
in
Drummondville
as
soon
as
the
appellant
completed
his
studies.
It
also
provided
that
the
parties
would
make
an
offer
to
purchase
on
a
site
located
on
Boulevard
St-
Joseph
comprising
an
industrial
lot
and
a
building
belonging
to
the
Société
d’entraide
économique
du
Centre
du
Québec
Inc.
(the
"Société
d’entraide")
and
that,
if
the
offer
was
accepted,
Mr.
Lévesque
would
begin
operating
the
garage
"as
soon
as
the
alterations
and
repairs
to
the
existing
building
are
completed".
The
appellant
undertook
to
come
and
join
his
uncle,
Mr.
Lévesque,
once
an
inventory
had
been
done,
and
to
start
operating
the
business
in
partnership
with
him,
only
after
he
had
completed
his
studies
in
Rimouski.
I
understand
that
it
was
the
appellant’s
father
who
insisted
that
the
appellant
finish
his
studies
before
going
into
business
with
Mr.
Lévesque
in
Drummondville.
An
initial
purchase
offer
of
$35,000
was
made
by
the
appellant
and
Mr.
Lévesque
for
the
lot
referred
to,
which
had
an
area
of
450,000
square
feet,
and
on
which
was
constructed
a
building
that
had
housed
an
old
factory.
That
offer
was
refused
by
the
Société
d’entraide.
A
second
offer
dated
August
5,
1985,
which
is
referred
to
in
paragraph
8
of
the
notice
of
appeal,
in
the
amount
of
$40,000,
was
however
accepted
on
August
16,
1985.
Let
us
point
out
here
that
the
greater
share
of
the
purchase
price
was
paid
out
of
funds
borrowed
from
Mr.
Y
von
Coulombe,
the
appellant’s
father,
and
from
his
wife.
Since
the
offer
had
been
accepted,
the
manager
of
the
Société
d’entraide
gave
Mr.
Lévesque
and
the
appellant
authorization
on
August
27
to
begin
to
clear
the
lot
and
to
do
the
work
required.
A
Mr.
Robert
Talbot
was
asked
to
provide
an
estimate
of
the
work
to
be
done,
and
by
letter
dated
September
8,
1985
he
set
the
price
at
$57,275.
The
essential
points
in
respect
of
the
sequence
of
events
concerning
the
acquisition
of
that
site
and
the
acquisition
of
a
second
site
comprising
three
buildings,
which
was
situated
not
far
away
on
the
same
boulevard,
are
essentially
described
in
paragraphs
9
to
17
of
the
notice
of
appeal,
set
out
above.
The
second
site,
which
had
an
area
of
550,000
square
feet,
was
acquired
at
a
price
of
$60,000
by
contract
signed
on
September
25,
that
is,
a
few
days
before
the
contract
for
the
acquisition
of
the
first
site
was
executed,
the
offer
having
been
accepted
by
the
Société
d’entraide
on
August
16,
1985.
A
number
of
points
in
Mr.
Lévesque’s
testimony
with
respect
to
these
two
transactions,
which
were
carried
out
a
few
days
apart,
should
be
noted.
According
to
him,
although
the
two
sites
were
of
large
sizes,
they
were
in
reality
quite
appropriate
for
the
type
of
business
they
were
planning
to
operate,
which
included
a
scrap
yard
since
the
scrapped
auto
bodies
could
only
be
disposed
of
at
the
back
of
the
lot
and
not
along
the
side
of
the
road.
From
his
experience
in
Amqui,
Mr.
Lévesque
also
stated
that
the
business
he
had
operated
there
in
the
1980s
had
required
that
he
made
use
of
lots
having
even
a
much
greater
area
precisely
to
provide
a
place
to
dispose
of
the
scrapped
auto
bodies.
Mr.
Lévesque
also
stated
that
if
the
offer
to
purchase
the
first
lot
had
been
made
after
several
visits
to
the
site
and
after
an
appraisal
of
the
repairs
to
be
done,
which
amounted
to
some
$70,000,
ultimately
it
was
the
fact
that
the
price
of
those
repairs
was
too
high,
in
view
of
the
opportunity
which
was
offered
to
them
to
acquire
the
second
site
with
three
buildings
that
required
only
minor
repairs
before
opening
for
business,
that
prompted
them
to
prefer
that
site
over
the
first
one.
The
delay
in
signing
the
agreement
of
purchase
for
the
first
site
before
the
notary,
and
the
notary’s
uncertainty
concerning
the
titles,
would
have
also
provided
them
with
a
reason
for
proceeding
rapidly
with
the
transaction
in
respect
of
the
second
site.
