Clemow Realty Limited v. Her Majesty the Queen as Represented, [1976] CTC 129, [1976] DTC 6094

Walsh, J:—This action concerns the profit made by plaintiff on the sale of certain land in the City of Ottawa in 1971 which plaintiff Claims is a gain of a capital nature whereas defendant has reassessed same as income pursuant to sections 3, 4 and paragraph 139(1)(e) of the Income Tax Act, RSC 1952, c 48, in effect at the time. The evidence disclosed that plaintiff in October 1958 purchased certain lands in the City of Ottawa being part of Lot 34, Concession B, Rideau Front, containing 12.38 acres more or less for a price of $42,500 and in February 1971 sold part of the said property consisting of 6.251 acres for a price of $160,000. Defendant has reassessed the gain as income in the amount of $120,547.21.

Previous sales had been made of portions of the property which is situated at the southwest corner of the intersection of Prince of Wales Drive (the Prescott Highway) and the Hog’s Back Road which at the time of the purchase terminated at Prince of Wales Drive. A small portion of the property, in the part zoned as apartments-commercial. fronting on Prince of Wales Drive, and near the intersection, was sold on November 21, 1960 to the Sun Oil Company for the price of $42,500 for the construction of a service station. This sale was accomplished by two deeds. Plaintiff Clemow Realty Limited sold this portion of the property to Sirotek Construction Limited, a company controlled by the same parties on August 10, 1960 for the same price, $42,500, following which Clemow Realty Limited resold same as indicated to Sun Oif Company Limited. Why it was done in this manner was not made clear in the evidence although the witness Frederick B Sirotek thought it had something to do with obtaining severance which he believes was easier for the construction company than for plaintiff, the landholding company. In any event, plaintiff conceded that this was a taxable gain and was assessed in the year 1960 on same, the purchase price paid by it for the entire property being pro-rated so as to calculate the portion attributable to the portion which was sold and the profit on same being determined accordingly.

Subsequently in 1966 the City of Ottawa expropriated a strip of land running part of the way along the north side of Plaintiff’s property for the eventual extension of Hog’s Back Road to the west of Prince of Wales Drive. As plaintiff points out this road could have been extended along a line adjacent to subject property without any expropriation, and in fact the expropriation resulted in the creation of a curve in the extension of the Hog’s Back Road, but Mr Sirotek subsequently learned that the reason for this was to provide for the eventual construction of the new bridge which was subsequently built. The evidence given on discovery as to what plaintiff received from the City. for compensation for the land so taken was not read into the record nor was any evidence given as to how this was treated by Plaintiff in its tax return for the year in question. The City created a reserve of a one foot strip however between the extended road and the subject property so that access to subject property was henceforth only available from Prince of Wales Drive.

Frederick B Sirotek, a business executive now residing in Ogdensburg, NY, president of plaintiff company as well as of Sirotek Construction Limited testified that he had started with the latter company in 1951 at which time he was resident of Ottawa, his home actually being on Prince of Wales Drive diagonally across the road from the southeast corner of the subject property. In 1952 and 1953, his company had built some single family dwellings but found this unprofitable so stopped building same, and thereafter he had limited his future business to commercial construction. In 1957 he learned that the subject property was for sale and took an option on same. Ciemow Realty Limited had been incorporated on January 30, 1953 its objects clauses being in part as follows:

a) to acquire, own and operate any building or any portion thereof for rental;

b) to acquire, own and operate lands or any interest therein and to erect buildings upon said lands for rental;

c) to acquire and hold shares and to take part in the management, supervision or control of the business or operation of any company or undertaking having objects similar to those of the company.

it has been consistently held, however, that the objects clauses of a corporation are relatively unimportant in determining its intentions. See for example Regal Heights Limited v MNR, [1960] SCR 902; [1960] CTC 384; 60 DTC 1270, inwhich Mr Justice Judson stated at page 907 [390, 1272]:

Nothing turns upon such a statement in such a document. The question to be determined is not what business or trade the company might have carried on but rather what business, if any, it did in fact engage in.

