Guy
Tremblay:—This
appeal
was
heard
on
July
13,
1982,
at
the
City
of
St
John’s,
Newfoundland.
1.
The
Point
at
Issue
The
point
at
issue
is
whether
the
appellant
has
the
choice
of
electing
to
claim
a
capital
loss
or
a
business
investment
loss
in
the
computation
of
her
income
for
the
1978
and
1979
taxation
years,
the
business
investment
loss
being
financially
more
advantageous
to
her.
2.
1979
Taxation
Year
At
the
commencement
of
the
hearing,
counsel
for
the
respondent
made
a
motion
to
dismiss
the
appeal
concerning
the
1979
taxation
year
on
the
basis
that
it
is
a
nil
assessment.
Indeed,
the
Board
has
no
jurisdiction
to
hear
such
an
appeal,
therefore
it
was
dismissed
from
the
bench.
Tribunals
have
many
times
given
decisions
about
that.
3.
The
Burden
of
Proof
3.01
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
results
particularly
from
several
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.02
In
the
same
judgment,
the
Court
decided
that
the
assumed
facts
on
which
the
respondent
based
the
assessment
or
reassessment
are
also
deemed
to
be
correct.
In
the
present
case,
the
assumed
facts
are
described
in
the
reply
to
the
notice
of
appeal
as
follows:
4.
In
so
reassessing
the
Appellant’s
income
tax
liability,
the
Respondent
relied,
inter
alia,
on
the
following
assumptions
of
fact:
(a)
The
336
shares
owned
by
the
Appellant
in
Baird
&
Company
Limited
were
shares
of
capital
stock
of
a
Canadian-controlled
private
corporation;
(b)
The
Appellant
still
owned
the
336
shares
referred
to
in
paragraph
4(a)
on
December
31,
1979;
(c)
As
a
result
of
the
bankruptcy
of
Baird
&
Company
Limited
on
March
27,
1979,
the
Appellant
was
deemed
to
have
disposed
of
the
336
shares
at
the
end
of
her
1979
taxation
year
and
to
have
reacquired
them
immediately
thereafter
at
a
cost
equal
to
nil;
(d)
The
Appellant
incurred
a
business
investment
loss
with
respect
to
the
deemed
disposition
of
the
336
shares
referred
to
in
paragraph
4(c)
in
the
amount
of
$126,000.00;
(e)
The
Appellant’s
allowable
business
investment
loss
in
1979
was
$63,000.00;
(f)
The
Appellant’s
total
income
in
1978
and
1979
was
as
follows:
1978
—
$44,049.00
1979
—
$48,990.00
4.
The
Facts
The
facts
are
not
in
dispute.
4.01
On
August
28,
1972,
the
appellant
inherited
three
hundred
and
thirty
six
(336)
common
shares
in
Baird
&
Company
Limited
from
the
estate
of
her
father.
the
late
James
Baird.
4.02
At
the
time
of
death,
a
value
of
one
hundred
and
twenty
six
thousand
dollars
($126,000)
was
accepted
by
the
Department
of
National
Revenue
as
the
value
of
the
three
hundred
and
thirty
six
(336)
common
shares.
4.03
On
March
27,
1979,
Baird
&
Company
Limited
was
adjudicated
as
bankrupt.
4.04
As
a
consequence
of
the
bankruptcy
of
Baird
&
Company
Limited,
the
appellant
was
deemed
to
have
disposed
of
the
said
shares
at
the
end
of
1979
for
nil
thereby
incurring
a
loss
of
one
hundred
and
twenty
six
thousand
dollars
($126,000).
4.05
The
said
loss
of
the
appellant,
upon
the
deemed
disposition
of
the
said
shares
in
Baird
&
Company
Limited,
was
claimed
as
a
capital
loss
for
the
taxation
years
ended
December
31,
1978
and
1979.
4.06
The
said
loss
of
the
appellant,
upon
the
deemed
disposition
of
the
said
shares
in
Baird
&
Company
Limited,
was
reassessed
as
an
allowable
business
investment
loss.
9.
Law
—
Analysis
5.01
Law
The
provisions
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended,
involved
in
the
present
case
are
paragraphs
3(b),
3(d),
3(e),
section
38,
and
paragraphs
39(1
)(b),
39(1
)(c),
111
(1
)
(a),
and
111
(8)(b).
