D
E
Taylor:—These
are
appeals
heard
on
common
evidence
in
London,
Ontario,
on
June
14,
1982
against
income
tax
assessments
for
the
years
1976,
1977
and
1978
in
the
case
of
Vernon
Boles,
and
for
1978
in
the
case
of
Marie
Boles.
While
it
was
not
raised
at
the
hearing,
it
would
appear
to
the
Board
that
there
is
no
appeal
for
1978
for
Marie
Boles
since
the
assessment
for
that
year
is
a
“nil”
assessment.
Accordingly,
the
appeal
of
Marie
Boles
will
be
quashed
and
the
balance
of
this
decision
will
relate
to
the
points
raised
by
counsel
in
regard
to
the
assessment
of
Vernon
Boles.
As
agreed
Statement
of
Facts
was
filed
as
follows:
1.
Vernon
Boles
and
Marie
Boles
are
spouses,
married
for
thirty-eight
years.
Throughout
marriage,
they
have
lived
on
a
farm,
being
parts
of
Lots
6
and
7,
Con-
cession
1,
in
the
Township
of
Eramosa,
in
the
County
of
Wellington,
containing
approximately
150
acres,
where
farming
is
actively
carried
on.
2.
David
Elmer
Boles,
father
of
Vernon
Boles,
died
June
24,
1967,
a
copy
of
letters
probate
as
issued
by
the
Surrogate
Court
of
the
County
of
Wellington
on
the
28th
day
of
July,
1967,
is
attached
as
Schedule
“A”.
3.
David
Elmer
Boles
was
the
owner
of
a
13/20
interest
in
parts
of
Lots
6
and
7,
Concession
1,
Township
of
Eramosa,
at
the
time
of
his
death.
4.
Vernon
Boles
was
an
owner
of
an
undivided
7/20
interest
in
the
said
lands
at
the
time
of
his
father’s
death.
5.
Vernon
Boles
in
1976
sold
his
dairy
herd
for
cash
and
reduced
his
farming
operations.
6.
In
March,
1977,
Vernon
Boles
sold
106.272
acres
of
land
being
part
of
the
150
acres
referred
to
in
paragraph
1,
without
buildings,
for
a
consideration
of
$1,200
per
acre
for
a
gross
consideration
of
$127,526.40.
The
outlays
and
expenses
for
the
said
sale
were:
|
(a)
Severance
fee
|
$400
|
|
(b)
Survey
costs
|
852
|
|
(c)
Legal
expenses
|
852
|
7.
The
proceeds
realized
from
the
sale
of
the
dairy
herd
and
the
106.272
acres
of
land
were
invested
in
investments
jointly
owned
and
the
income
was
reported
equally
by
each
of
Vernon
Boles
and
Marie
Boles.
8.
The
fair
market
value
of
the
106.272
acres
of
the
said
lands
on
December
31,
1971
was
$56,000.
9.
A
deed
to
Vernon
Boles
No
M-136710
attached
as
Schedule
“B”
was
a
result
of
an
Order
in
a
Partition
Action
made
by
Mr
Justice
Holland
dated
July
24,
1973,
and
minutes
of
settlement
dated
October
17,
1973
reflected
in
a
Report
of
His
Honour
Judge
Sutherland
dated
January
8,
1974.
A
copy
of
the
said
Judgment,
Minutes
of
Settlement
and
Report
are
attached
as
Schedules
“C”,
“D”,
and
“E”.
As
part
of
Schedule
“A”
noted
above,
there
was
attached
a
copy
of
the
will
of
David
Boles
dated
March
15,
1966,
which
read
in
part:
3.
I
GIVE,
DEVISE
AND
BEQUEATH
all
my
property
of
every
nature
and
kind
and
wheresoever
situate,
including
any
property
over
which
I
may
have
a
general
power
of
disposition
to
my
said
Trustees
upon
the
following
trusts
namely:
(a)
To
allow
my
Wife
during
her
lifetime
the
use,
occupancy
and
enjoyment
of
the
home
farm
being
the
West
half
of
Lot
6
Concession
1
and
the
South
half
of
the
West
half
of
Lot
7
Concession
1
in
the
Township
of
Eramosa
or
whatever
dwelling-house
or
residence
she
may
designate
and
I
may
own
at
my
death,
and
including
all
articles
of
personal,
domestic
and
household
use
or
ornament,
including
consumable
stores
and
automobiles
then
owned
by
me.