I
understand
as
well
from
his
testimony
that
the
buildings
that
stood
on
that
site
also
offered
the
opportunity
of
adding
the
sale
of
cars
by
auction
to
the
activities
that
had
initially
been
planned.
The
financing
for
the
acquisition
of
the
second
site
was
secured
by
obtaining
three
loans
of
$20,000
each
which
Yvon
Coulombe
granted
to
his
daughter
Lyne,
his
son
Gilles
and
Fernand
Lévesque,
his
brother-in-law,
who
became
the
purchasers.
That
arrangement
was
made
this
time,
according
to
Mr.
Lévesque,
because
Yvon
Coulombe
wanted
to
protect
his
two
children
by
limiting
in
this
way
the
amount
of
the
loan
he
granted
each
of
them.
Thus
at
the
end
of
September
1985
Mr.
Lévesque
found
himself
the
owner
of
a
one-half
interest
in
the
first
site,
with
the
appellant,
and
of
a
one-third
interest
in
the
second
site,
with
his
niece
Lyne
and
his
nephew
Gilles,
the
appellant.
The
business
of
selling
cars
by
auction
in
two
of
the
buildings
situated
on
the
second
lot
lasted
only
a
few
weeks,
in
October
and
November
1985,
and
proved
to
be
a
failure.
However,
toward
the
end
of
1985,
after
leaving
the
Ultramar
service
station,
Mr.
Lévesque
carried
on
his
other
business
activities
there,
doing
mechanical
work
and
radiator
repairs
and
selling
used
parts.
The
third
building
was
rented
from
the
outset
to
another
business
and
continued
to
be
rented
to
various
businesses
until
1992
when
it
was
destroyed
by
an
explosion.
Mr.
Lévesque
said
that
the
first
site,
which
was
no
longer
needed
and
which
was
never
used
for
the
business
that
had
initially
been
planned,
had
been
put
up
for
sale
simply
by
placing
a
sign
that
he
had
made
himself
on
the
lot.
The
building
that
stood
on
that
site
was
demolished
a
few
months
later
by
Mr.
Lévesque
himself
as
a
result
of
pressure
from
the
city,
which
had
found
it
to
be
unsafe
and
a
target
for
vandalism.
While
the
activities
relating
to
the
operation
of
the
garage
in
the
buildings
that
stood
on
the
second
site
were
carried
on
until
the
end
of
1987
or
the
beginning
of
1988,
Mr.
Lévesque
stated
that
he
had
left
primary
responsibility
for
that
business
to
one
of
his
sons
from
the
end
of
1986
because
business
was
not
as
flourishing
as
he
had
anticipated.
He
himself
decided
to
go
back
to
a
trade
at
which
he
had
worked
in
the
past,
that
of
a
semiskilled
concrete-
pouring
worker.
Through
an
acquaintance,
he
was
able
to
get
hired,
with
another
of
his
sons,
to
pour
concrete
floors
in
the
new
Domtar
plant
in
Windsor,
Quebec.
As
a
result
of
that
experience
and
after
doing
additional
finishing
concrete
work
on
contract
for
contractors
or
individuals,
Mr.
Lévesque
obtained
a
licence
in
1987
as
a
contractor
specializing
in
concrete
finishing
work.
As
he
explained
it,
it
was
only
much
later
that
he
got
more
involved
in
construction
and
he
obtained
a
general
commercial
and
residential
construction
contractor
licence,
at
the
end
of
1991
or
the
beginning
of
1992,
and
he
has
been
working
in
that
field
since
then.
As
a
result
of
these
events
and
other
problems
experienced
by
the
appellant,
the
plan
to
form
a
partnership
to
operate
a
garage
has
therefore
never
materialized.
The
transactions
concerning
the
first
site,
which
occurred
in
1987
and
1988
and
which
are
the
subject
of
this
appeal,
were
preceded
by
earlier
negotiations
for
the
sale
of
the
lot
as
a
whole.
According
to
Mr.
Lévesque,
while
the
intention
to
sell
the
land
had
been
advertised
only
by
the
sign
he
had
put
up
himself
in
1985,
discussions
did
not
take
place
until
1986
with
a
Mr.
Béland
who
said
that
he
was
prepared
to
purchase
the
entire
lot
for
$1
per
square
foot,
on
condition,
however,
that
the
vendors
bore
the
cost
of
the
infrastructure
work
and
certain
other
expenses.
Mr.
Béland
had
studies
done
and
took
preliminary
steps
through
his
brother-in-
law,
a
Mr.
Arel,
a
professional
engineer.
However,
after
a
while
Mr.
