Taylor,
TCJ:—This
appeal
was
heard
by
me
in
St.
John’s,
Newfoundland,
on
July
7,
1983
in
my
capacity
as
a
member
of
the
Tax
Review
Board
but
this
judgment
is
rendered
in
my
capacity
as
a
judge
of
the
Tax
Court
of
Canada.
The
appeal
relates
to
income
tax
assessments
for
the
years
1977,
1978
and
1979
in
which
the
Minister
of
National
Revenue
disallowed
the
claim
for
capital
cost
allowance
made
by
the
taxpayer.
Reference
is
made
to
earlier
jurisprudence
—
Combined
Appraisers
and
Consultants
Company
Ltd
v
MNR,
[1979]
CTC
2970;
79
DTC
770
—
with
a
similar
point
of
issue.
The
statement
of
facts
and
reasons
upon
which
this
current
appeal
was
launched
is
reproduced
in
full:
STATEMENT
OF
FACTS
AND
REASONS
Regulation
1100(12)
under
the
Income
Tax
Act
permits
“..
.
a
corporation
whose
principal
business
ws
the
leasing,
rental,
development
or
sale,
or
any
combination
thereof,
of
real
property
owned
by
it,”
to
deduct
capital
cost
allowance
on
rental
properties
against
the
corporation’s
total
income
without
restriction.
It
will
be
noted
that
the
Regulation
does
not
require
that
the
corporation’s
principal
business
be
the
rental
of
real
property
in
order
to
deduct
the
capital
cost
allowance
on
rental
properties
against
the
corporation’s
total
income.
Instead,
the
Regulation
permits
the
corporation’s
principal
business
to
be
any
combination
of
leasing,
rental,
development
and
sale
of
real
property.
The
Regulation
clearly
recognizes
the
fact
that
it
takes
time
to
(a)
purchase
the
land
and
construct
a
building,
the
development
stage,
and
(b)
advertise
and
lease
the
space
in
the
building,
the
leasing
stage,
before
the
corporation
is
actually
in
the
final
stage,
which
is
the
rental
stage.
The
Regulation
clearly
recognizes
the
necessary
time
and
stages
that
are
involved
before
the
rental
stage
in
the
real
estate
business
is
reached.
And,
if
a
corporation’s
principal
business
qualifies
at
the
time
all
the
tenants
are
in
place,
then
clearly
the
corporation
qualifies
at
the
time
of
the
development
stage
as
well
as
at
the
time
of
the
leasing
stage.
To
argue
otherwise
would
be
contrary
to
the
specific
wording
of
the
Regulation.
Interpretation
Bulletin
IT-371
(dated
25
April
1977
and
issued
by
Revenue
Canada,
Taxation),
in
paragraph
7
states:
“There
is
no
standard
set
of
criteria
that
may
be
looked
to
where
the
nature
of
each
of
a
taxpayer’s
businesses
is
known
but
it
must
be
determined
which
of
them
is
his
principal
business;
the
significant
factors
of
each
case
must
be
searched
out
and
evaluated.
In
the
Department’s
view,
the
following
are
among
the
factors
which
may
be
relevant:
(a)
the
profits
realized
by
each
of
the
businesses;
(b)
the
volume
and
the
value
of
the
gross
sales
or
transactions
of
each
business;
(c)
the
value
of
the
assets
of
each
business;
(d)
the
capital
employed
in
each
business;
and
(e)
the
time,
attention
and
effort
expended
by
the
employees,
agents,
or
officers
in
each
business.”
With
respect
to
IT-371,
each
of
the
factors
will
be
considered
seriatim.
(1)
Profits
The
profits
before
capital
cost
allowance
of
Combined,
the
corporation
involved
in
this
appeal,
from
the
combination
of
leasing,
rental,
development
and
sale
of
real
property
have
been
steadily
rising
since
1972,
the
year
in
which
Mr
George
Kirkland
acquired
control
of
the
corporation.
