Christie,
ACJTC:—These
appeals
were
heard
together
on
common
evidence
with
the
consent
of
the
parties
and
the
approval
of
the
Court.
They
relate
to
the
appellants’
1977,
1978
and
1979
taxation
years.
The
issue
is
this:
what
was
the
acreage
of
the
“principal
residence’’
of
the
appellants
under
paragraph
54(g)
of
the
Income
Tax
Act
(“the
Act’’)
in
respect
of
a
piece
of
real
estate
consisting
of
9.3
acres
and
structures
thereon
at
497
Stone
Church
Road
East
in
the
Township
of
Hannon,
Ontario
(“the
property’’)
immediately
prior
to
the
disposition
thereof
by
them
in
1977?
The
appellants
contend
for
9.3
acres
and
the
respondent
for
one
acre.
If
the
appellants
are
correct,
there
is
no
taxable
capital
gain
on
the
disposition.
If
the
respondent
is
correct,
there
is
a
taxable
capital
gain
in
relation
to
8.3
acres.
The
appellants
are
husband
and
wife.
They
jointly
purchased
the
property
and
established
their
residence
there
in
1966.
At
this
time
the
area
was
sparsely
populated.
Prior
to
this
they
lived
on
Garth
Street
in
Hamilton,
but
moved
when
dwellings
began
to
be
constructed
in
large
numbers
in
that
area.
This
construe-
tion
was
inconsistent
with
the
manner
and
surroundings
in
which
the
appellants
wished
to
exist
and
it
precipitated
the
move
from
Garth
Street.
The
property
was
sold
to
an
unsolicited
purchaser
in
1977
who
intended
to
subdivide
it.
The
appellants
sold
because,
again
in
their
eyes,
its
usefulness
for
the
mode
of
existence
which
they
wish
to
pursue
was
being
threatened
by
the
advancement
of
relatively
dense
housing.
After
selling
the
property
the
appellants
moved
to
631
Miles
Road
in
the
Township
of
Clembrook
which
is
further
from
Hamilton
than
the
site
of
the
property.
At
this
new
home
they
live
in
much
the
same
manner
as
they
did
on
the
property.
The
appellants
prefer
seclusion
and
self-sufficiency
in
the
production
of
their
food
to
the
extent
feasible.
While
residing
on
the
property
they
produced
all
of
the
food
they
consumed
except
for
certain
necessities
such
as
flour,
milk,
salt
and
pepper
which
they
had
to
purchase.
Regarding
self-sufficiency,
reference
was
made
to
geese,
ducks,
chickens,
eggs,
vegetables,
raspberries,
gooseberries,
currants
and
honey.
Mrs
Rode
baked
bread
and
pastries
and
made
noodles
and
spaghetti.
She
also
made
jams
and
jellies.
Food
was
canned
and
also
stored
frozen.
Mrs
Rode
said
these
were
the
kind
of
circumstances
under
which
she
was
raised
in
Germany,
the
country
of
her
origin.
Mr
Rode
testified
that
he
also
came
from
Germany
and
was
raised
on
a
farm
there.
Considerable
emphasis
was
placed
on
the
production
of
honey.
It
was
used
by
the
appellants
for
all
purposes
in
substitution
for
sugar.
On
average
they
kept
ten
beehives.
It
was
said
that
the
bees
subsisted
on
clover
and
flowers
on
the
property.
Almost
one-half
of
the
property
was
devoted
to
clover
and
corn.
A
neighbour,
Mr
Camly,
who
is
a
farmer
was
responsible
for
the
corn
and
clover.
Pollen
from
the
corn
was
said
to
be
vital
for
the
bees.
In
return
for
his
work,
Mr
Camly
would
reap
and
retain
the
corn
and
clover
crops
subject
to
supplying
the
appellants
with
some
corn
for
their
domestic
fowl
plus
manure
and
straw
for
the
gardens.
The
bee
colonies
were
located
in
a
corner
of
the
property.
They
could
not
be
close
to
the
dwelling
house
because
of
the
possibility
of
their
attacking
either
the
appellants
or
their
dog
or
both.
Counsel
for
the
appellants
introduced
in
evidence
a
booklet
entitled
“Beekeeping
in
Ontario”
published
by
the
Ministry
of
Agriculture
and
Food.
He
referred
to
page
6
where
this
is
said:
No
person
in
an
urban
municipality
shall
place
or
leave
hives
containing
bees
within
100
feet
of
a
property
line
separating
the
lands
on
which
the
hives
are
placed
or
left
from
lands
occupied
by
a
dwelling
..
.
.
The
source
of
this
statement
is
subsection
19(3)
of
the
Bees
Act,
RSO
1980,
c
42.
Counsel
then
introduced
in
evidence
a
“Factsheet”
which
is
also
published
by
the
Ministry
of
Agriculture
and
Food.