Béland
indicated
that
he
no
longer
wished
to
pursue
his
plan
and
he
returned
the
matter
to
Mr.
Lévesque,
who
stated
that
he
then
had
to
pay
$5,500
in
engineering
fees.
My
understanding
of
this
part
of
his
testimony
is
that
this
disbursement,
as
well
as
the
subsequent
expenses
that
he
and
the
appellant
had
to
incur
under
the
terms
of
the
agreements
with
Actimum
Services
Immobiliers
Inc.
("Actimum"),
and
with
Constructions
Gaétan
Brochu
(1984)
Inc.
("Constructions
Brochu"),
were
financed
by
the
appellant’s
father,
Yvon
Coulombe.
Mr.
Lévesque
stated
that
at
the
time
he
and
the
appellant
had
no
knowledge
of
the
market
or
of
real
estate
development,
and
that
it
had
been
decided
after
discussions
with
Yvon
Coulombe
that
these
substantial
expenses
would
be
incurred
solely
in
order
to
be
able
to
get
rid
of
the
lot
and
ultimately
to
repay
him
the
money
borrowed
at
the
time
of
the
acquisition.
The
essential
points
concerning
the
sale
to
Actimum
in
May
1987,
the
financial
difficulties
that
that
company
experienced,
the
retaking
of
possession
in
April
1988
and
the
resale
to
Constructions
Brochu
a
few
days
later
are
set
out
in
paragraphs
18
to
24
of
the
notice
of
appeal,
reproduced
above.
In
his
testimony,
Mr.
Lévesque
provided
details
concerning
the
negotiations
with
Actimum.
He
emphasized
the
confidence
that
he
and
the
appellant
and
his
father
had
that
this
company
would
be
able
to
proceed
with
subdividing
the
land
acquired
and
pay
the
agreed
price.
Only
a
few
houses
were
built,
and
they
remained
unsold.
Then
came
the
financial
problems,
the
failure
of
the
plan
and
the
retaking
of
possession.
Mr.
Lévesque
also
described
the
circumstances
of
the
resale
to
Constructions
Brochu
and
noted
the
fact
that
that
company
refused
to
purchase
a
part
of
the
land
which
was
still
zoned
commercial,
and
also
the
seven
or
eight
houses
that
had
already
been
constructed
by
Actimum
and
were
still
unsold.
According
to
the
explanation
given,
it
was
only
later,
in
1989,
that
the
commercial
part
of
the
land
that
he
and
the
appellant
had
had
to
retain
was
developed
by
constructing
commercial
buildings
which
were
then
resold.
These
transactions
were
reported
as
giving
rise
to
business
income.
Mr.
Lévesque
also
stated
that
between
the
time
the
two
sites
were
acquired
and
the
resale
of
the
larger
part
of
the
first
site
to
Constructions
Brochu,
the
only
other
transaction
in
which
he
and
the
appellant
participated
was
the
sale
of
a
small
parcel
of
the
second
lot
to
a
neighbour
who
operated
a
car
sales
business
and
who,
according
to
Mr.
Lévesque,
urgently
needed
it
to
operate
his
business.
In
short,
my
understanding
of
Mr.
Lévesque’s
testimony
is
that
the
purchase
of
the
first
lot
was
more
or
less
a
mistake
once
the
second
one
was
discovered
since
the
buildings
that
stood
on
that
lot
offered
the
possibility
of
starting
up
and
even
of
expanding
the
planned
business
activities
more
rapidly
and
without
having
to
do
the
costly
repairs
that
were
needed
on
the
building
that
stood
on
the
first
lot.
Thus
the
first
site
was
immediately
put
up
for
sale,
with
the
use
of
a
simple
sign,
and
Mr.
Lévesque
and
the
appellant
engaged
in
no
other
form
of
solicitation.
The
subsequent
negotiations
were
undertaken
at
the
initiative
of
interested
third
parties.
Thereafter,
the
transactions
and
the
undertakings
to
bear
the
substantial
financial
costs
made
to
persons
or
businesses
that
had
an
interest
in
developing
the
lot
were
carried
out
solely
for
the
purpose
of
getting
rid
of
an
asset
initially
acquired
for
the
purpose
of
operating
a
garage
on
it.
I
also
understand
that
Mr.
Lévesque
and
the
appellant
never
took
any
steps
themselves
in
relation
to
the
subdivision
of
the
lot,
such
as
changing
the
zoning,
negotiating
with
the
municipality
or
doing
engineering
studies,
although
they
agreed,
both
during
negotiations
with
Mr.
Béland
and
during
the
transactions
with
Actimum
and
Constructions
Brochu,
to
bear
the
costs
thereof
and
also
the
costs
of
substantial
infrastructure
work.
