Greenington Group LTD v. Minister of National Revenue, [1977] CTC 2494, [1977] DTC 343

Delmer E Taylor:—These appeals cover reassessments issued by the Minister of National Revenue dealing with the taxation years 1968, 1969 and 1970. For 1968, an amount of $135,947.16 was added to taxable income, described by the respondent as “Interest revenue realized upon the acquisition of the Glen Abbey property from Clearstream”. For 1969, it is the effect of the above-noted increase in taxable income (and the resultant reduction in available loss carry-forward) which is being appealed. For 1970, an amount of $473,623.12 was added to taxable income and described as “Profit realized on the sale of a portion of the Glen Abbey Property”. The respondent relied with respect to the 1968 and 1969 years, inter alia, upon sections 3, 4 and paragraph 6(1 )(b) of the Income Tax Act, RSC 1952, chapter 148 as amended, and for the 1970 year relied, inter alia, upon sections 3, 4, paragraphs 85B(1)(d) and 139(1 )(e) of the said Act.

Facts

Greenington Group Ltd (hereinafter referred to as “Greenington” or “the Company”) is a company incorporated under the laws of Canada, and was formerly known as Greenington Ltd, and earlier as “Robertson- Yates Corporation Limited” (whenever any one of the above names is used, it is to be understood to refer to and represent the appellant in this matter). An unrelated corporation, Clearstream Developments Limited (hereinafter referred to as “Clearstream”) held title to certain real property in the then Township of Trafalgar (such real property being hereinafter referred to as “parcel 1”) subject to a mortgage hereinafter referred to; and further was the holder of two options to purchase certain adjoining lands (hereinafter referred to as “parcels 2 and 3”). The mortgagee and optionee in respect of said lands was The Jesuit Fathers of Upper Canada Holding Corporation (hereinafter referred to as the “Jesuit Fathers’’).

By agreement dated July 22, 1964 Greenington agreed to loan to Clearstream an amount of $350,000 secured by a second mortgage on parcel 1 and an assignment of the interest of Clearstream in the options on parcels 2 and 3. A second agreement of July 20, 1965 provided for a further advance of $175,000, and a mortgage securing the total sum of $525,000 was registered. Clearstream defaulted in payment of an instalment of interest due on June 22, 1966, and made no further payments under the mortgage, including the principal amount which came due and payable on July 21, 1966. Greenington made certain payments to the Jesuit Fathers which were due and owing to them from Clearstream under the first mortgage. On July 29, 1966 the Company commenced a foreclosure action against Clearstream. The foreclosure action not having been concluded, a corporation Ontra-Desar Realty Investments Limited (hereinafter referred to as “Ontra-Desar”) was incorporated through the initiative of Greenington, and using as its trustee Mr Heinrich Ochs (hereinafter referred to as “Ochs”), an agreement with Clearstream was concluded by which initially the real property and options passed to Ontra-Desar, and then to Greenington, both transactions being completed before December 31, 1968. Greenington operated the golf and country club facilities on the property now known as Glen Abbey, exercised the options on parcels 2 and 3 on October 3, 1969, and during the year 1970 sold parcel 3 to an unrelated corporation Home Smith Limited (hereinafter referred to as “Home Smith”).

Contentions

The position of the appellant was that no amount was received in 1968 or in any other year in connection with the purchase of the property which could be classified as interest income; and that, with regard to the sale of parcel 3, the gain therefrom was on capital account, resulting from the acquisition and sale of capital assets.

The respondent asserted that the purchase price by Ontra-Desar from Clearstream included an amount of $135,947.16 as interest accrued and owing to the appellant, which amount on completion of the transaction by transfer from Ontra-Desar to Greenington was taxable to the appellant; and further that parcel 3 had been acquired and eventually sold by the appellant with the intention of turning the property to account for a profit.

Evidence

By agreement between the parties, a brief entered as Exhibit A-1 was filed with the Board, which brief contained 22 separate documents to which witnesses and counsel referred during the hearing.

Mr Morton Greenglass, called for the appellant, had provided legal advice and services to the appellant in connection with the mortgage foreclosure and the defence against such foreclosure raised by Clearstream. He summarized for the Board the major elements of the legal and tactical position adopted by Clearstream and, even under substantial cross-examination by counsel for the respondent, held to his view that the appellant did not have a completely stable position in the foreclosure action. He had so advised the client and his efforts on behalf of Greenington during the approximately two-year period in which the legal actions and counter-actions had continued were determined by this perspective. He had no knowledge of the corporation Ontra-Desar and had not been involved in any transactions on its behalf.

