Brule,
T.C.J.:—
This
is
an
appeal
from
an
assessment
of
the
taxpayer's
1987
taxation
year
in
which
the
valuation
and
characterization
of
a
retiring
allowance
received
by
the
appellant
is
to
be
determined.
Facts
In
1986
Trans-Canada
Resources
Ltd.
(the
company)
terminated
the
services
of
the
appellant
and
granted
to
him
a
retiring
allowance.
Such
allowance
was
in
the
amount
of
$288,200
to
be
paid
according
to
a
plan
set
out.
As
of
January
1,
1987
there
remained
unpaid
the
sum
of
$166,200.
Prior
to
the
payment
due
in
January
of
1987
the
company
encountered
severe
financial
difficulties
and
could
not
pay
its
creditors.
Under
the
terms
of
the
Companies
Creditors
Arrangement
Act,
a
plan
of
arrangement
was
arrived
at
wherein
the
company
increased
its
share
capital
and
then
issued
one
common
share
and
$0.25
to
all
the
unsecured
creditors
for
each
dollar
of
indebtedness.
Accordingly
the
appellant
received
on
September
16,
1987.
|
Cash
|
$
41,550
|
|
shares,
166,200
at
a
value
of
|
|
|
$0.60
each
|
$
99,720
|
|
$141,270
|
For
this
amount
the
company
issued
to
the
appellant
a
T4A-1987.
The
value
of
the
shares
at
$0.60
was
based
on
the
stock
market
closing
price
of
September
15,
1987.
When
subsequently
sold
at
intervals
the
appellant
received
an
average
of
approximately
$0.41
per
share.
Appellant's
Position
Counsel
for
the
appellant
indicated
that
the
assessment
was
wrong
and
raised
two
legal
arguments.
The
first
was
that
the
value
of
60
cents
per
share
was
too
high
in
view
of
the
facts
surrounding
the
settlement.
Secondly
he
indicated
that
the
nature
of
the
shares
as
being
capital
or
income
was
wrongly
interpreted
by
the
Minister.
It
was
suggested
that
they
were
received
on
the
appellant's
income
account
and
should
be
treated
accordingly,
thus
allowing
the
appellant
to
write
off
losses
against
other
income
on
the
disposition
of
the
shares.
As
to
the
valuation
of
the
shares
issue
the
Court
was
directed
to
the
trading
activity
in
the
shares
and
the
prices
paid
variance.
If
there
was
consistency
with
the
trading
pattern
then
the
price
of
$0.60
was
too
high.
In
support
of
this
there
was
cited
the
cases
of:
The
Queen
v.
National
System
of
Baking
of
Alberta
Ltd.,
[1978]
C.T.C.
30;
78
D.T.C.
6018
in
the
Federal
Court-Trial
Division
and
[1980]
C.T.C.
237;
80
D.T.C.
6178
in
the
Federal
Court
of
Appeal,
and
Joseph
Simard
&
Cie,
Ltée
v.
M.N.R.,
[1964]
C.T.C.
461;
64
D.T.C.
5289.
In
the
Baking
case
both
levels
of
the
Court
referred
to
a
passage
by
Mignault,
J.
in
the
case
of
Untermyer
Estate
v.
A.G.
of
British
Columbia,
[1929]
S.C.R.
84;
[1929]
1
D.L.R.
315,
as
follows:
.
.
.
the
market
price
must
have
some
consistency
and
not
be
the
effect
of
a
transient
boom
or
a
sudden
panic
in
the
market.
The
Simard
case
suggested
that
evidence
should
be
allowed
which
would
provide
an
objective
standard
in
valuation
matters.
In
the
present
case
the
Minister
should
have
considered
the
price
of
$0.60
per
share
in
relation
to
the
panic
situation
on
September
16
and
17,
1987.
The
result
would
be
that
the
value
of
the
shares
would
be
lowered
after
the
dilution
had
worked
its
way
through
the
system.
The
second
issue
the
Court
is
asked
to
decide
is
whether
the
shares
received
by
the
appellant
are
to
be
considered
as
captial
or
inventory.
Counsel
relied
on
certain
authorities
to
say
that
the
facts
in
this
case
can
support
the
proposition
that
the
appellant's
cause
of
conduct
in
dealing
with
the
company
shares
amounts
to
an
adventure
in
the
nature
of
trade.
Reference
was
made
to
the
following:
Bowyer-Boag
Ltd.
v.
M.N.R.,
2
Tax
A.B.C.
202;
50
D.T.C.
311,
Sydney
Bossin
v.
The
Queen,
[1976]
C.T.C.
358;
76
D.T.C.
6196,
Dr.
Andrew
Tamas
v.
The
Queen,
[1981]
C.T.C.
220;
81
D.T.C.
5150,
J.
Appleby
Securities
Ltd.
v.
M.N.R.,
[1971]
Tax
A.B.C.
49;
71
D.T.C.
94.
Minister's
Position
Dealing
first
with
the
valuation
on
September
16,1987
of
the
Company's
shares,
two
cases
were
given
to
show
that
the
best
indicator
of
the
value
of
publicly
traded
shares
is
the
market
value.
These
cases
were:
The
Queen
v.
