Kerr,
J:—This
is
an
appeal
from
a
judgment
of
the
Tax
Review
Board
that
allowed
the
defendant’s
appeal
from
an
assessment
made
by
the
Minister
of
National
Revenue
in
respect
of
the
defendant’s
1970
taxation
year.
Paragraph
2
of
the
plaintiff’s
statement
of
claim
reads
as
follows:
2.
The
Minister
of
National
Revenue
in
assessing
the
Defendant
for
its
1970
taxation
year,
included
in
the
computation
of
its
income
the
gain
of
$168,018.00
arising
from
the
sale
of
an
80
acre
parcel
of
land
being
a
portion
of
an
132
acre
parcel
of
land
which
the
Defendant
had
purchased
in
1965
at
a
cost
of
about
$500.00
per
acre
which
80
acre
parcel
of
land
was
resold
in
1970
for
the
sum
of
$200,000.00.
The
issue
in
this
appeal
is
whether
the
said
gain
was
income
from
a
business
or
venture
in
the
nature
of
trade.
The
plaintiff’s
statement
of
claim
says
that
in
assessing
the
defendant
for
its
1970
taxation
year
and
including
in
its
income
the
said
gain
the
Minister
did
so
on
the
assumption
that
the
gain
was
income
from
a
business
or
venture
in
the
nature
of
trade.
The
statement
of
defence
denies
that
the
gain
arose
from
a
business
or
venture
in
the
nature
of
trade,
and
says
that
the
lands
sold
by
the
defendant
were
sold
as
the
realization
of
capital
for
the
purpose
of
raising
funds
to
further
the
heavy
construction
business
which
the
defendant
was
then
embarking
upon
and
that
the
gain
was
a
capital
gain,
fortuitous
in
nature,
and
not
subject
to
tax
under
the
Income
Tax
Act.
Evidence
was
given
as
to
the
history
and
business
activities
of
Fredericton
Housing
in
home
construction;
the
purchase
of
the
Fraser
132
acres;
a
change
in
ownership
of
the
company
in
1969
when
sons
of
the
owners
entered
the
business
and
acquired
their
fathers’
shares;
a
consequent
extension
by
the
company
into
heavy
construction:
bonding
difficulties
of
the
company;
incorporation
of
another
company,
Fredericton
Housing
and
Construction
Co
Ltd
in
1969
as
an
operating
company
to
overcome
bonding
difficulties
and
engage
in
heavy
construction;
the
subsequent
sale
of
80
acres
of
the
Fraser
land
to
the
New
Brunswick
Housing
Corporation,
which
resulted
in
the
gain
in
issue;
the
relatively
inactive
position
of
Fredericton
Housing
thereafter;
the
interrelationship
of
the
two
companies;
and
their
income
tax
returns
and
financial
statements.
I
shall
refer
to
evidence
given
in
those
respects
generally
in
that
sequence.
Fredericton
Housing
Limited
was
incorporated
in
1954
by
two
friends,
Joseph
W
Gorham
and
John
L
Bird,
with
the
purpose
of
going
into
the
business
of
building
low-cost
homes
for
sale
in
and
about
the
City
of
Fredericton.
Raw
land
was
needed
for
that
business.
The
company’s
powers
in
its
letters
patent
included
the
power
to
acquire
and
sell
real
property
and
to
build
upon
such
property.
Gorham
and
Bird
were
the
owners,
in
equal
proportions,
of
all
the
issued
shares
of
the
company,
with
a
third
person,
the
company’s
accountant
John
Page,
holding
one
share
in
trust
for
them.
They
were
directors
of
the
company
from
its
inception
until
1969.
Shortly
after
its
incorporation
the
company
engaged
John
F
Graham
as
a
bookkeeper,
and
as
time
went
by
he
assisted
in
administration,
financing
and
sales,
and
became
secretary-treasurer.
The
company
commenced
building
low-cost
homes
in
the
village
of
Nashwaaksis
in
what
became
known
as
Fulton
Heights,
where
the
company
had
an
agreement
with
a
farm
owner
who
was
willing
to
subdivide
part
of
his
farm
into
building
lots,
giving
the
company
an
option
to
take
lots
progressively
as
it
needed
them.
The
company
built
homes
and
sold
each
home
and
the
lot
on
which
it
was
built,
as
a
unit.