My
Wife
may
at
any
time
direct
my
Trustees
to
sell
such
farm
or
dwelling-house
and
with
the
proceeds
of
such
sale
provide
another
dwelling-house
or
residence
for
her
use,
occupation
and
enjoyment,
and
so
on
from
time
to
time.
If
during
any
period
any
part
of
such
proceeds
be
not
so
used,
they
shall
be
invested
by
my
trustees
and
my
Wife
shall
during
such
period
be
entitled
to
the
income
therefrom.
My
Trustees
in
determining
the
amount
of
the
proceeds
of
the
sale
of
any
dwelling-house
or
residence
I
may
own
at
my
death
shall
not
deduct
the
amount
of
any
debts
secured
thereon.
All
taxes,
insurance,
mortgage
interest
and
repairs
shall
be
paid
out
of
my
general
estate,
being
charged
to
income
or
capital
or
partly
to
income
and
partly
to
capital
as
my
Trustees
in
their
discretion
consider
advisable.
If
my
said
Wife
shall
direct
the
sale
of
the
Home
Farm
as
hereinbefore
provided,
it
is
my
wish
that
my
son,
Vernon
shall
be
at
liberty
to
have
the
first
opportunity
of
purchasing
the
same
at
its
fair
market
value.
(b)
to
sell,
call
in
and
convert
into
money
all
my
estate
not
consisting
of
money
at
such
time
or
times,
in
such
manner
and
upon
such
terms,
and
either
for
cash
or
credit
or
for
part
cash
and
part
credit
as
my
said
Trustees
may
in
their
discretion
decide
upon,
with
power
and
discretion
to
postpone
such
conversion
of
such
estate
or
any
part
or
parts
thereof
for
such
length
of
time
as
they
may
think
best,
and
I
hereby
declare
that
my
said
Trustees
may
retain
any
portion
of
my
estate
in
the
form
in
which
it
may
be
at
my
death
(notwithstanding
that
it
may
not
be
in
the
form
of
an
investment
in
which
trustees
are
authorized
to
invest
trust
funds
and
whether
or
not
there
is
a
liability
attached
to
any
such
portion
of
my
estate)
for
such
length
of
time
as
my
said
Trustees
may
in
their
discretion
deem
advisable,
and
I
also
declare
that
my
Trustees
when
making
any
investments
for
my
estate
shall
not
be
limited
to
investments
authorized
by
law
for
trustees
but
may
make
any
investments
which
in
their
absolute
discretion
they
consider
advisable,
and
my
Trustees
shall
not
be
held
responsible
for
any
loss
that
may
happen
to
my
estate
by
reason
of
their
so
doing.
(e)
Upon
the
death
of
my
said
Wife,
or
if
she
predeceases
me
or
dies
in
circumstances
rendering
it
uncertain
whether
or
not
she
survived
me,
or
surviving
me
fails
to
survive
me
for
a
period
of
thirty
days
following
my
decease,
then,
(i)
to
transfer
to
my
son
Vernon
Boles
my
Home
Farm
property
being
the
West
half
of
Lot
6
Concession
1
and
the
South
half
of
the
West
half
of
Lot
7
Concession
1
in
the
Township
of
Eramosa
all
stock
and
implements
and
all
personal
household
and
domestic
articles
including
autos
located
therein
and
thereon
for
his
own
use
absolutely.
If
my
Wife
shall
not
occupy
the
said
farm
at
the
time
of
her
death,
then
to
transfer
to
my
said
son
any
residence
or
dwelling
then
occupied
by
her.
(ii)
to
pay
a
legacy
of
TWO
THOUSAND
($2,000)
dollars
to
my
granddaughter
BONNIE
BOLES.
(iii)
to
transfer
the
balance
of
my
estate
then
remaining
to
my
son
GRAY-
DON
BOLES
for
his
own
use
absolutely.
In
my
view
there
is
nothing
critical
to
this
appeal
which
arises
out
of
any
of
Schedules
“B”,
“C”,
“D”
or
“E”
noted
above.
The
point
at
issue
which
does
arise
in
relation
to
Schedule
“A”
is
the
date
at
which
it
can
be
said
that
Vernon
Boles
acquired
his
proprietary
interest
in
the
property
—
on
the
death
of
his
father
in
1967
(subject
only
to
certain
restrictions
related
to
the
maintenance
of
his
mother,
as
contended
by
the
Minister);
or
at
the
date
of
the
Minutes
of
Settlement
in
1973
—
Schedule
“C”,
(as
contended
by
the
appellant).
