Hazel M James, Robert E James v. Minister of National Revenue, [1985] 2 CTC 2001, 85 DTC 290

Rip, TCJ:—The appellants’ appeals from income tax assessments for 1976, 1977, 1978, 1979 and 1980 were heard on common evidence. The primary issue before the Court was to determine the value on December 31, 1971 of certain property located in Port Coquitlam, British Columbia and sold by the appellants in 1976. The second question the Court was asked to consider was whether a certain portion of the property in excess of the one acre allowed as principal residence by the respondent and sold by the appellants in 1976 was part of the principal residence of the appellants; the third question raised in the pleadings was not really in issue: the appellants did not claim a deduction pursuant to section 61 of the Income Tax Act ("Act") in the full amount of income-averaging annuities purchased and to the extent they are not successful in their appeals, they wish to offset any additional income with an increased deduction pursuant to section 61; counsel for the respondent agreed that the respondent would not oppose such a request. A subsidiary question was whether for the 1980 taxation year, the annuities were purchased within 60 days of the end of 1980; the certificates of purchase of the annuities state the premiums were made on March 2, 1981 and counsel for the appellant informed the Court the date of the actual purchase of the annuities, including delivery of the cheques for payment, was prior to March 1, 1981; here, too, counsel for the respondent agreed that if there was evidence of payment before March 1, 1981 or if March 1, 1981 fell on a Sunday, the payment reflected on the certificates of purchase, March 2, the next business day after March 1, would be considered to have been made within 60 days after the end of 1980. March 1, 1981 did in fact fall on a Sunday and it is only right and proper that a taxpayer have a complete 60 days to acquire an annuity; if the sixtieth day is not a business day, he should not be prevented from acquiring an annuity the next business day so as to qualify for income-averaging under the Act.

Valuation Day Value of Property

In 1966 the appellants purchased property in the District of Coquitlam, BC known as the Oxbow Ranch for $60,000. The property (hereinafter referred to as the “Oxbow Ranch property” or "subject property”) was made up of 11 parcels and consisted of approximately 120 acres. The subject property had an irregular shape and its configuration is best appreciated by looking at the following diagram:

The subject property lies on the east bank of the Coquitlam River and immediately north of the City of Port Coquitlam.

The Oxbow Ranch property was sold by the appellants in 1976. The appellants, in calculating their capital gains from the sale, claimed the value of the subject property on December 31, 1971 (“Valuation Day’’) was $950,000; the respondent assessed on the basis that the value of the property on Valuation Day was not more than $512,000.

At trial the appraisal report of the appellants’ appraiser put the value of the subject property on Valuation Day at $900,000; the appraisal report of the respondent’s appraiser put its value on Valuation Day at $570,000. (The value of the respondent’s appraiser included land at $530,000 and buildings on site at $40,000; the appellant’s appraiser was of the view the buildings had no market value.)

Mr James testified he and Mrs James owned the Oxbow Ranch property as joint tenants. The property had been in receivership for about a year and one-half prior to the purchase and was in a poor state of repair when purchased. The buildings — all of which required work — consisted of a riding stable on Lot 10, a pig barn and dance hall on Lot 10, and cabins on Lot 7. The appellants built a home on Lot 7 and moved onto the property in 1967.

The cabins were rented out in 1971 and 1972. Near their home the appellants gardened on a one-quarter acre plot of land but because the land consisted of gravel gardening was found to be difficult. A gravel pit was worked near the property.

The Oxbow Ranch property was situated close to the developed portions of the City of Port Coquitlam (“City”) and had a common boundary with the City of Port Coquitlam on the east boundary of Lots 8 and 9 along Oxford Road and the south boundary of Lot 7. Each of the City of Port Coquitlam and the District of Coquitlam (“Coquitlam”) was a separate municipality with its own mayor and council. By 1971 the City had developed to its maximum potential and homes had been built “right up to the property on Oxford”. It was clear that any future residential development in Coquitlam would eventually include the Oxbow Ranch property.