National
System
of
Baking
of
Alberta
Limited,
supra,
Jack
N.
Blinkoff
and
Janet
Beach
Henderson,
Executors
of
the
Estate
of
A.M.
Collings
Henderson
v.
M.N.R.,
[1975]
C.T.C.
485;
75
D.T.C.
5332.
If
the
Court
followed
this
proposition
then
the
value
of
$0.60
per
share
was
correct
in
the
assessment.
In
addition
to
this
the
respondent
relied
on
the
case
of
Victor
Mayson
v.
M.N.R.,
[1985]
1
C.T.C.
2395;
85
D.T.C.
341
to
show
that
the
use
of
hindsight
in
attempting
to
arrive
at
a
valuation
is
not
an
acceptable
approach.
The
second
issue
involves
the
nature
of
the
shares
received
by
the
appellant
in
his
settlement
with
Trans
Canada
Resources
Ltd.
The
decision
in
the
case
of
Dennis
J.
Date
v.
M.N.R.,
[1986]
1
C.T.C.
2268;
86
D.T.C.
1222
was
offered
for
the
proposition
that
what
was
received
in
a
settlement
should
not
be
broken
into
components
but
should
all
be
considered
as
income
and
taxable.
It
was
further
pointed
out
that
while
the
appellant
held
the
shares
he
received
on
September
16,
1987
they
should
not
be
considered
to
be
a
part
of
an
adventure
in
the
nature
of
trade.
The
appellant
was
holding
them
for
a
profit
but
could
have
liquidated
sooner.
He
was
not
in
a
business,
and
the
question
of
a
reasonable
expectation
of
profit
was
irrelevant.
For
such
to
be
valid
it
would
be
necessary
to
meet
the
tests
as
set
out
in
Moldowan
v.
The
Queen,
[1978]
1
S.C.R.
480;
[1977]
C.T.C.
310;
77
D.T.C.
5213,
and
as
also
expressed
in
John
D.
Coupland
v.
The
Queen,
[1988]
1
C.T.C.
414;
88
D.T.C.
6252.
Analysis
I
appreciate
the
valuation
argument
presented
by
the
appellant's
counsel
but
based
on
the
facts
in
this
case
do
not
find
that
there
was
any
great
inconsistency
in
the
market
fluctuation
of
the
shares.
An
examination
of
the
trading
activity
of
the
shares
shows
that
there
was
a
small
drop
after
September
16,
1987
until
September
24,
1987
as
evidenced
by
the
closing
price
of
each
day's
trading,
but
then
until
the
general
market
recession
in
mid
October
1987
only
on
one
day
did
the
closing
price
fall
below
the
$0.60
level.
Surely
if
the
appellant
had
wanted
to
dispose
of
his
shares
he
had
ample
opportunity,
but
he
did
not
engage
in
any
trades,
with
one
exception
at
the
end
of
February,
until
April
1988.
His
stated
evidence
was
that
he
believed
the
shares
would
climb
to
the
$0.75
to
$0.80
level.
In
effect
he
was
speculating
in
the
shares.
While
it
may
have
been
difficult
to
oppose
the
settlement
given
to
the
appellant,
nevertheless
his
evidence
was
that
he
was
satisfied
and
that
he
proceeded
in
an
orderly
fashion
to
convert
the
shares
to
cash.
This
he
did
not
do.
As
set
out
above
there
were
many
days
when
some
shares
could
have
been
liquidated
at
$0.60
or
better.
I
have
read
all
the
authorities
given
to
the
Court
by
both
counsel
and
believe
that
the
price
of
$0.60
per
share
was
the
correct
one.
As
to
the
nature
of
the
shares
on
distribution
to
the
appellant
again
I
find
inconsistency.
In
his
tax
return
for
1987
he
placed
a
value
on
the
shares
of
$0.52
but
did
not
report
the
sale
of
the
60,000
shares
he
sold
in
1987
from
the
distribution
on
September
16,
1987
as
either
income
or
capital.
The
shares
that
were
reported
as
being
disposed
in
1987
were
other
shares
owned
by
the
appellant
according
to
his
testimony.
Under
the
provisions
of
subparagraph
56(1)(a)(ii)
of
the
Income
Tax
Act
it
is
patently
clear
that
a
retiring
allowance
is
included
in
income
of
a
taxpayer
for
the
year
received.
Under
subsection
248(1)
of
the
Income
Tax
Act
a
"retiring
allowance"
is
shown
as
an
amount
received
in
respect
of
a
loss
of
an
office
or
employment.
The
amount
was
not
salary
or
wages
within
the
meaning
of
the
Income
Tax
Act.
Such
was
confirmed
in
the
case
of
Maruscak
v.
M.N.R.,
[1985]
2
C.T.C.
2048;
85
D.T.C.
426.
The
facts
of
the
cases
presented
by
the
appellant's
counsel
do
not
correspond
with
those
in
this
case,
nor
do
the
principles
they
stand
for
have
application.
The
result
is
that
the
loss
suffered
by
the
appellant
on
the
disposition
of
the
shares
is
a
capital
loss.
The
appeal
is
hereby
dismissed.
Appeal
dismissed.
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