It
continued
to
do
so
there,
and
also
acquired
land
under
somewhat
similar
arrangements,
or
by
purchase
and
mortgage
back
in
other
areas,
including
the
localities
of
Reid
Street,
Forest
Hill
and
Skyline
Acres,
and
followed
the
same
practice
of
selling
each
home
and
lot
as
a
unit.
When
it
started
building
homes
it
had
little
competition
but
in
later
years
competition
increased,
yet
it
continued
to
be
the
major
builder
of
low-cost
homes
in
the
area,
building
50
or
more
homes
in
each
of
the
years
1961-69,
and
from
1,500
to
1,600
in
total
from
its
commencement
in
1954.
As
stated,
the
company
was
selling
its
houses
and
lots
as
units,
it
did
not
advertise
lots
or
vacant
land
for
sale,
nor
did
it
in
those
years
sell
any
vacant
land,
although
it
had
opportunity
to
do
so,
except
a
sale
of
one
lot
to
a
man
who
had
purchased
a
house
and
lot
and
wanted
an
adjoining
lot,
and
in
the
1969-70
taxation
year
a
sale
to
the
City
of
Fredericton
of
one
acre
of
the
Woodbridge
land
which
the
City
wanted
for
school
purposes,
and
a
sale
of
another
acre
of
that
land
to
Central
City
Investments
for
a
small
shopping
centre
which
was
thought
to
be
beneficial
to
the
company’s
Skyline
Acres
development.
The
company
made
use
of
radio
and
newspaper
advertising
to
promote
and
sell
its
houses,
and
held
“open
house”
periodically
to
demonstrate
them.
It
did
its
own
promotion
and
marketing
and
had
no
licensed
real
estate
agent
on
its
staff.
The
company
prepared
subdivision
plans
for
the
raw
land
it
was
acquiring
and
had
them
approved
by
the
several
authorities,
including
the
City
of
Fredericton
and
the
village
of
Nashwaaksis,
the
New
Brunswick
Power
Commission
and
Central
Housing
and
Mortgage
Corporation.
It
was
the
company’s
policy
to
begin
constructing
the
homes
in
the
spring
of
each
year
on
speculation,
sometimes
with
some
sold
in
advance,
but
on
the
average
20
out
of
25
were
on
speculation.
Sidewalks,
paved
roads,
lighting
and
other
services
were
provided
under
sharing
of
the
cost
arrangements
with
the
authorities
concerned.
The
Fraser
land,
132
acres,
shown
coloured
red
and
purple
on
the
map
of
Fredericton
and
vicinity
included
in
the
defendant’s
exhibits,
was
purchased
by
Fredericton
Housing
from
Fraser
Companies,
Limited,
which
was
closing
out
its
paper,
pulp
and
lumber
business
in
Fredericton
and
selling
the
said
land,
and
the
deed
thereto
was
given
in
1966.
The
land
was
described
by
witnesses
as
being
at
the
time
of
sale
an
unserviced
wooded
and
rocky
property,
with
a
small
meadow,
a
rock
pit,
and
a
stream
running
through
the
land.
It
was
within
the
city
limits
and
about
/4
mile
from
Skyline
Acres
which
was
later
developed
by
Fredericton
Housing.
The
land
had
no
access
roads
into
it
off
Vanier
Highway
No
12,
nor
any
of
the
street
extensions
into
it
which
are
shown
on
the
Fredericton
map
from
the
adjoining
Southwood
Park.
The
purchase
price
was
$65,000,
with
a
down
payment
of
$25,000
and
a
mortgage
for
the
remainder
to
be
paid
within
18
months.
Fredericton
Housing
subsequently
got
extensions
of
the
mortgage,
and
it
was
paid
off
by
August
14,
1969
and
discharged.
Joseph
Gorham
testified
that
he
thought
at
the
time
of
purchase
it
would
likely
be
ten
years
before
it
would
be
developed.
He
said
it
was
good
business
to
purchase
land
ahead
of
the
time
for
its
use,
as
a
protection
against
speculators,
and
to
give
time
for
subdivision,
and
that
the
Fraser
land
was
purchased
with
that
in
mind.
He
acknowledged
the
correctness
of
the
following
extracts
from
the
defendant
company’s
notice
of
objection
respecting
iis
assessment
for
income
tax
for
its
1970
taxation
year:
10.
In
1965
the
Company
acquired
a
tract
of
land
(hereinafter
called
the
“Fraser
Lot”)
of
approximately
130
acres
from
Fraser
Companies
Limited.
