Jerome,
A.C.].:—
This
is
an
appeal
by
the
plaintiff
from
the
decision
of
the
Tax
Court
of
Canada
dated
May
24,
1991,
that
the
amounts
reported
by
the
plaintiff
as
taxable
capital
gains
for
the
1987
and
1988
taxation
years
were
subject
to
reassessment
by
the
Minister
of
National
Revenue.
This
matter
was
heard
in
Hamilton,
Ontario,
on
February
23
and
24,1993.
At
that
time
I
dismissed
the
appeal
for
reasons
delivered
orally
from
the
Bench,
indicating
these
written
reasons
would
follow.
On
March
5,
1993,
the
plaintiff
filed
a
notice
of
motion
pursuant
to
Rules
324
and
337(5)(b),
asking
the
Court
to
reconsider
its
judgment
on
the
grounds
that
relevant
evidence
which
should
have
been
presented
at
the
time
of
the
hearing
had
been
inadvertently
omitted.
After
having
carefully
reviewed
the
parties'
submissions
in
this
regard,
I
am
satisfied
that
my
decision
of
February
24,1993
should
remain
unchanged.
The
plaintiff
owned
and
resided
in
the
family
home
on
property
known
as
516
Fiddler's
Green
Road,
which
is
part
of
Lot
42,
Concession
3
in
the
Town
of
Ancaster,
Ontario.
Originally
the
property
comprised
100
acres,
but
part
was
sold
in
1973
and
at
different
times,
parts
were
also
sold
to
the
Ontario
Ministry
of
Transportation
and
Communications.
On
July
30,
1987,
the
plaintiff
sold
the
remaining
parcel
of
approximately
37
acres
for
$1,800,000.
For
her
1987
and
1988
taxation
years,
Mrs.
Carlile
reported
a
taxable
capital
gain
attributable
to
this
disposition
of
property
in
the
amount
of
$75,695.58
and
$100,928
respectively.
By
notice
of
reassessment
dated
April
2,
1990,
the
Minister
reassessed
the
amounts
of
taxable
capital
gains
for
the
plaintiff's
1987
taxation
year
as
$154,420
and
as
$205,895
for
the
1988
taxation
year.
The
reassessment
was
based
on
the
Minister's
valuation
of
the
property
which
showed
the
V-Day
value
of
the
land,
exclusive
of
the
residence,
to
be
$98,500,
and
the
value
of
one
acre
of
land
with
the
residence
to
be
$141,000.
The
plaintiff
objected
to
the
reassessment
by
notice
dated
April
2,
1990,
and
on
June
8,
1990
the
Minister
confirmed
the
reassessment.
The
plaintiff
then
appealed
to
the
Tax
Court
of
Canada
which
accepted
the
evidence
of
the
Minister's
expert
appraiser
and
held
that
the
plaintiff
had
not
refuted
the
amounts
set
out
in
the
reassessments.
The
Court
found
the
value
of
the
property
as
of
December
31,
1971
to
be
$98,500,
the
value
of
the
residence
at
that
date
to
be
$45,000,
and
the
value
of
the
residence
at
the
time
of
sale
in
1987
to
be
$160,000.
The
appeal
was
allowed
only
to
the
extent
that
the
Minister
was
ordered
to
reassess
the
plaintiff
on
the
basis
of
a
V-Day
valuation
of
the
property
of
$98,500
and
a
disposition
date
valuation
of
the
principal
residence
of
$160,000,
rather
than
$141,000.
The
plaintiff
filed
a
statement
of
claim
in
this
Court
on
July
18,1991,
alleging
the
Minister's
computation
of
the
market
value
of
the
property
as
of
December
31,
1971,
to
be
erroneous
in
law
and
contrary
to
the
accepted
methods
of
appraising
such
properties.
On
February
24,
1993,
the
plaintiff
filed
an
amended
statement
of
claim,
wherein
it
was
further
submitted
that
the
entire
property
should
be
included
as
lands
subjacent
and
contiguous
to
her
principal
residence
and
therefore
exempt
from
capital
gains
tax
pursuant
to
paragraphs
40(2)(b)
and
54(b)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
plaintiff
contends
that
the
whole
of
the
land
should
be
deemed
to
be
a
principal
residence
because
of
applicable
zoning
by-laws
of
the
town
of
Ancas-
ter
which
require
a
minimum
lot
of
25
acres.
Both
by-laws
to
that
effect
were
filed
and
form
part
of
the
evidence.
The
relevant
sections
of
the
Income
Tax
Act
provide
that
all
gains
arising
out
of
the
disposition
of
property
are
to
be
taxable,
with
the
exception
of
those
arising
from
the
sale
of
a
principal
residence,
which
are
exempt
from
tax.
A
principal
residence
may
include
up
to
one
acre
of
land,
subjacent
and
contiguous
to
the
housing
unit
itself.
No
larger
area
of
land
shall
be
deemed
to
be
part
of
the
taxpayer's
principal
residence
unless
the
taxpayer
is
able
to
establish
that
the
excess
is
necessary
to
the
use
and
enjoyment
of
the
housing
unit
as
a
residence.
