Schaefer v. R., [1999] 3 CTC 2264, 99 DTC 640

Sarchuk T . C.J.:

These are appeals of Frances B. Schaefer and Leonard W. Schaefer from assessments of tax with respect to their 1988, 1989 and 1990 taxation years. Throughout the 1988, 1989 and 1990 taxation years, the Appellants operated The Spike & Spoon Restaurant in Collingwood, Ontario, as a partnership, each having a 50% interest therein. In computing their business income for those taxation years, each Appellant deducted certain expenses for advertising, travel and automotive operating costs. The Minister disallowed these expenses. At the commencement of the trial, Counsel for the Appellants informed the Court that the disallowance of these expenses was no longer being challenged by the Appellants.

Furthermore, in computing income for the 1989 taxation year, the Appellants reported the sale of a farm property described as south half of lot 21, concession 8, Nottawasaga Township, County of Simcoe, and known as Tally-Ho, on capital account. In reassessing the Appellants, the Minister treated the sale on income account.

At the commencement of the trial, Counsel filed with the Court a statement of certain agreed facts. [1] In addition, evidence was adduced from both Appellants as well as from David Capin (Capin), their accountant, Ann Fraser (Fraser), a business consultant with the Ontario Ministry of Economic Development, Trade and Tourism, and Sarah E. Friesen (Friesen).

Background

In or about 1972, the Appellants, both school teachers, moved to Collingwood and opened The Spike and Spoon Restaurant in a large older house. From 1972 up to and including 1989, this business was the principal source of revenue for both Appellants. While relatively popular and with what was described as a good clientele, the restaurant never provided them with a satisfactory living. In Frances Schaefer’s words, “we made money and covered our expenses and our living requirements”.

The Appellants had been friends with Friesen for a number of years. She often came up from Toronto to spend weekends with them during the course of which they cross-country skied, hiked, and otherwise explored the surrounding countryside. According to Friesen, at some point of time in mid-1986, the subject of country inns came up, piqued her curiosity and she decided to investigate the possibility of opening one in the Collingwood area. She engaged a real estate agent who provided her with listings and took her to see properties. Friesen described the Appellants as “very helpful in finding the real estate agent and in telling her about the Collingwood area”. They also provided her with additional information with respect to potential properties and based on their personal experience, with respect to the cost of running an establishment such as a restaurant.

Tally-Ho was originally constructed in the 1840s as a stagecoach house and thereafter, for a number of years, was used as an inn. At some point of time, it was converted to residential use and was being used as such at the time it was listed for sale in the fall of 1987 for $995,000. Friesen made arrangements to inspect Tally-Ho and did so with Leonard Schaefer. Her impression on that occasion was that it did not have enough bedrooms and lacked a convention room. A second viewing of Tally-Ho was arranged on which occasion, they were accompanied by Frances Schaefer. Friesen said that Tally-Ho seemed to be a suitable property for the establishment of a country inn. However, she testified that by the late fall of 1987, she had decided not to pursue the project “because I preferred to continue working for a corporation and not take the risk of opening an inn in Collingwood”. In January 1988, she took up a new position in Toronto and informed the Appellants that she had decided not to proceed with the project. Several months later on May 31, 1988, Leonard Schaefer submitted a written offer to Mrs. Doerr to purchase Tally-Ho.

The facts agreed upon by the parties are as follows:

I. At all times relevant to these appeals, Leonard W. Schaefer and Frances B. Schaefer were husband and wife.

2. At all times relevant to these appeals, the Appellants owned and operated, in partnership, The Spike & Spoon, an up-scale restaurant in Collingwood, Ontario.

3. On May 31, 1988, Mr. Schaefer, on behalf of himself and Mrs. Schaefer, conditionally offered to purchase the property described as South Half of Lot 21, Concession 8, Township of Nottawasaga, County of Simcoe (the “Tally-Ho Property”) at a purchase price of $500,000. The offer was conditional until 11:59 p.m. on June 20, 1988 upon Mr. Schaefer arranging financing through a first mortgage on the Tally-Ho Property. The closing date proposed in the offer to purchase was August 15, 1988.

4. On June 2, 1988, the owner of the Tally-Ho Property, Jane Doerr, signed the offer back to Mr. Schaefer with amendments. These amendments included:

(i) an increase in the purchase price to $595,000;

(ii) a change of the time at which Mr. Schaefer must obtain a first mortgage against the Tally-Ho Property to 11:59 p.m. on June 10, 1988.