This
tract
of
land
is
in
the
immediate
area
of
Skyline
Acres
and
its
acquisition
was
meant
to
insure
the
future
availability
of
lots
on
which
the
Company
could
continue
its
operation
as
a
volume
builder
of
homes
in
the
Skyline
Acres
subdivision.
This
land
was
acquired
for
a
price
of
$65,000.00,
primarily
financed
by
mortgage.
25.
The
sole
intention
of
the
taxpayer
in
acquiring
the
Fraser
Lot
was
to
insure
the
continued
availability
of
lots
on
which
the
taxpayer
could
pursue
its
business
as
a
volume
builder
of
houses.
But
he
said
paragraph
25
maybe
should
have
included
apartments,
as
the
company
had
apartments
in
mind
in
the
long
run
although
it
had
no
plans
for
apartments
when
the
Fraser
land
was
acquired,
nor
was
there
then
any
intention
to
build
a
company
plant
or
office
building
or
a
shopping
centre
on
that
land.
The
company
began
to
change
its
business
direction
in
1968
and
1969
when
Robert
C
Bird,
a
son
of
John
Bird
Sr,
and
Stirling
Gorham,
a
son
of
Joseph
Gorham
Sr,
came
into
the
company.
The
sons
had
an
understanding
with
their
fathers
that
they
would
come
with
the
company
for
a
trial
period
of
one
year
and
if
they
decided
to
stay
thereafter
they
would
purchase
their
fathers’
shares.
Robert
Bird
was
a
civil
engineer,
graduated
in
1957,
following
which
he
was
employed
for
11
years
with
Diamond
Construction
Company,
which
had
a
very
large
business
in
major
building
and
heavy
construction
projects,
and
he
had
become
supervisor
of
construction
projects
of
that
company.
Stirling
Gorham
was
also
an
engineer,
graduated
in
1962.
They
made
a
condition
of
their
stay
with
the
defendant
that
it
would
diversify
its
operations
into
general
construction
projects,
including
apartment
buildings
and
town
houses
types
of
dwellings.
The
result
was
that
these
two
sons
and
two
other
young
employees
of
the
company,
Haze-n
Thomas
and
John
Graham,
acquired
all
the
shares
of
Bird
Sr
and
Gorham
Sr
in
1969,
the
division
of
shares
being
40%
to
each
of
the
sons,
10%
to
Thomas
and
10%
to
Graham.
The
sale
price
of
the
shares
was
agreed
on
a
book
value
basis
of
$242,000.
This
value
is
not
in
issue.
When
the
new
members
acquired
their
shares
in
1969
the
company
had
gotten
into
general
and
heavy
construction
to
only
a
minor
extent,
but
thereafter
the
new
members
were
anxious
to
expand
in
that
direction
and
they
obtained
several
contracts,
but
the
company
was
experiencing
difficulty
in
getting
necessary
bonding
for
the
larger
projects.
As
to
the
bonding
situation
evidence
was
given
by
David
J
Wilson,
principal
shareholder
of
a
Fredericton
insurance
firm,
W
Hedley
Wilson
Ltd,
which
deals
in
various
types
of
insurance
and
specializes
in
bonding
insurance
coverage
for
construction
contractors.
He
said
that
for
large
projects
the
contractors
need
two
kinds
of
bonds,
(a)
a
bid
bond
that
provides
a
financial
guarantee
which
will
be
liable
to
forfeiture
if
the
contractor
is
offered
the
contract
and
refuses
to
enter
into
it,
and
(b)
a
performance
bond
which
in
effect
guarantees
performance
and
completion
of
the
contract.
The
amount
of
working
capital
of
the
contractor
is
important,
and
bonding
companies
usually
give
bonding
on
a
rule
of
thumb
measurement
of
10
to
15
times
working
capital.
Wilson
was
not
handling
bonding
insurance
for
Fredericton
Housing
prior
to
the
new
members
coming
into
the
company,
but
he
knew
Robert
Bird
and
discussed
bonding
with
him
and
obtained
the
company’s
business.
However,
he
experienced
difficulty
in
getting
required
bonding
for
the
company
because
of
its
insufficiency
of
working
capital.