Prior
to
1972
and
prior
to
Mr
Kirkland’s
acquisition
of
Combined,
the
corporation
did
not
have
any
income
from
real
estate
operations,
it
was
Mr
Kirkland’s
acquisition
of
control
in
1972
that
changed
the
focus
of
combined
to
a
corporation
whose
principal
or
main
raison
d’être
was
a
combination
of
leasing,
rental,
development
and
sale
or
real
estate.
And,
it
is
clear
that
in
the
years
1977,
1978,
1979
the
profits
before
capital
cost
alowance
from
this
real
estate
activity
were
significant
and
substantial.
And
it
is
arguable
that
profits
before
capital
cost
allowance
is
the
appropriate
measure,
since
capital
cost
allowance
is
a
non-cash
charge
and
has
no
effect
on
the
cash
flow
(and
hence
the
profitability)
of
the
business.
Non-cash
items
do
not
affect
the
profitability
of
the
business.
(2)
Volume
and
Value
of
Gross
Sales
or
Transactions
In
much
the
same
way
as
the
profits
of
the
real
estate
business
have
increased
since
the
acquisition
by
Mr
Kirkland
in
1972,
the
volume
and
value
of
gross
sales
from
the
real
estate
leasing,
rental,
development
and
sales
have
increased
to
where
in
1977,
1978,
and
1979
the
gross
sales
from
the
real
estate
business
constitute
a
significant
and
substantial
proportion
of
business
done
by
Combined.
And
when
Mr
Kirkland
acquired
Combined
in
1972,
thee
was
a
conscious
effort
to
convert
Combined
into
a
corporation
whose
chief
business
was
real
estate
leasing,
rental,
development
and
sales,
and
in
the
years
in
questions
—
1977,
1978
and
1979
—
that
objective
was
reached
to
the
point
where
appraisals
constituted
merely
a
sideline
to
provide
the
expertise
necessary
for
careful
evaluation
of
its
investments
in
its
main
business
of
real
estate
leasing,
rental,
development
and
sales.Extensive,
detailed
and
careful
appraisals
were
necessary
to
make
certain
that
Combined
made
the
correct
decisions
in
its
primary
business
or
real
estate
leasing,
rental
development
and
sales.
In
terms
of
the
volume
and
value
of
transactions,
it
is
true
that
when
a
house
is
sold,
there
is
only
one
sale
transaction.
When
an
appraisal
is
performed,
there
is
only
one
transaction.
And,
more
appraisals
were
done
by
Combined
in
the
years
in
question
than
house
sales.
However,
the
amount
received
from
one
appraisal
is
miniscule
when
compared
to
the
amount
received
from
one
house
sale.
Accordingly,
the
value
of
a
house
transaction
is
staggering
when
compared
to
an
appraisal
transaction.
One
cannot
ignore
the
volume
of
transactions
necessary
to
the
construction
of
a
house.
Selection
of
the
site,
design
of
the
building,
obtaining
municipal
approval,
arrangement
of
financing,
purchase
of
materials,
letting
contracts
for
construction,
supervision
of
contractors,
and
sale
must
be
done.
Of
course,
one
could
argue
that
all
this
activity
is
only
valid
if
the
work
is
done
by
employees
of
Combined
or
done
by
Combined
itself.
However,
anyone
who
argues
this
does
not
understand
the
construction
business,
where
to
reduce
expenses,
most
of
the
work
is
done
by
contractors
or
subcontractors
who
act
as
agents
of
the
owner
of
the
property.
And,
this
fact
is
clearly
recognized
in
paragraph
7
of
Interpretation
Bulletin
IT-371
when
it
states
“the
time,
attention
and
effort
expended
by
the
employees,
agents
or
officers
in
each
business”
In
terms
of
the
value
of
transactions,
one
must
also
take
into
account
the
size
of
purchases
of
real
estate
by
Combined.
In
1977
Combined
had
a
property
on
Ken-
mount
Road
which
was
purchased
for
$185,000.00
and
which
it
presently
leases
to
commercial
tenants.
