A
W
Prociuk
(orally):—The
appellant,
formerly
known
as
Radatzhe
Brown
Developments
Ltd,
appeals
from
an
assessment
for
the
taxation
year
1967
wherein
the
Minister
disallowed
the
use
of
the
provisions
of
subsection
85E(4)
in
the
determination
of
the
quantum
of
tax
payable
for
that
year.
The
appellant’s
principal
activity
was
the
acquiring
of
raw
land,
developing
it
for
construction
and
then
selling
the
same
by
lots
to
building
contractors.
In
1967
it
had
67
unserviced
lots
remaining
out
of
an
area
of
some
34
acres
purchased
years
earlier.
By
reason
of
financial
difficulties
it
decided
in
the
spring
of
1967
to
sell
the
said
lots
as
quickly
as
possible
and
to
terminate
its
business
as
a
land
developer.
A
portion
of
these
lots
were
sold
under
an
agreement
for
sale
dated
May
31,
1967.
The
terms
of
payment
were
on
a
monthly
basis
and
the
last
payment
was
received
in
April
of
1968
at
which
time
title
to
the
land
was
transferred
to
the
purchasers.
The
remaining
lots
were
sold
in
the
summer
of
1967
but
one
of
the
terms
of
the
agreement
for
sale
was
that
the
appellant
would
complete
paving
and
curbing
of
said
lots.
This
was
done
in
September
of
that
year
and
the
appellant
was
able
to
collect
the
amount
then
owing
and
transferred
title
to
the
said
lands
at
that
time.
In
filing
its
1967
return
the
appellant
declared
a
net
income
of
$233,112,
from
which
it
claimed,
and
was
allowed,
a
reserve
of
$114,028.97
under
paragraph
85B(1)(d),
arriving
at
a
taxable
income
of
$119,083.
The
appellant
then
sought
to
apply
the
provisions
of
subsection
85E(4)
which
the
Minister
disallowed
for
the
following
reasons:
1.
the
appellant
had
not
gone
out
of
business
because
it
continued
to
collect
payments
on
the
purchase
price
until
April
1968,
on
a
portion
of
its
inventory;
and
2.
the
appellant
continued
to
pave
and
curb
the
remaining
lots
after
its
sale
in
the
early
summer
of
1967,
thus
continuing
in
business.
The
Minister
relies
on
the
decision
of
Mr
Justice
Cattanach
in
Sorbara
v
MNR,
[1964]
CTC
536;
64
DTC
5324,
when
he
stated
at
pages
543
and
5330
respectively:
In
my
view,
the
business
of
acquiring
land
for
disposition
at
a
profit
includes
all
operations
essential
to
the
successful
completion
of
the
project,
including
not
only
sale
or
other
disposition,
but
collection
of
the
proceeds
of
disposition.
Having
perused
the
above-noted
case,
I
am
satisfied
that
the
facts
there
were
substantially
different
from
those
in
the
instant
case.
In
that
case
the
appellant
did
not
cease
to
carry
on
business,
and
in
fact
a
portion
of
the
land
appropriated
by
the
federal
government
was
returned
to
him.
Under
those
circumstances,
it
is
clear
that
he
could
not
avail
himself
of
the
provisions
of
subsection
85E(4).
In
the
instant
case
the
appellant
disposed
of
all
its
inventory
in
1967.
Completion
of
street
paving
and
curbing
was
a
term
of
the
sale.
Failure
on
its
part
to
carry
out
the
terms
of
the
agreement
for
sale
would
undoubtedly
have
resulted
in
legal
proceedings
being
commenced
at
the
instance
of
the
purchaser.
This,
in
my
opinion,
is
not
carrying
on
the
business
of
land
developing,
but
merely
complying
with
the
terms
of
the
sale
of
a
business.
Similarly
collecting
moneys
due
as
a
result
of
the
sale
of
a
business
is
not
in
the
instant
case
a
carrying
on
of
a
business.
Accordingly,
I
find
that
the
appellant
ceased
its
operations
as
a
land
developer
in
1967
and
was
therefore
entitled
to
the
benefit
of
the
provisions
of
subsection
85E(4).
The
appeal
is
allowed
and
the
matter
referred
back
to
the
Minister
for
reassessment
accordingly.
Appeal
allowed.
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