Lucien Guay v. Minister of National Revenue, [1977] CTC 2543, 77 DTC 386

Guy Tremblay [TRANSLATION]:—The case at bar was heard at Sherbrooke on February 8, 1977.

1. Summary

The question here is as to the fair market value of a piece of land on December 31, 1977—land purchased for $4,000 in the summer of 1971 and expropriated for $80,000 in the summer of 1972.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessments are incorrect. This burden of proof results not from any provision of the Income Tax Act but from several decisions [, including the judgment] of the Supreme Court of Canada rendered in R RWS Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. The Facts

3.1. The Facts Alleged

3.1.1. The Facts Alleged by the Appellant

The facts alleged by the appellant according to the notice of appeal are as follows:

(Translation)

1. In the summer of 1971, the appellant sold his property, which had become too small for his business of selling and repairing mobile homes.

2. He then purchased, for the purpose of relocating his business, the piece of land whose fair market value at December 31, 1971 is now being questioned.

3. The appellant had begun to prepare the land, and draw up plans, for the construction of a building when he received an expropriation notice from the Quebec Department of Transport for July 31, 1972: the government needed this land for Highway 51.

4. Following negotiations, the fair market value of this piece of land at July 31, 1972 was set at $80,000.00. The appellant received this amount in 1973.

5. In his 1973 return, the appellant declared the fair market value of the piece of land at December 31, 1971 as $60,100.00.

6. The appellant maintains that this amount is reasonable and represents the fair market value at December 31, 1971, and that the sum of $80,000.00 paid by the Quebec Department of Transport as the fair market value at July 31, 1972 proves that the sum of $60,100.00 is more than reasonable.

3.1.2. The Facts Alleged by the Respondent

In his reply to the notice of appeal, the respondent submits the following:

1. He admits paragraphs 1 and 2 of the Facts stated in the Notice of Appeal.

2. He admits paragraphs 1, 2, 3 and 4 of the Reasons given in the Notice of Appeal.

3. He denies paragraphs 5 and 6 of the Reasons.

4. The Minister of National Revenue relied, inter alia, on the following facts in his assessment of the appellant for 1973:

(a) on June 18, 1973, the Quebec Department of Transport expropriated real estate belonging to the appellant for the sum of $80,000.00;

(b) the Minister of National Revenue set its fair market value at December 31, 1971 at $7,000.00;

(c) the Minister of National Revenue, by means of a Notice of Assessment dated October 31, 1975, included in the income of the appellant for 1973 the taxable portion of the capital gain arrived at by subtracting from the proceeds of disposition the fair market value of the property and the expenses resulting from its sale.

3.2. The Facts Proven

(a) It is important, first of all, to stress that the Board did not allow an assessment report on the land at December 31, 1971 to be filed since the assessor was absent. His absence, in fact, resulted in the Board not obtaining important information concerning the facts alleged and also prevented the respondent from cross-examining him.

(b) On August 16, 1971, the appellant purchased a piece of land situated off Highway 20 near Drummondville for $4,000.

(c) The appellant submitted his evidence by means of the testimony of Mr Henri Boucher, a former employee of the Quebec Department of Transport. Mr Boucher had been in charge of the assessment of the land at July 31, 1972 for purposes of expropriation. This assessment had been set at $51,000.

(d) Mr Boucher had at some point handed the case over to others who had had to complete negotiations with counsel for the expropriated party. Finally, this party, the appellant in the case at bar, had received compensation of $80,000.

(e) The evidence shows that this compensation included damages, although the proportion was never exactly determined.

(f) The respondent, represented by Mr Léo Paul Morin, Assessor, submitted and explained an assessment of the land in the amount of $7,000.

4. Point at Issue

The issue is as to the value of the piece of land at December 31, 1971. This value at December 31, 1971 is clearly essential in determining the appellant’s capital gain.

5. Comments

Pursuant to the investigation, the Board has concluded that the appellant has not discharged his burden of proof.

Thus, if the evidence is allowed in its entirety, the appellant has shown that the land was worth $51,000 on July 31, 1972, when the issue is as to its value on December 31, 1971.

One can no doubt argue that there are only 7 months between July 31, 1972 and December 31, 1971, and there cannot be a very great difference in assessment.

The Board, however, points out that there are only 4 /2 months between August 16, 1971, the date on which the land was purchased for $4,000, and December 31, 1971, and that the difference in assessment cannot be that great for these two dates either.

Perhaps something important happened between August 16, 1971 and December 31, 1971—something that could have influenced the value of the land. If so, the appellant should have submitted proof.

Perhaps, on the other hand, nothing important happened between December 31, 1971 and July 31, 1972 to influence the value of the land, in which case one could conclude that the value on December 31, 1971 and July 31, 1972 would have been the same. If so, the appellant should again have submitted proof.

The only proof submitted by the appellant of any fact that might have influenced the value between August 16, 1971 and December 31, 1971 is the statement of Mr Henri Boucher that the circumstances under which the seller of the land, Mr Alphonse Valois, had sold had been such that the sale price was lower than the real value of the land. This statement was contradicted by the respondent, supported by facts. In any case, is the respondent’s assessment of $7,000 to December 31, 1971 not a sufficient increase? If not, the appellant should again have Submitted proof.

The Board also took notice that in the price of $80,000, an amount— perhaps even a large amount—was included for damages, which would decrease the capital gain.

The appellant did not rebut this proof either. Considering the basic facts above, the precedents referred to by the parties are not pertinent. Since the body of proof submitted by the appellant is not sufficient to reverse the respondent’s assessment, this assessment must be allowed.

Conclusion

The appeal is dismissed.

Appeal dismissed.