John Bailey, president of Greenington, detailed the history of the Company in the construction industry, and his view of how the appellant, starting with a simple investment loan of $350,000 from surplus funds, concluded by owning the real estate involved. He had been first approached regarding the loan by a former major shareholder in Greenington in whom he had great confidence. This resulted in a meeting with the management group of Clearstream, one member of which was a Mr Halford whom he also knew from mutual business interests. In addition to the security for the loan, noted earlier, Bailey had accepted on behalf of Greenington a 12 /2% interest in the voting stock of Clearstream, certain positions on the board of directors, and he had acted on a building committee in connection with the construction contracts for the golf club grounds and facilities. As the appellant’s investment in Clearstream grew, and as the part of his own time which was devoted to Clearstream’s problems increased, Greenington itself experienced financial difficulties culminating finally in a curtailment of bid and performance bonding available. The appellant’s foreclosure action was designed simply to protect its own investment and when efforts to purchase the property were rebuffed by Clearstream, he had engineered the admittedly clandestine but successful program through Ochs and Ontra-Desar for such a purchase. All the funds made available to Ontra-Desar were provided from the appellant’s own banking accommodation. He had placed a limit on Ochs of about $700,000 in additional investment he was prepared to make to acquire the property.

The second mortgage on parcel 1 held by the appellant had never been regarded by Bailey as the real security for the loan—such security came from the assignment of the options on parcels 2 and 3 since it was expected they would increase in value on completion of the golf course itself. The money loaned to Clearstream had come partially from the liquidation of certain investments held by the appellant prior to and during 1964, and partially from current operating profits. Many of the investments held by Greenington had been very conservative (largely government bonds yielding 3 and 4% interest) but a substantial part had been in higher risk but higher return securities. Bailey’s efforts during the period of time were directed to some degree to improving the net return to the appellant from its total investment portfolio. He therefore saw the opportunity in Clearstream as one that fitted into this program—the interest rate offered being 10%. When he had ordered the purchase through Ontra-Desar, he believed he had exhausted all efforts to protect his investment, both amicably on a corporate and personal basis, and legally through foreclosure action. There had never been any payment to the appellant of the $135,947.16 alleged by the respondent to be interest income, and the sale of parcel 3 to Home Smith had been without any effort on the appellant’s part to produce any sale. Further, he had been reluctant to retain any part of the real estate—his first offer to Home Smith (after he had been contacted independently by a real estate agent) had been to sell all the property. Home Smith had not been interested in parcel 2, and he had retained it.

Mr John Bright, a lawyer who had been during the times material very active in the affairs of Clearstream generally, corroborated the information provided by Messrs Greenglass and Bailey, particularly the fact that Clearstream had taken great umbrage at the efforts of the appellant to foreclose. He fought the legal actions vigorously, and stated that the directors of Clearstream generally would not have sold to the appellant except at the highest possible price (he suggested $1,950,000 would likely have been acceptable), that Clearstream had tried to get unconditional offers from other parties after the foreclosure action started based on a value of $1,650,000 and that the offer from Ontra-Desar for $1,575,000 was the highest unconditional offer Clearstream had received. The directors, even though unaware that Ontra-Desar was in reality the appellant, were generally reluctant to accept the offer since, among other factors, it meant a substantial loss to many or all of them from their total investments in Clearstream to date. Such total investment (shares, loans, advances, etc) other than the amount of the mortgages (the Jesuit Fathers and Greenington) had reached more than $400,000 by 1968. He believed the best value, primarily potential, was in parcel 2, and there had been some moderate changes in municipal zoning during the years involved which made residential development of some part of the property possible. However, in his opinion, it would have been perhaps 15 years in the future from 1968. His advice to the management of Clearstream had been to accept the offer from Ontra-Desar. He also noted that even yet there has been no residential development in the peripheral land surrounding the golf course, and he saw no immediate probability of it. He did agree, however, that in 1966 the directors of Clearstream firmly believed they had a very substantial and potentially highly profitable venture in Clearstream, once the problems of construction and development were overcome.