In the late 1960s, Mr James testified, there was pressure for development, in particular the development of a mobile home park. He stated that in 1967 he could have built a mobile home park with 500 homes on the subject property. In the late 1960s the appellants were turning away many young couples who wanted to set up a mobile home on the property. Mr James stated mobile homes were being placed all over the area without any regard to any sense of good planning and the appellants’ property was an obvious location for the development of a mobile home park.

Mr James testified that on December 31, 1971 the Oxbow Ranch property was not subject to the Greenbelt Protection Act of British Columbia. The Greenbelt Protection Act was described by Mr James as legislation requiring an owner of property subject to the legislation to obtain the prior consent of the provincial government before he could develop the property. The subject property was not subject to any land freeze legislation on Valuation Day, and prior to Valuation Day Mr James had learned verbally from the British Columbia Government that the subject property would be the only property in the area not subject to land freeze, even after Valuation Day.

In the meantime, as early as 1967, the appellants were making applications to the municipal authorities for development and in 1968 applied to build a mobile home park but “the size of the mobile home park that we wanted to build was very scary to the local politicians. They wanted us to put in ten trailers and then work to 100. We wanted to put in a park about the size of 500 trailers’" but because of the scarcity of schools in the area the application was refused.

On December 31, 1971 the appellants’ application to Coquitlam for permission to develop a mobile home park was subject to the Greater Vancouver Regional Sewer District putting in a major sewer trunk-line. Council of the District would consider no use for the property other than as a mobile home park; but before approval for the appellants’ project would be given the sewer trunk-line had to be built.

It became quite clear during trial that the appraisal of the Oxbow Ranch property as at December 31,1971 was not easy. Counsel for the respondent acknowledged in argument that the two appraisers agreed that it was difficult to find a property approximately comparable to the Oxbow Ranch. Each party called an expert appraiser to testify as to the value of the Oxbow Ranch property on Valuation Day.

The appellants’ appraiser was Mr Allen Keenleyside who was born in Chilliwack, British Columbia in 1918 and except for war service, lived all of his life in the Lower Mainland of British Columbia. From 1952 to 1976 he lived in Port Coquitlam. Mr Keenleyside graduated in 1950 with a Bachelor of Science degree in Agriculture from the University of British Columbia and on graduation joined the staff of the Veterans" Land Act, Department of Veterans Affairs, where he worked until 1956 as a settlement officer. In 1950 he first became familiar with the Oxbow Ranch property as he was responsible for, amongst other things, the appraisal of land for purchase by the government for a settlement of veterans in Coquitlam, Port Coquitlam and Pitt Meadows area of British Columbia, an area that included the Oxbow Ranch.

Mr Keenleyside passed the required examinations and was awarded the Accredited Rural Appraiser designation by the Appraisal Institute of Canada and at the time of the trial he held the title of Accredited Appraiser and was a “Fellow"" of the Institute. Mr Keenleyside has lectured and published under the auspices of the Appraisal Institute.

Mr Keenleyside left the Veterans" Lands Act administration in 1956 and worked for an appraiser for 16 months until January 1958 when he and a Mr Penny formed an appraisal firm, Penny and Keenleyside. Approximately 90 per cent of the appraisals done by Penny and Keenleyside were in the Lower Mainland and Fraser Valley areas of British Columbia. At one point in time Penny and Keenleyside was the largest firm doing appraisal work in the Fraser Valley. Mr Keenleyside retired from Penny and Keenleyside in February 1984.

Mr James first approached Mr Keenleyside to appraise the property in 1977 and at the time the property was in relatively the same condition it was at the end of 1971.

Mr Keenleyside testified that the potential for mobile homes generally in the area of the Oxbow Ranch property had been realized before 1972. He said as early as 1957 a “good"" mobile home park was started in the area.