The company remained dormant however and the first and only asset which it acquired was the subject property, title being taken in its name. Mr Sirotek had acquired a 50% shareholding in the company from Mrs Greenberg who owned the other 50% of the shares. She is the wife of Michael Greenberg, an attorney, who owned 50% of the shares of Sirotek Construction Limited, so both companies can be said to have been owned and controlled jointly by Mr Sirotek and the Greenbergs. Mr Greenberg was inactive throughout all the dealings, however, leaving the business operations entirely to Mr Sirotek.

Immediately to the south of the property purchased there was a Veterans’ Land Act development with a considerable number of houses on same separated from subject property by what would have been the extension of Nesbitt Street if this extension were ever built. The proximity of this development did not mean however that services would be available for the subject property because it had its own sewage disposal plant and water system and it was Mr Sirotek’s understanding that they were not up to the standards required by the City of Ottawa which was therefore unwilling to take them over, nor would they have been adequate io service subject property. The fact that there were still some unbuilt areas of this Veterans' Land Act development however and especially directly opposite subject property probably had some influence in the zoning by the City of Ottawa of subject property, a strip being the southern portion running back from Prince of Wales Drive consisting of about 1/:». of subject property being zoned as single residential while the other 44 running back from Prince of Wales Drive bounded to the north by what was eventually to become the extension of Hog’s Back Road being zoned at the time as apartments-commercial.

At the time of the purchase Mr Sirotek’s company had already built a number of service stations in the City and he had close relations with a number of oil companies and hoped to be able to sell a portion of the property on Prince of Wales Drive near the Hog’s Back Road to one of them as he realized this would be a good location. He approached Sun Oil but although turned down on his first approach he later completed the sale to them as stated above. The proceeds of this sale resulted in recovering the entire purchase price of the whole property. At the time of the purchase he had planned to run a road down the middle of the property off Prince of Wales Drive roughly on the division between the single residential and apartments- commercial zones. His company had built a number of small warehouse units and rented same and he contemplated dividing the commercially zoned lots on this road into 100 foot lots on which to construct warehouses and rent same. From 1958 to 1964, he was in communication with the City of Ottawa whose approval would be required for any zoning changes and for the services, and at an early date it became apparent to him that the City did not want the road down the centre of the property but instead was planning to extend the Hog’s Back Road with a curve in it which would result in taking part of subject property. His construction company had built a shopping centre for David Loeb to the north of subject property and Mr loeb owned some other land back of the shopping centre to the west of same which adjoined the northwest portion of subject property, and they jointly asked to have some rezoning done to allow for a greater density, since, although the area in question was zoned apartments-commercial the density was too low for what they considered to be profitable development. Corroboration of these negotiations appeared in a letter dated November 27, 1959 written by Mr Sirotek on behalf of Clemow Realty Limited to the City planner which reads in part:

Mr David Loeb and myself have met recently to discuss our plans for our respective properties.

We have agreed that the R6 zoning would not provide sufficient density, and we would rather see an R7 zoning applied to the residential portions. I should like to note that we would more than likely not be building to the full extent that R7 allows, namely 85 units per acre, but more than likely substantially less, in the 30 io 60 units bracket. We both would like to have the entire residential area zoned for apartments of various sizes and/or height, details of which would be easier to discuss in person.

This brought no results however and it was not until 1964 that the City passed Bylaw AZ 64 which I understand was a general rezoning of the whole area. This left the single residential area of subject property adjacent to the Veterans’ Land Act property more or less unchanged save for a small portion on the front adjacent to Prince of Wales Drive which was now added to the area zoned as apartments- commercial. The larger area being the northern portion of the property which had previously been zoned as apartments-commercial now retained this zoning for about half of its depth, while the other half adjacent to the proposed Hog’s Back Road extension was now zoned for row housing.