Mr Thomas McWhirter, CA, who had been accountant for the appellant during a major part of the time material, recounted the difficulties in collecting interest from Clearstream, the efforts to foreclose or negotiate an acceptable settlement to retrieve the appellant’s investment, the problems encountered in the foreclosure, including making certain that option payments to the Jesuit Fathers were paid on time. He was aware of Ontra-Desar, and its purpose generally, but took no part in the efforts of that company to bring about the purchase. Greenington had not accrued on its own books, the interest payable after the foreclosure action was commenced, and the amount at issue here was only the calculation of the interest. Under cross-examination he agreed that the fixed assets purchased by Greenington (building, equipment, etc) had been recorded in the books of the appellant at their cost, and that the balance of the total amount paid had been recorded as land. This total had not included the interest alleged by the respondent to have been received by the appellant and, therefore, the amount entered on the record of Greenington to record the purchase would have been less than that agreed to by Clearstream for the sale, ie $1,575,000.

For record purposes, there are reproduced certain portions from documents which the Board considers to be pertinent to an understanding of the evidence and argument:

Exhibit A-1—Document #5—A reporting letter from Simpson & Duncan, Barristers & Solicitors, Hamilton, Ontario, to Robertson-Yates Corporation Limited, dated December 8, 1964:

The second mortgage, constituting your main security hereunder from Clearstream to Robertson-Yates Corporation Limited, secures the principal sum of $350,000.00.

Exhibit A-1—Document #11—Agreement of Purchase and Sale between Clearstream Developments Limited (the Vendor) and Heinrich Ochs (the Purchaser) dated July 26, 1968:

. . . the Vendor . . . hereby agrees with . . . the Purchaser . . . to sell all and singular the lands and premises (. . . hereinafter called Parcel 1) and an Option to purchase . . . (hereinafter called Parcel 2), and an Option to purchase . . . (hereinafter called Parcel 3), and the assets described in Schedule “D” hereto at the aggregate price of One Million Five Hundred and Seventy-Five Thousand Dollars ($1,575,000.00) in lawful money of Canada payable as follows and upon the following terms and conditions:

1. The aggregate price of One Million Five Hundred and Seventy-Five Thousand Dollars ($1,575,000.00) shall be payable as follows:

(a) Seventy-Five Thousand Dollars ($75,000.00) by certified cheque . . .

(b) Three Hundred and Sixty Thousand Dollars ($360,000.00) by the assumption on closing of . . . the existing first mortgage . . .

(c) The balance of the said price, namely the sum of One Million Two Hundred and Forty Thousand Dollars ($1,240,000.00) in cash or by certified cheque or bank draft . . . on closing . . .

21. This counter-offer shall be irrevocable by the Vendor until 11:55 a.m. on the 2nd day of August, 1968. . . .

The undersigned accepts the above counter-offer.
DATED at	this 1st day of August, 1968.
	(Sgd.) Heinrich Ochs	L.S.
	Heinrich Ochs

Exhibit A-1—Document #13—Reporting letter from Young & McGuigan, Barristers & Solicitors, Port Credit, Ontario, to Ontra-Desar, dated October 2, 1968:

3. Robertson Yates Corporation Limited Mortgage.

The said property is subject to a second mortgage in favour of Robertson Yates Corporation Limited in the principal sum of $651,907.44 plus accrued interest to date of closing in the sum of $5,879.00 and you will note these amounts reflected to your credit on the within statement of adjustments. We enclose photocopy of mortgage statement received from Robertson Yates Corporation Limited in confirmation of these figures.

Notwithstanding the fact that the agreement of purchase and sale did not call for the assumption of this mortgage, you instructed us to complete the transaction on that basis, and we understand that you will be making settlement directly with the said mortgagee.

Argument

Dealing with the matter of the alleged interest income, counsel made two points for the Board’s consideration:

—Since the appellant already held a mortgage on the property, that which was acquired was only the interest of Clearstream. Using a theoretical example (A as owner of a piece of property worth $1,000, B as holder of a mortgage on it, the principal of which is $700 and unpaid interest of $100 having accumulated, B acquires the property for the net difference of $200), counsel concluded:

Now “B”, at this point, has acquired real property with a value of one thousand dollars, less the encumbrances on the property, that is eight hundred dollars, therefore he has acquired from “A” an interest worth two hundred dollars. He has not acquired from “A” an interest worth a thousand dollars. The value of the property and the value of the interest owned by “A” are two different things, and on a purchase one acquires what the other person has to sell. That again is a basic legal proposition, that a purchaser or a vendor cannot sell more than what he has to sell.

