John
B
Goetz:—This
is
an
appeal
from
an
income
tax
assessment
with
respect
to
the
appellant’s
1974
taxation
year.
The
appellant
sought
to
deduct
the
sum
of
$5,342.57
as
a
non-capital
loss
in
computing
his
income
for
the
1974
taxation
year.
The
Minister
treated
this
sum
as
a
capital
loss
and
allowed
the
taxpayer
the
amount
of
$2,671.28
as
a
loss
resulting
from
bankruptcy
of
Voyageur
Airways
Limited
and
that
such
capital
loss
came
within
the
meaning
of
section
39
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended.
In
reassessing
the
appellant,
the
respondent
relied,
inter
alia,
upon
sections
38,
39
and
paragraphs
111(1)(a)
and
(b)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended.
Facts
The
appellant,
at
the
time
of
the
hearing,
was
a
retired
pharmacist,
living
in
North
Bay,
Ontario.
When
the
loan
in
question
was
made
in
1970,
the
appellant
worked
as
a
hospital
pharmacist.
The
appellant,
in
seeking
to
establish
a
picture
of
making
loans
as
a
business,
cited
a
bill
of
sale
that
he
took
on
the
sale
of
his
house
in
1972
and
which
agreement
for
sale
was
entered
into
because
the
down
payment
was
too
small.
In
1972
the
appellant
sold
an
apartment
building
which
he
owned
and
took
a
mortgage
for
the
balance
of
the
purchase
price,
which
mortgage
bore
interest
at
the
rate
of
8
/4%.
These
were
the
only
transactions
involving
the
credit
extended
by
the
appellant,
other
than
the
transaction
in
question.
The
transaction
which
is
the
subject
matter
of
this
appeal
related
to
a
loan
to
Voyageur
Airways
Limited
(hereinafter
referred
to
as
“Voyageur”)
made
by
the
appellant
in
1970
in
the
amount
of
$12,000,
security
being
a
chattel
mortgage
on
a
building
on
leased
land.
Voyageur
went
bankrupt
leaving
a
balance
on
the
loan
owing
to
the
appellant.
The
appellant
who
was
a
shareholder
and
secretary
of
Voyageur
stated
that
the
loan
by
him
in
the
amount
of
$12,000,
bearing
interest
at
the
rate
of
12%,
was
made
to
enable
the
company
to
purchase
an
aircraft
for
its
use
which
would
generate
income.
He
also
stated:
‘‘We
were
under-capitalized”,
and
that
the
loan
of
$12,000
was
the
only
loan
made
by
the
appellant
in
this
way
to
the
public.
He
stated
that
a
Mr
Gray
of
Voyageur
approached
him
to
join
his
company
and
invest
capital
therein.
Further,
he
said
that
he
never,
at
any
time,
advertised
that
he
was
in
the
business
of
lending
money.
Findings
The
appellant,
in
his
evidence,
sought
to
establish
a
system
of
transactions
whereby
he
would
be
considered
a
money-lender.
These
transactions,
as
aforementioned,
involved
the
sale
of
his
home
by
way
of
agreement
for
sale
and
the
sale
of
a
commericial
building,
security
for
the
balance
of
the
purchase
price
being
a
mortgage.
These
were
ordinary
transactions.
The
loans
here
were
all
part
of
the
selling
price
of
these
properties
owned
by
the
appellant.
The
loan
to
Voyageur
was
solicited
by
Mr
Gray,
the
major
shareholder
in
Voyageur,
who
approached
the
appellant
to
invest
money
in
his
company
whereby
he
would
become
the
shareholder
and
secretary
thereof.
In
other
words,
the
advance
made
by
the
appellant
to
Voyageur
would
appear
to
be
clearly
an
investment
on
account
of
capital.
To
succeed
in
his
appeal,
the
appellant
must
establish
that
he
was
a
professional
money-lender
which
would
enable
him
to
rely
upon
the
provisions
of
section
18
of
the
Act
whereby
such
a
loan,
if
made
in
the
ordinary
course
of
business,
resulting
in
a
loss,
would
be
deductible
from
the
profits
of
that
business.
Paragraphs
18(1)(a)
and
(b)
read
as
follows:
In
computing
the
income
of
a
taxpayer
from
a
business
or
property
no
deduction
shall
be
made
in
respect
of
(a)
an
outlay
or
expense
except
to
the
extent
that
it
was
made
or
incurred
by
the
taxpayer
for
the
purpose
of
gaining
or
producing
income
from
the
business
or
property;
(b)
an
outlay,
loss
or
replacement
of
capital,
a
payment
on
account
of
capital
or
an
allowance
in
respect
of
depreciation,
obsolescence
or
depletion
except
as
expressly
permitted
by
this
Part;
I
do
not
feel
that
the
appellant
has
brought
himself
within
the
purport
and
purpose
of
this
section.
A
money-lender
is
one
who
is
willing
to
lend
to
all
and
sundry,
provided
that
he
can
get
proper
security.
The
loan
in
this
case,
of
course,
was
not
made
in
the
ordinary
course
of
the
business
of
the
appellant.
None
of
his
evidence
discloses
any
of
the
earmarks
of
a
moneylender.
The
loan
or
outlay
by
the
appellant
was
not
incurred
by
him
for
the
purpose
of
gaining
or
producing
income
from
the
business
of
Voyageur,
rather
it
was
clearly
a
capital
investment
in
that
company
in
order
to
enable
it
to
purchase
an
aircraft,
the
use
of
which
would
enable
Voyageur
to
carry
on
business.
The
loan,
being
a
capital
investment,
the
Minister
was
correct
in
assessing
the
appellant
pursuant
to
the
provisions
of
paragraph
39(1
)(b)
of
the
Act
which
reads
as
follows:
For
the
purposes
of
this
Act,
(b)
a
taxpayer’s
capital
loss
for
a
taxation
year
from
the
disposition
of
any
property
is
his
loss
for
the
year
determined
under
this
subdivision
(to
the
extent
of
the
amount
thereof
that
would
not,
if
section
3
were
read
in
the
manner
described
in
paragraph
(a)
of
this
subsection,
be
deductible
in
computing
his
income
for
the
year
or
any
other
taxation
year)
from
the
disposition
of
any
property
of
the
taxpayer
other
than
(i)
depreciable
property,
or
(ii)
property
described
in
subparagraph
(a)(i),
(ii)
or
(iii).
After
considering
the
facts
and
the
cases
cited
by
counsel,
I
have
reached
my
conclusion
and
find
that:
(1)
the
appellant
was
not
in
the
business
of
lending
money;
(2)
the
loan
by
him
was
an
outlay
on
account
of
capital
to
Voyageur
and
therefore
the
validity
of
the
assessment
by
the
Minister
is
correct.
See:
George
A
Orban
v
MNR,
10
Tax
ABC
178;
54
DTC
148;
Bruno
J
Arnold
v
MNR,
32
Tax
ABC
349;
63
DTC
598;
Stewart
&
Morrison
Limited
v
MNR,
[1972]
CTC
72;
72
DTC
6049;
Her
Majesty
the
Queen
v
Romeo
Lavigueur,
[1973]
CTC
773;
73
DTC
5538;
MNR
v
Kelvingrove
Investments
Ltd,
[1974]
CTC
450;
74
DTC
6357;
Associated
Investors
of
Canada
Limited
v
MNR,
[1967]
CTC
138;
67
DTC
5096.
In
light
of
the
above
findings,
I
dismiss
the
appeal.
Appeal
dismissed.
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