In
1978,
Combined
purchased
a
commercial
site
on
Empire
Avenue
for
$85,000.00
and
had
its
agent,
Empire
Development
Group
Limited,
construct
an
office
building.
And
even
though
Empire
acted
as
its
agent
in
the
construction,
two
of
Combined’s
most
senior
employees,
Messrs
Kirkland
and
Hunt
devoted
more
than
50
percent
of
their
time
to
this
project.
And
other
employees
of
Combined
devoted
considerable
time
to
this
project.
This
does
not
even
take
into
account
all
the
carpenters,
labourers,
electricians,
plumbers,
painters
and
others
who
acted
as
sub-agents
of
Combined
in
this
project.
In
addition,
Combined
built
and
presently
rents
a
two-apartment
house
on
Newfoundland
Drive.
Combined
acquired
and
presently
rents
a
two-apartment
house
on
Collins
Place,
and
two
single
family
residences
on
Lomac
Drive
and
Empire
Avenue.
As
well,
in
1980
Combined
acquired
land
on
Whiteway
Street
for
future
development.
And
these
are
just
the
properties
owned
by
Combined.
These
do
not
take
into
account
the
properties
which,
for
convenience,
are
in
the
name
of
Mr
Kirkland
or
in
the
name
of
other
corporations
controlled
by
Mr
Kirkland.
A
number
of
these
properties
are
managed
by
Combined,
and
in
a
number
of
cases,
Combined
guarantees
the
mortgages
on
such
properties.
(3)
Value
of
Assets
In
terms
of
the
value
of
the
assets
of
each
business,
there
is
little
in
the
way
of
assets
employed
in
the
appraisal
business.
On
the
other
hand,
the
May
1981
cost
of
the
real
estate
owned
by
Combined
was
$1,300,000.00.
Interpretation
Bulletin
IT-371,
however,
does
not
refer
to
“cost”,
it
refers
to
“value”
which,
in
terms
of
the
properties
owned
by
Combined,
would
be
considerably
in
excess
of
the
$1,300,000.00
figure.
And
in
the
years
in
questions
—
1977,
1978
and
1979
—
the
cost
of
the
assets
and
the
value
of
the
assets
employed
in
the
real
estate
leasing,
rental,
development
and
sale
business
was
considerably
greater
than
those
in
the
appraisal
business.
One
might
even
go
so
far
as
to
say
the
assets
in
the
appraisal
business
were
insignificant
when
compared
to
the
real
estate
business.
Of
course,
everyone
knows
that
all
you
need
in
the
way
of
assets
to
do
an
appraisal
is
an
office
and
transportation
(4)
Capital
In
terms
of
the
capital
employed
in
each
business,
the
results
are
much
the
same
as
they
are
for
the
value
of
assets
test.
The
capital
employed
by
Combined
in
the
appraisal
business
is
again
insignificant
when
compared
to
the
capital
employed
in
the
real
estate
leasing,
rental,
development
and
sale
business.
When
one
compares
the
real
properties
owned
by
Combined
in
1977,
1978
and
1979
with
the
office
and
transportation
expenses
involved
in
the
appraisal
business,
the
capital
employed
in
the
real
estate
leasing,
rental,
development
and
sale
business
is
overwhelmingly
in
favour
of
the
real
estate
business.
However,
this
does
not
tell
the
whole
story
in
terms
of
the
capital
employed
by
Combined.
In
addition,
Combined
guarantees
mortgages
on
real
property
which
are
held,
for
convenience,
in
the
names
of
Mr
George
Kirkland
and
other
corporations
which
Mr
Kirkland
controls.
And
these
guarantees
are
a
use
of
Combined’s
capital,
as
guarantees
are
a
contingent
liability
of
Combined
and
a
use
of
Combined’s
assets.
(5)
Time,
Attention
and
Effort
This
particular
test
relates
to
the
time,
attention
and
effort
expended
by
the
employees,
agents
and
officers
in
the
real
estate
leasing,
rental,
development
and
sale
business.
Employees
and
officers
of
Combined
are
relatively
easy
to
identify.