According to Mr Keenleyside prior to the mid-1960s the Coquitlam River, being the northern and western boundaries of the Oxbow Ranch property, occasionally flooded the Oxbow Ranch property and much of the Coquitlam River Valley down to the Fraser River. In the mid-1960s, Mr Keenley- side stated, BC Hydro “more or less” rebuilt the flood gates on the Coquitlam dam, putting in new motors and gears and built a new house on the dam for a full-time caretaker whose duty was to ensure seven feet of freeboard on the dam, ie water was to be kept seven feet below the spillways. The danger of flooding was thus reduced and by 1971 properties along both sides of the river were available for residential development.

Along the west side of the Coquitlam River, opposite the Oxbow Ranch property, there existed on Valuation Day — and still today — a strip of land which was subject to flooding. Mr Keenleyside testified that at Valuation Day the municipal authorities in practice would not allow any subdivision along this line, although there was no legal impediment preventing subdivision. Both Mr Keenleyside and the respondent's appraiser used several comparable sales of properties affected by this flood line, and in Mr Keenleyside’s view these were poor comparables.

In 1971 Lots 9 and 10 consisting of 20.06 acres were zoned CS-3, which allowed for the development of tourist accommodation such as tents, trailers and campers; a small convenience store for the benefit of tourists would also be permitted in Mr Keenleyside’s view. The balance of the land, lots 6, 7, 8, 11, 12, LS 3 and LS 6 were zoned P-2, an institutional zoning; this has been a holding zoning, a zoning put on the property until the authorities decide how the property should be used, and in Mr Keenleyside’s view, "complicates the valuation process for there is no evidence on which to base a value”. In Mr Keenleyside’s opinion the most reasonable use of the balance of the property and indication of value is "a small holding which is somewhat of a holding zoning”.

Mr Keenleyside divided the Oxbow Ranch property into three parts, according to zoning, for appraisal purposes, as follows:

(i) Lots 9 and 10 which were zoned CS-3;

(ii) Lots 6, 7, 8, 11, 12, and LS 3 which were zoned P-2, an institutional zoning, which has turned out to be a small holding; the area aggregates approximately 88 acres; these lots varied in size from 9.8 acres to 15 acres; and

(iii) LS 6, also zoned P-2, but which he described as being difficult to do anything with and having a nominal value, consisting of 12 acres.

To appraise the first part of the subject property, Lots 9 and 10, Mr Keenleyside compares the sales of three other properties as being the best indication of value. One of the properties, consisting of 14.34 acres, sold for $8,050 per acre in early 1971. This property had drainage problems and in Mr Keenleyside’s view was inferior to the Oxbow Ranch property. Another property sold for $14,943 per acre in July, 1973. However Mr Keenleyside gave the greatest weight to the sale of a third property which was in use as a mobile home park on Valuation Day. This property, comprising 45.3 acres,* [1] was sold on December 30, 1971 for either $1,250,000, according to Mr Keenleyside who obtained the price from the interim agreement, or $941,000, the price reflected in documents filed at Land Titles. From the sale price appraisers for both the appellants and the respondent deducted $498,000, being the value of 166 mobile home pads, a pad being a concrete slab on a mobile home site on which is placed a mobile home; various services (eg electricity) are available at each pad. Thus the price per acre was either $12,185 or $9,779. Mr Keenleyside adopted the $12,185 amount, rounded off to $12,000, for the third sale. In his view the latter comparable sale “was probably as good as l’d be able to find and applied judgment to it”. He considered the Oxbow property better than the first comparable he used but not as good as the second (he appears to have been influenced by the date of the second sale as well); the value, in his view, fell in the middle, ie, $12,000, the "rounded off" sale price of the third property. Mr Keenleyside did not make any adjustment for the fact that approximately 15 acres of the mobile home park property lay on the flood plane; nor did he make any adjustment to any of his other comparable sales since he was of the view he did not have sufficient evidence to do a statistical analysis.

In appraising the second part of the Oxbow Ranch Mr Keenleyside was of the view there was not a large enough sample of comparable sales to make any analysis significant and made a "judgment call” appraisal of $7,000 per acre or $617,540 for the 88 acres. In arriving at this value he reviewed nine sales of properties that took place between April 1970 and November 1972 which he said confirmed his estimate of market values.