—If the respondent’s position were upheld, it would result finally in double taxation to the appellant—initially when the purchase transaction was completed and secondly at the time the appellant sold the property, realizing in the results of that second transaction its apparently long delayed interest income. Adding C as a third party subsequent purchaser to his example, counsel asserted:

“B” wants to sell that property to “C”, again for a thousand dollars. The mortgage has not been discharged. “B” will sell that property for a thousand dollars, “A” will give “B” two hundred dollars cash, and assume the obligations encumbering that property, so he will assume the obligation to pay “B’’, at this point, seven hundred dollars of principal and one hundred dollars of interest. “C” will then make payments of interest due under that mortgage. Those payments of interest will clearly be taxable to “B”, additionally the Minister’s position is that on the purchase by ‘‘B”’ of “A” ’s interest, “B” is deemed to have received the amount of interest. I submit to you that that proposition is not correct, that it cannot be correct, because it would lead to double taxation.

.. . and:

It is only upon the subsequent liquidation or sale of the property that “B” receives his hundred dollars’ interest. . . .

Counsel referred the Board particularly to Winnipeg Supply and Fuel Co Ltd v MNR, 3 Tax ABC 70; 4 DTC 444, a decision of Judge Graham of the then Tax Appeal Board, in which he permitted the treatment of an amount eventually received by the appellant from a transaction with some elements of similarity to the instant case, as on account of capital rather than operating account. Counsel quoted a portion of the headnote from DTC:

The appellant supplied materials to A for the erection of a building and when A ran into financial difficulties took a mortgage in the amount of $74,022.74. In time the unpaid interest on the mortgage amounted to $17,578.50, which the appellant charged to profit and loss. The appellant advanced the sum of $2,574 and along with other creditors became a registered owner of the property which was subsequently sold.

On the question of the capital gain claimed from the sale of the property, counsel stressed that the business of the appellant during the years in question was that of construction, not investment, and that the purchase and eventual resale in question resulted only from the efforts of Greenington to protect an investment it had made from surplus funds available in the Company. Counsel admitted that the appellant had acquired the property for resale—it had no interest in remaining in the business of operating a golf club:

. . we may, I submit, however, consider that the test is whether the appellant acquired the Glen Abbey property for the purpose of making a profit on the ultimate resale of that property. Those words are extremely important. Those words are the test. Did they acquire that property for the purpose of making a profit on the ultimate resale of the property, not— was that property acquired for resale? It certainly was. It was acquired for liquidation immediately, if possible, . . .

. . . the purchase was solely to protect his position and to get the appellant out of that position which it found itself in, and could not get out of otherwise.

The simple hope that they can realize proceeds, at least sufficient to get your money out, is not sufficient to make it an adventure in the nature of trade It must be more than that. The purchase must be made for the purpose, as an operating motivation, the realization of a profit on that property.

Counsel quoted from earlier case law and the Board specifically noted the following: Her Majesty the Queen v Ginakes Brothers Limited, [1977] CTC 18; 77 DTC 5023; Sterling Paper Mills Inc v MNR, [1960] CTC 215; 60 DTC 1171.

Counsel for the respondent, in dealing with the same issues, put forward that on the interest income matter the example showing double taxation (A, B and C noted earlier) did not apply in this case at all, but that it served to emphasize the point apparently being made by counsel for the appellant that since Greenington had not received the amount alleged as interest in 1968, either from Clearstream (by way of the proceeds of the sale) or “from itself”, then there should be no income tax liability. With this proposition counsel for the respondent disagreed since, in his view, Greenington had received a benefit, a reduction in the purchase price of the property, and that benefit was in lieu of interest. The Board was referred to W Wallace Robinson v MNR, [1972] CTC 460; 72 DTC 6394, and J E Groulx v MNR, [1967] CTC 422; 67 DTC 5284, in considering the Minister’s position with regard to the interest income portion of the reassessment. It was brought to the attention of the Board that the total gain on the property sold in 1970, according to the appellant’s calculation, had been $609,570.28 ($135,947.16 plus $473,623.12, the two amounts at issue) and that Greenington regarded this all as non- taxable. The Minister had divided the amount as per the reassessments, but counsel suggested that in the event the Board held the $135,947.16 not to be interest, that amount would be taxable in 1970 in any event.