(111) and a change of the closing date to August 31, 1988.

5. On June 5, 1988, Mr. Schaefer accepted the amendments proposed by Jane Doerr on June 2, 1988.

6. On June 9, 1988, Mr. Schaefer proposed amendments to the agreement of purchase and sale for Tally-Ho Property. These amendments included:

(i) a condition that the Jane Doerr provide financing of $395,000 through a first mortgage of $395,000 against the Tally-Ho Property; and

(ii) the removal of the condition that Mr. Schaefer be able to obtain financing through a first mortgage against the Tally-Ho Property prior to 11:59 p.m. on June 10, 1988.

7. On June 10, 1988, Jane Doerr accepted the amendments to the agreement of purchase and sale that were proposed by Mr. Schaefer on June 9, 1988.

8. By application dated August 2, 1988, Alex E. Besse, the Appellants’ lawyer, applied to the Township of Nottawasaga to have the zoning of the Tally-Ho Property changed to permit the operation of a country inn and dining facilities.

9. On August 31, 1988, the Appellants’ purchase of the Tally-Ho Property from Jane Doerr closed.

10. On September 7, 1988, the Council of the Township of Nottawasaga considered and did not approve the rezoning application submitted by Alex E. Besse in respect of the Tally-Ho Property. This decision was communicated to Alex E. Besse in a letter dated September 12, 1988 from Robert Campbell, the clerk-treasurer of the Township of Nottawasaga.

11. On or about May 25, 1989, Gillian Brenda Fodor offered to purchase the Tally-Ho Property at a purchase price of $710,000. The closing date proposed in the offer to purchase was June 27, 1989.

12. On or about May 25, 1989, Mr. Schaefer signed the offer back to Gillian Brenda Fodor with amendments. These amendments included an increase in the purchase price to $825,000. On May 26, 1989, Gillian Brenda Fodor accepted the amendments proposed by Mr. Schaefer.

13. On June 27, 1989, the Appellants’ sale of the Tally-Ho Property to Gillian Brenda Fodor closed.

14. In their 1989 tax returns, each of the Appellants reported a taxable gain of $38,487.85 in respect of their sale of the Tally-Ho Property. This taxable capital gain was calculated as follows:

Proceeds of Disposition		$825,000
Adjusted Cost Base:
Purchase Price (incl. incidentals)	$604,663
	$70,047	$674,710
Carrying Costs
Subtotal		$150,290
Selling Costs		34,826
Capital Gain		$115,464
		$ 57,732
Capital Gain Attributable to each Appel-
lant (50%)
Taxable Capital Gain
Attributable to each Appellant (66.67%)		$ 38,488

15. In their 1989 tax returns, each of the Appellants claimed a capital gains deduction of $38,487.85 to offset the taxable portion of the capital gain reported by each of the Appellants on the sale of the Tally-Ho Property.

16. By Notice of Reassessment dated June 25, 1993, the Minister of National Revenue reassessed the 1989 taxation year of Mrs. Schaefer to:

(i) recharacterize the $57,732 capital gain reported by Mrs. Schaefer in respect of the disposition of the Tally-Ho Property as income from an adventure or concern in the nature of trade; and

(ii) to disallow $38,487 of the capital gains deduction claimed by Mrs. Schaefer.

17. By Notice of Reassessment dated June 30, 1993, the Minister of National Revenue reassessed the 1989 taxation year of Mr. Schaefer to:

(1) recharacterize the $57,732 capital gain reported by Mr. Schaefer in respect of the disposition of the Tally-Ho Property as income from an adventure or concern in the nature of trade; and

(ii) to disallow the capital gains deduction of $38,487 claimed by Mr. Schaefer.

18. By Notice of Objection dated July 13, 1993, Mr. Schaefer objected to the recharacterization of the capital gain reported on his 1989 tax return as income from an adventure or concern in the nature of trade and the disallowance of the capital gains deduction of $38,487 claimed.

19. By Notice of Objection dated July 13, 1993, Mrs. Schaefer objected to the recharacterization of the capital gain reported on her 1989 tax return as income from an adventure or concern in the nature of trade and the disallowance of $38,487 of the capital gains deduction claimed.

