Doris I Glover, Phyllis Brown, Jack Glover, Rodger E Glover and Mary Frances Glover v. Minister of National Revenue, [1977] CTC 2535, 77 DTC 388

A J Frost (orally: May 6, 1977):—I shall now give my decision in Appeals Nos 76-73, 76-74, 76-75, 76-76 and 76-90 between Doris I Glover, Phyllis Brown, Jack Glover, Rodger E Glover and Mary Frances Glover, appellants, and the Minister of National Revenue, respondent.

These are income tax appeals from notices of reassessment with respect to the appellants’ 1973 taxation year which were heard on common evidence.

The facts relating to all five appeals were agreed to and the prepared statement by counsel for both sides read as follows:

1. John H Glover, the father of the Appellant, died on 6th March 1960 intestate and Letters of Administration of his estate were granted to National Trust Company, Limited by the Surrogate Court of the County of Wentworth on 14th June 1960. Mr Glover left 9 children surviving, his wife having predeceased him. The Appellant and Rodger E Glover, Phyllis Brown, Doris I Glover and Blair Glover (now represented by his widow, Mary Frances Glover) are all children of the late John H Glover and inherited an undivided one-ninth interest in a farm property, the sale of which gives rise to this appeal, which farm had >een in the ownership of the Glover family since 1808. At all times material to this appeal, the area of the farm was 65.292 acres and was located at the southwest corner of Rymal Road (formerly -53 Highway) and Glover Road in the Township of Glanford. In 1959 the City of Hamilton annexed that part of the Township of Glanford which included the farm in question. Following the death of John H Glover, the farm was rented to farmers residing nearby until 1973.

2. As a result of an Offer to Purchase dated 19th May 1973 and accepted 29th May 1973, the farm was sold by the children of the late John H Glover and his Administrator to Dicenzo Construction Company Limited for $946,734 being approximately $14,500 per acre and the sale was completed on or about 31st August 1973. A mortgage that was given by the purchaser to secure part of the purchase price was fully paid by March 15, 1974 and no question of a reserve arises.

3. In filing his income tax return for 1973, the Appellant reported the sale of the farm property and the receipt of his interest therein and submitted a valuation of the farm as at December 31, 1971 of $14,500 per acre to claim a capital gain of nil.

4. By Notice of Reassessment dated 27th December 1974, the Minister assessed on the basis that the value of the farm property at 31st December 1971 was $846,734 or approximately $13,000 per acre which resulted in a capital gain of $100,000 to all the children of John H Glover and after deductions for fees, a taxable capital gain to the Appellant of $3,532.85.

5. The Appellant objected to the Notice of Reassessment dated 27th December 1974, and by Notice of Reassessment dated 30th October 1975, the Minister reassessed on the basis that the value of the farm property at 31st December, 1971 was $562,000 or approximately $8,600 per acre, which resulted in a capital gain of $384,734 to all the children of John H Glover and after deductions for fees, a taxable capital gain to the Appellant of $19,071.41.

6. This Appeal to the Tax Review Board is from the Notice of Reassessment dated 30th October 1975 and the sole issue is the value of the farm property on 31st December 1971.* [1]

The question at issue in these appeals is the market value of the subject property as at December 31, 1971. The testimony of Mrs Doris M Smith, Ontario Land Economist, indicated a value on that date of $13,000. Mrs Smith supported her opinions by giving evidence with respect to 15 sales in the area ranging from $10,940 to $53,150 per acre.

In support of the respondent’s position Mr Warren Sabourin, Appraiser for the Department of National Revenue, testified that in his opinion the subject property had a value of only $8,600 per acre as at December 31, 1971, but his 10 comparables failed to adequately support that opinion.

It seems clear from the evidence that the subject property, due to its large acreage, long frontage on a provincial highway and location in the City of Hamilton, is a very viable parcel of land with considerable potential.

Mr Sabourin placed great emphasis on the highest and best use concept of future industrial development, whereas Mrs Smith’s view was somewhat broader in that she considered the highest and best use, from a value point of view at least, was simply to hold the land for future development. Even today the zoning has not been finalized.

The Board finds that the 25 comparables used by the appraisers failed to pinpoint value, or present any pattern of real estate values in the area. Many of the sales appear to be of a speculative nature with prices fluctuating wildly. The Board is therefore reluctant to decide these appeals on the evidence of comparable sale prices.

The Board notes that for some time prior to Valuation Day the real estate values were rising slightly, but following Valuation Day prices started to rise more rapidly. By mid-1973, that is after the date of the sale of the subject property, real estate prices virtually started to jump and continued to do so for two years.

Against this background of increasing prices the Board concludes that the value of the subject property did not increase from $8,600 to $14,500 between Valuation Day and the date of sale, as contended by the respondent. Accordingly the Board favours the appellants’ position.

With respect to the Minister assessing the land at $13,000 and then reassessing it at $8,600, I can only say that what the Department did does not have the right look.

The Board, however, fully realizes that the Department has thousands of cases to handle and this point is not particularly important; certainly the Board has not given any consideration or weight to the interim assessment of the Minister of the $13,000 per acre.

The Board, of course, does not have the role of an assessor and because it cannot key in on the comparables and reach a conclusion from the evidence, the Board has simply taken judicial notice of what has happened, generally speaking, to real estate values during the period under review, and having done this the Board must conclude that the balance of probability favours the appellants’ position. It is not customary to reach a decision on this basis, but under the circumstances I do not see what else I can do.

The appeals are therefore allowed and the matters referred back to the respondent for reconsideration and reassessment accordingly.

Appeals allowed.