Clayton Andreychuk v. Minister of National Revenue, [1983] CTC 2052, 83 DTC 20

D E Taylor:—This is an appeal heard in Toronto, Ontario, on September 20, 1982, against income tax assessments for the years 1976 and 1977 in which the Minister of National Revenue disagreed with the calculation of certain items included by the taxpayer in filing his income tax returns and reassessed accordingly. In view of the unusual nature of the arguments raised, the complete notice of appeal is reproduced:

1. The Appellant purchased the “Cecil Hotel” at Bredenbury, Saskatchewan, under a Conditional Sales Agreement, dated 18th April, 1973, providing for his possession August 1, 1973, on which said last mentioned date he commenced to carry on business as the unincorporated proprietor thereof. He continued to carry on the said business until May 31, 1976, at which time he agreed to sell the said Hotel, its furniture and fixtures, and the business and goodwill, under the provisions of a Conditional Sales Agreement, as further described in paragraph numbered 3 below, and he therefrom ceased to carry on any business.

2. The price paid by the Appellant under the said contract to purchase the “Cecil Hotel” amounted in all to $89,000, including land, goods and chattels and hotel premises, as set out in the said purchase agreement, and which said agreement mentioned no specific consideration for “goodwill”. Before the date of the aforementioned contract of sale with possession on May 31,1976, as aforesaid, he had added capital to the said business by further investment in depreciable capital assets of $8,705.07.

3. Under the provisions of the said contract for the Appellant’s Conditional Sale of the said Hotel and business on May 31, 1976, the total price was fixed at $130,000, with $50,000 payable in cash on possession May 31, 1976, and the balance of $80,000, together with interest at 9% per annum, payable in blended monthly instalments of $900 until the said interest and principal was to be paid in full — that is to say over a period of approximately 12 years. In accordance with an understanding reached with the purchasers subsequent to the date of the said contract of sale, the said sale price was broken down into $1,000 for land, $94,000 for the building, $25,000 for equipment, and $10,000 for goodwill.

4. The Appellant’s total profit or gain on the disposal aforesaid calculated on an accrual basis, including $25,266.27 for what is deemed by the Act to be “recaptured depreciation”, and $10,000, as designated by the mutual understanding aforesaid, for “goodwill”, and a balance of $22,060.93 which his accountants designated as “capital gain’, was $57,327.20, but the Appellant alleges and the fact is that no part of the said “gain on disposal” was receivable into his hands, under the terms of the said contract of sale, until the year 1981.

5. On his disposal of the said Hotel and business, the Appellant engaged the services of his accountants, Messrs Gibson, Shaw, Skilnick and Kemp of Melville, Saskatchewan, to prepare a Balance Sheet and Income Statement for the period ending May 31, 1976. The said Income Statement disclosed a “net income from operations” for the said Hotel business during the said five months of $11,059.68, which the Appellant duly reported in his 1976 Income Tax Return. But the said Income Statement was continued on to add the aforementioned “gain on disposal” as extraordinary items of business income, and accordingly calculated a “net income for the period” of $68,386.88.

6. The Appellant in accordance with the said Income Statement reported his “gain on disposal” as income in 1976, but set up a reserve against the “goodwill” and “capital gain” portions in accordance with the provisions of Section 40; for that part of the profit, deemed by the Act to be taxable income through “recaptured depreciation’, he also set up a reserve as provided by Section 20(1 )(n) because the said income was not receivable for more than two years. In spite of his misgivings about its actual reasonableness when applied to the particular facts recited above, as his guide for the reasonableness of the amount of the said reserves, he applied the same formula as suggested by the Department for calculating reserves for capital gains. Accordingly, he reported in his 1976 Tax Return out of his anticipated “gain on disposal”, an amount of $15,129.25, notwithstanding that no part of that amount was receivable by him for a further 5 years.

7. For the year 1977, the Appellant reported as taxable income the principal received by instalments in that year under the provisions of the said contract, and reduced the aforementioned reserves accordingly. The Appellant pro-rated the said principal sum received in 1977 amongst “recaptured depreciation”, and “capital gain”, and payment on account of “goodwill” in accordance with the proportions indicated for those items in his 1976 Return.

