Dorothy M Rosenfeld v. Minister of National Revenue, [1982] CTC 2226, 82 DTC 1214

M J Bonner:—These appeals from assessments of income tax for the 1976 taxation year were heard together on common evidence. On assessment the Minister included in the computation of the income of each appellant one- half of the profit realized on the sale of a farm located in Lot 13, Concession B, Township of Mersea.

Various attacks on the assessments were made by the appellants, but in my view the appeals can properly be decided when the two following questions are considered:

(a) Did the appellant, John Rosenfeld, realize any gain?

and

(b) Was the gain realized by Dorothy Rosenfeld, whatever its nature, realized in 1976 or was it realized in 1975?

John Rosenfeld and his wife carried on the business of farming in equal partnership. By Agreement of Purchase and Sale formed on August 8, 1974, Exhibit A-1, between Harvey and Lena Russelo as vendors and Mrs Rosenfeld as purchaser the farm was bought. The purchase price was $65,000. A part of the purchase price, $45,000, was borrowed from the Bank of Montreal. Mr Rosenfeld said in evidence that he co-signed the note to the bank. It is evident from the face of the note that Mr Rosenfeld did not sign as guarantor. He signed as one of two joint makers of the note. In any event, according to the evidence, Mrs Rosenfeld alone took title. The evidence of Mr Rosenfeld was clear that the land was not partnership property. Mr Rosenfeld said that all farms operated by the partnership were the property of one or the other of the two appellants. The Minister’s assumption that the farm was purchased in equal partnership has therefore been shown to be wrong in fact.

In April of 1975, shortly after completion of the purchase, Mrs Rosenfeld sold the land, that is to say, she as vendor entered into an agreement, Exhibit A-2, with Matteo and Bruno Stramacchia as purchasers for the sale of the land. The sale was, according to the agreement, to be completed “on or before January 6, 1976’’.

It is without doubt true that Mr Rosenfeld, a licensed real estate agent, advised and guided his wife in relation to the purchase and sale of the farm. It is also clear that he assisted her in financing the purchase by joining with her in borrowing the necessary money from the bank. Those facts, however, do not lead to the conclusion that Mr Rosenfeld had any right to any part of the gain. Mrs Rosenfeld alone bought. She alone sold. The gain was hers. No part of that gain can enter into the computation of her husband’s tax liability. As to those arguments advanced by counsel for the Minister, which were not founded on partnership, I need only point out that the income in question here is not income from property in respect of which the attribution rules of section 74 of the Income Tax Act can operate. Accordingly, the appeal of Mr Rosenfeld will be allowed and his assessment will be referred back to the respondent for reconsideration and reassessment on the basis that no part of the gain in question can properly enter into the computation of his income.

Turning next to Mrs Rosenfeld’s appeal, and specifically to the question whether any part of the gain can properly enter into the computation of her income for 1976, it should be observed that the respondent pleaded that on assessing he found or assumed:

(c) by agreement dated April 21, 1975, the appellant and her spouse accepted

an offer to purchase the subject property for a sale price of $98,000;

(d) on or about December 17, 1975, the appellant and her spouse sold the subject property for total proceeds of $98,000 cash;

The evidence, viewed as a whole, supported the respondent’s assumptions as to the timing of the relevant events. Mr Rosenfeld’s evidence, which was not contradicted, was that the proceeds of sale were received from the lawyer in December of 1975. The only element of doubt here arises from the fact that the payment by Mrs Rosenfeld to her lawyer of land speculation tax was not made until January of 1976. It may have been a bit unusual for a real estate sale to be closed prior to receipt by the vendor’s solicitor of funds needed to discharge land speculation tax liability. On the other hand, it would be even more unusual for a lawyer to pay over to the vendor the balance due on closing at a time before delivery of the deed of conveyance. In light of the pleaded assumptions of fact and the evidence of Mr Rosenfeld, I must conclude that closing of the sale took place in 1975.

Counsel for the respondent argued that the appellant was estopped from contending that closing took place in 1975. She founded that argument on a supposed representation of fact made to the respondent that the closing took place in 1976. The supposed representation was said to have been made by letter stating that the sale of the farm took place in accordance with the Agreement of Purchase and Sale. That agreement, as previously noted, called for closing . . on or before January 6, 1976”. Quite apart from the fact that other elements necessary to the operation of the doctrine of estoppel are absent here, I cannot find that the representation alleged to have been made was inconsistent with the evidence of facts leading to the conclusion that closing took place in 1975. “On or before” means just what it says. Thus, Mrs Rosenfeld agreed to sell in 1975. She fulfilled that agreement in 1975. The purchasers fulfilled their obligation to pay her for the land in 1975. The gain, whether of an income or capital nature, cannot be said to have been realized upon the disposition of the property in 1976. The appeal of Mrs Rosenfeld will therefore be allowed and the assessment referred back to the respondent for reconsideration and reassessment on the basis that the gain in issue was realized in 1975, not in 1976.

Appeals allowed.