D
E
Taylor:—This
is
an
appeal
heard
at
a
special
sitting
of
the
Board
held
in
the
City
of
Toronto,
Ontario,
on
February
20,
1980
against
an
income
tax
reassessment
for
the
year
1975
in
which
the
Minister
of
National
Revenue
gave
the
following
explanation
for
changes:
Your
interest
income
has
been
reduced
by
$1,087.50.
Your
carrying
charges
have
been
reduced
by
$1,072.60.
Your
interest
and
dividend
income
deduction
has
been
reduced
by
$1,000
as
there
was
no
bona
fide
acquisition
or
disposition
of
the
bonds.
The
respondent
relied,
inter
alia,
upon
section
3,
subsection
9(1),
paragraph
12(1)(c),
subsection
20(14)
and
section
110.1
of
the
Income
Tax
Act,
SC
1970-71-72,
Cc
63,
as
amended.
This
decision
is
to
be
read
in
conjunction
with
the
decision
in
Frederick
Tim
Smye
v
MNR.
Background
The
appellant
is
a
lawyer.
On
December
12,1975,
he
placed
an
order
with
his
investment
dealer
A
E
Ames
&
Company
(“Ames”)
to
purchase
$30,000
of
Government
of
Canada
Bonds
(“Bonds”)
at
7
/4%.
On
December
15,1975,
the
said
Bonds
matured
and
were
redeemed.
Contentions
By
the
appellant:
—
Physical
delivery
of
the
bonds
to
me
was
made
by
Ames
against
full
payment
on
December
12,
1975.
—The
bonds
were
paid
for..
.
by
my
bank
at
my
direction
against
delivery.
—
In
addition
to
the
capital
disbursement
of
$30,000,
I
was
obliged
to
incur
an
outlay
of
$1,072.60
which
represented
the
amount
of
interest
accrued
on
said
bonds
as
at
the
date
of
purchase.
—The
bonds
were
held
by
my
bank
pursuant
to
my
pledge
to
them
of
the
bonds
from
the
date
of
delivery
to
the
date
of
maturity.
—The
bonds
were
disposed
of
on
December
15,
1975
by
redemption.
—
I
received
an
interest
payment
of
$1,087.50
on
account
of
the
ownership
of
the
Said
bonds.
For
the
respondent:
—The
said
bonds
were
not
assigned
or
transferred
to
the
appellant
within
the
meaning
of
subsection
20(14)
of
the
Income
Tax
Act.
—
Even
if
there
was
a
transfer
or
assignment
of
the
said
bonds,
the
appellant
earned
no
interest
from
the
ownership
of
the
said
bonds,
but
in
fact
all
interest
that
accrued
prior
to
the
date
of
the
assignment
or
transfer
of
the
bonds
to
the
appellant
was
capital
in
the
hands
of
the
appellant,
and
not
interest
within
the
meaning
of
paragraph
12(1)(c)
of
the
Income
Tax
Act.
—
Further,
no
interest
from
the
said
bonds
was
receivable
by
the
appellant
in
1975
within
the
meaning
of
paragraph
12(1)(c)
of
the
Act
and
therefore
the
appellant
is
not
entitled
to
a
deduction
pursuant
to
section
110.1
of
the
Income
Tax
Act.
Evidence
General
evidence
was
submitted
on
behalf
of
the
appellant
in
support
of
the
assertions
made,
but
the
Board
cannot
be
certain
whether
the
bonds
were
delivered
to
the
bank
by
Ames
or
by
the
appellant,
nor
of
the
conditions
of
the
pledge
under
which
they
were
held
at
the
bank.
Further,
there
was
no
specific
identification
provided
to
the
Board
giving
the
serial
numbers
of
the
bonds.
It
is
noted
also
that
no
claim
was
made
by
the
appellant
with
regard
to
any
possible
interest
paid
to
the
bank
for
the
three
days
(December
12-15,
1975).
Findings
The
Board
makes
reference
to
the
decisions
of
John
R
White
v
MNR
and
Vernon
G
M
Fitzgerald
v
MNR.
Taking
into
account
the
evidence
and
information
available
to
the
Board,
even
though
it
is
less
than
complete,
it
must
be
concluded
that
certain
bonds
were
transferred
from
Ames
to
the
appellant’s
bank,
with
the
specific
direction
of
the
appellant
and
under
circumstances
in
which
Ames
was
paid
for
the
bonds
and
the
accrued
interest.
While
the
benefit
of
any
doubt
will
be
accorded
to
the
taxpayer
in
this
situation,
it
may
well
represent
the
minimum
evidence
acceptable
for
proving
fulfillment
of
the
provisions
of
subsection
20(14)
of
the
Act.
Decision
The
appeal
is
allowed
and
the
matter
referred
back
to
the
respondent
for
reassessment
accordingly.
Appeal
allowed.
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