Mr.
Lévesque’s
testimony
established
that
the
need
to
sell
the
lot
became
increasingly
urgent
in
order
to
repay
Yvon
Coulombe
who
had
financed
not
only
a
large
part
of
the
cost
of
that
lot
but
also
of
the
second
one,
and
the
subsequent
expenses.
Mr.
Gariépy’s
testimony
related
to
the
circumstances
surrounding
the
transactions
with
Actimum
and
was
of
little
assistance
in
deciding
this
case.
As
to
Mr.
Yvon
Coulombe,
the
appellant’s
father
and
Mr.
Lévesque’s
brother-in-law,
he
first
described
the
development
of
various
businesses
that
he
had
operated
and
his
investments
in
real
estate.
Today,
he
and
his
wife
own,
either
directly
or
indirectly
through
a
management
company,
several
apartment
buildings
in
Rimouski;
he
stated
that
he
started
to
acquire
them
in
1952,
and
that
he
has
never
resold
a
single
one.
Mr.
Coulombe
said
that
the
only
thing
he
had
in
mind
when
he
decided
to
finance
a
large
part
of
the
acquisition
of
the
lots
in
Drummondville
through
loans
to
the
interested
parties
was
his
son’s
partnership
with
Mr.
Lévesque
for
the
purpose
of
ultimately
operating
a
garage.
He
stated
that
he
would
never
have
considered
lending
them
the
money
if
the
purpose
of
the
acquisition
had
been
to
build
a
residential
complex.
According
to
him,
the
only
plan
was
to
have
a
garage
and
it
had
been
necessary
first
to
purchase
an
appropriate
site,
since
in
any
event
Mr.
Lévesque
had
to
leave
the
service
station
owned
by
Ultramar
which
wanted
to
get
rid
of
it
one
way
or
another.
Although
it
was
Mr.
Lévesque
who
was
in
Drummondville
to
conduct
the
discussions
and
negotiations
for
the
purchase
of
the
first
lot
as
well
as
the
second
lot,
and
then
to
put
the
first
one
up
for
sale,
Mr.
Coulombe
said
that
he
had
always
been
kept
aware
of
what
was
happening
by
Mr.
Lévesque
and
had
full
confidence
in
him.
Since
it
was
he
who
had
financed
the
acquisitions
and
who
had
had
to
pay
out
substantial
additional
sums
of
money,
it
is
my
understanding
that
he
had,
if
not
the
last
word,
at
least
considerable
influence
in
any
decision
leading
up
to
the
transactions
at
issue.
Thus,
with
respect
to
the
aim
and
the
circumstances
surrounding
both
the
acquisitions
and
the
dispositions,
his
testimony
is
relevant
and
essentially
confirms
that
of
Mr.
Lévesque’s.
The
testimony
of
the
appellant
Gilles
Coulombe
dealt
first
with
his
interest
in
mechanics
and
old
and
used
cars,
which
he
had
fun
repairing
and
rebuilding
since
he
was
a
teenager:
he
said
that
he
had
rebuilt
sixty
or
so
cars
over
the
years
and
still
owned
five
old
cars.
He
also
talked
about
his
visits
to
his
uncle,
Fernand
Lévesque,
when
the
latter
was
operating
his
garage
and
motor-racing
track
in
Amqui.
It
was
from
these
experiences
of
learning
about
the
field
that
the
plan
to
go
into
partnership
with
his
uncle
to
operate
a
garage
in
Drummondville
hatched
in
1985.
The
appellant,
who
was
then
20
years
old
and
still
in
school,
also
referred
to
his
father’s
insistence
that
he
complete
his
studies
before
going
into
business
with
his
uncle
in
the
operation
of
a
garage,
the
management
of
which
he
thought
he
would
eventually
take
over.
His
testimony
also
dealt
with
the
initial
steps
in
which
he
was
involved
concerning
the
acquisition
of
the
first
lot,
his
perception
of
the
condition
of
the
premises
and
the
major
repairs
needed
and
the
opportunity
they
were
offered
to
acquire
the
second
lot
at
a
good
price,
where
the
buildings
required
very
few
repairs,
and
also
the
decision
they
made
to
get
rid
of
the
first
lot,
where
the
building,
by
comparison,
required
a
larger
total
investment
and
did
not
provide
as
many
advantages.
The
appellant’s
testimony
also
dealt
with
the
subsequent
events
relating
to
the
offers
received
to
purchase
the
first
lot
which
he
and
Mr.
Lévesque
wished
to
get
rid
of
as
a
single
unit
and
to
the
various
agreements
and
the
difficulties
they
encountered
in
that
respect.