And
in
the
terms
of
Combined,
its
two
most
senior
employees
—
Messrs
Kirkland
and
Hunt
—
spent
more
than
50
per
cent
of
their
time
on
the
real
estate
business.
In
addition,
one
other
employee
of
Combined
devotes
considerable
time
to
the
real
estate
business.
But
it
will
be
noted
again
that
Interpretation
Bulletin
IT-371
is
not
limited
to
employees
and
officers
of
Combined.
And,
as
previously
mentioned,
this
is
understandable
in
the
construction
business,
because
of
the
way
in
which
the
construction
business
is
conducted
through
sub-contractors
and
sub-sub-
contractors
to
keep
expenses
as
low
as
possible.
And
this
is
presumably
why
Interpretation
Bulletin
IT-371
uses
the
word
“agents”
as
sub-contractors
are
agents
of
the
owner
of
the
land.
When
one
considers
how
many
painters,
carpenters,
electricians,
plumbers,
labourers
and
others
that
would
have
been
involved
in
the
construction
of
the
Empire
Avenue
office
building
alone,
which
was
commenced
in
1978,
the
time,
attention
and
effort
of
these
agents
would
alone
overwhelmingly
tip
the
scales
in
favour
of
the
real
estate
business.
But
this
is
only
one
project,
there
were
other
rental
properties
in
the
years
in
question,
and
time,
attention
and
effort
of
the
agents
involved
overshadow
the
appraisal
business.
The
time
at
which
the
properties
became
rented
is
not
the
deciding
criterion.
And
to
say
that
the
principal
business
of
Combined
is
real
estate,
when
its
properties
are
fully
rented,
is
to
ignore
the
fact
that
it
takes
time
to
construct
rental
properties,
whether
with
employees
or
agents.
The
time,
attention
and
effort
of
agents
or
contractors
and
sub-contractors
must
be
considered
under
Interpretation
Bulletin
IT-371.
In
summary,
Regulation
1100(12)
does
not
require
that
a
corporation’s
principal
business
be
the
rental
of
real
estate
in
order
to
qualify.
it
states
that
a
corporation’s
principal
business
be
a
combination
of
leasing,
rental,
development
and
sale.
The
Regulation
clearly
recognizes
that
it
takes
time
to
construct
rental
properties,
and
Interpretation
Bulletin
IT-371
clearly
recognizes
that
this
development
stage
can
be
carried
out
through
agents
or
contractors
and
sub-contractors.
And
if
a
corporation’s
principal
business
is
real
estate
when
its
properties
are
fully
rented,
then
its
principal
business
is
real
estate
when
its
properties
are
being
developed
and
acquired.
Additional
details
were
provided
in
the
Minister’s
reply
to
notice
of
appeal:
2.
In
computing
its
income
from
rental
properties
for
its
1977,
1978
and
1979
taxation
years,
the
Appellant:
(a)
included
therein
as
“gross
rents”,
the
following
amounts:
1977
—$48,020.00
1978
—
49,594.00
1979
—
58,623.00
(b)
deducted
therefrom
as
current
expenses
the
following
amounts:
1977
—
$67,097.00
1978
—
60,609.00
1979
—
85,464.00
(c)
as
a
result
of
paragraph
2(b),
arrived
at
a
loss
for
the
respective
taxation
year
from
renting
or
leasing
a
rental
property,
computed
without
regard
to
paragraph
20(1)(a)
of
the
Income
Tax
Act
in
the
following
amounts:
1977
—
($19,077.00)
1978
—(
11,015.00)
1979
—
(
26,841.00)
(d)
sought
to
deduct
therefrom,
as
a
deduction
under
paragraph
20(1)(a)
of
the
Act
the
following
amounts
1977
—
$18,962.00
1978
—
17,066.00
1979
—
53,373.00
The
respondent
contended
that:
—
During
the
Appellant’s
1977,
1978,
and
1979
taxation
years,
its
principal
business
was
the
appraisal
of
real
estate;
—
During
the
Appellant’s
1977,
1978,
and
1979
taxation
years,
it
was
not
a
corporation
whose
principal
business
was
the
leasing,
rental,
development
or
sale,
or
any
combination
thereof,
of
real
property
owned
by
it.