Mr Keenleyside analyzed nine other sales between April 1970 and November 1972 to assist him in appraising the second part of the Oxbow Ranch property. Mr Keenleyside's evidence was that because this portion turned out to be a holding zoning,* [2] the valuation process was further complicated because there was no evidence on which to base a value. Most of the comparables, according to Mr Keenleyside, were poorly zoned, were inferior to the Oxbow Ranch property either because they were partly on the flood line or they were too small for subdivision. The range of values in his report was from $3,548 per acre to $8,222 per acre, four sales being under $7,000 and five over. Here, too, no adjustment was made to any comparable sale. I gathered during trial that in arriving at a value for this part of the property, at least, Mr Keenleyside was relying on his experience and knowledge of the area rather than comparable sales.

The sale of an eight-acre property for $7,688 per acre in November, 1972 was considered by Mr Keenleyside the best of the nine comparable sales, notwithstanding the same property was sold for $5,625 per acre in April 1972. In his appraisal report Mr Keenleyside mentions both sales of the property but chose the second sale as being the relevant comparable to use in appraising the Oxbow Ranch property, his reason being the two sales "showed an increase in value in the area during the early ’70 to '72 period, and that there was a certain amount of optimism in the area". He offered no other reason why in his view the second sale was more indicative of value as at Valuation Day than the first sale.

Mr Adolph A Michel testified on behalf of the respondent as his expert witness. Mr Michel is an employee of the respondent. He has been an appraiser since the late 1950s; he received his designation as an accredited appraiser, AAIC, from the Appraisal Institute of Canada in 1969. For 22 years until 1977 he worked for the Department of Highways of Saskatchewan. He was first employed by the respondent in August 1977 at its Penticton District Office and in 1980 moved to the respondent's Vancouver District Office where he now works. He has performed some 700 appraisals including appraisals of land in the Fraser Valley, Coquitlam and Port Coquitlam. Mr Michel has appeared as an expert witness before various courts and arbitration tribunals. He has completed appraisals for clients on a fee basis in Saskatchewan when this was not in conflict with his responsibilities with the Saskatchewan Government. Mr Michel is a past education chairman for the Regina Chapter and retired from appointment as the Governing Council Member of the Regina Chapter of the Appraisal Institute of Canada; he was chairman of the Regina Chapter in 1976.

Mr Michel also divided the Oxbow Ranch property into three parts, but he divided the property on the basis of his appreciation of the potential for development. Each portion was a different phase of development. The potential for development of each part depended on its distance from the centres of Port Coquitlam and Coquitlam. The first phase of the development would have been, in his view, Lots 6, 7, 8, 9, 10, 11 and 12, consisting of approximately 75.13 acres; these lots had more potential than the others because on Valuation Day they had water available from the Vancouver District main trunk-line. The second phase, considered by Mr Michel to have almost the same potential as the first, except for the water availability, included LS 3, consisting of approximately 32.72 acres, and the third phase was the land described as LS 6.

Mr Michel had not seen the Oxbow Ranch property before 1981 when he appraised its value as at Valuation Day; at that time much of the property had been developed and was in a much different state than it was at the end of 1971. Also, Mr Michel was unable to interview any of the vendors or purchasers of sales and purchases of properties used by him as comparables. In determining the sale price and dates of sales he adopted the prices and dates found in the Land Titles Office. His investigation of the subject property showed that at Valuation Day Coquitlam had enacted various bylaws and regulations. Lots 6, 7, 8, 11 and 12 on LS 3 and LS 6 were zoned P-2 and Lots 9 and 10 were zoned CS-3, as indicated by Mr Keenleyside. But, the Lower Mainland Regional Plan for the Greater Vancouver Regional District, which included Port Coquitlam and Coquitlam, designated the Oxbow Ranch property as RSV-1, limited reserve, effectively placing the area into a holding category pending future demands on potential development. In Mr Michel’s view, notwithstanding the zoning of the Oxbow Ranch property, the data he had appeared to support the Oxbow Ranch property development as a mobile home park. In his view the highest and the best use of the Oxbow Ranch property as of December 31, 1971 was, for the first phase, as a mobile home park and related uses including a small retail store and community hall, for phase two, expansion at a later date, and for the third phase as a holding property.