It
would
be
useful
to
quote
precisely
from
the
Notice
of
Appeal,
and
the
Reply
to
Notice
of
Appeal:
For
the
appellant:
3.
The
Appellant
states
that
the
capital
gains
on
the
sale
of
part
of
the
lands
in
1977
should
be
calculated
on
an
adjusted
cost
base
for
the
said
lands
as
at
October
1973,
being
the
date
on
which
he
was
first
entitled
to
an
absolute
title
to
the
property.
For
the
respondent:
.
.
.
on
the
death
of
David
E
Boles
a
life
interest
was
created
in
favour
of
his
widow,
Laura
Boles
with
the
remainder
on
her
death
to
pass
to
the
Appellant
and
in
addition
(the
respondent)
states
that
the
said
life
interest
pertained
to
the
13/20th
interest
retained
by
David
E
Boles
.
.
.
On
the
main
point
at
issue,
counsel
were
in
agreement
that
if
the
Board’s
decision
should
be
that
Vernon
Boles
acquired
his
proprietary
interest
in
the
property
in
1967,
then
at
least
that
part
of
the
assessment
should
stand.
If,
however,
the
Board’s
decision
should
be
1973,
then
the
matter
was
to
be
referred
back
to
the
Minister
for
reassessment.
There
is
a
second
point
to
be
addressed
and
that
is
whether
or
not
Marie
Boles
had
a
proprietary
interest
in
the
farm
assets
at
the
date
of
sale
in
1977.
On
this
issue
both
appellants
testified
that
Marie
Boles
had
made
some
small
financial
contribution
in
earlier
years
(between
1954
and
1961),
and
that
she
had
contributed
work
in
“acquisition,
management,
maintenance,
operation
and
improvement”.
The
operating
statements
and
financial
results
of
the
farm
had
always
been
reported
solely
by
Vernon
Boles.
There
was
no
physical
indication
or
documentation
of
“partnership”
presented
to
the
Board.
Interest
income
which
arose
out
of
the
investment
of
the
funds
from
sale
of
cattle,
milk
contracts
and
finally
the
land
in
1976
and
1977
had
been
invested
“jointly”
by
them,
but
had
been
included
in
the
taxable
income
of
Vernon
Boles
and
deducted
from
that
of
Marie
Boles,
by
the
Minister.
A
third
point
was
the
disallowance
of
certain
amounts
charged
by
Vernon
Boles
as
part
of
the
farm
operating
expenses
during
the
years
in
question.
These
amounts
included
claims
for
property
taxes,
utilities,
etc.
The
original
tax
returns
of
Vernon
Boles
had
been
prepared
dividing
such
expenses
generally
along
a
/
personal,
/3
farm
ratio.
In
my
view,
little
need
be
said
regarding
the
last
point
—
no
basis
was
presented
that
any
of
the
expenses
disallowed
by
the
Minister
in
connection
with
the
farm
operation
should
be
allowed
by
the
Board.
On
the
evidence
and
testimony
presented
to
the
Board,
it
would
be
difficult
to
conclude
that
the
farm
was
being
operated
in
the
years
under
review
in
a
manner
to
permit
the
deduction
of
the
resulting
“full”
farming
losses.
Particularly
after
the
sale
of
the
land,
it
might
well
be
argued
that
only
a
“restricted”
farming
loss,
if
that,
should
be
permitted.
That
part
of
the
appeal
will
be
dismissed.
On
the
second
point
above,
while
counsel
for
the
appellant
made
a
diligent
effort
to
equate
the
Boles
situation
with
a
“constructive
trust”,
or
a
“resultant
trust”,
based
upon
the
Family
Court
Act
and
the
recent
decision
of
the
Board
in
S
Feder
v
MNR,
[1981]
CTC
2330;
81
DTC
307
and
I
Feder
v
MNR,
[1981]
CTC
2327;
81
DTC
311,
it
is
my
opinion
that
no
such
inference
can
be
made.
As
for
the
case
of
Feder
(supra),
counsel
for
the
Minister
noted
that
he
had
been
unable
to
isolate
in
the
decision
the
basis
upon
which
the
presiding
member
arrived
at
the
conclusion
that
.
there
was
a
constructive
trust
in
all
assets
held
in
the
name
of
the
appellant
for
the
benefit
of
himself
as
well
as
equally
for
his
wife
Maria”
and
that,
in
view
of
the
jurisprudence
quoted
at
this
hearing,
such
a
conclusion
was
not
good
law.