Appellants Position

The Appellants contend that their sole motive for the purchase was to develop Tally-Ho into a country inn. Although ultimately frustrated, their intention to operate it as an inn was believed to be viable at the time they entered into the agreement to purchase. They said the property was ideal for this purpose and that they were provided with assurances from their accountant, Capin, that the project was financially feasible. They further contend that they had informal assurances that Tally-Ho could be zoned for that purpose and that they would be able to obtain financing on favourable terms from Ontario Development Corporation (ODC) or some other government agency as they had done with The Spike & Spoon.

It is the Appellants’ position that their efforts to develop Tally-Ho into a country inn were frustrated by their inability to obtain appropriate zoning for the property and, to a lesser extent, their failure to obtain financing on favourable terms. The Appellants categorized the denial of the rezoning as an “insurmountable obstacle”. Their Counsel submitted that the prospect of resale was never an operating motivation in the acquisition of Tally-Ho and that the Appellants’ inability to develop it as originally intended does not necessarily result in the forced sale being on income account. [2]

Analysis

The Appellants maintain that the gains realized on the sale of Tally-Ho were on account of capital. That said, it is necessary for the Appellants to adduce evidence which, on a balance of probability, establishes that the purchase was to hold for investment for the purpose of earning or producing income, in this case, from the operation of a country inn. The question thus becomes one of the intention of the Appellants at the time of the acquisition of Tally-Ho and in particular, whether there was either a primary or secondary intention to resell. Generally speaking, such intent is to be ascertained from their entire course of conduct and the relevant circumstances and inferences flowing therefrom; Gairdner Securities Ltd. v. Minister of National Revenue^ [3] and Racine v. Minister of National Revenue? [4] In Racine, Noel J. observed:

In examining this question whether the appellants had, at the time of the purchase, what has sometimes been called a “secondary intention” of reselling the commercial enterprise if circumstances made that desirable, it is important to consider what this idea involves. It is not, in fact, sufficient to find merely that if a purchaser had stopped to think at the moment of the purchase, he would be obliged to admit that if at the conclusion of the purchase an attractive offer were made to him he would resell it, for every person buying a house for his family, a painting for his house, machinery for his business or a building for his factory would be obliged to admit, if this person were honest and if the transaction were not based exclusively on a sentimental attachment, that if he were offered a sufficiently high price a moment after the purchase, he would resell. Thus, it appears that the fact alone that a person buying a property with the aim of using it as capital could be induced to resell it if a sufficiently high price were offered to him, is not sufficient to change an acquisition of capital into an adventure in the nature of trade. In fact, this is not what must be understood by a “secondary intention” if one wants to utilize this term.

To give to a transaction which involves the acquisition of capital the double character of also being at the same time an adventure in the nature of trade, the purchaser must have in his mind, at the moment of the purchase, the possibility of reselling as an operating motivation for the acquisition; that is to say that he must have had in mind that upon a certain type of circumstances arising he had hopes of being able to resell it at a profit instead of using the thing purchased for purposes of capital. Generally speaking, a decision that such a motivation exists will have to be based on inferences flowing from circumstances surrounding the transaction rather than on direct evidence of what the purchaser had in mind.

Emphasis added

Over the years the Courts have considered a number of criteria in determining whether a gain on the sale of property is on capital or income account. In Happy Valley Farms Ltd. v. Minister of National Revenue, [5] Rouleau J. made reference to: the nature of the property sold; length of period of ownership; frequency of similar transactions; the work expended in connection with the property realized; the circumstances responsible for the sale of the property; the taxpayer’s intention at the time of acquisition of the asset. In the context of the facts in the present appeals, I believe the following to be relevant.

Nature of Property Sold

Tally-Ho was described as an “1845 Stone Georgian Estate” located minutes from Collingwood, Wasaga Beach, and less than a mile from Devil’s Glen Ski Hill. [6] It had been renovated by the vendors and consisted of a very large kitchen, an equally large family room, a large master bedroom and ensuite, two other large bedrooms and a landing large enough for a sitting room. The Appellants say it was ideally suited for conversion to an inn by adding, in Frances Schaefer’s words: “a whole wing of bedrooms down the back” and using the main house for a conference room.