—
The
Appellant’s
claim
for
capital
cost
allowance
must
be
calculated
in
accordance
with
section
1100(11)
of
the
Income
Tax
Regulations.
There
was
little
dispute
between
the
parties
regarding
either
the
gross
or
net
revenue
results
which
the
corporation
derived
from
its
respective
“appraisal”
and
“real
estate”
operations.
Without
going
into
a
great
deal
of
detail,
I
am
satisfied
that
by
any
reasonable
standards
of
either
business
practice
or
accounting
procedure,
the
appraisal
operation
produced
a
net
return
to
the
company
—
both
in
income
and
cash
—
whereas
the
real
estate
operation
did
not.
While
one
might
contend
that
the
sale
of
property
was
indeed
a
business,
it
could
not
be
contended
that,
on
its
own,
it
was
the
principal
business
of
the
corporation.
Equally,
it
might
be
contended
that
the
rental
operation
was
not
a
business
but
an
investment.
However,
unless
the
rental
element
of
the
operation
could
be
included
as
a
“business”
and
as
part
of
the
“real
estate
business”,
there
was
no
basis
for
the
contention
that
the
“real
estate
business”
was
the
principal
business.
Therefore,
the
issues
are
simple:
(a)
was
the
rental
of
real
estate
a
business;
and/or
(b)
was
it
of
such
a
character
that
the
principal
business
of
the
appellant
was
real
estate
rather
than
appraisal
oriented?
Factor
(a)
above,
while
not
specifically
covered
by
the
Minister
in
the
reply
to
notice
of
appeal,
is
inherent
in
Regulation
1100(12)
and
was
discussed
at
length
during
the
hearing.
The
testimony
of
the
president
of
the
appellant
corporation
on
this
point
was
rather
destructive
to
the
appeal
since
Mr
Kirkland
indicated
that
the
reason
the
rental
operation
normally
and
consistently
resulted
in
a
loss
was
because
the
profit
to
be
gained
was
not
from
the
rental
operation
—
that
merely
held
the
real
property
until
its
value
increased
sufficiently
and
the
property
itself
could
be
sold
producing,
in
his
opinion,
a
capital
gain.
It
was
brought
to
his
attention
that
a
serious
question
arose
from
that
situation
—
whether
the
rental
operation
could
be
considered
a
“business”,
that
is
—
if
there
was
a
“reasonable
expectation
of
profit”?
Taken
literally,
the
president’s
testimony
would
leave
little
room
for
consideration
of
this
appeal,
but
I
am
not
prepared
to
deal
with
the
issue
so
summarily
since
that
aspect
of
it
appears
to
me
to
be
one
which
should
require
more
complete
review
and
opinion
from
counsel
before
it
could
form
the
basis
for
dismissal.
It
was
also
brought
to
the
attention
of
counsel
for
the
appellant
that
it
was
difficult
to
see
that
the
words
“any
combination
thereof”
(Reg.
1100(12))
permitted
that
combination
to
include
investment
income
from
rental
property,
plus
business
income
from
property
sales.
Each
element
of
the
“combination”
therefore
must
be
in
its
own
right
a
“business”,
at
least
as
this
Court
saw
the
matter.
The
elevation
of
“investment
income
from
rental
property”
to
“business
income
from
rental
property”
must
entail
something
more
than
just
an
increase
in
the
quantum
of
gross
revenue
produced.
Simply
put,
if
the
revenue
from
rentals
where
one
(1)
property
is
involved,
is
characterized
as
income
property,
then
merely
increasing
the
revenue
base
to
ten
(10)
properties
would
not
alter
that
characterization
to
income
from
business.
One
of
the
areas
in
which
this
“business”
v
“property”
income
question
arises
is
that
dealing
with
“active
business
income”
under
subsection
125(1)
of
the
Act.
