Delmer
E
Taylor:—This
is
an
appeal
against
an
income
tax
assessment
for
the
year
1973,
in
which
the
Minister
of
National
Revenue
included
in
the
appellant’s
taxable
income
an
amount
of
$26,421.50
as
income
from
business
rather
than
regarding
it
as
a
non-taxable
receipt
as
Claimed
by
the
appellant.
The
respondent
relies,
inter
alia,
upon
sections
3,
4,
9
and
96
and
subsection
248(1)
of
the
Income
Tax
Act,
RSC
1952,
chapter
148
as
amended
by
SC
1970-71-72,
chapter
63
and
amendments
thereto.
Facts
The
appellant
is
a
full-time
employee
of
Parks
Canada.
In
the
year
1965,
while
sea-diving
in
his
spare
time
in
conjunction
with
two
other
men,
Mr
Alex
Storm
and
Mr
Harvey
MacLeod,
he
located
the
wreck
of
the
French
man-of-war
“Le
Chameau’’,
which
sank
in
1725
approximately
12
miles
from
Louisbourg,
Nova
Scotia.
Numerous
artifacts
were
recovered,
most
of
which
were
later
turned
over
to
the
proper
public
authorities
for
historical
and
archaeological
purposes.
However,
gold
and
silver
coins
were
also
recovered
which,
after
considerable
litigation,
were
eventually
sold
for
approximately
$280,000.
The
appellant,
after
expenses,
received
$26,421.50
as
his
share,
which
amount
was
assessed
as
taxable
by
the
Minister
in
the
year
1973.
The
basis
of
the
assessment
is
regarded
as
an
agreement
between
the
three
parties
earlier
mentioned,
dated
March
6,
1965.
Contentions
In
the
“Summary
of
Facts’’
attached
to
the
Notice
of
Appeal,
the
appellant
put
forward
his
position
as
follows:
1.
Officials
of
the
Department
refused
to
allow
the
taxpayer
access
to
records
on
his
file
to
which
he
has
a
right
of
access.
2.
Officials
of
the
Department
after
receiving
a
request
from
the
taxpayer
that
he
be
allowed
to
attend
the
“appeal”
re
the
Notice
of
Objection,
failed
to
notify
him
of
the
date.
3.
The
Department
has
previously
ruled
that
the
proceeds
were
not
taxable.
4.
The
amount
of
income
calculated
by
the
Department
has
not
taken
into
account
expenses
incurred.
5.
The
income
is
not
taxable.
6.
The
Department
by
historical
precedent
has
not
taxed
others
in
an
equal
position.
7.
The
Department
is
in
error
in
regard
to
the
facts
of
the
situation.
8.
The
moneys
received
were
a
capital
gain.
9.
The
taxpayer
was
not
in
fact
afforded
the
opportunity
to
a
90-day
period
in
which
to
file
a
Notice
of
Objection.
The
respondent
asserted:
(a)
by
an
Agreement
dated
6
March
1965
the
appellant,
Alex
Storm
and
Harvey
MacLeod
formed
a
partnership
(hereinafter
called
the
“Partnership”)
“to
dive
and
search
for
the
underwater
wreck
of
‘Le
Chameau’,
a
French
man-o-war
or
frigate
reputably
sunk
in
or
about
the
year
1725,
in
the
general
area
of
Bauliene
or
Baleine,
towards
Port
Nova
and
off
the
general
south
east
coast
of
Cape
Breton,
or
any
other
wreck
which
may
be
present
in
the
immediate
area,
and
to
explore
for,
raise,
divide
and
sell
the
whole
or
any
portion
or
portions
of
the
said
wreck”;
(b)
one
or
more
of
the
members
of
the
Partnership
was
the
holder
of
a
license
under
the
Treasure
Trove
Act
of
Nova
Scotia;
(c)
the
members
of
the
Partnership
purchased
supplies
and
equipment
in
order
to
pursue
their
search
for
the
wreck
of
“Le
Chameau”;
(d)
the
Partnership
and
its
members
at
all
times
intended
to
sell
for
profit
any
items
of
value
discovered
in
the
search
for
the
said
wreck;
(e)
in
the
fall
of
1965
the
members
of
the
Partnership
discovered
a
large
quantity
of
gold
and
silver
coins
lying
on
bed
rock
where
they
were
diving
in
search
for
the
said
wreck;
(f)
the
said
coins
and
other
artifacts
discovered
by
the
Partnership
were
sold
for
proceeds
of
approximately
$280,000
of
which
the
appellant’s
share
after
expenses
was
$26,421.50;
(g)
in
selling
the
said
coins
and
artifacts
the
Partnership
dealt
with
them
as
an
ordinary
dealer
in
such
items
would
have
dealt;
(h)
the
Partnership
was
organized
to
search
for
the
wreck
of
“Le
Chameau”
and
ta
sell
the
coins
and
artifacts
discovered
in
the
search;
Evidence
As
part
of
the
documentary
evidence
submitted
by
the
appellant,
there
are
the
following:
Exhibit
A-1—Agreement
between
Alex
Storm,
David
MacEachern
and
Harvey
MacLeod,
dated
March
6,
1965.