In
that
situation
the
shareholders
of
Fredericton
Housing,
on
advice
of
their
solicitor,
accountant
and
insurance
firm,
decided
to
incorporate
a
separate
company,
with
the
same
shareholding
ratio
as
they
had
in
Fredericton
Housing,
to
carry
on
general
construction,
and
to
transfer
the
current
assets
and
current
liabilities
of
the
old
company
to
the
new
company
in
order
to
make
the
bonding
situation
more
acceptable
to
the
bonding
company.
Accordingly,
Fredericton
Housing
and
Construction
Co
Ltd
was
incorporated
on
August
6,
1969
with
power,
inter
alia,
to
carry
on
the
business
of
general
contractors
and
to
build
all
kinds
of
buildings
and
structures.
An
agreement
for
the
purchase
and
transfer
of
certain
assets
of
Fredericton
Housing
was
entered
into
by
the
two
companies,
a
copy
of
which
was
filed
as
an
exhibit
herein.
This
improved
the
bonding
situation
but
not
enough
initially
to
enable
the
companies
to
secure
bonding
for
large-scale
projects
to
the
extent
desired
by
the
new
owners.
But
later
the
sale
of
80
acres
of
the
Fraser
land
provided
needed
liquid
assets
which
increased
the
bonding
capacity
greatly
and
helped
the
new
company
to
obtain
more
and
larger
contracts.
Following
its
incorporation
Fredericton
Housing
and
Construction
Co
continued
house
building,
but
also
expanded
its
operations
into
larger
projects;
and
Fredericton
Housing
became
relatively
inactive,
but
held
title
to
the
Fraser
land
and
long-term
assets
and
investments
and
equipment
which
it
rented
to
the
new
company.
Individual
lots
are
being
transferred
to
the
new
company
as
and
when
they
are
needed
by
that
company.
Another
company,
Fredericton
Rentals
Ltd,
was
also
incorporated
by
those
same
shareholders
and
with
a
similar
ratio
of
shareholding,
to
manage
the
permanently
held
property
of
Fredericton
Housing.
As
to
the
sale
of
the
80
acres
of
the
Fraser
land
to
New
Brunswick
Housing
Corporation,
Robert
Bird
testified
that
he
knew
Ken
Scott,
its
president,
and
they
met
often,
both
being
interested
in
housing
projects,
and
in
the
fall
of
1969
Scott
asked
him
if
he
would
be
willing
to
sell
all
or
part
of
the
Fraser
land
and
offered
$2,500
per
acre
for
it.
He
took
the
offer
up
with
the
other
shareholders
and
former
senior
shareholders,
and
with
the
company’s
solicitor,
who
gave
an
opinion
that
a
gain
from
any
such
sale
would
be
a‘
capital
gain.
Graham
was
against
selling
all
the
land,
feeling
that
the
company
would
continue
to
need
land
for
housing,
which
was
the
activity
of
its
business
in
which
he
was
most
active,
and
because
of
the
Fraser
land’s
proximity
to
Skyline
Acres
it
would
be
a
good
area
to
move
into
next.
It
was
then
decided
to
sell
80
acres,
and
an
option
was
given
to
the
Housing
Corporation
on
October
10,
1969
for
purchase
of
80
acres
at
$2,500
per
acre..
The
option
was
accepted
on
January
12,
1970
and
a
deed
was
given
in
March
1970.
The
portion
sold
is
coloured
purple
on
the
Fredericton
map.
All
the
land
was
in
the
same
state
as
when
it
was
bought
in
1965.
The
portion
remaining
after
the
sale
of
the
80
acres
is
still
in
that
same
state,
except
that
a
small
part
south
of
the
highway
is
being
used
for
repairing
equipment.
An
offer
was
recently
received
from
the
Housing
Corporation
to
purchase
the
remaining
42
acres,
but
Fredericton
Housing
has
refused
the
offer,
looking
forward
to.
using
the
land
for
high-density
housing,
in
relation
to
a
master
plan
being
developed
by
the
City.
The
company
has
now
obtained
a
10-year
mortgage
for
$150,000
on
the
42
acres,
with
both
the
company
and
Fredericton
Housing
and
Construction
on
the
mortgage,
although
title
to
the
land
is
in
Fredericton
Housing.
The
land
is
zoned
green
belt.
The
net
proceeds
of
the
sale
of
the
80
acres,
$168,018,
went
to
Fredericton
Housing
and
Construction,
and
it
was
reported
by
that
company
in
its
income
tax
return
for
1970.
The
gain
was
never
reported
by
Fredericton
Housing
in
its
income
tax
returns.