8. By “Notice of Assessment”, dated September 4, 1980, the Minister increased the Appellant’s own assessment of his 1976 income to the full amount of $25,266.07 for “recaptured depreciation”, and further added to his assessed income in 1976 the sum of $5,000, being one-half the portion of the said total gain specifically designated as being consideration for “goodwill”, and the Minister approved a reserve only against the balance of the gain on disposal nominally designated as “capital gain’.

9. The position of the Minister, as revealed to the Appellant by the Appeals Officer in the Department, both orally and by supporting documents supplied, is:

(a) That, by virtue of Section 13(1), “recaptured depreciation” must be included in computing the income of the taxpayer in the year of disposal of the depreciable property; and

(b) “A reserve for amount not due until later year’, as provided by virtue of Section 20(1 )(n), was declared to be “not allowable” to the Appellant on the grounds that the sale of the said Hotel and business was not “property sold in the course of business”; and

(c) That a reserve against the amount of the said gain designated as being payment for “goodwill” was “not allowable” by virtue of Section 40(1), on the grounds that the provisions of that Section are applicable to “capital gains and losses” only.

10. The Appellant disputes the position of the Minister, as set out in paragraph numbered 9 above, and pleads that:

(a) Section 13(3)(b) provides, inter alia, that, “where the taxpayer is an individual”, a reference in Subsection (1) to “the income” shall be read as a reference to “the income from the business”; and

(b) Section 20(1 )(n) provides for “.. . a reasonable amount as a reserve in respect of such part of the amount so included in computing the income as may reasonably be regarded as a portion of the profit from the sale”; and

(c) Section 20(1), in its preamble, designates certain allowable deductions, including the deduction mentioned in 20(1 )(n), from a taxpayer’s income from a business or property . . as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as appliable thereto”;

and

(d) Section 40(1) deals specifically with a “taxpayer’s gain for a taxation year from the disposition of any property . . and in no place in that Section does the phrase “capital gain” appear notwithstanding that a special meaning of the phrase “capital gain” is specifically set forth in the preceding Section 39. The Appellant pleads that the plain meaning of the word “gain” as used in the said Section is in the general sense of “profit”.

11. The Appellant further alleges and the fact is that on his own purchase of the said Hotel and business on August 1, 1973, no specific consideration for “goodwill” was stated or fixed. The Appellant had set up no account for “cumulative eligible capital” when he carried on the business up to the said date of sale, and he had made no claim by deductions from income to amortize any cost thereof to be recaptured upon his disposition of the business and property. The Appellant’s position is that the “goodwill” mentioned in connection with the said sale was an asset created during his own operation of the said business. The Appellant submits that the said amount, labelled as being consideration for “goodwill”, is otherwise indistinguishable from that portion of the gain on disposal labelled as being in respect to “capital gain”.

12. The Appellant further pleads that Section 21(1) of the Income Tax Application rules (1971), as referred to in the Notice of Confirmation by the Minister, has appliction only to a business carried on by a taxpayer “throughout the period commencing January 1, 1972, . . The Appellant respectfully submits that the said Section is not applicable to the Appellant on the grounds that he could not be said to have acquired the said business or property until August 1, 1973.

13. The Appellant therefore pleads that, notwithstanding the label of “goodwill” in which the Appellant acquiesced, he is lawfully entitled to set up a reasonable reserve against proceeds on disposal not due until future years as provided by Section 40, and as already approved by the Department with respect to that part of his gain or profit mutually labelled by the parties to the contract of sale as “capital gain’.

14. IN THE ALTERNATIVE, in view of the fact that the Appellant, except as to income from the said “Cecil Hotel’, reported his income on a cash basis, should the Board find that the sale of the said Hotel was not made in the course of business, or that a reasonable reserve for income not receivable until future years is not allowable to him on income reported on an accrual basis, and in order to avoid an absurdity in the interpretation of the within Statute, the Appellant has refiled his tax returns for the years 1976 and 1977 and reported his income on a cash basis, omitting all reference to the said disposition made in 1976, with the intent that the profit or gain and recapture shall be reported as and when received by him; and the Appellant requests the Board to direct the Minister to confirm the same.

In the respondent’s reply to notice of appeal, the Minister contended:

. . . the amount of $25,266.27 has been properly determined and taken into account in computing the Taxpayer’s income for the 1976 taxation year in accordance with the provisions of Subsection 13(1) of the Act.