He
also
described
the
health
problems
that
forced
him
to
put
his
studies
in
Rimouski
temporarily
on
hold,
resuming
them
a
year
later
on
a
part-time
basis
only.
He
mentioned
the
other
activities
in
which
he
had
been
involved
since
then
in
Rimouski
and
explained
the
circumstances
as
a
result
of
which
he
never
came
to
join
his
uncle
in
Drummondville.
The
appellant
actually
contributed
little
new
information
with
respect
to
all
of
the
circumstances
surrounding
the
various
transactions,
and
confirmed
the
testimony
given
by
Mr.
Lévesque
and
his
father,
Yvon
Coulombe.
Counsel
for
the
respondent
supplemented
this
testimony
by
entering
part
of
the
transcript
of
the
appellant’s
examination
for
discovery.
Counsel
for
the
appellant
contended
that
the
transactions
at
issue
must
be
considered
to
be
capital
in
nature
since
this
was
a
sale
of
an
asset
acquired
for
the
sole
purpose
of
operating
a
business
on
it.
He
stated
that
there
was
ample
documentary
evidence
of
Mr.
Lévesque’s
and
the
appellant’s
intention
to
operate
a
garage
in
partnership.
He
recalled
that
in
fact
Mr.
Lévesque
and
his
sons
did
operate
a
garage,
although
it
was
operated
in
the
buildings
located
on
the
second
lot
and
without
the
planned
partnership
with
the
appellant.
Counsel
for
the
appellant
emphasized
that
neither
the
appellant
nor
Mr.
Lévesque
had
any
experience
at
all
at
that
time
in
the
real
estate
field,
and
that
in
any
event
all
they
had
done
was
try
to
get
rid
of
the
first
lot
which
had
then
become
useless
in
view
of
the
acquisition
of
the
second
one,
but
which
they
had
been
obliged
to
acquire
as
a
result
of
the
prior
acceptance
of
the
offer
to
purchase
together
with
a
deposit.
Moreover,
according
to
him,
the
subsequent
events
establish
only
the
desire
to
get
rid
of
that
lot
as
a
single
unit,
which
they
were
however
able
to
do
only
in
part,
and
after
experiencing
a
number
of
difficulties
and
reversals
both
with
Mr.
Béland
and
with
the
Actimum
company.
In
addition,
in
his
view,
while
the
sale
price
set
both
with
Actimum
and
with
Constructions
Brochu
may
appear
high
in
comparison
to
the
acquisition
price,
it
must
be
taken
into
account
that
in
each
case
there
was
an
undertaking
to
bear
substantial
costs,
particularly
for
the
infrastructures.
According
to
him,
although
the
lot
was
of
a
large
size,
it
was
suitable
only
for
the
requirements
of
the
type
of
business
that
the
appellant
and
Mr.
Lévesque
were
proposing
to
operate
together,
and
at
the
time
it
was
situated
in
an
industrial
zone
in
which
this
sort
of
operation
was
permitted.
Moreover,
the
zoning
change
for
subdividing
it
was
made
at
the
request
of
the
third
parties
involved,
and
specifically
in
response
to
the
efforts
made
by
Mr.
Béland
and
his
brother-in-law
Mr.
Arel.
Counsel
pointed
out
that
neither
the
appellant
nor
Mr.
Lévesque
had
done
anything
at
all
to
develop
the
lot
other
than
what
had
initially
been
planned,
although
they
did
agree,
in
order
to
get
rid
of
the
lot,
to
bear
the
costs
connected
with
the
change
of
use.
In
his
opinion,
the
context
of
the
investment,
and
particularly
the
financing
by
the
appellant’s
father
who,
like
the
appellant,
resided
in
Rimouski,
some
five
hours
by
road
from
Drummondville,
made
it
to
some
extent
unlikely
that
they
could
even
have
contemplated
making
a
subdivision
there.
Counsel
contended
that
at
the
time
of
the
acquisition,
in
view
of
the
circumstances
and
more
particularly
of
the
partnership
agreement
between
the
parties,
there
could
not
have
been
a
secondary
intention
to
resell
at
a
profit.
In
support
of
his
position
that
the
gain
realized
from
the
transactions
had
to
be
treated
as
a
capital
gain,
counsel
for
the
appellant
referred
to
the
following
decisions:
-Lapp
v.
M.N.R.
(1951)
3
Tax
A.B.C.
301,
51
D.T.C.
75
(T.A.B.);
—Quon
v.
M.N.R.,
[1962]
C.T.C.
343;
62
D.T.C.