The Appellants’ testimony, and that of Capin, with respect to the proposed use of Tally-Ho as a country inn leads to the conclusion that it could only be expected to generate significant revenue if they were able to immediately obtain rezoning of the property; obtain financing in excess of $1,000,000 to fund the acquisition and the additional amounts required for furniture, renovations and additions; complete all projected renovations within a period of approximately one year; and then, to meet projected occupancy rates and not exceed projected expenses (which I might add did not include all of the mortgage interest). [7]

On the other hand, the Appellants and in particular, Leonard Schaefer, were unquestionably impressed by Tally-Ho. He had reviewed a number of listings on behalf of Friesen in the period 1986 to 1988, had visited a number of properties that were available for purchase and was familiar with the market. He testified that Tally-Ho was unique in all of Ontario, “100% restored and renovated to highest standards” and was “a gem, a gold mine, a diamond lying in a field waiting to be discovered”. It was evident that the Appellants were aware that it was a remarkable residence with great value and marketability and were equally aware of the growth occurring in the Collingwood area in 1988 and of the fact that property values were on the rise. [8]

Feasibility of Project

The Appellants contend that their decision to acquire Tally-Ho for conversion into a country inn was financially sound. In reaching this conclusion, they relied in a general sense on their experience and modest success at The Spike & Spoon. They also say they shared Friesen’s view, which had been communicated to them, that such a project was viable. Since the decision to acquire Tally-Ho was made before their discussions with Capin, the Appellants do not suggest that his projections were a factor, but do imply that his advice confirmed their belief that Tally-Ho operated as an inn/conference centre could be profitable.

Capin testified that in the course of the brief meeting on June 7th, he took “sketchy notes” and made a very rapid calculation based on numbers provided to him by Schaefer. This formed the basis for his initial assessment that the project “appeared to be able to sustain itself and reduce its mortgages over a period of time”. With respect to the subsequent projections, [9] the assumptions made by Capin included the following:

(a) that in the spring of 1989 a further expansion estimated to cost $400,000 will be undertaken;

(b) that the Appellants would be able to obtain additional financing for $400,000;

(c) that the expansion will be completed in the later summer or fall of 1989;

(d) that the expansion will include 10 additional rooms and a pool;

(e) no rental until the fall of 1989 and then assume revenue of $20,000 for that year based on obtaining a winter season tenant; and

(f) 29% occupancy after the expansion was completed.

Capin was also informed that the total cost of the project would be in the neighbourhood of $1,000,000, most of which was to be financed. The “estimates” of $400,000 for the expansion and the time frame for its completion came from Leonard Schaefer and were not supported by any plans, proposals or bids from builders or architects. Indeed, Capin conceded that he was unaware of the source and accuracy of the information provided to him. As well even the very nature of the proposed expansion differed from witness to witness. Frances Schaefer testified that an additional nine rooms and a possible restoration of the barn as a conference centre were being consid- ered. [10] According to Leonard Schaefer, he walked over the property with an architect “to decide exactly where we would put a wing with 14 guest rooms and a larger room”. [11] In his report, Capin assumed a 10-room expansion but in his testimony made mention of five rooms and a pool.

It is a fact that the “forecasted financial information” was prepared by Capin on an urgent basis, at the Appellants’ request, to permit them to make a presentation “of some sort of cash flow projections to satisfy the Bank in order to qualify for the mortgage”. Since the Appellants were aware that the assumptions relied upon by Capin to produce this information, particularly with respect to expansion costs, were totally unsupported by independent evidence, the Capin material could hardly be considered by them to be a genuine feasibility analysis. In these circumstances, Leonard Schaefer’s assertion that based on his discussions with Capin, it “was clear in my mind” that Tally-Ho “would be viable” is questionable.

Financing

From the outset, the Appellants proposed to finance virtually the whole of the cost of acquisition. Their May 31st offer was signed back to them by the vendor with amendments, inter alia, increasing the price to $595,000 and requiring that the Appellants obtain a first mortgage by June 10th. On June 5th, the proposed amendments were accepted. At this point of time, the Appellants had not obtained a commitment from any financial institution for the requisite borrowing, nor had they discussed the purchase with their accountant, Capin. [12] On June 9th, Leonard Schaefer proposed further amendments to the agreement which included a condition that the vendor provide financing of $395,000 through a first mortgage against Tally-Ho [13] and in turn, the Appellants agreed to waive their condition with respect to obtaining financing prior to June 10, 1988. The vendor accepted these amendments. Even at this point of time the Appellants had not taken any steps to secure the necessary financing. This is confirmed by Leonard Schaefer’s June 13, 1988 letter [14] to Capin in which he writes, inter alia:

“Balance on closing $200,000 — to be raised by new mtge. on Spike & Spoon by CIBC”; and “first thing on the list however, is the formal presentation of some sort of cash flow projections to satisfy the Bank, in order to qualify for the mortgage.”