The
shareholders
apparently
treated
the
two
companies
as
one
in
some
respects,
and
the
auditors
regarded
them
as
associated
companies
under
the
Income
Tax
Act
and
assumed
that
Fredericton
Housing
and
Construction
owned
the
land
when
the
80
acres
were
sold.
The
proceeds
were
used
in
part
to
pay
and
reduce
accounts
payable
and
the
remainder
was
invested
in
bank
certificates,
which
improved
the
working
capital
and
bonding
position
of
the
companies.
John
Page,
a
chartered
accountant
and
at
one
time
a
senior
partner
in
the
accounting
firm
H
R
Doane
and
Company
which
acted
as
auditors
for
both
of
the
companies,
testified
that
he
was
a
director
of
Fredericton
Housing
during
the
period
1954
to
1958
and
frequently
discussed
its
affairs
with
the
owners
and
pointed
out
to
them
that
they
could
get
more
profits
from
selling
lots
than
by
building
houses,
but
they
were
satisfied
to
stay
with
building
houses;
and
at
directors’
meetings
there
was
no
discussion
about
engaging
in
selling
or
trading
in
vacant
land.
Various
entries
in
the
financial
statements
and
books
of
the
companies
and
their
income
tax
returns
were
referred
to
in
evidence
and
were
spoken
to
by
Page
and
by
Donald
A
Profit!,
who
also
was
a
chartered
accountant
with
Doane
and
Company
and
along
with
Page
looked
after
the
accounting
of
the
companies.
Profitt
has
become
secretary-treasurer.
In
Fredericton
Housing’s
balance
sheet
for
its
fiscal
year
ending
April
30,
1966
the
Fraser
land
was
included
with
other
land
in
an
item
“Land
for
future
building’,
not
under
“Fixed”
Assets,
similarly
in
the
balance
sheet
for
1967.
In
its
return
for
1968
the
land
was
included
in
an
item
“Land
for
future
building’,
under
a
heading
“Investments”,
but
not
under
Fixed
Assets.
In
its
1969
return
it
was
included
under
“Land
for
further
development”
under
Long-term
Assets,
again
not
under
Fixed
Assets.
Profitt
said
that
the
accounting
practice
was
to
transfer
lots
from
land
held
for
development
to
current
assets
as
inventory
building
lots
as
they
became
serviced
and
to
take
care
of
the
next
year’s
construction.
Since
1970
Fredericton
Housing
does
not
carry
an
inventory
of
lots,
for
since
1969
it
has
been
holding
only
longterm
land
and
investments
and
equipment,
and
the
present
practice
is
to
transfer
lots
from
its
long-term
land
to
Fredericton
Housing
and
Construction
as
and
when
they
are
needed;
and
that
since
August
1969
Fredericton
Housing
has
been
relatively
dormant
and
all
construction
has
been
carried
on
by
Fredericton
Housing
and
Construction.
in
Fredericton
Housing’s
1970
return
there
is
no
Fixed
Assets
item
or
inventory
of
land
as
opposed
to
inventory
of
lots,
but
there
is
an
item
‘‘Land
for
future
development”,
and
Page
and
Profitt
said
that
if
the
80
acres
had
not
been
sold
it
would
have
been
included
there.
Page
said
the
description
shows
its
nature
as
land
for
utilization
at
some
indefinite
future
time;
that
he
would
not
include
land
for
future
development
in
inventory,
it
would
have
to
be
subdivided
and
disposable
within
about
12
months
to
be
included
in
inventory;
but
in
the
case
of
a
trader
in
real
estate,
land
intended
to
be
held
for
later
future
use
could
be
placed
in
deferred
inventory;
and
that
the
description
of
“land
for
future
development”
can
be
broader
than
merely
for
houses
and
it
can
include
apartments
and
other
buildings.
Profitt
said
that
the
change
in
accounting
presentation
in
1970
from
what
it
was
in
1968
and
1969
was
not
in
reality
a
different
presentation
and
it
made
no
change
in
the
balance
sheet.
In
Fredericton
Housing’s
returns,
interest
payable
on
the
mortgage
to
the
Fraser
Companies
was
charged
to
current
expenses
and
was
not
capitalized,
nor
were
any
taxes
on
the
land
capitalized
in
any
year.
Fredericton
Housing’s
supplementary
income
tax
return
for
1970
shows
a
gain
of
$12,364
on
disposal
of
Woodbridge
and
Longwood
Drive
properties,
which
was
not
taken
into
revenue
by
the
company,
but
the
Minister
added
it
to
taxable
income.