In
cases
where
a
taxpayer
alleges
that
the
parameters
of
the
principal
residence
exceed
one
acre,
he
or
she
is
faced
with
a
significant
evidentiary
burden.
This
onus
on
the
taxpayer
was
described
by
Christie,
A.C.T.C.C.J.
in
Rode
v.
M.N.R.,
[1985]
1
C.T.C.
2324,
85
D.T.C.
272,
at
page
2326
(D.T.C.
274)
in
the
following
terms:
In
these
circumstances
the
law
provides
that
the
excess
shall
be
deemed
not
to
have
contributed
to
the
appellant's
use
and
enjoyment
of
the
housing
unit
as
a
residence
unless
he
established
that
it
was
necessary
to
such
use
and
enjoyment.
The
emphasized
words
are
key.
The
word
"deemed"
in
paragraph
54(g)
has
this
consequence.
Even
if
an
appellant
establishes
beyond
controversy
that
what
exceeds
one
acre
did
in
fact
make
an
important
contribution
to
his
use
and
enjoyment
of
the
housing
unit
as
a
residence,
this
does
not
assist
him
because
the
fact
has
been
nullified
by
the
legislation
unless
he
proves
necessity.
Therefore
what
an
appellant
must
do
in
order
to
establish
that
his
principal
residence
exceeds
one
acre
is
to
prove
that
the
excess
was
"necessary"
to
the
use
and
enjoyment
of
the
housing
unit
as
a
residence.
I
believe
that
in
its
context
this
requirement
dictates
that
a
stringent
test
shall
be
applied
in
determining
the
acreage
of
a
principal
residence.
[Emphasis
added.]
Counsel
for
the
plaintiff
argues
that
because
of
the
by-laws
which
require
a
minimum
lot
of
25
acres
in
the
town
of
Ancaster,
the
decision
of
the
Federal
Court
of
Appeal
in
The
Queen
v.
Yates,
[1986]
2
C.T.C.
46,
86
D.T.C.
6296
(affirming
[1983]
C.T.C.
105,
83
D.T.C.
5158
(F.C.T.D.))
dictates
that
the
entire
parcel
of
land
be
included
as
Mrs.
Carlile’s
principal
residence
and
therefore
exempt
from
capital
gains
tax.
I
do
not
agree.
The
existence
of
zoning
by-laws
which
legally
oblige
a
taxpayer
to
have
a
minimum
amount
of
land
in
connection
with
her
residence,
is
not
sufficient,
in
and
of
itself,
to
discharge
the
critical
burden
of
proof
on
the
plaintiff
for
the
purposes
of
paragraph
54(g)
of
the
Income
Tax
Act.
It
is
still
incumbent
on
the
plaintiff
to
show
that
a
larger
area
was
necessary
to
her
use
and
enjoyment
of
the
housing
unit
as
a
residence.
This
very
issue
was
addressed
in
Augart
v.
M.N.R.,
[1992]
2
C.T.C.
412,
92
D.T.C.
6610
(F.C.T.D.).
In
that
case,
the
taxpayer
purchased
an
8.99
acre
parcel
of
land
for
$50,000
in
1966
and
resold
it
for
$899,000
in
1980.
At
all
material
times,
he
resided
in
the
three-bedroom
bungalow
situated
on
one
portion
of
the
land,
but
operated
a
small
horse,
calf
and
pig
farm
with
several
outbuildings
on
the
remaining
portion.
Approximately
five
months
before
the
land
was
sold,
it
became
redesignated
under
a
new
amending
municipal
by-law
requiring
all
single
detached
dwellings
affected
to
have
a
minimum
site
area
of
eighty
acres.
The
Minister
assessed
the
taxpayer's
gain
on
the
sale
on
the
basis
that
he
required
only
one
acre
of
the
land
for
the
use
and
enjoyment
of
his
principal
residence.
The
taxpayer's
appeal
to
the
Tax
Court
of
Canada
was
allowed
([1989]
1
C.T.C.
2353,
89
D.T.C.
263).
The
Court,
relying
on
the
decision
in
Yates,
found
that
on
the
basis
of
the
new
by-law,
all
of
the
taxpayer's
land
should
benefit
from
the
principal
residence
exemption.
On
appeal
to
this
Court,
Strayer,
J.
held
that,
notwithstanding
the
by-law,
the
taxpayer
was
unable
to
demonstrate
that
anything
in
excess
of
three
acres
had
been
required
for
the
use
and
enjoyment
of
his
principal
residence
and
accordingly,
it
was
only
that
portion
which
qualified
for
the
exemption.
He
made
the
following
comments
concerning
the
application
of
Yates
at
pages
415-16
(D.T.C.
6612):
With
respect
I
believe
that
the
learned
judge
of
the
Tax
Court
misconstrued
the
meaning
of
the
Yates
decision
in
holding
that
it
required
treating
the
whole
of
the
8.99
acres
here
as
part
of
the
principal
residence.
