George E C Jackson v. Minister of National Revenue, [1984] CTC 2238

St-Onge, TCJ [ORALLY]:—The appeal of Mr George E C Jackson was heard on January 13, 1984, at the City of Toronto, Ontario, and it has to do with a claim for capital losses for the appellant’s 1975, 1976 and 1977 taxation years.

The facts are as set forth in paragraphs, 2, 3 and 4 of the reply to the notice of appeal which read as follows:

Reply to Notice of Appeal

2. In reporting his income for the 1975, 1976 and 1977 taxation years, the Appellant claimed capital loss for the said taxation years in the amount of $1,000.00, $2,165.00 and $2,000.00 respectively with respect to shares held by the taxpayer in Radio Engineering Products Ltd.

3. In assessing tax for the 1975, 1976 and 1977 taxation years by Notice of Reassessment the Respondent disallowed the capital losses on the said shares for the 1975, 1976 and 1977 taxation years.

4. In assessing tax as aforesaid, the Respondent relied upon the following assumptions of fact:

(a) The facts set out above;

(b) the taxpayer owns 1,500 shares in Radio Engineering Products Ltd;

(c) in 1969 Radio Engineering Products Ltd. was taken over by an American Company called Nytronics Inc;

(d) in 1972 Nytronics Inc sold all its outstanding shares of Radio Engineering Products Ltd to the government of Canada for $1.00 and a release of any claims by the Government of Canada against the said Government;

(e) Radio Engineering Products Ltd was placed in bankruptcy on November 27, 1975;

(f) the shares owned by the Appellant are worthless;

(g) the Corporation, Radio Engineering Products Ltd, has not wound up and the charter of the said company has not been surrendered.

At the hearing, the appellant has admitted paragraphs 2, 3 and 4 of the respondent’s reply to the notice of appeal.

In order to claim and obtain a capital loss, the appellant must fall squarely within the four corners of the exempting clause 54(c)(ii)(A) of the IncomeTax Act, SC 1970-71-72, c 63, as amended, which reads as follows:

(c) “Disposition” of property. — “disposition” of any property, except as expressly otherwise provided, includes

(ii) any transaction or event by which

(A) any property of a taxpayer that is a share, bond, debenture, note, certificate, mortgage, hypothec, agreement of sale or similar property, or an interest therein, is redeemed in whole or in part or is cancelled,. . .

As may be seen, there was no disposition of property since:

1) The shares are still owned by the appellant, and are still in his possession;

2) They have never been redeemed in whole or in part, nor have they been cancelled.

Consequently, although the shares owned by the appellant, in Radio Engineering Products Ltd, were worthless there was never any disposition of property within the meaning of paragraph 54(c) of the Income Tax Act.

For these reasons, the appeal is dismissed.

Appeal dismissed.