Mr Sirotek then had rough sketch plans prepared for a proposed apartment of substaniial size with three wings which would be located diagonally in the area zoned as apartments-commercial with access from Prince of Wales Drive. He conceded that at that time he had no immediate plans for the remaining areas, still zoned as single residential or row housing but that if necessary they could remain as park land for the benefit of the apartment residents. He considered these areas to be the least valuable portions of th property in any event.

During the various discussions prior to 1964, he had ascertained that the City did not want to approve severances but preferred a full Subdivision plan. He had suggested some but conditions imposed by the City on the approval of same made it undesirable to proceed with them so no agreement was ever reached. One of these dated October 8, 1964 was produced. Part of his motivation for the large apartment building which he planned was because by 1966 he was by no means convinced that the City was serious about extending the Hog’s Back Road at an early date and by building one large building he would avoid any problem of severance or of having a subdivision plan approved, and access could be had to it from Prince of Wales Drive whether or not the Hog’s Back Road was extended. The City refused to approve this plan, however, and possibly as a result of it, they decided to proceed with the expropriation of part of subject property for the road extension. This now left the apartments-commercial zoned area of his property too shallow and irregular in shape to locate the type of building he had planned. Corroboration of some of the problems encountered is found in a letter from Mr Sirotek on behalf of plaintiff to the Secretary of the Board of Control dated March 17, 1967 which reads in part as follows:

When the above property was purchased some ten years ago, there were no plans for the Hogs Back Road Extension. We have anticipated the construction of a central road, making maximum use of the land and involving minimum development cost. On that basis the purchase was economically sound. However, when applying for a subdivision plan, the City Planning Department has required a very uneconomical layout, involving an 86-ft. collector street, located almost entirely on the land to be subdivided, and the construction of another roadway along the southerly lot line. While only half of the road allowance for this road (Greenbrier Avenue) would be on the subdivided land, the cost of servicing would be extremely high in view of the fact that the recovery by way of a frontage charge to the property owners on the south side of the street would be negligible. The above, together with the uneconomical size of some of the residential lots (169-ft. depth), made it impossible to proceed with the subdivision to this day.

rie then considered building row housing in the area zoned for same, especiaily since some row housing had already been built in an area west of his property zoned as single residential so he suggested a change in zoning of his single residential property to allow row housing there as well as in the area already zoned for that purpose running along the proposed Hog’s Back Road extension. He finally obtained rezoning approval in late 1968 which resulted in the back portion of plaintiffs property consisting of perhaps 60% of same now being zoned as row housing with the front portion on Prince of Wales Drive being zoned as apartments-commercial and totally eliminating the area previously zoned for single residential housing adjacent to the Veterans’ Land Act development. Following this zoning change however he never had any subdivision plan registered for the property. By this time Mr Sirotek testified that he had lost interest in developing the portion of the property now available for row housing or town housing as his company had in 1967 or 1968 lost $500,000 in a construction project, leaving him short of funds to commence any major building developments. In the spring of 1969 he left Ottawa to take up residence in Barbados remaining there until 1972. During this period nothing was done on behalf of plaintiff to advance the development of the land. On September 24, 1970 as the result of an unsolicited offer, an agreement to sell the rear portion of the property zoned for town nousing was entered into between Clemow Realty Limited and one James Arthur Mullen, in trust, for $160,000. This was signed on behalf of plaintiff by Laya Shabinsky, secretary-treasurer and director of the company and eventually culminated in a sale on February 10, 1971 to Douglas R MacDonald and David C Anderson of the said portion of the property for that price. Mr Sirotek testified that he had previously received many offers for the purchase of the property but none had been accepted, and that one of his motives for selling part of the property at that time was because the company owed money to the bank and the expenses of holding the property were mounting. The business losses of plaintiff for 1970 alone were shown as $20,252.51 in the tax return.