I
would
only
point
out
that
the
Feder
decision
goes
on
to
state
that
“From
the
time
of
their
arrival
in
Canada
in
1949,
they
pooled
all
their
assets
and
income,
their
relationship
was
indeed
a
partnership
in
every
sense
of
the
word”
(italics
mine),
and
that
the
“Feder”
case
(supra)
was
not
appealed
by
the
Minister.
Nevertheless,
I
am
unable
to
find
any
basis
in
the
testimony
in
this
appeal
that
would
support
a
conclusion
that
the
Boles
were
in
fact
or
in
law,
partners.
There
is
no
reason
to
conclude
from
Feder
(supra)
that
whatever
financial
contribution
was
made
by
Marie
Boles,
was
as
a
partner
rather
than
as
an
investor,
or
even
as
a
donor.
Vernon
Boles
operated
the
farm
during
the
period
relevant
to
this
determination,
without
any
visible
regard
for
the
alleged
proprietorship
interest
of
Marie
Boles.
Counsel
for
the
Minister
quoted
the
case
of
Re
Leatherdale
and
Leatherdale,
118
DLR
(3d)
72,
and
Pettkus
v
Becker,
117
DLR
(3d)
257,
in
which
the
rigid
requirements
are
set
out
which
could
permit
a
sharing
of
the
legal
entitlement
to
the
property
held
in
the
name
of
Vernon
Boles
in
such
a
manner
that
a
beneficial
interest
for
Marie
Boles
could
be
seen.
There
is
no
indication
in
the
testimony
of
either
party,
let
alone
in
the
documentation
available,
which
would
support
such
a
conclusion
(see
Isfeld
v
MNR,
[1980]
CTC
2970;
80
DTC
1882.
That
part
of
the
appeal
will
also
be
dismissed.
On
the
main
point,
it
is
evident
that
Schedule
“A”
(the
will
of
David
Boles)
is
subject
to
several
possible
interpretations.
The
responsibility
for
that
lack
of
clarity
may
rest
with
the
drafters
of
the
document
rather
than
with
the
Minister
of
National
Revenue.
However,
it
is
implicit
in
the
assessment
struck
by
the
Minister
that,
as
of
the
date
of
his
father’s
death,
Vernon
Boles
held
the
interest
in
the
property
as
a
proprietor,
not
merely
as
a
trustee.
I
am
unable
to
find
in
the
relevant
document
any
assurance
that
such
a
perspective
is
completely
correct.
I
can
only
read
Schedule
“A”
as
designed
to
create
a
trust,
the
accounting
for
which
the
trustees
were
responsible
in
terms
of
any
relevance
it
might
have
to
income
tax
application.
No
reference
was
made
at
the
hearing
whether
or
not
such
a
reconciliation
of
assets
and
income
for
tax
purposes
was
made
between
the
years
1967
and
1973.
The
legal
actions
taken
by
Vernon
Boles
in
1973
(referenced
in
Schedules
“C”,
“D”
and
“E”
noted
earlier)
brought
to
an
end
the
interest
of
and
executrix
position
of
Laura
B
Boles
in
the
trust
whatever
that
interest
might
have
been.
The
Board
is
not
called
upon
in
this
matter
to
determine
whether
or
not
those
actions
also
brought
to
an
end
the
trust
itself.
No
evidence
was
presented
to
cover
the
period
from
1973
to
1977,
which
would
assist
in
deciding
whether
that
sale
was
from
the
estate
or
from
Vernon
Boles
personally.
In
any
event,
the
evidence
does
not
support
a
conclusion
that
at
any
date
earlier
than
1973
Vernon
Boles
could
be
said
to
have
unequivocally
acquired
the
remaining
13/20
interest
in
the
property
in
question.
Accordingly,
the
Minister’s
assessment
must
fail
on
that
point.
Decision
The
appeal
of
Marie
Boles
for
the
year
1978
is
quashed.
The
appeal
of
Vernon
Boles
for
the
years
1976,
1977
and
1978
is
allowed
in
part
in
order
that
any
capital
gain
realized
on
the
relevant
property
sale
in
1977
shall
be
recalculated
on
the
basis
that
acquisition
of
the
property
by
Vernon
Boles
occurred
in
1973.
In
all
other
respects
the
appeal
of
Vernon
Boles
is
dismissed.
The
entire
matter
is
referred
back
to
the
respondent
for
reconsideration
and
reassessment
in
a
manner
not
inconsistent
with
the
above
reasons
for
decision.
Appeal
of
Vernon
Boles
allowed
in
part,
Appeal
of
Marie
Boles
dismissed.
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