My
understanding
of
the
principle
in
Yates
is
that
the
minimum
amount
of
land
which
the
taxpayer
is
legally
obliged
to
have
in
connection
with
his
residence
at
the
time
of
disposition
of
the
property
establishes
objectively
the
amount
of
land
associated
with
the
principal
residence”.
One
may
still
look
to
see
whether
by
a
subjective
test
—
i.e.,
in
terms
of
the
use
actually
made
by
the
taxpayer
of
the
property
—
he
is
entitled
to
claim
more
than
three
acres
as
necessary
to
the
use
and
enjoyment
of
the
housing
unit.
I
am
satisfied
that
the
taxpayer
has
not
met
the
burden
of
proof
placed
on
him
by
paragraph
54(g)
of
the
Income
Tax
Act
to
show
that
a
larger
area
was
"necessary
to
such
use
and
enjoyment".
There
is
really
nothing
to
suggest
that
the
house
could
not
havebeen
lived
in
quite
conveniently
on
a
property
of
three
acres.
[Emphasis
added.]
In
the
present
case,
there
is
simply
no
evidence
that
an
area
larger
than
one
acre
was
necessary
to
Mrs.
Carlile's
use
and
enjoyment
of
the
housing
unit.
The
plaintiff
has
therefore
not
met
the
burden
of
proof
placed
on
her
by
paragraph
54(g)
of
the
Income
Tax
Act
and
for
that
reason
her
appeal
in
this
respect
must
be
dismissed.
I
turn
now
to
the
question
of
the
valuation
of
the
property.
As
stated
in
my
oral
reasons
for
judgment,
I
accept
the
evidence
of
the
plaintiff's
expert
witness,
Mr.
Paul
Pirie,
that
the
highest
and
best
use
of
the
subject
property
at
V-Day
was
for
development
as
a
residential
subdivision.
His
report
identifies
several
examples
of
such
use
among
comparable
properties
and
in
my
view
his
determination
represents
a
reasonable
expectation
and
proper
evaluation
of
highest
and
best
use.
The
market
value
of
a
property
is
the
amount
which
the
land
might
be
expected
to
realize
if
sold
on
the
open
market
by
a
willing
seller
to
a
willing
buyer.
Both
Mr.
Sabourin,
the
defendant's
expert
appraiser
and
Mr.
Robertson,
the
plaintiff's
expert
appraiser,
used
the
direct
comparison
approach
to
valuation.
This
approach
involves
comparing
similar
or
reasonably
similar
type
property
sales
at
times
somewhat
concurrent
with
the
effective
date
of
appraisal,
in
this
case
December
31,
1971.
Several
properties
in
the
vicinity
were
compared,
some
situated
on
the
same
side
of
Highway
403
as
the
subject
property,
and
some
on
the
opposite
side.
Those
properties
located
on
the
opposite
side
of
the
highway
were
zoned
as
neighbourhood
development
properties,
in
contrast
to
those
on
the
same
side,
which
were
zoned
as
agricultural.
Mr.
Sabourin
based
his
calculations
on
the
Pottruff
property,
as
a
direct
comparable
to
the
Carlile
property,
and
I
find
it
to
be
appropriate.
Both
abut
Highway
403
on
the
south
side
and
have
frontage
on
the
north
side
of
Highway
53;
both
are
separated
by
a
subdivision
development
on
lot
43;
the
lots
are
approximately
the
same
size
and
the
zoning
for
each
is
agricultural.
The
Pottruff
sale
took
place
on
May
8,
1970,
at
a
value
of
approximately
$2,000
per
acre.
It
was
Mr.
Sabourin's
view
that
the
Carlile
property
had
some
characteristics
which
rendered
it
superior
to
the
Pottruff
property
and
he
therefore
appraised
the
subject
property
at
a
V-Day
value
of
$3,000
per
acre.
Mr.
Robertson
attempted,
without
success,
to
distinguish
the
subject
property
from
the
Pottruff
property.
His
analysis
led
him
to
appraise
the
V-Day
market
value
of
the
subject
property
at
$6,000
per
acre,
an
amount
considerably
higher
than
the
value
of
the
Pottruff
property.
This
valuation
is
speculative
in
the
extreme
and
simply
unsupported
by
the
evidence.
On
the
other
hand,
the
Pottruff
property
is
an
excellent
comparable
and
provides
a
precise
indication
of
the
V-Day
value
of
the
plaintiff's
property.
Were
I
deciding
this
matter
as
an
expropriation
dispute,
I
would
have
great
difficulty
in
justifying
any
value
exceeding
the
$2,000
per
acre
paid
for
the
Pottruff
property.
I
do,
however,
recognize
that
the
Minister
has
considerations
which
could
justify
the
$3,000
which
has
formed
the
calculations
for
the
purpose
of
the
reassessment.
Therefore,
in
reasons
given
orally
from
the
Bench
at
the
conclusion
of
the
trial
in
this
matter
on
February
24,
1993,
I
dismissed
this
appeal
with
costs.
Appeal
dismissed.
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