Soon after the property was sold the new purchasers built row housing on it, so whatever difficulties had previously existed had been overcome by this time. Mr Sirotek insisted that in requesting the rezoning of the single residential area to permit row housing his motive was to cevelop the same rather than to sit back and wait for the single housing residential area to increase in value. Row housing would not require subdivision or extensive public servicing, as one sewer and one water line to the Prince of Wales Drive serves all the development of this nature. Furthermore, he stated that building single housing residences for rental purposes is not as profitable as row housing. While the 1968 rezoning had the effect of making the property more valuable it was not done with the intent of selling same.

Mr Sirotek also testified in cross-examination that he has been associated with other companies concerned with land, but his evidence relating to the activities of these various companies indicates that the properties which they own were developed for rental purposes, and that, in any event, his experience in developing land is really a secondary interest to his work as a contractor. It was only for a brief period between 1950 and 1954 that F B Sirotek Limited, one of his companies, had sold houses built on its land. It is a fair conclusion to draw from this portion of his evidence that neither he himself nor any of the companies with which he has been associated as a major shareholder has traded in land as distinct from developing same.

In all cases of this sort the ultimate decision must rest from a finding of fact as to what was the real intention of the taxpayer (in this case as represented by Mr Sirotek) at the time the property was purchased and whether there was any secondary intention that in the event the proposed building development could not be carried out the property could in any event be sold at a profit. In reaching a conclusion on this question of fact the expressed intention of the owner of the property is less important that the indications given as to his intentions by his subsequent conduct with respect to it following the acquisition. A leading case on the doctrine of secondary intention is that of Regal Heights Limited v MNR (supra) in which Judson, J stated at page 905 [388, 1272]:

There is no doubt that the primary aim of the partners in the acquisition of these properties, and the learned trial judge so found, was the establishment of a shopping centre but he also found that their intention was to sell at a profit if they were unable to carry out their primary aim.

This doctrine was further developed by Noël, J, as he then was, in the case of Paul Racine, Amédée Demers and François Nolin v MNR, 65 DTC 5098; [1965] CTC 150, in which he stated at page 5103:

It is not, in fact, sufficient to find merely that if a purchaser had stopped to think at the moment of the purchase, he would be obliged to admit that if at the conclusion of the purchase an attractive offer were made to him he would resell it, for every person buying a house for his family, a painting for his house, machinery for his business or a building for his factory would be obliged to admit, if this person were honest and if the transaction were not based exclusively on a sentimental attachment, that if he were offered a sufficiently high price a moment after the purchase, he would resell. Thus, it appears that the fact alone that a person buying a property with the aim of using it as capital could be induced to resell it if a sufficiently high price were offered to him, is not sufficient to change an acquisition of capital into an adventure in the nature of trade. In fact, this is not what must be understood by a “secondary intention’’ if one wants to utilize this term.

Even if a property is bought with the express purpose of reselling same at a profit this does not necessarily result in a conclusion that the gain resulted from an adventure in the nature of trade by virtue of the definition of “business” in paragraph 139(e) of the Act in effect in 1971 and was not the realization of capital gain on an investment. This was the finding of the Supreme Court in the case of Irrigation Industries Limited v MNR, [1962] SCR 346; [1962] CTC 215; 62 DTC 1131, in which Martland, J referred with approval to a general statement of the principle by Lord Buckmaster in Leeming v Jones, [1930] AC 415, where he stated at page 420:

an accretion to capital does not become income merely because the original capital was invested in the hope and expectation that it would rise in value; if it does so rise, its realization does not make it income.

This was carried even further and applied to land by Kearney, J in the case of MNR v Valclair Investment Company Limited, [1964] CTC 22; 64 DTC 5014, and the companion case, MNR v Cosmos Inc, [1964] CTC 34; 64 DTC 5020, in which he compared the purchase of land for future sale for profit to the purchase of growth stocks paying no dividends and considered that the holding of it was not an undertaking or adventure in the nature of trade, but it is true that in doing so he found that it lacked the badges of trade, the speculation and risk being negligible as land was capable of producing an annual income even though the land in question was not being used productively.

