Christie,
ACJTC:—These
appeals
relate
to
the
appellants’
1979
taxation
year.
They
were
heard
together
on
common
evidence
by
agreement
among
the
parties
and
with
the
consent
of
the
Court.
The
issue
is
whether
the
respondent
was
correct
in
his
reassessments
of
the
taxable
capital
gains
realized
by
the
appellants
on
the
sale
by
them
in
1979
of
certain
real
estate
in
Alberta
consisting
of
317
acres
of
land
and
buildings
thereon
(“the
property”).
This
in
turn
depends
on
the
answer
to
two
questions:
was
the
respondent
correct
in
(a)
decreasing
the
adjusted
cost
base
of
the
land,
and
(b)
changing
the
allocation
of
the
proceeds
of
disposition
as
indicated
in
paragraph
3
of
the
reply
to
notice
of
appeal
with
the
consequent
increase
in
the
calculated
capital
gain
stated
in
that
paragraph?
The
second
question
is
whether
the
respondent
is
correct
in
his
determination
that
the
principal
residence
of
the
appellants
consisted
of
one
acre
and
not
five
acres
as
contended
by
them.
The
onus
which
the
appellants
must
discharge
in
order
to
succeed
is
to
demolish
the
basic
facts
on
which
the
reassessments
rest:
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182
per
Rand,
J
delivering
the
judgment
of
the
Supreme
Court
of
Canada
at
201
(DTC
1183).
This
has
not
been
done.
No
evidence
which
could
be
regarded
as
an
expert
opinion
in
appraising
the
value
of
the
property
in
issue
was
introduced
by
the
appellants
at
the
hearing.
This
is
the
kind
of
evidence
that
was
tendered.
(i)
A
letter
dated
September
4,
1981,
addressed
“To
Whom
it
May
Concern”
and
signed
by
Mr
H
M
Rhodes,
RR
1,
Innisfail,
Alberta.
The
letter
expresses
an
opinion
regarding
the
value
of
certain
land
to
which
these
appeals
relate.
Mr
Rhodes
is
said
to
have
been
a
municipal
councillor
at
the
time
the
letter
was
written.
The
land
is
located
in
that
municipality.
(ii)
A
letter
dated
February
15,
1978,
addressed
to
the
appellant,
Robert
Cox,
reminding
him
of
payment
due
in
the
sum
of
$220
for
an
appraisal
of
land
to
which
these
appeals
relate.
The
letter
is
signed
by
Gordon
C
Hodgen
who
describes
himself
as:
“Candidate
Member
of
the
Appraisal
Institute
of
Canada”.
Attached
to
the
letter
is
a
single
sheet
of
paper
entitled
“Appraisal
for
Parkland
Savings
&
Credit
Union”.
The
document
does
not
fix
a
numerical
value
for
any
land
or
building
described
therein.
It
states
that
the
“remaining
life”
of
the
residence
is
25
years.
This,
the
appellants
say,
is
in
conflict
with
an
appraisal
report
prepared
by
Mr
L
H
Downey
of
Calgary
for
Revenue
Canada.
(iii)
A
letter
dated
March
11,
1985,
addressed
to
the
appellant,
Robert
Cox,
and
signed
by
Mr
Bill
Farr.
Attached
to
the
letter
is
a
soil
survey
report
prepared
by
Mr
Farr.
He
is
described
as:
“Educational
Assistant,
Olds
College,
Olds,
Alberta,
Diploma
in
agronomy,
land
resources
and
classification”.
The
authors
of
these
documents
were
not
called
to
testify
at
the
hearing.
I
said
then
and
I
repeat
now,
this
type
of
evidence
cannot
be
assigned
any
weight
for
the
reason
that
the
respondent
was
not
afforded
the
opportunity
of
testing
by
cross-examination
the
expertise
of
the
authors
of
the
opinions
or
what
they
said
in
the
documents
referred
to.