Mr Michel appraised the phases on the market data approach, considering a number of sales which, he felt, have similar potential for development, location, and which took place within a reasonable period of time with respect to the date of appraisal. The various sales are comparable to the property to be appraised in Mr Michel’s view.

Mr Michel considered seven comparable sales. Five of these comparables were used by Mr Keenleyside. He adjusted the selling price of the various comparables for time, either before or after December 31, 1971, distance from the developed areas of Coquitlam and Port Coquitlam, development potential, size and zoning. In his view any property that was less than 20 acres was not applicable and could not be a comparable without adjust- ment. After determining the adjusted price per acre of each comparable, Mr Michel made a further analysis differentiating the three portions of the Oxbow Ranch property and prepared what he called "Sets of Arrays” for each portion. The median of each array of comparables was the value per acre he accorded to each portion.

One of the sales Mr Michel used as a comparable and which was not used by Mr Keenleyside was of a property on the west side of Coquitlam River, across from the Oxbow Ranch property, facing Lots 8 and 9 of the subject property. This property consisted of 45.9 acres, was as close to the Oxbow Ranch property as any other property, if not the closest, and its zoning was "relatively equal” to that of the Oxbow Ranch property. Part of the property, however, was on flood line. Mr Michel reported this property was sold for $100,000 on October 23, 1972. After making adjustments downward for time (five per cent) and development potential (five per cent) Mr Michel accorded this property a value of $1,966 per acre.

However Mr Michel was unaware that this sale was not at arm's length and on cross-examination he acknowledged that the sale should not have been considered by him and the deletion of this sale from his arrays would produce new medians for phases one and two. One year later, in October 1973, the property appears to have been sold in an arm's length transaction for $610,000. Mr Davidson, appellants’ counsel, took Mr Michel through rates of adjustment he made to the various comparables used in his report in an attempt to arrive at a revised adjusted selling price of the property as at Valuation Day. Mr Davidson adjusted downward the selling price of $610,000 by 20 per cent for time and five per cent for development potential to arrive at an adjusted selling price of $457,500 or $11,994 per acre. Mr Michel did not comment on Mr Davidson's suggestion that his calculations reflected a realistic adjusted selling price of this property.

Mr Michel's second comparable not considered by Mr Keenleyside was the sale of 6.39 acres, which included an old home and double garage, for $54,000 or $7,910 per acre, on May 24, 1972. Mr Michel adjusted downward the sale price by ten per cent for location and ten per cent for size. However Mr Michel’s report indicates an adjusted selling price of $51,500, the same as the actual selling price, from which he has deducted $14,000 as his estimated value of improvements, built in 1945, rounding the price per acre to $5,000. A 20 per cent downward adjustment as suggested by Mr Michel to the indicated value of land (ie, the sale price less the value attributed to improvements), $40,500, would indicate an adjusted sale price per acre of $4,702. In cross-examination Mr Michel was questioned as to whether a potential purchaser of the property for development of new houses would want an “old house stuck in the middle” of the development and if such a house, which probably would be demolished for development, has any value to a purchaser. Mr Michel replied that even though the house may be demolished "it doesn't mean that it doesn't add anything to the total value of the sale”.

Similarly in respect of sale comparables of properties on the flood line, Mr Michel refused to concede that the land on the flood line had any lesser value than land which could be built on.

Mr Michel, in my view, relied too heavily on making arbitrary adjustments to the comparable sales prices without informing me why a particular percentage was used in making the adjustment. He made adjustments for time, development potential, location, size and zoning. But I am not satisfied that even if adjustments were warranted, they were warranted in each and every case. In certain cases, for example, the development potential of a particular property may depend on its zoning or location or size, or all three, but Mr Michel made adjustments not only for development potential but for one or more of the other three factors as well, thus in my mind “doubling” or “tripling” the rate of adjustment.