Profitt
said
that
these
properties
were
serviced.
The
company
took
into
income
its
profits
on
the
previously
mentioned
sales
of
land
to
the
City
for
a
school
and
to
Central
City
Investments
for
a
small
shopping
centre,
and
there
was
evidence
that
these
lands
were
serviced
also.
Among
other
things
brought
out
in
evidence
was
that
the
Fraser
land
has
never
been
advertised
for
sale,
nor
prior
to
the
sale
of
the
80
acres
was
it
ever
rented
or
dedicated
to
any
income
earning
use;
in
1969
the
companies
were
not
financially
able
to
develop
it;
the
price
of
$2,500
per
acre
obtained
for
the
80
acres
was
thought
by
the
shareholders
to
be
surprisingly
high
and
the
offer
came
fortuitously
at
a
time
when
the
companies
needed
an
injection
of
money
to
increase
their
bonding
capacity
and
enable
them
to
bid
for
and
obtain
a
greater
volume
of
heavy
construction
contracts,
and
Fredericton
Housing
and
Construction
has
increased
its
bonding
capacity
and
its
business
greatly
as
a
result,
in
part
at
least,
of
that
new
money
from
the
sale
of
the
80
acres;
and
a
summary
of
combined
operations
of
the
two
companies
for
the
year
ended
January
31,
1974,
was
presented
in
evidence,
as
was
a
summary
of
bids
made
and
accepted
or
refused,
as
the
case
may
be,
and
bonding
obtained
or
refused,
for
the
years
1968
to
1974
inclusive;
there
was
also
evidence
of
salaries
and
dividends
paid
by
the
companies,
and
a
statement
(Exhibit
D-8)
of
profits
and
dividends
and
a
reserve
for
taxes
in
the
years
1972,
1973
and
1974;
and
evidence
that
Fredericton
Housing
obtained
rental
income
from
an
apartment
building
and
from
some
houses
pending
their
sale.
In
his
reasons
for
judgment
allowing
Fredericton
Housing’s
appeal
the
learned
Chairman
of
the
Tax
Review
Board
expressed
his
view
in
the
following
paragraph
of
his
reasons
[p
2555]:
In
my
view,
the
land
purchased
from
Fraser
Companies
on
a
long-term
basis
was
an
investment
in
the
future
of
this
company:
it
was
a
capital
asset
until
brought
into
the
normal
trading
aspect
of
the
company
by
subdivision
of
lots
on
the
land,
or
by,
at
the
very
least,
the
submission
of
a
plan
of
subdivision
for
approval,
on
the
particular
land
in
question.
In
my
view,
until
that
happened,
it
was
a
capital
asset,
and
what
happened
in
this
case
was
merely
that
the
company
transformed
the
capital
asset,
when
the
fortuitous
offer
from
the
housing
authority
was
forthcoming,
from
land
to
cash;
and
that
it
was
neither
a
sale
in
the
normal
course
of
the
company’s
operation
nor
was
it,
in
my
view,
a
venture
in
the
nature
of
trade.
It
was
nothing
more
than
a
conversion,
as
I
have
said,
of
a
capital
asset
from
land
to
cash,
which
allowed
the
company
to
continue
its
operation,
and
presumably
enhanced
the
treasury
of
the
country
by
creating
taxable
income
from
the
appellant’s
ability
to
branch
out
into
more
extensive
construction.
However,
with
all
respect
for
the
Chairman’s
said
view
and
his
experience
in
tax
matters
of
this
kind,
I
have
reached
a
different
conclusion.
On
my
appreciation
of
the
evidence
it
is
my
view
that
the
Fraser
land
was
stock-in-trade
or
inventory
of
Fredericton
Housing
in
its
business,
that
the
sale
of
the
80
acres
was
not
a
sale
or
realization
of
a
capital
asset,
and
that
the
gain
in
issue
on
the
sale
was
a
profit
from
the
operation
of
the
company’s
business
and
not
a
profit
of
a
capital
nature.
The
company
was
carrying
on
a
business
of
acquiring
land
on
which
to
build
houses
for
sale,
building
houses
on
the
land
so
acquired,
and
selling
the
houses
and
the
portions
of
land
on
which
they
were
built,
as
and
when
sales
became
possible.