5.02
Analysis
5.02.1
In
claiming
a
capital
loss,
the
appellant
wants
to
be
able
to
deduct
from
capital
accumulations
in
the
future.
As
the
appellant
has
no
business
investment
income
at
all
to
permit
it
to
be
used
in
business
investment
loss,
and
as
she
has
income
from
capital
assets,
therefore
she
prefers
to
consider
the
loss
as
capital
loss
and
not
to
be
precluded
from
deduction.
5.02.2
The
allowable
business
investment
of
$63,000
was
deducted
by
the
respondent
($14,148
in
1978
and
$48,852
in
1979).
CCH
Canadian
Limited
well
explained
the
application
of
the
business
investment
loss
and
the
capital
loss:
One-half
of
a
taxpayer’s
business
investment
loss
for
a
year
is
the
taxpayer’s
allowable
business
investment
loss
under
paragraph
38(c).
Under
section
3
the
allowable
business
investment
loss
is
not
deducted
from
taxable
capital
gains
but
is
deducted
in
whole
from
income
from
all
sources.
One-half
of
ordinary
capital
losses
are
deducted
from
taxable
capital
gains
and
then,
in
the
case
of
an
individual,
from
other
income
to
the
maximum
of
$2,000
each
year.
If
the
taxpayer’s
allowable
business
investment
loss
in
a
year
exceeds
his
income
from
all
sources
for
that
year,
the
excess
may
be
carried
back
one
year
and
forward
five
years
as
non-capital
loss
and
applied
against
income
from
all
sources
in
those
years.
.
.
.
Ordinary
allowable
capital
losses
may
be
carried
back
one
year
and
forward
indefinitely
but
may
be
applied
only
against
taxable
capital
gains
and,
in
the
case
of
an
individual,
against
up
to
$2,000
each
year
of
other
income.
(CCH
Topical
Law
Reports,
page
5157)
5.02.3
The
appellant’s
contention
is
that
when
the
Income
Tax
Act
was
amended
in
1978
to
provide
that
capital
loss
could
be
included
in
business
investment
income,
the
legislator’s
intention
was
to
give
to
the
taxpayer
a
wider
applicability
of
deductibility:
“It
was
for
the
benefit
of
the
taxpayer
that
this
particular
provision
was
brought
in.”
In
fact,
the
crux
of
the
matter
is
“can
the
tax
authority
compel
that
the
loss
be
treated
as
a
business
investment
or
can
the
taxpayer
elect
to
treat
it
as
a
capital
loss”?
5.02.4
Firstly,
it
is
obvious
to
the
Board
that
a
business
investment
loss
is
a
capital
loss.
This
clearly
appears
from
the
definition
of
business
investment
loss
given
in
paragraph
39(1
)(c)
of
the
Act:
Sec
39.
Meaning
of
capital
gain
and
capital
loss.
(1)
For
the
purposes
of
this
Act,
(c)
a
taxpayer’s
business
investment
loss
for
a
taxation
year
from
the
disposition
of
any
property
is
the
amount,
if
any,
by
which
his
capital
loss
for
the
year
from
a
disposition
after
1977
.
.
.
It
is
a
capital
loss,
but
it
is
a
special
capital
loss
to
which
the
legislator
gives
a
particular
treatment:
it
is
entirely
deductible
from
income
of
all
sources.
The
appellant’s
contention
that
it
can
also
be
deductible
from
taxable
capital
gain
is
based
first
on
the
fact
that
in
paragraph
39(1
)(e)
of
the
Act,
the
legislator
used
the
word
“is”
rather
than
the
words
“shall
be”.
In
using
“shall
be”,
the
legislator
would
have
made
the
provision
mandatory.
In
using
“is”
it
is
not
mandatory.
Therefore,
it
leaves
open
for
the
taxpayer
to
elect
to
treat
it
either
as
a
capital
loss
or
as
a
business
investment
loss.
Moreover,
counsel
for
the
appellant
referred
to
Interpretation
Bulletin
IT-
484
dealing
with
business
investment
losses.
He
said:
..
.
where
a
business
investment
loss
is
realized
by
the
estate
of
a
deceased
taxpayer
in
its
first
taxation
year,
an
election
may
be
filed
to
treat
the
amount
as
a
business
investment
loss
of
the
deceased,
in
the
year
of
death,
rather
than
merely
as
a
capital
loss.