I must now put myself in the position of a person owning the subject property at December 31, 1971 willing to sell, but under no compulsion to sell, and capable of appreciating all the factors bearing on what a reasonably prudent and competent person would take into account in the circumstances and consider what amount he would insist on having before he would sell, and I must put myself in the position of a person desiring to buy a property such as the subject property at December 31, 1971 but under no necessity of obtaining that particular property, and capable of appreciating all factors bearing on what a reasonably prudent and competent person would take into account in the circumstances, and consider what is the highest amount that he would be prepared to pay to acquire the property: vide National Capital Commission v Benjamin Marcus, [1969] 1 Ex CR 327 at 349-50, per Jackett, P. The only way I do this is by considering the evidence of value of the Oxbow Ranch property as at December 31,1971 opined by Mr Keenleyside and Mr Michel. To accept an appraisal, whether it is based on one or more sales, I must understand the reasoning by which a conclusion has been reached by each appraiser to form my own conclusion as to the weight of the reasoning on which the appraisal is based: vide National Capital Commission v Benjamin Marcus, op cit at 338.

In the case at bar I must also pay heed to the opinion of Mr Keenleyside not only as an experienced appraiser but also as a person who, in the words of Ms Clare, counsel for the respondent, “has very excellent general knowledge of the area in which the subject property is located”, since a good part of his testimony was also based on his considerable knowledge of the area. Based on his experience, for example, he was of the view that in respect of his second portion of the subject property there was no large enough sample available to make a statistical analysis of sales significant. He was of the view no adjustments to comparable sales could be made since there was simply no evidence on which to make adjustments. He admitted quite candidly that his appraisal value for the second portion was a “judgment call”. Similarly he appraised the first portion giving ultimate weight to an analysis of one particular sale because of his knowledge of the properties.

Mr Michel, on the other hand, through no fault of his own, had no prior personal knowledge of the subject property. Unlike Mr Keenleyside he did not observe the subject property in the state it was on Valuation Day. His knowledge of the area in 1971 is as a result of his own research which appears to have been done with diligence.

An appraisal of real estate is no more that what the appraiser judges to be the value of the real estate; all appraisals are opinions, or to use Mr Keen- leyside's words, “judgment calls”. However to adopt an appraiser's opinion I must be able to appreciate how he reached his opinion. I give weight to Mr Keenleyside's experience as an appraiser for many years in the area where the Oxbow Ranch property was considered, his residence in the area since the 1950s and his knowledge of the area in general and the subject property in particular since he first started work as an appraiser. I conclude from his evidence his experience gave him knowledge of how the municipal councils of Coquitlam and Port Coquitlam carried on their affairs, their priorities, the influence of the local public service on the elected officials and public sensitivity in the municipalities. With this knowledge a person may sometimes predict — or realize he cannot predict — how and when a property may develop. Mr Keenleyside knew what was happening in the area of the subject property on Valuation Day. He also said he appreciated what the land values were in the area; this was his "judgment call’’. But what disturbs me in considering the adoption of Mr Keenleyside's report without adjustment is that he did not permit me to appreciate how his "judgment call” was formed. The comparable sales he used, in particular for the appraisal of the second portion of the subject property, appeared to result from a search of comparable sales which would confirm an opinion already formed, rather than to serve as the basis for the opinion. But, as Ms Clare mentioned, the Oxbow Ranch was a difficult property to appraise; in this particular situation Mr Keenleyside’s knowledge of the area through his experience as an appraiser must be considered and used to serve as the basis of the value to be determined. I therefore am inclined to give greater weight to Mr Keenleyside's evidence, even though I am not thoroughly satisfied with this evidence.

I accept Mr Keenleyside's opinion that the number of comparable sales were not sufficient and that realistic adjustments to the selling prices of the comparable sales was not possible.

I also accept Mr Keenleyside's division of the subject property based on zoning as at Valuation Day.