The respondent’s assertion regarding the second matter was twofold. First, it could be held by the Board that the appellant was in the business of lending money, the earlier investments and the efforts of Mr Bailey to increase the yield therefrom testifying to his desire and intention to move the interests of the Company toward investment and away from construction. The cases of Stanley Cerisano Limited v MNR, 34 Tax ABC 341; 64 DTC 99; Mortimer Investment Corporation v MNR, 41 Tax ABC 433; 66 DTC 539; and J E Verreault & Fils Liée v MNR, 39 Tax ABC 409; 65 DTC 734, were quoted by counsel to substantiate this view. Second, and what appeared to be the major point, the entire transaction from the efforts to foreclose through the purchase and finally the sale, at a profit, were for the purpose of gaining possession of the property in question and realizing thereon. Indeed, there was some evidence that the appellant contemplated right from the start (the loan of $350,000) the requirement to take the property, particularly that represented by the options and sell it. Therefore, the consideration of a gain on the total transaction existed at the moment the appellant embarked on the venture. Accordingly, it should be characterized as a venture in the nature of trade.

From the decision in MNR v James A Taylor, [1956] CTC 189; 56 DTC 1125, counsel concluded that just the admission by Mr Bailey, on behalf of the appellant, that the intention on acquisition of the property was to sell it, not hold it for an investment, was sufficient reason to regard it as a venture in the nature of trade. Two other cases of significance were also quoted by counsel: Algoma Central and Hudson Bay Railway Company v MNR, [1961] CTC 9; 61 DTC 1027; Harry Moluch v MNR, [1966] CTC 712; 66 DTC 5463.

Findings

The Board notes with interest the reference by counsel for the respondent to the bases of the assessments under appeal—effectively, that if the amount of $135,947.16 were not held to be taxable in the year 1968, it should be added to the amount of $473,623.12 under appeal for the year 1970, and the total, $609,570.28 treated as taxable for that year. I have been unable to find instances where the Board, in its decisions, has interpreted the responsibilities assigned to it under section 87 of the Tax Review Board Act in such a way as to implement a proposal of this nature unless it had been raised by the taxpayer as part of the appeal. Accordingly, the Board’s efforts will be directed only toward an examination of the bases for the income tax imposition in the respective years in question, according to the notices of reassessment and the notices of appeal, and not toward any reallocation of the amounts involved.

The Board feels constrained to comment specifically upon two points raised in argument by counsel for the appellant. First, that the acquisi- tion by Greenington was only the interest of Clearstream in the property. I am not at all certain what would be the significance if this were the case, but the fact is that the appellant (through Ontra- Desar) agreed to purchase the land and buildings and options involved (Exhibit A-1, Document #11); there was no reference to acquiring only the vendor’s interest and to try to establish otherwise merely because the property was encumbered, in part to the appellant, serves only to cloud the issue. Second, the Board turns to the result of double taxation concluded by counsel from the theoretical example using A, B and C as owner, mortgagee and eventual purchaser. Counsel has assumed that because A only received a final $200 amount from B and B acquired title to the property worth $1,000, B did not at the time of such acquisition receive the accrued interest, and could not do so until he (B) resold the property. More importantly, and that which troubled counsel, if B did treat, or was required to treat $100 as interest, then he would be subject to double taxation when he actually received that $100 as part of a subsequent sale to a third party (C). The Board suggests that the only serious risk of such double taxation would rest with the actions in recording the transaction taken by B, not any actions taken by taxing authorities. I do not wish at this time to comment on the merits of B recording as interest the $100 either at the time of acquisition of the property or at the time of subsequent resale, but if B chose to take the $100 into income and pay tax thereon at the time of acquisition, it would be purely a mechanical accounting entry to so do. Depending on whether B recorded his business on an accrual basis or not, there would be an accounting entry similar to the following:

Any resale would not require the re-recording of this portion of interest on the land cost and therefore there could be no double taxation. The Minister’s reassessment in the instant case does not open up the spectre of double taxation as alleged by counsel. It appears to the Board to concern a mere fundamental matter—that the interest income (if indeed the $135,947.16 is classified as such) should be taxed once, just as any other income. The period selected for such imposition by the Minister was the year 1968.