CIBC rejected the Appellants’ application. On August 8, 1988, Leonard Schaefer again wrote to Capin, in part as follows: [15]

“CIBC wouldn’t approve $300 thousand, because we weren’t putting in enough money.” T.D. — specifically Jim McClure, — seemed quite determined to do business with us; however, they too are “challenging” us with — you should put more money in. The most immediate problem is to raise $200 thousand to close and Jim will do that. He is waiting to hear from us to-day to arrange this.

Subsequently, T.D. agreed to advance $175,000 to the Appellants but only on an interim demand basis until April 30, 1989 at a rate of approximately 13%.

The Appellants clearly lacked the financial resources to carry Tally-Ho for any significant period of time and were well aware of this fact. It is evident from their testimony that without the renovations, additions and furniture, it would not have been possible to operate Tally-Ho as a country inn on a financially viable basis. The Spike & Spoon was admittedly incapable of providing anything close to the amounts required for interest costs and other incidental expenses since in Frances Schaefer’s words: “we made money and covered our expenses and our living requirements” from it and no more. Aside from placing a mortgage on The Spike & Spoon property, there was little evidence from either of the Appellants as to where the additional necessary funds would be obtained. [16] They say they expected to get financing at a lower rate than that available from Banks from the ODC. However, the evidence is that the Appellants first discussed their plans with Fraser, a business consultant with ODC on June 13, 1988 — after the acquisition. [17]

The Appellants’ financing plan was grossly incompatible with their alleged intention of operating Tally-Ho as a country inn. As was observed in Racine,^ [18] the absence of financial means may be considered an indicator that the Appellants must have had the intention of reselling Tally-Ho as a motivating force at the time of its purchase.

Zoning

The Appellants were aware that it would be necessary to obtain rezoning of Tally-Ho to permit its use as a country inn and rezoning was not guaranteed. Notwithstanding that fact, the offer to purchase was not conditional upon obtaining the requisite approval. They say this was because based on an informal discussion Leonard Schaefer had with the Reeve of Not- tawasaga Township, they concluded that rezoning was not a problem but was merely a formality that would have to be gone through. Indeed, the Appellants did not consult their solicitor about rezoning until after their offer to purchase had been accepted.

In the circumstances, it is fair comment that the Appellants’ somewhat cavalier attitude towards zoning is equally consistent with their knowledge that the property had been acquired at below market price from a vendor intent upon disposing of it; that property prices were on the upswing in the area; and that resale at a profit was probable.

Credibility

Although both Appellants were involved, it is evident that Leonard Schaefer took the most active role in the purchase and resale of Tally-Ho. For that reason, his credibility is of substantial import. As was demonstrated in cross-examination by Counsel for the Respondent, he made conflicting assertions with respect to a number of matters and often appeared to be less than forthright in his responses. By way of example, he denied being aware that Friesen had contacted her solicitors and obtained a legal opinion as to the zoning change required to operate Tally-Ho as a country inn; he denied being aware that Tally-Ho was a very valuable property; denied that if he and Frances Schaefer sold Tally-Ho, they would “get more than our money

tion and in particular, would not be prepared to consider “an upgrading loan of $200,000 in third position”. As a result, the Appellants were advised that there was no point in an application for financing being submitted.

back because I believed it was a national treasure”; he categorically denied that it was his belief when the offer to purchase Tally-Ho was made that they could put it back up for sale and make more that they paid for it. In each of the above instances, his statements were inconsistent with or contradictory of his testimony on discovery.

It is also a fact that the Appellants, although they did not list Tally-Ho for sale with an agent until January 1989, had decided to sell the property at the latest by mid to late September 1988. Leonard Schaefer denied that various individuals were privately approaching the Appellants and that they held off listing the property until January 1989 in the hopes of being able to effect a sale and save real estate agent fees. His testimony in this respect was both inconsistent with his testimony on discovery and was contradicted by Frances Schaefer who conceded that they were letting people know that Tally-Ho was up for sale and available well before it was listed.