Subsection
14(2)
of
the
Tax
Court
of
Canada
Act
states
that,
notwithstanding
the
provisions
of
the
Act
under
which
an
appeal
is
made
to
the
Tax
Court,
it
is
not
bound
by
any
legal
or
technical
rules
of
evidence
in
conducting
a
hearing
for
the
purposes
of
that
Act.
I
cannot,
however,
construe
this
as
an
unfettered
license
to
disregard
the
laws
of
evidence.
Indeed
I
believe
that
there
is
a
positive
duty
on
the
Court
to
apply
those
laws
if
the
nature
of
the
subject
matter
before
it
for
determination
is
such
that
in
order
for
justice
to
be
done
they
should
be
applied.
This
is
especially
true
where
cross-
examination
can
be
vital.
Cross-examination
is
described
by
Wigmore
in
his
monumental
work
on
the
law
of
evidence
as:
“Beyond
any
doubt
the
greatest
legal
engine
ever
invented
for
the
discovery
of
truth”.*
Included
in
the
subject
matters
of
the
kind
mentioned
are
controversies
over
the
value
of
property.
Another
common
example
is
the
intention
of
taxpayers
at
the
time
of
disposition
of
property.
Those
aspects
of
these
appeals,
within
the
scope
of
the
first
question
posed,
cannot
succeed.
Turning
now
to
the
second
question
regarding
whether
at
the
time
of
disposition
of
the
property,
the
principal
residence
of
the
appellants
comprised
one
acre
or
five
acres.
They
basically
relied
on
the
location
of
four
things
in
relation
to
the
housing
unit.
They
are:
a
barn,
a
shelter
belt
of
trees,
a
well
and
a
dugout.
The
barn
was
needed
for
a
horse
kept
by
the
appellants.
It
was
said
that
this
horse
was
a
necessary
means
of
transportation
for
their
handicapped
daughter.
The
daughter
left
home
in
1978
to
work
in
Calgary
for
the
Canadian
National
Institute
for
the
Blind.
She
later
moved
to
Edmonton
to
work
there
for
the
Institute.
The
dugout
consisted
of
a
sizable
excavation
which
photographs
entered
as
exhibits
indicate
was
some
considerable
distance
from
the
housing
unit,
although
the
precise
distance
was
not
given
in
evidence.
This
dugout
was
filled
with
water
and
used
to
raise
trout
for
the
purposes
of
the
appellants.
Mr
Cox
had
been
issued
a
licence
in
this
regard.
The
well
was
100
feet
and
the
shelter
belt
some
200
feet
from
the
housing
unit.
In
Rode
v
MNR,
[1985]
1
CTC
2324;
85
DTC
272
this
is
said
at
2326
[DTC
273]:
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
/i
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
is,
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
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
is:
“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.
Even
assuming
for
the
purposes
of
this
appeal
that,
for
the
reason
given,
the
barn
could
have
been
regarded
as
necessary
for
the
use
and
enjoyment
of
the
housing
unit
as
a
residence
by
the
appellants,
that
necessity
terminated
when
the
daughter
moved
to
Calgary.
This
eliminates
the
barn
as
a
relevant
factor
at
the
date
of
disposition.
The
dugout
or
fish
pond
was
quite
capable
of
contributing
to
the
use
and
enjoyment
of
the
housing
unit
as
a
residence,
but
it
does
not
meet
the
test
of
necessity
enunciated
in
Rode.
The
same
can
be
said
of
the
shelter
belt.
It
was
the
appellants’
evidence
that
the
location
of
the
well
vis-a-vis
the
housing
unit
was
such
that
when
the
requirement
of
an
access
road,
estimated
at
100
yards
in
length,
was
also
taken
into
consideration
they
“wouldn’t
fit’’
within
one
acre.
Why
was
not
explained
and,
more
important,
nothing
was
forthcoming
to
justify
the
necessity
of
five
acres
because
of
the
relationship
among
the
housing
unit,
the
well
and
the
access
road.
This
aspect
of
the
appeals
also
fails.
The
appeals
are
dismissed.
Appeals
dismissed.
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