Further, income from the sale of goodwill in the amount of $5,000 is included in the Taxpayer’s income for the 1976 taxation year in accordance with the provisions of subsection 14(1 ) of the Act and Subsection 21 (1 ) of the Income Tax Application Rules (1971).

And, the taxable capital gain of $4,474.48 realized from the disposition of “The Cecil Hotel” in the taxation year 1976, has been properly determined and taken into account in computing the Taxpayer’s income for that year in accordance with the provisions of Sections 3, 53, 54 and paragraphs 38(a), 39(1 )(a), and 40(1 )(a).

And reasonable reserves of $13,111.98 and $12,446.02 have been properly allowed in the 1976 and 1977 taxation years respectively in accordance with the provisions of Paragraph 40(1 )(a)(iii) of the Act.

The respondent relied, inter alia, upon sections 3, 13, 14, 38, 39, 40, 53 and 54 of the Income Tax Act, SC 1970-71-72, c 63, as amended.

No evidence was introduced, the parties being content to deal with the points in dispute solely on the basis of the interpretation of the Income Tax Act. The parties agreed that as a result of the recent judgment in The Queen v Timagami Financial Services Limited, [1982] CTC 314; 82 DTC 6268 dealing with the terms “due” and “payable”, a recalculation of some elements of the amounts at issue was warranted and counsel for the Minister undertook to see that this was done and reassessments issued. However, to expedite matters, the parties also agreed to argue the issues remaining based upon the principles involved, setting aside the specifics of the amounts earlier detailed.

The principal points at issue, simply stated, were:

(1) Is the taxpayer entitled to the deduction of a reserve under paragraph 20(1 )(n) of the Act with respect to the income included in filing his tax return related to the “recaptured depreciation”?

(2) Is the taxpayer entitled to the deduction of a reserve under subsection 40(1) of the Act with respect to the income included in filing his tax return related to the “goodwill”?

I should also note for the record that counsel for the appellant raised the issue of the “reasonableness” of the reserves allowed by the Minister (even if the Minister were correct) but counsel left that matter to be reviewed at a later date, if necessary, when the required reassessments (noted above) had been struck. Also, while counsel for the appellant noted that the appellant had filed “amended” tax returns based on the “cash” method, he did not pursue that issue and indeed, in my view, it would have been pointless.

In dealing with the issues, the main points raised by counsel were:

For the appellant:

On question (1)

The taxpayer could not conceive and certainly did not anticipate, that the taxing authorities having already by section 13(1) obligated the taxpayer to include the amount of recaptured depreciation in the year of its disposal (on the disposal of the business) in his calculation of income and having by subsection (3) of section 13 declared that the income so included be regarded as his income from the business, should then interpret the words of section 20(1 )(n) as disentitling the taxpayer to a reserve because the property could not be said to have been sold in the course of business, he was directed to put it in income, as income from the business and then the department said that wasn’t property sold in the course of the business.

The department could not concede that a receivable arising from the sale of the relevant property might reasonably be regarded as qualifying for a reserve permitted for a property sold in the course of the business. I submit that there is a very real difference between the words “sold in the course of the business” and the phrase “sold in the course of business”, and yet those phrases are used as if they were interchangeable. “Sold in the course of business” has a very general connotation and to use the words “sold in the course of the business” has a very definite connotation.

. . . I don’t think there could be any assumption that he was going out of business or retiring.

Now, another note I would make is that if the Minister is correct in his interpretation which he puts forward in the Reply there is no possible reserve for recaptured depreciation. If you want to draw that to its absurd conclusion, if the man enters into an agreement for sale where he would not recapture the depreciation for 50 years, would the Board say that is nevertheless payable right now in the year that the contract was entered into? I can’t believe that that was the intention of Parliament.

Counsel referenced the case of Harry R Hersey v MNR, 25 Tax ABC 155; 60 DTC 528, and placed special emphasis on the quotation to be found at 160 and 531 respectively, including the following:

I am of the opinion that the words in the course of the business are fatal to the appellant’s claim.

The disposal of a building by a retail merchant on going out of business is not, to my mind, a sale in the course of business, but the parting with a capital asset, and I have found no authority that indicates otherwise.

Counsel strongly stressed that the presiding member in Hersey (supra) had not addressed himself properly to the article “the” from the phrase “in the course of the business” (to be found in paragraph 85B(1 )(d) of the Income Tax Act then in force, but identical to paragraph 20(1 )(n) of the current Act). Rather, according to counsel, the presiding member had altered the context by using in his decision the phrase “in the course of business”, thereby omitting the allegedly vital reference to a specific business.