Exhibit
A-8—Grant
of
a
licence
to
Alex
Storm
under
the
Treasure
Trove
Act,
dated
February
1,
1965.
Exhibit
A-9—Portions
of
a
decision
of
the
Supreme
Court
of
Canada
in
the
matter
of
Ronald
Blundon
et
al
v
Alexander
Storm.
From
Exhibit
A-1,
certain
portions
are
reproduced:
3.
Each
partner
shall
contribute
whatever
capital,
or
the
equivalent,
that
may
from
time
to
time
be
deemed
necessary
by
the
partnership
group.
4.
The
partnership
group
may
at
any
time
appoint
a
banker
for
the
group
and
may
from
time
to
time
decide
upon
a
location
for
safekeeping
of
money
or
valuable
articles
owned
by
the
partnership
group.
8.
The
partnership
shall
use
the
following
accounting
procedure:
Gross
Profit
minus
Expenses
equals
Net
Profit.
Each
partner’s
share
shall
be
computed
from
the
net
profit.
9.
The
individual
partners
shall
share
contributions
to
capital,
expenses,
losses
and
profits
according
to
the
proportions
set
out
in
the
following
schedule,
that
is
to
say:
Government:
10%,
historical
artefacts
and
access
to
our
research
information.
(After
completion
of
project.)
Alex
Storm:
30%
and
discretion
over
division
of
12%
according
merit,
and
discretion
over
division
of
possible
income
from
magazine
articles.
David
MacEachern:
28%,
plus
possible
merit-share.
Harvey
MacLeod:
20%,
plus
possible
merit-share,
plus
50%
ownership
on
M.V.
“Marilyn
B.
II”.
20.
For
the
purposes
of
Article
19
hereof,
the
value
of
partner’s
share
and
interest
shall
be
determined
as
follows:
the
fair
market
value
as
of
the
date
when
the
selling
partner’s
offer
of
sale
is
made
to
the
other
partners
of
all
items
which,
at
that
date,
have
been
raised
above
water
by
the
actions
of
the
partnership
group.
The
money
value
of
selling
partner’s
share
shall
be
payable
and
paid
to
the
selling
partner
within
thirty
(30)
days
of
the
date
of
marketing
of
the
items
involved
in
the
valuation
of
the
share.
From
Exhibit
A-9,
the
following
two
letters
are
reproduced:
I
hereby
notify
you
that
as
of
February
1,
1965,
I,
Alex
Storm
of
Louisbourg,
terminate
my
partnership
in
the
“Chameau
Agreement’’
of
the
25th
of
August
A.D.
1961.
Louisbourg,
March
27-1965.
Dear
Mr.
Dillon,
In
addition
to
my
letter
to
you
of
Febr.
8th
1965,
in
which
I
terminated
my
partnership
in
the
“Chameau
agreement’’
of
the
25th
of
August
A.D.
1961,
I
would
like
to
inform
you
that
as
of
the
first
day
of
February,
A.D.
1965,
I
am
the
new,
possibly
the
third,
holder
of
the
treasure
trove,
and
have
established
the
diving
rights
on
the
1725
wrecked
French
frigate
‘Le
Chameau’’.
Information
concerning
this
matter
can
be
obtained
from
the
receiver
of
wrecks
of
district
19,
Mr.
Alfred
David
Perry,
dept,
of
Northern
Affairs
&
National
Resources,
p.o.
Box
160,
Louisbourg,
N.S.
As
you
may
be
well
aware,
being
a
former
holder
of
this
treasure
trove,
this
is
an
exclusive
right,
therefore,
I
cannot
allow
you,
or
any
other
party,
to
dive
for
or
retrieve
any
artefacts
or
treasure
trove
from
the
by
me
claimed
area,
this
area
more
particularly
described
as
following:
On
Map
4375,
“Guyon
Island
to
Flint
Island’’,
Nova
Scotia.