1204
(Ex.
Ct.);
—Westmount
Lumber
Co.
v.
M.N.R.
(1965),
39
Tax
A.B.C.
307,
65
D.T.C.
666
(T.A.B.);
-Racine,
Demers
and
Nolin
v.
M.N.R.,
[1965]
C.T.C.
150,
65
D.T.C.
5098
(Ex.
Ct.);
-Armstrong
v.
The
Queen,
[1985]
2
C.T.C.
179,
85
D.T.C.
5396
(F.C.T.D.).
The
position
of
counsel
for
the
respondent
is
that
the
acquisitions
of
the
two
lots
with
the
buildings
that
stood
on
them
were
in
reality
parallel
transactions
for
different
purposes.
She
contended
that
the
first
lot
was
acquired
for
resale
or
subdivision
while
the
second
was
acquired
in
order
to
carry
on
the
activities
relating
to
the
operation
of
a
garage,
and
she
admits
that
those
activities
were
in
fact
carried
on
there.
In
the
alternative,
counsel
for
the
respondent
contended
that
when
the
first
lot
was
acquired,
the
intention
of
the
parties
involved
was
to
resell
it
at
a
profit
if
the
repairs
to
the
building
were
found
to
be
too
costly.
According
to
her,
the
building
located
on
the
first
lot
was
dilapidated
and
had
no
value,
which
both
Mr.
Lévesque
and
the
appellant
and
his
father
certainly
knew.
My
understanding
of
her
position
is
that
the
building
could
never
have
been
used
for
the
activities
planned
in
relation
to
the
operation
of
a
garage
or
a
used
car
and
parts
sales
business,
so
that
the
acquisition
of
that
lot
could
have
been
motivated
only
by
the
desire
to
resell
it
at
a
profit.
Counsel
for
the
respondent
believed
that
the
acquisition
of
the
first
lot
might
in
some
way
have
been
cancelled
after
the
appellant
and
Mr.
Lévesque
discovered
the
second
lot,
particularly
because
there
were
problems
with
the
titles
that
delayed
the
signing
of
the
contract.
In
her
view,
the
acquisition
in
such
circumstances
could
have
been
motivated
only
by
the
intention
to
resell
at
a
profit.
Similarly,
she
contended
that
subsequent
events
confirm
that
initial
intention,
in
that
the
financial
undertakings
made
both
to
Mr.
Béland
and
to
Actimum,
and
later
to
Constructions
Brochu,
confirmed
their
intention
to
participate
in
the
proposed
subdivision
of
the
lot.
Counsel
for
the
respondent
therefore
believed
that
the
appellant
had
been
involved
from
the
outset
in
an
adventure
in
the
nature
of
trade,
and
that
the
negotiations,
transactions
and
financial
undertakings
with
these
various
developers
amounted
to
a
participation
in
developing
the
lot,
thereby
in
some
way
giving
concrete
effect
to
the
initial
intention
to
sell
at
a
profit.
She
also
pointed
out
that
the
transactions
must
be
considered
to
be
transactions
concerning
a
vacant
lot
in
view
of
the
condition
of
the
building
constructed
on
it,
which
was
demolished
shortly
after
the
acquisition.
According
to
her,
in
that
context,
the
large
size
and
the
location
of
the
lot
must
also
be
taken
into
consideration.
In
support
of
her
position,
counsel
for
the
respondent
referred
more
specifically
to
the
decisions
in
the
following
cases:
—M.N.R.
v.
Taylor,
[1956]
C.T.C.
189,
56
D.T.C.
1125
(Ex.
Ct.);
—Marois
v.
The
Queen,
[1983]
C.T.C.
304,
83
D.T.C.
5344
(F.C.T.D.).
Analysis
The
oft-cited
classic
distinction
between
a
transaction
that
gives
rise
to
business
income
and
a
transaction
that
results
in
a
capital
gain
was
stated
by
Clerk
L.J.
in
California
Copper
Syndicate
v.
Harris,
as
follows
at
(1904),
5
T.C.
159
at
pages
165-66:
It
is
quite
a
well
settled
principle
in
dealing
with
questions
of
assessment
of
income
tax,
that
where
the
owner
of
an
ordinary
investment
chooses
to
realize
it,
and
obtains
a
greater
price
for
it
than
he
originally
acquired
it
at,
the
enhanced
price
is
not
profit
in
the
sense
of
Schedule
D
of
the
Income
Tax
Act
of
1842
assessable
to
income
tax.
But
it
is
equally
well
established
that
enhanced
values
obtained
from
realization
or
conversion
of
securities
may
be
so
assessable,
where
what
is
done
is
not
merely
a
realization
or
change
of
investment,
but
an
act
done
in
what
is
truly
the
carrying
on,
or
carrying
out,
of
a
business.