In the present case Mr Sirotek certainly contemplated the possibility of selling a portion of the land profitably for a gas station even before it was purchased and plaintiff was successful in so doing and did not attempt to claim the profit on this sale was the realization of an investment With respect to the remaining land there is no suggestion that it produced any significant income nor that it was expected to while awaiting development during the long period in which it was held between the purchase in 1958 and the sale in 1971. While this is one element to consider, the absence of income from the property is not a principal consideration in determining whether it was purchased for development with the secondary intention of reselling at a profit if this could not be accomplished, or as a pure investment. As is stated in R v Stanfold Investment Corp, [1974] CTC 19; 74 DTC 6035, at page 26 [6040]:

The mere fact that it was general knowledge at the time of the purchase that the area in question, which eventually became part of the City of Laval, was developing rapidly and that a person buying land there would most likely find that it would increase in value, is not sufficient, in my view, to indicate that this was the secondary intention of defendant at the time the purchase was made. On the contrary, the evidence discloses that the sole intention was that the defendant would develop the property itself as a revenue-producing investment and the mere fact that defendant no doubt realized that there was little, if any, risk of loss and on the other hand a reasonable expectation of profit even if its intention was frustrated and it was forced to sell the land, is not in my view sufficient to establish that this was a secondary intention of defendant at the time of the purchase. Knowledge and intention are not synonymous.

In the present case at the time of the purchase plaintiff’s intention as expressed by Mr Sirotek was to build a road along the line of the demarcation between the single residence zone and the apartments- commercial zone and to develop the latter by building a series of small warehouses on same but his intentions with respect to the area zoned for single family residences was by no means clear as Mr Sirotek was not interested in constructing this type of building. He did not make any study in depth of the possibilities of changing the zoning before making the purchase but he stated that this was not a major factor in his mind at the time as in 1957 it was not difficult to get zoning bylaw changes as Ontario Municipal Board approval was not needed at that time. Before long he found that his proposed road down the middle of the property would not be acceptable to the City and that there were difficulties in the way of changing the zoning of the apartments-commercial zone area so as to allow a higher density and in converting the single residential zoned area into apartments- commercial or row housing zoning. Nevertheless he persisted in attempts to have the zoning changed. In addition to his evidence, his letter of November 27, 1959 to the Planning Department written on behalf of Mr David Loeb, the owner of nearby property and himself, the proposed subdivision plan dated October 8, 1964, and the letter of March 17, 1967, all produced as exhibits, corroborate these efforts.

There was a constant frustration of these efforts however since the City did not want to commit itself until 1964 when Bylaw AZ 64 was passed which made significant changes in the zoning of plaintiff’s property as outlined above. Following this in 1966 he submitted a sketch plan for a large apartment house in the apartments-commercial area in connection with an application for a building permit. Admittedly at this time no further steps had been taken leading to any development of the row housing or single residential zones. The building of this proposed apartment was frustrated by the City expropriation in the latter part of 1966. Following this a rough sketch was made in 1967 of a town housing plan for the area so zoned. Actually it was only in September 1968 that rezoning approval was obtained enlarging the row housing or town housing zone, and the apartments-commercial zone and eliminating the single residential zone altogether, as detailed above. It was only subsequent to this that the property in the zone for row housing was sold by plaintiff in 1971 with plaintiff still retaining the area now zoned as apartments-commercial which it has not yet developed. However a reasonable explanation accounting for this change of plans has been given. First, the financial difficulties in which Mr Sirotek who alone conducted plaintiff’s affairs found himself as a result of severe losses suffered in his construction business, and second his departure for the West Indies. In this respect the facts closely resemble those in the case of Bead Reaities Ltd v MNR, 119711 CTC 774; 71 DTC 5453, in which the individual who had been most active in attempting to develop the plaintiff’s property in Ottawa had moved to Toronto after a long series of attempts to construct buildings for long-term rental on the property had been unavailing, it was producing no revenue, and meanwhile the taxes and charges were mounting up. An unsolicited offer was then accepted for the property which was sold at a profit which was found to be a capital gain. That case referred to the case of Point Pleasant Investments Limited v MNR, [19681 Tax ABC 1227; 69 DTC 23, in which three Halifax citizens formed a company to buy property on which to construct multiple housing units. As a result of amendments made to zoning regulations it subsequently became more costly to build on the property part of which was now restricted to single family houses. The proposed development had become impracticable, financial problems had arisen, and one of the principals had been taken ill. When an unsolicited offer for the sale of the property at a substantial profit was accepted it was held that this was profit arising from the realization of an investment as there was no alternate intention to sell the land at a profit at the time that it was acquired. The judgment in the Bead Realties case at page 787 [5461] states:

Appellant’s original intention was by no means an unrealistic one or one which at the time seemed incapable of being carried to fruition but although there had been no change in the zoning by-law making it impossible in the present case, it had nevertheless, after three years’ effort, been unsuccessful in obtaining a suitable tenant. Meanwhile, it had lost interest on the $42,000 it had invested in the property for three years, and had had to pay all the taxes during this period, and finally Dr Irving Betcherman, who was the member of the group on whom they all relied to carry out their development plans, was moved to Toronto as a result of events beyond his control. While he could perhaps have continued to carry out the project by correspondence or telephone from there, it was certainly less convenient when he was no longer stationed in Ottawa. Finally, an entirely unsolicited offer was received which would result in a very substantial profit in a period of not much over three years, which offer was too good to refuse. This is exactly the sort of offer referred to in the judgment of Noel, J in Racine, Demers and Nolan (supra) and the judgment of Martland, J in the Irrigation Industries case (supra). I therefore do not find that the acceptance of this offer and sale of the property at a profit converts what started out as an investment in real estate into an adventure in the nature of trade so as to make appellant taxable on these profits.

In the Stanfold Investment Corp case (supra) the property was acquired in 1959 in a rapidly expanding area with the intention of developing a large industrial complex. The expectation of various zoning changes never materialized however and great delay was encountered with the municipal authorities in the construction of necessary services such as sewers, roads, etc. Eventually the land was threatened with expropriation, in any event, by the municipality to construct an industrial park. In 1966 the company therefore accepted an unsolicited offer and the profit resulting from this was not taxed as resulting from an adventure in the nature of trade since there was no secondary intention to resell at the time the property was originally acquired, but rather the intention from the outset had been to develop the land as a ong term revenue-producing investment.

These cases can be distinguished from the case of Varennes Holdings Corp v The Queen, [1975] CTC 230; 75 DTC 5164, in which a large scale developer had purchased a large tract of farm land near Montreal in 1956 and in 1967 after having done nothing with it sold half of it at a profit. This was held to be an adventure in the nature of trade, because, despite plaintiff's contention that in acquiring the property it had always intended to develop it as a residential and commercial development including a shopping centre on part of it it did little if anything to advance this intention until finally in 1966 a bylaw was passed preventing the commercial and residential develop- ment of it, so the project was then abandoned and part of the property sold. Comparing what plaintiffs in that case had done with that property with what they had done with other properties they owned previously, the Court commented at page 236 [5168-9]:

. . . no formal application for services was ever made in writing nor were any serious efforts made to obtain them, plaintiff being content to await developments with respect to the property. This is in marked contrast with the conduct of plaintiffs’ principals in connection with their other developments where they assiduously sought changes in zoning, prepared plans, arranged for the furnishing of services and eventually overcame the many obstacles encountered by any developer. While they certainly had the knowledge and experience to undertake a major development on the subject property at the time they bought it, this appears to have been little more than a vague possibility for some time in the distant future. Certainly, their conduct does not indicate the absence of a secondary intention of selling the property at a profit in the event that, for some reason, the development could not be eventually proceeded with as planned.

and again at page 237 [5169]:

In the present case plaintiff was not forced to sell when it did, and during the lengthy period of ownership did, and has still done, practically nothing to advance its development as a revenue-producing property by pressing for the furnishing of services which appear to have been readily available to others who made serious efforts to obtain them.