Motivation

The Appellants knew that they acquired Tally-Ho at below market value. Prior to making the offer to purchase, Leonard Schaefer became aware that the vendor, without consulting an agent, had recently sold the southernmost 100 acres for $65,000 which in his words, was approximately one-quarter of its value. Schaefer testified that he considered her to be somewhat eccentric and, taking into account the fact that she was recently widowed and was anxious to sell, believed that if he offered her one-half of what she was asking for, she would accept. [19] The evidence also establishes that the Appellants discussed the possibility of resale at the time of the acquisition. This intention was communicated to Capin both on June 13, 1988 and August 8, 1988. Furthermore, as previously observed, both Appellants were acutely aware of the rising market and of the resale value of Tally-Ho. The listing price set by the Appellants in January 1989 was $875,OCX). [20] He said he did not consider this price to be unreasonable since the vendor had originally asked for close to a $1,000,000. He also said builders estimated it would cost $2,000,000 to build Tally-Ho and observed that several chalets in the area were being constructed for $1,000,000 and one for over $2,000,000. Thus, when the Appellants received an offer to purchase for $710,000, they countered at $825,000 which, they were sure, would be accepted. [21]

The testimony of Leonard Schaefer with respect to the reason for the acquisition of Tally-Ho was both inconsistent and on a number of instances questionable. In the course of the examination-in-chief, he flatly denied any plans to resell Tally-Ho at a profit or indeed, to resell Tally-Ho at all. However, in his letter of June 13th to Capin, he expressed the view that if the inn were not turning a profit in two years, Tally-Ho would be put back on the market. Then on August 8th, he wrote:

it has become our inclination at this point to simply close the deal — make no further expenditures on the property, and to do nothing with it till we get a firm commitment from ODC to participate fully in the venture and of course if: they won’t support us fully or, if we feel threatened by mounting costs, we will unload the property.

These comments were made prior to the closing of the purchase which was scheduled for August 30th.

With respect to the purpose behind the acquisition of Tally-Ho, the following exchange took place between Counsel for the Respondent and Leonard Schaefer:

Q. And the secondary motivation was that if things didn’t work out with the country inn you could sell this property and get your money back, yes?

A. It certainly had to be talked about.

Q. And you believed that, yes?

A. So we could get the backing.

Q. You believed that you could sell that property if things didn’t work out and you would get your money back.

MR. SCHAEFER: I believed we could sell it and get more than our money back because I believed it was a national treasure.

SO, sir, having read out these questions and answers to you, I’m going to ask you once again, was it your belief when you offered to purchase the Tally-Ho property that you could put that property back up for sale and make more than you paid for it?

A. No.

At another point on discovery, Leonard Schaefer stated:

And people came running in because for a hundred years nobody has been able to see the inside of this historical home. You know it was just fabulous, and so I knew it was potentially a very valuable home and that regardless of what any real estate market was doing if my primary purpose of doing an inn didn't work, my secondary purpose of selling it would too, because we had a lot of rich clients who came to our inn, and I felt regardless of what the local real estate market is, I can take somebody out there and show them this place and they will buy it. [22] (Emphasis added)

When this answer was put to him at trial, he responded: “rather than secondary, I would say my last resort, intention”. Considering the evidence in its totality, the Appellants’ assertions at trial that the resale of Tally-Ho was never their secondary intention are not credible.

In Tonn v. /?., [23] Linden J.A. stated:

...A subjective intention is often determined by what may be reasonably inferred from the circumstances. Someone who claims a subjective intention that is foolish may not be believed. A taxpayer’s intention to produce profit normally has to be reasonable before a Court will accept it. There is some difference of meaning and interrelationship between subjective and objective, however. Iacobucci, J. attested to this in Symes where he stated the following concerning business intention within paragraph 18(1 )(«):

As in other areas of law where purpose or intention behind actions is to be ascertained, it must not be supposed that in responding to this question, courts will by [sic] guided only by a taxpayer’s statements, ex post facto or otherwise, as to the subjective purpose of a particular expenditure. Courts will, instead, look for objective manifestations of purpose, and purpose is ultimately a question of fact to be decided with due regard for all of the circumstances.

In the present appeals, both the direct evidence and the inferences reasonably drawn from the surrounding circumstances clearly point to the conclusion that at the time of the purchase of Tally-Ho, the Appellants had in mind the possibility of reselling as an operating motivation for their acquisition.

The appeals are dismissed, costs to be taxed.

Appeals dismissed.