I am of the view however that the values Mr Keenleyside accorded to parts one and two of the subject property are too high and must be revised. In Edna I Bibby v The Queen, [1983] CTC 121; 83 DTC 5148, at 131 (DTC 5157), Mr Justice Walsh states as follows:

While it has frequently been held that a Court should not, after considering all the expert and other evidence merely adopt a figure somewhere between the figure sought by the contending parties, it has also been held that the Court may, when it does not find the evidence of any expert completely satisfying or conclusive, nor any comparable especially apt, form its own opinion of valuation, provided this is always based on the careful consideration of all the conflicting evidence. The figure so arrived at need not be that suggested by any expert or contended for by the parties.

In respect of the first part of the Oxbow Ranch property, being Lots 9 and 10, Mr Keenleyside's value was greatly influenced by a sale of 45.3 acres of land on which there was in existence a mobile home park; based on an assumed selling price of $1,250,000 for the property, he adjusted the sale price for land to be $552,000 or $12,000 per acre for the land. However Land Titles records reflect the selling price of this property to be $941,000; the adjusted sale price for the land thus would be $443,000, or $9,780 per acre. I value the first part of the subject property at $10,000 per acre, a value I believe consistent with the comparables used by Mr Keenleyside and the purchase price indicated in Land Titles records.

The determination by Mr Keenleyside of the value of the second part of the Oxbow Ranch property, Lots 6, 7, 8, 11, 12, Sections 12 and LS 3 consisting of 88 acres also requires some adjustment. One of the sales used by Mr Keenleyside was of a property that was sold on November 21, 1972 for $7,688 per acre; however, the same property was sold on April 17, 1972, three and one-half months after Valuation Day, for $5,625 per acre. In my view Mr Keenleyside gave insufficient weight to the earlier sale and too much weight to the later sale; even if a property is sold several times over a relatively short period of time at substantial increases in selling prices one must not lose sight that the date one is attempting to determine a valuation for is December 31, 1971 and the date of sale closest to that date is the relevant date to consider, all things being equal, even if the property is in a dynamic area. Mr Keenleyside's value of this part of the subject property was, in his words, a “judgment call”, based on his experience and confirmed by the comparables he used. The range of his values without adjustment was from $3,598 to $8,222, five of the sales were over $7,000 and four were under, and therefore he accorded the second part of the Oxbow Ranch property a value of $7,000, which, based on his knowledge was fair. However I doubt a potential purchaser would have paid $7,000 for the lots in the second part of the subject property. In my view a potential purchaser would pay, and the appellants would have accepted, $6,300 per acre for the second portion of the Oxbow Ranch property.

As far as the third part of the property is concerned Mr Keenleyside was of the view it would sell for not less than $1,000 per acre; Mr Michel was of the view it would not sell for more than $2,000 per acre. This part of the property is in the same state today as it was in 1971. Since one appraisal deals with a minimum price and the other to maximum price, I shall accept the maximum value as the price the appellants might have received for the third part of the Oxbow Ranch property on December 31, 1971, that is $2,000 per acre.

Therefore in my view on Valuation Day the Value of the Oxbow Ranch property was as follows:

Principal Residence

The second issue is whether all the land comprising Lot 7, on which was situated the appellants’ residence, is to be included as part of the appellants' principal residence. I must consider if the area of the lot in excess of the one acre subjacent to the housing unit and such portion of any immediately contiguous land as may reasonably be regarded as contributing to the appellants’ use and enjoyment of the housing unit as a residence is necessary to such use and enjoyment. Counsel for the appellants referred me to The Queen v William Yates, [1983] CTC 105; 83 DTC 5158 where 9.3 acres of land were found to be necessary for the use and enjoyment of the taxpayer's residence since he could not legally have occupied his housing unit as a residence on less than ten acres. The only evidence before me was simply that it would not be economic to subdivide Lot 7: I fail to see that just because something, ie subdivision, is not economic the land in question automatically becomes necessary for one's use and enjoyment as a residence. Also, cabins on Lot 7 had been rented in earlier years. The appellants' appeals on this issue fail.

The appeals of Mr and Mrs James will therefore be allowed with costs and are referred back to the respondent for reconsideration and reassessment in accordance with these reasons.

Appeals allowed in part.