On Question (2)

Turning to (section) 14(1), it speaks only of amounts which have become payable to the taxpayer in the taxation year and that the consideration given to the taxpayer will be such that any payment (if any had been made after 1971 for that consideration) would have been an eligible capital expenditure of the taxpayer in respect of the business. The fact is that the taxpayer gave no consideration for allocating capital property in 1973. He had made no eligible capital expenses since his purchase. He had not himself purchased any item labelled “goodwill”, carried no such item in any financial statement. He had not claimed any deductions for it with respect to good will or recapture of the cost of goodwill. So that when he comes to sell, I am willing to concede that the purchaser from him may have paid a consideration for good will, but as far as the taxpayer was concerned he had no good will to give him, to present to him. Certainly not in his accounts or his statements.

For the respondent-.

On question (1)

. . . the appellant going out of business and, as the Hersey case illustrates, going out of business is not equivalent to “in the course of the business”. With respect, I do not agree that the interposition of the article “the” between “in the course of” and “business” should change that basic principle. The use of the article “the” in my submission simply refers back to the appellant’s specific business in respect of which amounts have been included in income. In other words, you would treat an amount included in income and the reserve with respect to one individual business so that if the appellant had more than one business, the reserves would be applicable only to the individual business.

On question (2)

.. . section 14(1) would include in income only those amounts immediately payable in the taxation year. It is not a question of course of allowing a reserve, but simply of limiting the amount you include in income . . .

.. . Simply under the Income Tax Act there is no section that would allow the appellant to deduct a reserve on an amount included in income pursuant to section 13(1) and, if one considers the policy behind the inclusion of recaptured depreciation, that result is logical. Recaptured capital cost amounts are simply amounts recovered that have been expensed in previous years. We are not talking about capital gain on the land or the assets or the building. We are just talking about amounts that have been deducted previously and in respect of those deductions the appellant or any taxpayer has already obtained the tax relief for those years on some sort of hypothetical assumption that that asset or that property is subject to wear and tear and, therefore, the market value of it is being depreciated over the years. Upon actual disposition, therefore, if the taxpayer receives proceeds, that in fact recovered those amounts deducted, there is no illogic or inequity in including those amounts back into income.

In addition to the Hersey case, as to whether or not property sold when a taxpayer is going out of business constitutes “in the course of business”, I note section 23(1) appears to make that distinction. This has to do with the sale of inventory when a taxpayer effectively is selling the entire business, and this section deems that that inventory — this has to be property or assets held as inventory, not as capital property — that deems that that inventory shall be considered to have been sold by him in the course of carrying on business. That section would not be necessary if one could equate going out of business with “in the course of carrying on business” and I submit that the phrase “course of carrying on business” and “in the course of the business” are not significantly different or they do not alter the principle.

Findings

I do not agree with counsel for the appellant in this matter that the inclusion or exclusion of the article “the” in the Hersey decision has any effect on the appellant’s entitlement to a reserve under paragraph 20(1 )(n) of the Income Tax Act. It seems perfectly clear to me that the term “that source” in subsection 20(1) of the Act simply refers back to “a business or property” earlier in that same section, and is directly relevant to the consequent paragraph 20(1 )(n) in which the term used is “the business”. As I see it, the source of income may be a business and if it is determined as such (as it is in this case), then altering the article to the, or even that from a would be immaterial. However, I am not quite so content that the appellant’s claim to a reserve is unfounded simply because of the decision in Hersey so strongly referenced by counsel for the respondent. The basic rationale in Hersey (supra) is that the sale of the capital asset “on going out of business” did not come within the framework of the term “in the course of the business”. The presiding member in that case gave no reason for arriving at that conclusion, nor did counsel for the respondent provide any in this appeal for adopting it. The possible relationship between paragraphs 20(1 )(n) and 25(1 )(n) (15(3) of the old Act) could have some bearing on the validity of that conclusion. Subsection 248(1) of the Act contains this definition for “Fiscal period”:

“fiscal period” means the period for which the accounts of the business of the taxpayer have been ordinarily made up and accepted for purposes of assessment under this Act and, in the absence of an established practice, the fiscal period is that adopted by the taxpayer (but no fiscal period may exceed

(a) in the case of a corporation, 53 weeks and

(b) in the case of any other taxpayer, 12 months,

and no change in a usual and accepted fiscal period may be made for the purposes of this Act without the concurrence of the Minister).