The
company
was
the
major
builder
of
low-cost
houses
in
the
Fredericton
area
during
the
relevant
years
since
its
incorporation
in
1954,
and
prior
to
the
purchase
of
the
Fraser
land
in
1966
it
had
built
and
sold
many
houses
and
had
subdivided
vacant
land
and
developed
it
for
housing.
It
needed
land
for
its
business
and
was
acquiring
it
in
advance
of
the
time
for
building,
as
indeed
it
was
advisable
for
it
do
to
in
order
to
have
land
at
reasonable
cost
when
needed.
Buying
and
developing
land
for
houses
was
its
business.
The
land
so
acquired
was
an
ingredient
of
what
it
hoped
to
sell.
When
it
purchased
the
Fraser
land
it
was
looking
forward
to
a
long-range
continuation
of
its
business,
and
the
land
was
acquired
for
its
usual
housing
construction
purposes
and
its
anticipated
land
needs.
There
is
little
evidence
that
the
Fraser
land
was
acquired
or
intended
to
be
used
or
kept
for
any
other
purpose,
or
that
prior
to
the
sale
of
the
80
acres
it
was
dedicated
to
any
other
purpose.
Undoubtedly
the
sale
of
the
80
acres
to
New
Brunswick
Housing
was
unexpected
and
fortuitous,
and
it
was
a
sale
of
a
large
acreage
of
undeveloped
land
unlike
the
sales
of
houses
and
their
lots
which
was
the
method
used
almost
exclusively
by
the
company
to
dispose
of
its
land
acquired
for
building
purposes.
But
neither
those
particular
facts
nor
the
evidence
as
a
whole
warrants,
in
my
opinion,
a
conclusion
that
the
sale
of
the
80
acres
was
not
a
sale
of
stock-in-trade
or
that
the
gain
was
not
a
profit
from
the
operation
of
the
company’s
business.
The
land
was
always
land
that
the
company
intended
to
sell.
True,
it
intended
to
sell
it
in
residential
lot
parcels
with
houses
built
on
them
by
the
company.
But
an
opportunity
came
to
sell
80
acres
at
a
large
profit
at
a
time
when
money
was
needed,
and
the
company
took
advantage
of
the
opportunity
without
waiting
to
develop
the
land.
Nevertheless,
the
Fraser
land
was
an
ingredient
of
what
the
company
was
in
the
business
of
selling,
part
of
its
stock-in-trade
for
eventual
disposal
by
sale
in
the
normal
course
of
its
business,
and
its
character
as
such
had
not
changed
from
the
time
when
‘it
was
acquired
from
the
Fraser
Companies.
I
do
not
agree
with
the
contention
of
the
company
that
the
land
was
an
asset
of
a
capital
nature
that
would
only
become
stock-in-trade
when
it
was
made
ready
for
subdivision,
servicing
and
building.
-
I
have
considered
the
manner
in
which
the
Fraser
land
was
treated
in
the
bookkeeping
and
accounts
of
the
companies,
but
I
do-not
regard
it
as
conclusive
on
the
question
whether
the
land
was
a
long
term
capital
asset.
The
accounting
treatment
lent
itself
to
argument
as
to
what
was
meant
and
intended.
Fredericton
Housing
became
relatively
dormant
as
a
builder
of
houses
when
Fredericton
Housing
Construction
was
incorporated
and
became
the
operating
company.
The
latter
company
went
successfully
into
the
heavy
construction
field,
but
it
continued
the
previous
business
of
building
houses,
and
land
for
that.
purpose
was
transferred
to
it
by
Fredericton
Housing
as
needed.
I
do
not
think
that
the
change
in
corporate
direction
and
activities
changed
the
character
of.
the
80
acres
of
the
Fraser
land.
Nor
do
I
think
that
the
motivation
for
its
sale
and
the,
beneficial
effect
it
had
in
increasing
the
bonding
capacity
of
the
companies
and
their
business
are
determining
factors
in
respect
of
the
issue
herein.
\
_-*
In
the
result
my
conclusion
is
that
the
gain
in
question
from
the
sale
of
the
80
acres
was
a
profit
from
the
sale
of
Stock-in-trade
of
Fredericton
Housing
in
the
course
of
the
operation
of
its
business
for
profit,
and
that
it
was
not
a
gain
of
a
capital
nature.
The
appeal
is
therefore
allowed
with
costs
and
the
assessment
appealed
from
is
restored.
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