It
has
the
heading
“Pollination
for
Fruit
and
Seed
Production”.
Counsel
referred
to
these
passages
in
the
document:
Legume
blossoms
are
usually
borne
in
heads
or
racemes
composed
of
many
separate
florets,
each
of
which
must
be
visited
individually
if
it
is
to
be
pollinated.
An
acre
of
red
clover
contains
about
200
million
florets,
while
an
acre
of
alsike
has
twice
this
number.
To
carry
out
the
tremendous
number
of
blossom
visits
required,
it
is
recommended
that
two
to
three
colonies
of
honeybees
should
be
placed
in
or
adjacent
to
the
seed
field.
Red
clover
and
birdsfoot
trefoil
are
not
as
attractive
as
some
of
the
other
clovers,
although
honeybees
do
visit
them
regularly.
These
two
exhibits
were
simply
placed
in
evidence.
The
precise
intended
impact
of
them
was
not
explained
by
counsel
or
the
appellants
in
their
capacity
as
witnesses.
Presumably
they
are
intended
to
emphasize
the
ample
space
requirements
of
beekeeping.
Other
generous
portions
of
the
property
were
devoted
to
the
vegetable
and
berry
gardens.
Some
land
was
also
committed
to
a
shelter
for
the
domestic
fowl.
A
strip
of
it
on
the
side
of
the
property
opposite
that
which
Mr
Camly
worked
was
in
wild
clover
which
also
nourished
the
bees.
Mrs
Rode
was
asked
this
question
and
gave
this
reply:
Q.
Was
there
any
portion
of
the
land
that
you
were
not
using
in
connection
with
the
lifestyle?
A.
There
was
every
inch
we
used.
We
needed
it,
we
had
to
work,
we
needed
every
inch
of
the
land.
Mr
Rode’s
evidence
was
to
the
same
effect.
To
round
out
the
narrative,
the
purchaser
of
the
property
mortgaged
it
to
the
appellants
at
the
time
of
acquisition.
He
defaulted
on
the
payments
under
the
mortgage
and
consequently
the
property
was
repossessed
by
the
appellants.
They
continue,
however,
to
live
at
631
Miles
Road
and
the
property
is
leased
by
them.
Paragraph
54(g)
of
the
Act
defines
“principal
residence”
of
a
taxpayer
for
a
taxation
year.
It
includes
the
stipulation
that
the
geographical
limits
up
to
one
acre
(now
/2
hectare)
of
a
principal
residence
is
the
land
subjacent
to
the
housing
unit
and
such
portion
of
any
immediately
contiguous
land
as
may
reasonably
be
regarded
as
contributing
to
the
taxpayer’s
use
and
enjoyment
of
the
housing
unit
as
a
residence.
This
means
that
the
area
encompassed
by
a
principal
residence
is
a
variable
depending
upon
the
pertinent
circumstances.
I
am
also
of
the
view
that
the
test
to
be
applied
in
determining
what
that
area
1s,
is
flexible
having
particular
regard
to
the
underlined
words
if
the
taxpayer
is
not
contending
that
the
subjacent
and
immediately
contiguous
land
comprising
his
principal
residence
exceeds
one
acre.
In
such
cases
significant
weight
should
be
attached
in
favour
of
an
appellant
to
credible
evidence
that
can
be
sensibly
regarded
as
making
the
kind
of
contribution
described.
If,
on
the
other
hand,
the
appellant
is
contending
that
the
parameters
of
his
principal
residence
exceed
one
acre,
he
is
faced
with
a
significantly
altered
and
more
difficult
task.
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
establishes
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.
I
am
also
of
the
opinion
that
what
constitutes
a
principal
residence
is
to
be
decided
throughout
by
objective,
not
subjective,
testing.
To
determine
a
lis
respecting
the
boundaries
of
a
principal
residence
on
the
basis
of
evidence
which
is
purely
the
mental
perception
of
one
of
the
parties
to
the
controversy
would
strike
me
as
raising
a
serious
question
of
justness
although
I
appreciate
that
the
words
“contribute
to
the
taxpayer’s
enjoyment”
in
paragraph
54(g)
tend
to
draw
one
towards
applying
a
subjective
test
in
this
regard.
Parliament
has
placed
two
things
together
contraposed.
First,
provision
for
the
determination
of
variable
dimensions
of
land
which
may
constitute
the
principal
residence
of
taxpayers
in
respect
of
which
they
can
succeed
in
what
they
contend
is
the
correct
dimension
by
meeting
the
application
of
a
flexible
test.
This
applies
to
an
area
which
has
fixed
lines
of
demarcation
which
must
not
exceed
one
acre.
Second,
provision
for
the
determination
of
variable
dimensions
of
land
which
may
constitute
the
principal
residence
of
taxpayers
which
are
in
excess
of
one
acre
and
which
have
no
fixed
outer
limits.