Obviously the determination of the fiscal period of a business is left to the taxpayer under circumstances when that business continues to operate — subsection 248(1). When the business is sold (the instant case), the fiscal period ends with that sale, as I read subsection 25(1) of the Act, unless the alternate election is made. The sale ends the business — the business ends with the sale. It might well be argued that up to and including the moment of the sale of the business, the property in question was being used in the course of the business. That could easily lead me to serious reservations about the conclusion reached in Hersey (supra).

Further, I am intrigued by a significant comment made by counsel for the respondent in argument (quoted above) which puts forward almost as an alternate position of the Minister that no section of the Act (certainly not paragraph 20(1 )(n) ) permits the deduction of a reserve against an amount of income arising out of recaptured depreciation, and I assume she means, at any time whether or not the business is sold. I can understand the logic and the reasoning she proposed upon which to reach that conclusion (quoted), but it falls far short of providing a direct answer to the proposition raised by this appellant — that the amount of income to be included as a result of the provisions of subsection 13(1) comes completely within the words providing for the reserve in paragraph 20(1 )(n). I can agree that it.would be illogical that the legislators would have intended such a reserve be available under recaptured depreciation circumstances — based upon the reasoning proposed by counsel. But that is not the question posed to the Board by the appellant — that question is whether it is illegal'. I can appreciate the problem which faced both counsel since it does not appear to me that that particular issue may ever have been directly addressed.

In reviewing the case law myself, I have not found a clear instance where such a reserve has been allowed, although there are several situations where “real estate” was sold, and it could be assumed that the reserve permitted did include a provision for some recaptured depreciation. One reference to paragraph 20(1 )(n) has come to my attention, and that is on 820 of Schneider et al v MNR, [1981] CTC 2901; 81 DTC 817, in which the Board commented:

Section 20(1 )(n) of the same Act provides a reserve of the same nature for certain amounts due in later years, even if the profit of the transaction is not a capital gain.

While Schneider (supra) apparently deals with “capital cost allowance”, it is difficult to tell from the record what amount that may have been, and whether in the final analysis a reserve against the recaptured depreciation was allowed under paragraph 20(1 )(n) by the presiding member. It would be my impression, however, that there is nothing in the decision which would lead the Minister to disallow such a reserve when striking the new reassessment, a conclusion which would seriously undermine the Minister’s assertions in this matter. Searching back even further, one comes to Avril Hold ings Ltd v MNR, [1969] CTC 397; 69 DTC 5263, where capital cost allowance, and the corresponding section of the old Act (85B(1 )(d) ) were in contention. However, the headnote says it all — “The company’s argument that it should have been allowed a reserve under section 85B was not pressed at the hearing”. Perhaps that is not too surprising since the decision at the Board level, [1968] Tax ABC 407; 68 DTC 361, had concluded that the company was not entitled to utilize the reserve provisions of paragraph 85B(1)(d) because the amount at issue had been received in full. While the fact that no clarification of the point at issue here arose out of Avril Holdings (supra), there was a very interesting footnote on 417 and 5275 respectively of that judgment:

**lf the recovery of capital cost allowances under subsection 20(1) in a particular taxation year is limited to the amount of the proceeds of disposition which is payable or collectible in that year, the recapture could be frustrated by spreading the payment or receivability of the proceeds over a period of years and making the yearly payment less than the amount of the undepreciated capital cost of the property at the time of its disposal. Take, for example, depreciable property with a capital cost of $100,000, in respect of which there has been an aggregate of $80,000 in capital cost allowances, and then a sale of property for $70,000. The undepreciated capital cost is $20,000, and the sale price exceeds that cost by $50,000. If the taxpayer is entitled to receive the full amount of the sale price in the year in which the property is sold, recapture of $50,000 would follow under section

20. But, if the $50,000 is payable over a 5-year period in annual payments of $10,000, the payment in any year would not exceed the $20,000 undepreciated capital cost at the time of the sale, and, if the recapture contemplated in section 20 has reference only to the amount of the proceeds which is payable or collectible in an individual taxation year, there would be no recapture for there would be no excess to bring section 20 into operation. However, there would be recapture if the amount of the sale price in full, even if it is to be paid to the taxpayer over a period of years, is “proceeds of disposition” within the purview of the section.