Comparing this find with the facts of the present case 1 do not think it can be said that plaintiffs made no attempt to secure zoning change or to obtain approval of a subdivision plan, nor to at least take the first steps in planning the construction of a large apartment building on the portion of the property zoned for this purpose. The property was held for a long while during which some purchase offers were refused, and part was finally sold following an unsolicited offer due to the departure of Mr Sirotek from the country and financial difficulties which made it apparent that immediate development could not be proceeded with and that the carrying charges and expenses were mounting up rapidly.

Defendant would have the Court make a fine distinction, however, between different portions of the property, pointing out that nearly all the proposed zoning changes and contemplated construction related to the apartments-commercial zoned area of the property which plaintiff still owns and that plaintiff never had at any time any fixed plans for the development of the single family residential zone or the row housing area which shortly before the sale of same was enlarged to include parts of the former single family residential zone, as a result of the zoning approval obtained by plaintiff in September 1968.

According to this argument plaintiff really had different intentions with respect to three parts of the property:—an intent of selling a portion of it to an oil company for a service station which was carried out, an intent of developing the apartments-commercial zone which has never been carried out for various reasons, which portion of the property is still owned by plaintiff and therefore not in issue in the present case, and a third intention, or as defendant would put it, absence of intention with respect to the portion of the property sold in 1971. It is perhaps accurate to say that plaintiff did not at the time of purchase have any firm intention with respect to the portion then zoned for single family residences and that sale of this portion at a profit might always have been in plaintiff’s mind. After the rezoning in 1964 by Bylaw AZ 64 plaintiff may still have had no very firm intention with respect to what would be done with the area behind the now reduced apartments-commercial area now zoned for row housing other than to try to incorporate the single residential zoned area into it as was eventually done by the rezoning in September 1968. However whatever change of intention plaintiff might have had forced upon it in 1964 is not relevant since it is the intention at the time of purchase which is important, and there is nothing to indicate that at that time there was any secondary intention to sell even the portion of the property zoned as single residential, despite the fact that Mr Sirotek’s interest was restricted to commercial, apartment house and possibly row housing developments. I do not believe therefore that we can break down plaintiff’s intentions into separate intentions with respect to different portions of the property and therefore conclude that since there was no firm intention of developing the portion sold in 1971 the gain in this sale must be considered to have resulted from an adventure in the nature of trade. If we consider the property purchased as a whole the intention to develop at least a major portion of it appears to be clear, and subsequent changes of plans cannot be considered to have retroactive effect even if they result in an alteration of the Original intention.

Defendant argues that the rezoning change obtained by plaintiff in September 1968 was sought with a view to enhancing the value of the property for sale and not for development of same. If this had been plaintiff’s first attempt at rezoning this argument would have more force. As it is, while the rezoning undoubtedly increased the value of the property this was a necessary step before it could be profitably developed whether by plaintiff or by a purchaser. The fact that incidentally it added to the value of it for a potential purchaser does not justify concluding that this was the motive for which the rezoning was sought. Certainly it now became possible to immediately develop the town housing portion of same as the purchasers rapidly did. If plaintiff has had no credible reason to explain why it did not now proceed with the development itself this would certainly have weakened its argument that its intention when acquiring the property and thereafter had always been to develop rather than to sell same. However, for the reasons already given and accepted plaintiff appears to have been justified in its decision soon after the rezoning to sell this portion of the property rather than to develop it itself. The fact that in so doing it made a profit is irrelevant in view of the jurisprudence cited above to the effect that the making of a profit can just as well be an element of an investment transaction as of an adventure in the nature of trade.

For the above reasons plaintiff’s action is maintained and the reassessment of its income tax for the 1971 taxation year is set aside with costs.