My
own
research
has
not
turned
up
jurisprudence
which
I
would
consider
definitive
in
making
that
specific
distinction
as
far
as
rental
income
is
concerned.
A
quotation
from
Charwood
Investments
Limited
v
MNR,
[1978]
CTC
2545;
78
DTC
1411,
at
2548
and
1413
respectively,
still
appears
apt
to
me:
A
review
of
the
cse
history
supplied
by
both
counsel
for
the
appellant
and
counsel
for
the
respondent
does
not
lead
me
beyond
the
conclusion
reached
in
Spence
Building
Limited(supra)
at
pages
76
and
2111
respectively:
According
to
the
judgments
in
the
cases
I
have
cited
in
this
decision,
it
is
an
examination
of
the
“activity”
or
“activities”
of
the
operation
in
question
which
forms
the
basis
for
determining
whether
the
income
of
a
corporation
should
be
identified
as
from
a
“business”
of
a
“property”.
The
review
in
this
case
of
the
various
possible
factors
and
characteristics
in
such
“activity”
or
“activities”
has
provided
little
enlightenment
on
how
any
“corporate
business
income”
(once
having
been
identified
as
such)
might
be
regarded
as
from
other
than
an
“active”
business.
The
Chief
Justice
in
the
judgment
in
the
Rockmore
Investments
Ltd
case
demurred
from
giving
any
general
conclusion
on
how
the
concept
of
“active”
business
is
to
be
applied.
The
Board’s
determination
that
the
income
in
question
in
this
appeal
is
from
“property”
and
not
from
“business”
leaves
it
unnecessary
to
pursue
the
matter
of
the
“active”
identification
any
further.
(Underling
mine)
There
was
no
need
in
Charwood
(supra)
to
answer
the
basic
question
posed
in
this
appeal
—
was
the
rental
income
in
itself
from
property
or
business?
The
decision
of
the
Board
reflects
a
view
that
the
totality
of
the
operations
of
Charwood
constituted
a
business.
It
is
noted
for
the
record
that
Charwood
(supra)
is
under
appeal
by
the
Minister
of
National
Revenue.
In
the
instant
appeal,
a
different
section
of
the
Act
is
involved
(a
regulation,
in
fact)
and,
as
I
read
it,
even
a
possible
blurring
of
the
“business”
characteristics
of
each
element
of
the
operations
cannot
be
tolerated.
For
purposes
of
Charwood
(supra),
the
fact
that
the
income
arose
within
a
corporate
structure
normally
established
for
business
purposes
was
one,
but
Only
one,
ingredient
to
be
taken
into
account
in
determining
the
nature
of
the
operations.
However,
with
regard
to
Regulation
1100(12)
of
the
Act,
it
might
be
argued
that
this
is
the
critical
requirement
—
operation
in
a
corporate
structure
—
which
identifies
those
operations
as
“business”
rather
than
“property”
oriented.
Clearly,
the
same
benefit
from
that
regulation
is
not
available
to
an
unincorporated
taxpayer,
but
that
problem
is
not
one
for
necessary
determination
by
this
Court
in
this
appeal.
Assuming
that
the
income
from
rentals
for
this
appellant
corporation
is
from
business
(I
do
not
say
“active"
business
—
since
that
question
is
not
before
me),
the
task
left
to
the
appellant
is
to
show
to
the
Court
that
either
in
itself,
or
in
combination
with
the
income
from
property
sales,
it
constitutes
the
principal
business
of
the
taxpayer.
On
this
“principal
business”
question,
the
most
analogous
circumstances,
in
my
view,
are
those
which
surround
the
distinction
made
in
Moldowan
v
MNR,
[1973]
CTC
2294;
73
DTC
228,
regarding
the
deductibility
of
farming
losses,
and
subsequently
reviewed
in
James
R
Leslie
v
MNR,
[1982]
CTC
2233;
82
DTC
1216.