The above comment by the learned judge would seem to confirm that the entire amount of the recaptured depreciation (not merely the portion payable in the year, if applicable) must be taken into income in the year of the sale. That point did not seem to be in dispute between the parties to this appeal, but in my mind that does not quite answer the question posed to the Board by this appellant. Bringing all the recaptured depreciation into income could still leave that amount subject to the reserve benefits reflected in paragraph 20(1)(n), if the appellant in this matter is correct.

After serious consideration and at the risk of being at odds with Hersey (supra), I would suggest that the Minister has not established for me in this case the chronological flow chart which would support a conclusion that a transaction (the sale of the property) recorded concurrently with the sale of the business, is excluded from the bounds of the expression “in the course of the business” to be found in paragraph 20(1 )(n) of the Act. Secondly, the legal or technical basis upon which to base the Minister’s claim that “recaptured depreciation” in itself falls outside the bounds of paragraph 20(1 )(n) has not been demonstrated. One might be tempted thereupon to allow this appeal but, as I see it, while the Minister has not proven his case, he was not required to do so. It remains for the appellant’s counsel to demonstrate that the reserve claimed is available to his client, particularly when faced with the very logical and acceptable rationale for exclusion of recaptured depreciation noted above.

On that score, it is not for the Board to say what the legislators intended, but it is certainly not beyond my imagination that they did intend precisely that which the appellant finds odious and which the respondent in this matter finds logical. The amount at issue is “recaptured depreciation” — simply depreciation charged incorrecty but not illegally as a deductible expense in prior years. Incorrect only in the sense that it was not an accurate reflection of the real depreciation. The appellant was certainly entitled under the Act to calculate it as such and deduct it. The excess amounts of depreciation charged over those actually sustained, correspondingly reduced the income tax impact for the appellant during prior years. It might well be argued that retribution, even restitution in the year of the sale transaction, would only be just. The amount of depreciation charged annually is left to the discretion of the taxpayer — up to the maximum limits in each year. He simply took advantage of that maximum, rather than using the alternative of taking a more modest amount somewhat closer to actual obsolescence or wear and tear on the asset. A gamble taken, a risk accepted, that is all. But that is merely a rephrasing of the logic proposed by counsel for the respondent, it still does not deal with the legal question.

The critical word in subsection 13(1) (which brings the amount into income) is “excess”, in the final phrase “the excess shall be included in computing the income . ..” The corresponding critical word in paragraph 20(1 )(n) under which the taxpayer seeks relief is “profit”, found in the last phrase “profit from the sale”. In my analysis of the situation, the “recaptured depreciation” is not profit from the sale, it is not profit in any sense of the word — it is simply the calculated accumulation of an unwarranted charge made by the taxpayer, the quantity of which always existed but was determined only by virtue of the sale. But it is not “profit from the sale”. In fact, it has nothing to do with the sale of the property, other than that the sale provides a number required in making the calculation for the excess depreciation charged. The “profit from the sale” would be the difference between the cost of the property sold and the amount for which it was sold, not the difference between the net depreciated value and the amount of the sale. Simply put, the profit is the capital gain on the sale of the asset, unless it is established that the taxpayer in question was in the business of buying and selling such assets. The fact that the “excess” is brought into income by virtue of subsection 13(1) of the Act does not turn it into a “profit” for purposes of paragraph 20(1 )(n) of the Act. They are simply not interchangeable terms under these circumstances as would be necessary in order for the appellant to succeed. As I see it, therefore, the bar to the utilization of paragraph 20(1 )(n) with respect to recaptured depreciation taken into income under subsection 13(1) of the Act may not arise out of the juxtaposition and comparative definitions of “going out of business” and “in the course of the business”, nor out of the mere logic of such a disallowance, but rather out of the precise terminology used by the legislators in those two sections, particularly the words “excess” and “profit”.

With regard to the “goodwill” question, in my view section 14(1) and the related sections are quite clear and unambiguous. The amount at issue does not qualify under any section permitting the deduction of a reserve, and the fact that the taxpayer had paid nothing for the “goodwill” on acquisition of the business is irrelevant.

Decision

The appeal is dismissed.

Appeal dismissed.