(SN
page
15)
.
.
.
In
fact,
paragraph
9
of
the
said
Interpretation
Bulletin
reads
as
follows:
9.
Where
the
estate
of
a
deceased
taxpayer
realizes
in
its
first
taxation
year,
a
capital
loss
that
qualifies
as
a
business
investment
loss,
it
is
the
Department’s
view
that
an
election
under
subparagraph
164(6)(d)(i)
may
be
utilized
to
effectively
have
it
treated
as
a
business
investment
loss
of
the
deceased
in
the
year
of
death
in
the
application
of
subsection
164(6),
rather
than
merely
as
a
capital
loss
of
the
deceased
in
that
year.
Of
course
this
treatment
would
be
effective
only
for
the
amount
of
the
business
investment
loss
less
the
excess
of
any
capital
gains
over
capital
losses
other
than
business
investment
in
the
estate.
To
the
extent
that
a
business
investment
loss
is
subject
to
such
an
election
it
would
not
be
deducted
from
other
income
pursuant
to
paragraph
3(d)
in
computing
the
income
of
the
estate.
The
fundamental
issue
to
be
retained
is
that
there
are
specific
provisions
in
the
Act
which
provide
that
a
taxpayer
can
make
an
election
(subparagraphs
164(6)(d)(i)
and
(ii)).
These
provisions
existed
before
the
application
of
the
business
investment
loss.
0.02.5
It
is
the
Board’s
opinion
that
the
appellant’s
theory
is
economically
logical
and
pursuant
to
equity.
However,
the
Board
cannot
share
the
appellant’s
opinion
that
the
provisions
of
the
Act
providing
the
business
investment
loss
can
be
construed
in
the
sense
that
the
taxpayer
can
make
an
election
to
treat
the
loss
either
as
a
capital
loss
or
as
a
business
investment
loss.
When
the
legislator
has
the
intention
to
permit
an
election
to
the
taxpayer,
it
is
clearly
stipulated.
One
may
read,
among
others,
subsections
28(1),
29(1),
39(4),
45(2),
85(1)
and
104(14)
of
the
Act,
which
are
all
provisions
whereby
the
taxpayer
may
make
an
election
in
the
calculation
of
income.
If
it
is
the
legislator’s
intention
to
permit
an
election
to
the
taxpayer,
he
must
clearly
express
it.
5.02.6
Given
the
provisions
of
the
Act
quoted
above,
as
they
are
written,
it
is
the
Board’s
opinion
that
one
must
conclude
that
the
legislator
has
not
given
the
taxpayer
the
choice
of
making
an
election.
(a)
In
paragraph
39(1
)(b)
of
the
Act,
the
legislator,
in
giving
the
definition
or
better
the
computation
of
the
capital
loss
pursuant
to
section
3,
expressly
excludes
the
business
investment
loss
provided
in
paragraph
3(d).
(b)
Moreover,
the
legislator
in
subparagraph
3(b)(ii)
of
the
Act
expressly
excludes
business
investment
loss
in
the
computation
of
capital
loss
to
be
subtracted
in
the
computation
of
taxable
capital
gain
for
the
year.
(c)
The
same
logic
is
followed
by
the
legislator
in
paragraph
111
(8)(b)
of
the
Act
which
provides
the
definition
of
non-capital
loss
(business
loss).
Indeed,
business
investment
loss
is
included
in
business
loss,
the
balance
of
which
may
be
deducted
in
the
computation
of
the
income
of
the
taxpayer’s
fiscal
year
preceding
the
year
of
the
loss
and
in
the
computation
of
the
five
fiscal
years
following
the
year
of
the
loss,
as
provided
for
in
paragraph
111
(1
)(a).
5.02.7
The
Income
Tax
Act
must
be
construed
as
it
is
written.
The
legislator
has
not
clearly
permitted
an
election
to
the
taxpayer
to
treat
the
said
loss
as
a
Capital
loss
or
as
a
business
investment
loss,
despite
the
fact
that
it
seems
that
it
would
be
equitable
and
economically
logical
to
permit
such
an
election.
6.
Conclusion
The
appeal
is
dismissed
in
accordance
with
the
above
reasons
for
judgment.
Appeal
dismissed.