Taylor,
TCJ:—These
are
appeals
heard
on
common
evidence
in
Calgary,
Alberta,
on
December
18,
1984,
against
income
tax
assessments
for
the
year
1979
in
which
the
Minister
of
National
Revenue
taxed
as
on
income
rather
than
on
capital
account
certain
amounts
received
in
that
year
related
to
the
sale
of
these
appellants’
shares
in
a
corporation
known
as
Terra-Flex
Ltd.,
(“Terra-Flex”).
The
precise
amounts
involved
are
not
in
issue
between
the
parties,
only
the
principle
which
arises
out
of
the
transaction,
and
the
income
tax
implications
thereof.
Using
the
notice
of
appeal
of
Wagenaar
the
situation
was:
During
the
latter
part
of
1978
—
an
agreement
was
reached
whereby
the
taxpayer
would
sell
his
shares,
the
consideration
being
twenty
six
per
cent
(26%)
of
the
net
profit
for
the
year
ended
December
31,
1978.
The
only
difference
between
that
and
the
situation
for
Dales
was
that
Dales
owned
only
16
per
cent
of
the
shares.
The
critical
portions
of
the
Minister’s
reply
to
notice
of
appeal
(again
using
Wagenaar’s
documents)
read:
The
agreement
of
December
1st,
1978,
specified,
amongst
other
things:
—
the
sale
by
the
Appellant
to
Geoffrey
C
Agassiz
of
the
Appellant’s
shares
for
$2.00
per
share;
—
the
purchaser
causing
the
company
to
pay
the
Appellant
a
bonus
of
$26,000.00
on
or
before
January
5,
1979;
—
the
purchaser
causing
the
Appellant
to
pay
an
additional
bonus
of
61.53%
of
“42%
of
the
1978
net
profits
of
Terra-Flex
Ltd’’
including
an
amount
of
$18,571.00
on
or
before
January
5,
1979
with
the
balance
of
the
said
bonus
to
be
paid
on
or
before
March
31,
1979;
Terra-Flex
Ltd
paid
the
Appellant
.
.
.
and
correspondingly
issued
him
a
T4A
slip.
In
assessing,
the
respondent
relied
inter
alia,
on
section
3
and
subsections
248(1)
and
5(1)
of
the
Income
Tax
Act,
RSC
1952,
c
148
as
amended
by
s
1
c
63,
SC
1970-71-72.
In
addition,
it
was
the
respondent’s
position
that
for
the
year
1979,
Wagenaar
was
an
employee
of
Terra-Flex,
and
that
he
received
the
amount
in
dispute
in
his
capacity
as
officer
or
employee
of
that
company.
The
agreement
reached
between
Wagenaar
and
Dales
on
one
hand
and
a
Mr
Geoffrey
C
Agassiz
on
the
other
was
dated
December
1,
1978
and
called
for
the
closing
date
to
be
January
5,
1979.
The
1979
income
tax
return
of
the
appellants
showed
that
they
had
reported
a
small
amount
of
employment
income
(presumably
for
5
days)
from
Terra-Flex
in
1979,
but
the
amounts
in
dispute
in
these
appeals
had
not
been
reported
as
“salary”.
Both
appellants
testified,
as
did
a
Mr
Hans
B
Tebrake,
who
had
been
their
personal
accountant
and
the
accountant
for
Terra-Flex
for
the
period
before
the
“closing
date”
of
the
agreement.
Mr
Tebrake
had
not
been
involved
in
the
preparation
of
the
offending
T4A
slips,
that
function
being
performed
by
his
successor.
However,
Mr
Tebrake
had
been
involved
in
early
discussions
leading
to
the
agreement,
and
it
was
his
understanding
that
those
discussions
at
all
times
had
revolved
around
a
payment
for
capital,
and
that
nothing
had
been
interjected
which
would
have
led
him
to
think
of
the
amounts
paid
in
the
sale
transaction
as
“employment”
income.
He
had
not
seen
the
agreement
himself,
until
some
time
after
the
transaction,
when
the
possible
income
tax
impact
arose
out
of
the
T4A
slips.
Mr
Tebrake
also
stated
that
in
his
opinion
the
shares
had
been
worth
more
than
$2,
and
that
there
were
several
valuable
assets
which
belonged
to
the
company
at
the
date
of
the
transaction.
In
my
view,
the
only
evidence
which
the
Court
need
or
can
take
into
account
is
the
agreement
itself,
and
it
is
clear.
There
was
only
one
asset
which
could
be
sold
directly
by
the
appellants,
and
that
was
the
shareholdings
they
had
in
Terra-
Flex.
For
that,
the
purchaser,
Mr
Agassiz,
paid
$2.
After
the
date
of
the
agreement
(it
was
done
in
1979,
but
there
does
not
appear
to
be
any
bar
in
the
agreement
to
prohibit
the
action
in
1978)
the
purchaser
of
the
shares
(Mr
Agassiz)
had
an
obligation
to
“cause
the
company”
to
do
certain
other
things
(see
quotations
from
reply
to
notice
of
appeal,
above)
—
and
it
is
out
of
these
payments
that
the
current
dispute
arises.
It
is
quite
posssible
that
the
corporation
Terra-Flex
could
have
viewed
the
payments
at
issue
in
a
different
light
than
as
remuneration,
but
I
can
find
nothing
in
the
terms
of
the
agreement
which
would
have
mandated
any
such
alternative
treatment.
The
suggestion
was
made
that
the
payments
might
have
been
in
connection
with
the
“general
release”
or
“restrictive
covenants”
clauses
of
the
agreement,
but
there
is
no
basis
for
such
a
contention
—
albeit
that
different
terminology
in
the
agreement
might
have
produced
that
result.
The
company
(the
payer
of
the
disputed
amounts)
obviously
interpreted
the
agreement
to
read
that
the
“bonus”
meant
an
additional
remuneration
of
some
sort
—
nominally
salary
or
wages.
That
interpretation
is
clearly
open
to
the
company
from
the
agreement
—
in
fact
it
is
a
very
logical
one.
If
these
appellants
have
cause
for
complaint,
that
complaint
might
be
more
appropriately
directed
at
Terra-Flex
or
Mr
Agassiz
in
connection
with
the
interpre-
tation
and
implementation
of
the
agreement,
but
there
is
no
cause
for
complaint
against
the
Minister
of
National
Revenue
for
taxing
the
amounts
as
dictated
by
the
action
of
Terra-Flex.
I
can
sympathize
with
the
assertions
of
the
appellant
that
they
had
no
choice
but
to
sign
the
agreement
as
it
was
put
in
front
of
them,
and
perhaps
that
is
true.
But
that
can
have
no
bearing
on
the
determination
of
this
Court
with
regard
to
the
tax
impact
of
the
transaction.
The
appeals
are
dismissed.
Appeals
dismissed
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