One
(1)
square
nautical
mile,
projected
perpendicular
on
the
cove
west
of
Cape
Breton,
thus
taking
in
Porto
Nova
Isl.
Chameau
Rock,
to
the
western
half
of
Cape
Breton
and
proceeding
from
there
on
to
the
West
to
what
is
known
as
Woody
Point.
Yours
very
truly,
(sgd)
Alex
Storm
Argument
The
argument
of
the
appellant
was
that
no
matter
what
may
have
been
the
respective
interests
of
his
two
partners,
his
participation
was
only
in
the
pursuit
of
a
hobby—deep-sea
diving—which
provided
satisfaction
to
him
and
held
the
possibility
of
adding
to
the
history
of
Canada.
And
further,
since
the
recovery
was
“treasure”,
it
was
his
argument
that
it
should
be
treated
as
a
discovery
and
the
proceeds
held
to
be
capital
gain
and
not
taxable.
The
respondent
argued
that
the
profit
had
resulted
from
a
well-
organized
and
documented
endeavour
to
search
for
and,
if
possible,
realize
a
gain
upon
any
items
of
value
to
be
found
in
connection
with
the
deep-sea
diving
pursuit.
The
case
of
MNR
v
James
A
Taylor,
[1956]
CTC
189,
56
DTC
1125,
was
cited
by
the
respondent
as
support.
Findings
In
response
to
appellant’s
argument
that
the
endeavour
was
a
hobby,
the
Board
points
out
that
hobby
though
it
may
have
been,
it
was
clearly
a
hobby
with
a
potential
for
profit,
and
under
favourable
circumstances,
Substantial
profit.
At
the
minimum
this
would
tend
to
distinguish
it
from
a
hobby
and
endow
it
with
characteristics
somewhat
akin
to
a
business
endeavour.
The
argument
that
since
“treasure”
was
the
material
involved
(the
property
found,
litigated
over,
assessed
and
finally
sold),
its
treatment
for
income
tax
purposes
should
be
different
than
any
other
stock-in-trade
does
not
appear
to
the
Board
to
be
supported.
The
agreement
between
the
parties
(Exhibit
A-1)
gives
ample
evidence
that
they
were
prepared
to
invest
time,
money,
and
equipment
in
determining
its
location,
physically
acquiring,
retaining
and
reselling
it,
all
characteristics
identifiable
with
the
business
treatment
of
stock-in-trade.
Finally,
dealing
specifically
with
the
sections
of
the
Income
Tax
Act
upon
which
the
respondent
relies,
ie
sections
3,
4
and
subsection
248(1),
the
Board
points
out
that
the
definition
of
“business”
as
given
in
subsection
248(1)
of
the
Act
would
seem
broad
enough
to
include
therein
this
project
described
by
the
partners
as
an
“enterprise
or
project”,
as
an
“undertaking”
or
an
“adventure
in
the
nature
of
trade”.
Subsection
248(1)
reads
as
follows:
“business”
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment;
The
Board
is
aware
that
the
undertaking
probably
necessitated
high
risks
of
personal
safety;
that
the
investment
of
time
and
dollars
was
part
of
an
individual
commitment;
and
that
the
possibility
of
success
may
have
appeared
slight.
Although
these
factors
are
undoubtedly
recognized
and
appreciated
by
Canadians
in
the
contribution
this
venture
has
made
to
uncovering
the
early
history
of
the
country,
such
noteworthy
elements
do
not
change
the
financial
aspects
nor
its
essential
character
for
income
tax
purposes.
The
Board
notes
that
the
hearing
produced
some
indication
that
the
amount
allegedly
in
dispute
($26,421.50)
might
not
be
exactly
the
correct
amount,
that
all
of
the
funds
might
not
have
been
received
in
the
year
1973,
and
that
certain
expenses
incurred
in
the
search
might
not
have
been
allowed
to
the
appellant.
The
respondent
agreed
to
these
points
and
will
reconsider
these
matters
and
review
any
findings
with
the
appellant.
Decision
In
the
opinion
of
the
Board,
the
evidence
does
not
support
the
reasons
advanced
by
the
appellant
to
exclude
the
income
from
tax
liability,
but
rather
such
evidence
substantiates
in
large
measure
the
position
taken
by
the
respondent.
Subject
to
the
comments
made
in
the
immediately
preceding
paragraph,
the
appeal
is
dismissed.
Appeal
dismissed.
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