The
simplest
case
is
that
of
a
person
or
association
of
persons
buying
and
selling
lands
or
securities
speculatively,
in
order
to
make
gain,
dealing
in
such
investments
as
a
business,
and
thereby
seeking
to
make
profits.
There
are
many
companies
which
in
their
very
inception
are
formed
for
such
a
purpose,
and
in
these
cases
it
is
not
doubtful
that,
where
they
make
a
gain
by
a
realization,
the
gain
they
make
is
liable
to
be
assessed
for
income
tax.
What
is
the
line
which
separates
the
two
classes
of
cases
may
be
difficult
to
define,
and
each
case
must
be
considered
according
to
its
facts;
the
question
to
be
determined
being-Is
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realizing
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit-making?
[Emphasis
added.]
Similarly,
while
the
decision
in
Taylor,
supra,
provides
us
with
the
classical
tests
for
determining
the
existence
of
an
adventure
in
the
nature
of
trade,
it
is
particularly
in
the
oft-
cited
judgment
of
Racine,
Demers
and
Nolin,
supra,
that
the
"secondary
intention"
doctrine
is
stated.
On
this
point,
Noël
J.
of
the
Exchequer
Court
stated,
at
page
159
(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.
Generally
speaking,
a
decision
that
such
a
motivation
exists
will
have
to
be
based
on
inferences
flowing
from
circumstances
surrounding
the
transaction
rather
than
on
direct
evidence
of
what
the
purchaser
had
in
mind.
[Emphasis
added.
]
While
these
distinctions
have
long
been
used
by
our
courts
in
their
efforts
to
determine
the
true
nature
of
a
transaction,
and
while
we
might
note
that
the
results
have
not
always
been
very
consistent,
the
fact
is
that
each
case
must
be
examined
in
light
of
its
specific
circumstances,
one
of
the
most
important
one
being
the
intention.
With
this
in
mind,
it
has
often
been
said
that
the
case
law
offered
limited
assistance
in
deciding
a
case
involving
different
factors
in
a
different
context,
so
that
they
must
necessarily
be
given
different
weight.
On
the
question
of
intention,
while
we
must
try
to
determine
it
mainly
by
examining
the
overall
conduct
of
a.
taxpayer
in
the
specific
context
of
the
transaction
that
is
the
subject
of
the
case,
the
credibility
that
may
be
assigned
to
his
testimony
is
an
aspect
that
is
of
prime
importance
in
the
analysis.
In
the
case
at
bar,
and
in
view
of
the
general
principles
stated
by
the
courts
to
which
I
have
briefly
referred,
I
believe
that
I
may
conclude
from
the
evidence
adduced
that
the
transactions
at
issue
must
be
treated
as
giving
rise
to
a
capital
gain
and
not
to
business
income.
The
testimony
of
the
appellant,
his
father
Yvon
Coulombe
and
Fernand
Lévesque
are
consistent
on
the
essential
points
surrounding
the
acquisition
of
the
two
sites
in
question
here
in
1985.
The
same
is
true
for
the
disposition
of
the
first
lot
as
a
single
unit
in
1987,
the
possession
and
the
resale
of
the
larger
part
of
that
lot
in
1988.
I
have
no
serious
evidence
which
could
cast
doubt
on
the
credibility
of
these
persons
with
respect
to
the
true
purpose
and,
ultimately,
with
respect
to
what
appears
to
be
the
sole
reason
that
prompted
them
to
acquire
both
the
first
and
the
second
lot.
The
appellant
and
his
uncle,
Fernand
Lévesque,
wished
to
acquire
a
lot
in
order
to
operate
a
garage
there,
alongside
which
they
would
operate
a
used
car
and
parts
sales
business.
The
knowledge,
background
and
experience
of
both
Mr.
Lévesque
and
the
appellant,
and
their
respective
personal
situations,
make
this
hypothesis
entirely
likely,
and
the
only
one
that
should
be
accepted
in
the
circumstances.
Let
us
recall
that
at
the
time
of
the
acquisition
Mr.
Lévesque
was
already
operating
a
garage
in
Drummondville
while
the
appellant,
who
was
20
years
old,
was
still
a
student
in
Rimouski.
Neither
of
them
had
experience
in
subdividing
land
or
had
previously
been
personally
involved
in
any
real
estate
transactions
at
all.