I
believe
that
in
this
regard
it
was
the
intention
of
Parliament
that
crossing
the
demarcation
lines
of
one
acre
and
the
process
of
expansion
beyond
them
shall
be
a
formidable
task.
This
is
the
effect
of
the
injection
of
the
word
“necessary”
in
determining
dimensions
in
excess
of
one
acre.
Among
the
interpretations
assigned
to
the
word
“necessary”
in
the
Oxford
English
Dictionary
1s:
“indispensable,
requisite,
essential,
needful;
that
cannot
be
done
without”.
From
this
selection
I
believe
that
the
phrase
“that
cannot
be
done
without”
best
epitomizes
what
a
taxpayer
must
meet
in
order
to
establish
that
his
principal
residence
can
properly
be
regarded
as
greater
than
one
acre.
To
my
mind,
the
proper
approach
to
the
determination
of
these
appeals
is
to
objectively
consider
all
of
the
relevant
circumstances
adduced
in
evidence
which
were
in
existence
immediately
prior
to
the
disposition
of
the
property
and
in
the
light
of
that
answer
this
question:
have
the
appellants
established
on
a
balance
of
probabilities
that
without
the
area
of
land
for
which
they
contend
constituting
the
subjacent
and
immediately
contiguous
land
component
of
their
housing
unit
they
could
not
practicably
have
used
and
enjoyed
the
unit
as
a
residence?
I
say
“immediately
prior
to
the
disposition”
because
“the
critical
time
is
the
moment
before
disposition”:
The
Queen
v
Yates,
[1983]
CTC
105
at
106;
83
DTC
5158
at
5159*.
Decided
cases
signify
that
legal
attributes
attaching
to
land
may
or
may
not
determine
the
magnitude
of
the
land
component
of
a
principal
residence.
This
is
illustrated
by
reference
to
Yates
(supra)
and
Watson
et
al
v
MNR,
[1985]
1
CTC
2276.
In
Yates
the
taxpayers
had
purchased
ten
acres
of
vacant
land
on
which
they
built
a
residence.
This
was
the
minimum
residential
area
permitted
under
applicable
zoning
laws.
The
effect
of
these
laws
as
described
by
Mahoney,
J
at
106
(DTC
5159)
was
that:
“The
Defendants
could
not
legally
have
occupied
their
housing
unit
as
a
residence
on
less
than
ten
acres”.
[Emphasis
added.]
His
Lordship
went
on
to
say:
It
follows
that
the
entire
ten
acres,
subjacent
and
contiguous,
not
only
“may
reasonably’’
be
regarded
as
contributing
to
their
use
and
enjoyment
of
their
housing
unit
as
a
residence;
it
must
be
so
regarded.
It
also
follows
that
the
portion
in
excess
of
one
acre
was
necessary
to
that
use
and
enjoyment.
In
Watson,
Bonner,
TCJ
said:
Mr
Watson
stated
that
both
when
the
property
was
acquired
and
when
it
was
expropriated
it
could
not
be
severed.
He
referred,
I
assume,
to
the
prohibition
contained
in
subsection
29(2)
of
the
Planning
Act,
RSO
1970,
c
349.
The
argument
seemed
to
be
that
in
order
to
use
the
house
and
in
particular
to
have
access
to
it
the
whole
parcel
was
necessary
because
it
was
not
possible
to
convey
the
house
and
a
strip
of
land
required
for
the
driveway
without,
at
the
same
time,
conveying
the
rest
of
the
parcel.
In
my
view
the
definition
of
“principal
residence’’
contained
in
paragraph
54(g)
is
such
that
considerations
as
to
what
can
lawfully
and
effectively
be
conveyed
are
irrelevant.
The
amount
of
land
which
contributes
to
the
use
and
enjoyment
of
a
housing
unit
is
not,
by
paragraph
54(g)
of
the
Income
Tax
Act,
made
to
depend
on
what
can
lawfully
be
bought
and
sold.
The
essence
of
the
appellants’
position
is
that
because
of
the
particular
lifestyle
which
they
chose
to
pursue
while
residing
on
the
property
their
principal
residence,
for
the
purposes
of
paragraph
54(g)
of
the
Act,
constituted
9.3
acres
at
the
time
of
its
sale
in
1977,
not
one
acre
as
asserted
by
the
respondent.
While
the
appellants
mode
of
existence
was
of
course
perfectly
acceptable,
some
might
say
commendable,
it
was
not
something
that
operated
to
their
tax
advantage
on
the
disposition
of
the
property.
On
the
basis
of
the
evidence
adduced,
they
have
failed
to
show
that
the
second
question
previously
posed
should
be
answered
in
the
affirmative.
The
appeals
are
dismissed.
Appeals
dismissed.
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