In
particular
I
refer
to
the
comments
of
Justices
Pratte
and
Ryan
(Federal
Court
of
Appeal)
in
Moldowan
v
The
Queen,
[1975]
CTC
323;
75
DTC
5216,
to
be
found
at
323
and
333
and
5217-5219
respectively:
In
order
to
qualify
as
the
taxpayer’s
chief
source
of
income,
it
is
not
necessary,
in
my
opinion,
that
farming
be
more
important
than
all
the
taxpayer’s
other
sources
of
income
grouped
together;
it
is
sufficient
that
farming,
as
a
source
of
income,
be
more
important
than
any
of
the
other
sources
of
income.
1.
the
importance
of
a
source
of
income
cannot
be
entirely
divorced
from
the
importance
of
the
income
that
it
normally
produces
or
that
it
is
expected
to
produce
in
the
future;
The
relative
importance
of
sources
as
sources
of
income
would
seem
to
me
to
be
in
most
part
a
function
of
their
capacity
to
produce
gain.
The
real
estate
rental
in
this
appeal
need
not
produce
income
in
order
to
remain
the
source
of
income
—
even
the
source
of
business
income.
However,
except
in
the
most
unusual
or
temporary
circumstances,
a
source
which
produces
a
negative
impact
on
the
total
income
should
not
represent
the
“principal
business”
of
the
taxpayer,
or
the
essential
ingredient
in
the
combination
in
the
“principal
business”,
when
another
“business”
conducted
in
the
same
corporation
shows
a
positive
impact
on
the
total
income,
as
I
follow
any
application
Moldowan
(supra)
may
have
to
Regulation
1100(12).
I
am
unable
to
conclude
for
the
specific
purpose
of
the
exempting
deduction
provided
in
Regulation
1100(12)
that
the
term
“in
computing
his
income”
(Reg
1100(11))
should
be
transformed
and
reversed
effectively
into
“in
computing
his
loss”.
Where
the
range
of
businesses
being
conducted
in
a
corporate
structure
include
those
related
to
real
property
listed
in
Regulation
1100(12)(a),
and
one
or
more
not
so
specified,
the
task
of
showing
that
the
specified
businesses
represent
the
“principal
business”
is
formidible
indeed
when
the
result
of
those
specified
businesses
is
a
“loss”
rather
than
“income”,
while
the
non-specified
businesses
show
a
profit.
Even
under
circumstances
where
the
net
result
would
be
a
profit,
a
further
and
imposing
hurdle
is
faced
—
to
contrast
that
income
with
any
income
from
other
businesses
conducted
within
the
same
corporate
umbrella.
In
my
view,
that
second
hurdle
need
not
be
faced
by
the
Court
in
the
circumstances
of
this
appeal
—
the
existing
contrast
between
the
“loss”
from
the
specified
activities
of
the
corporation
and
the
“profit”
from
the
other
activities
rules
out
any
serious
consideration
of
this
appellant’s
arguments.
I
am
not
persuaded
that
Regulation
1100(12)
was
inserted
in
the
Act
for
the
purpose
to
which
this
taxpayer
wants
it
dedicated
—
to
deduct
the
loss
resulting
from
real
property
operations
in
the
corporation
from
other
income
in
the
same
corporation.
In
my
view,
this
appellant
has
not
shown
that
the
Court
should
consider
the
“principal
business”
of
a
diversified
corporation
to
be
that
portion
of
its
operations
which
produces
a
net
revenue
loss,
while
that
portion
of
its
operations
which
produces
a
net
revenue
gain
is
relegated
to
a
minor
role.
In
this
appellant’s
first
appeal
on
this
issue
(supra),
the
point
was
strongly
made
by
the
appellant
that
separation
of
these
activities
was
the
immediate
goal
of
the
corporation.
That
did
not
result
in
the
interim
and,
indeed,
the
current
appeal
arises
from
the
retention
in
one
operating
struc-
ture
of
both
the
losses
and
the
profits
which
arise
from
such
diversified
corporate
activities,
while
at
the
same
time
claiming
the
maximum
tax
benefits
perceived
in
the
Act.
The
appeal
is
dismissed.
Appeal
dismissed.
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