It
is
difficult
to
imagine
that
Yvon
Coulombe,
who
financed
the
greater
portion
of
the
acquisition
price
of
the
two
lots,
either
directly
or
with
his
wife,
through
loans
to
the
parties
involved,
would
have
granted
those
loans
for
the
purpose
of
purchasing
the
lots,
and
the
buildings
that
stood
on
those
lots,
for
a
speculative
purpose.
While
it
may
be
argued
that
Yvon
Coulombe
had
experience
in
real
estate,
the
evidence
established
that
his
experience
was
as
an
investor
who
had,
over
the
years,
acquired
a
large
number
of
apartment
buildings
of
which
he
had
never
disposed.
It
appears
unlikely,
in
this
context,
and
this
is
consistent
with
his
testimony,
that
he
would
have
agreed
to
finance
the
acquisitions
if
they
had
been
made
by
his
son
and
Fernand
Lévesque
for
a
reason
other
than
that
of
operating
the
planned
business.
While
I
believe
that
the
purpose
of
the
assistance
offered
to
his
son
and
Mr.
Levesque
was
essentially
to
acquire
a
suitable
site
for
the
type
of
operation
they
were
planning,
I
further
believe
that
there
was
no
serious
evidence
from
which
I
could
conclude
that
the
possibility
of
reselling
at
a
profit
might
have
been
a
determining
factor
in
the
acquisition.
I
therefore
consider
that
the
evidence
establishes
that
the
only
concern
of
Mr.
Lévesque
and
of
the
appellant
was
the
acquisition
of
a
suitable
site
for
the
operation
of
the
business
planned.
While
the
first
lot
and
the
building
that
stood
on
it
seemed
at
first
to
meet
their
expectations
despite
the
repairs
needed,
to
the
point
that
they
believed
they
were
getting
a
good
deal,
it
was
found
to
be
less
of
a
bargain
when
they
realized
that
the
second
lot
and
the
buildings
that
stood
on
it
could
be
acquired
for
a
price
more
or
less
equivalent
to
the
cost
of
the
repairs
needed
on
the
building
located
on
the
first
lot.
The
evidence
established
that
the
second
site
presented
a
number
of
advantages
that
the
first
one
did
not
have,
namely
the
fact
that
no
repairs
were
needed,
the
possibility
of
starting
operations
more
quickly,
the
possibility
of
adding
the
sale
of
cars
by
auction
to
the
planned
business
activities
and
even
the
possibility
of
renting
one
of
the
three
buildings
to
another
business.
At
that
time
the
offer
on
the
first
lot,
together
with
a
deposit,
had
already
been
accepted
several
weeks
before,
so
that
it
appeared
unrealistic,
in
the
circumstances,
that
they
could
have
refused
to
sign
the
purchase
contract.
The
subsequent
efforts
to
sell
the
lot
following
negotiations
and
the
receipt
of
offers
were,
in
my
opinion,
essentially
intended
to
enable
them
to
get
rid
of
a
useless
asset
as
a
single
unit,
and
not
to
participate
in
a
residential
construction
project
that
they
would
have
envisaged
from
the
outset.
Accordingly,
I
believe
that
Mr.
Lévesque
and
the
appellant,
as
well
as
the
appellant’s
father,
tried
to
get
out
of
that
situation
by
acting
on
the
offers
they
received.
Apparently,
none
of
the
third
parties
interested
in
acquiring
the
lot
in
order
to
subdivide
it
could
finance
both
the
cost
of
acquisition
and
the
necessary
infrastructures.
In
this
context,
I
would
tend
to
believe
the
testimony
of
the
interested
parties
when
state
that
they
quite
simply
had
not
to
act
on
the
basis
of
the
offers
received
and
that
agreeing
to
finance
the
infrastructures
or
to
bear
other
costs
seemed
to
be
the
only
possible
way
of
getting
rid
of
the
lot.
It
is
clear
that
after
the
sale
to
Constructions
Brochu
in
1988
matters
proceeded
differently
and
Mr.
Lévesque
became
more
active
in
developing
the
part
of
the
lot
that
was
still
unsold.
However,
these
are
different
transactions,
and
moreover
they
have
been
declared
as
giving
rise
to
business
income.
I
therefore
believe
that
the
appellant
has
established
the
necessary
facts
for
me
to
conclude,
on
a
balance
of
probabilities,
that
the
transactions
at
issue
were
capital
in
nature.
The
appeals
are
therefore
allowed
and
the
assessments
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment
taking
into
consideration
that
the
transactions
at
issue
give
rise
to
capital
gains
and
not
to
business
income
and
that
the
reserves
must
therefore
be
calculated
according
to
the
provisions
of
the
Act.
The
whole
with
costs
to
the
appellant.
Appeals
allowed.