Counsel for the respondent conversely put forward that the appellant had received a “benefit”—a reduction on the purchase price of the property by the amount of the interest taxed. It is the view of the Board that for any such “benefit” to be taxable, its value to the taxpayer should be demonstrable. By simply accepting the assertion of the respondent, the Board would run the risk that the so-called benefit was only a mathematical paper calculation, since it was not accrued and not physically received. Counsel for the respondent was correct in asserting that the appellant received a benefit but it was not merely a theoretical reduction in some agreed upon amount. That benefit was a real and tangible one. It was included in the real value of the land purchased. There is no question in my mind that the price agreed to for sale by Clearstream ($1,575,000) was the minimum to which that company was prepared to agree, and that the outstanding obligations upon which it had based that amount included the interest on the mortgage to the appellant. The vendor could not and would not have further reduced this sale price by the amount under appeal, unless assured that such interest would not be claimed by the appellant. This assurance, under the circumstances prevailing, Ontra-Desar could not provide, and it was therefore certainly the view of Clearstream that it had paid the interest. The evidence all supports the opinion that the value of the assets acquired by the appellant was equal [to] the $1,575,000 total purchase price. Furthermore, there is no evidence to support a view that the appellant, through Ontra-Desar, agreed to pay anything more than the minimum at which the assets could be purchased. The appellant received a portion of the land purchased in lieu of its interest, and that does constitute a benefit.

Having given these reasons, however, the Board is faced with another matter—the case of Winnipeg Supply (supra) regarded as authority by counsel for the appellant who stated to the Board: “This case has never been overruled and it is, I submit, clear law, and it is, I submit, correct law.” Counsel for the respondent did not comment on the conclusion reached by his colleague on the case referred to above. Such a decision, however, if taken as a precedent, would do serious damage to the basis of the respondent’s reassessment, whether or not a calculable and real benefit had been received. The Board suggests, however, that counsel for the appellant has been misled by a headnote which is a less than accurate reflection of the judgment itself. The amount of $17,578.50 was not interest (in the sense of income) on the mortgage, it was the interest (in the same of proprietorship) of the appellant in the total amount of $74,022.74 for which the various suppliers, including the appellant, had accepted a third mortgage. The case provides no support for the contention that even if the amount should be recognized as interest, it would be nevertheless a capital gain.

Turning to the second matter under appeal, the Board finds only limited evidence to support a conclusion that at the time of making the Original loan of $350,000, the appellant had embarked on a course of leading the business away from construction toward investments as the main activity. The Board accepts the statements of Mr Bailey, and the evidence submitted substantiates the view that this was an investment of surplus funds. The investment shortly turned out to be a troublesome one which required not just surplus funds but operating and finally borrowed funds to secure, service and finally realize— but in the origin it was from surplus funds. The other part of the respondent’s argument on this point—that the entire transaction should be characterized as a venture in the nature of trade—is not one either which the Board believes can be supported. To accept this argument the Board must view the appellant’s actions—first in advancing $350,000, second in agreeing to advance a further $175,000, third the foreclosure efforts and attempts to negotiate or purchase, and finally the secret arrangement to acquire the property through Ontra-Desar requiring approximately an additional $550,000 in cash plus the assumption of considerable outstanding obligations as a continuum carefully planned and executed with the end purpose in mind of selling at a profit the assets so tortuously acquired.

In rejecting the above proposition, the Board does so, fully aware that the appellant and its chief officer, Mr Bailey, were not naïve or without purpose and objective. They proved themselves adaptable and capable of not only surviving but succeeding under circumstances which were indeed trying. As part of the development group, the appellant, through Mr Bailey, had engaged in the management and direction of Clearstream in a way generally not expected of mere creditors. The decision to foreclose on the mortgage and to eventually purchase was made, in my view, in the full knowledge by Mr Bailey that the property had some potential, but with the motivation being to secure the investment which was at considerable risk. I cannot even conclude from the evidence that in 1968, for the amount of $1,575,000 the appellant paid for a partially completed unprofitable golf course and two parcels of virtually undevelopable land, it received an outstanding bargain. As stated earlier, the total package was worth that amount, but there is no support for the view it was readily worth a great deal more, thereby providing the appellant with a business reason for its acquisition, paramount to the reason given— protecting the investment already made.

Decision

The decision of the Board is that the appeal should be allowed in part to permit the amount of $473,623.12, assessed by the respondent as income during the year 1970, to be treated as of a capital nature. The portion of the appeal dealing with the amount of $135,947.16 assessed to income tax in 1968, is dismissed, and the appeal against the reassessment for the year 1969 resulting from the above reassessment for 1968 is also dismissed.

Appeal allowed in part.