The
Assistant
Chairman:—The
appeal
by
Mr
Viateur
St-Pierre
against
an
assessment
for
the
taxation
year
1968
was
heard
at
Montreal,
Quebec
on
October
31,
1972.
In
1968
appellant
sold
his
grocery
and
purchased
a
hotel
for
which
he
paid
$100,000,
and
which
he
subsequently
sold
for
$105,000.
The
case
at
issue
turns
on
three
main
points:
(a)
Appellant
considers
the
value
of
the
hotel
to
be
$87,517.21,
while
respondent
contends
that
it
is
$45,000,
in
accordance
with
the
valuation
which
he
made
of
the
property.
Respondent’s
appraiser
fixed
it
at
$48,849.50,
according
to
the
replacement
cost
method;
appellant
contends,
however,
that
in
the
view
of
a
reputable
con-
tractor
the
replacement
cost
would
be
$125,000,
but
he
submitted
no
proof
that
this
latter
contention
was
well
founded.
In
his
testimony
appellant
stated
that
the
hotel
consisted
mainly
of
a
public
bar.
Very
few
meals
were
served
and
few
rooms
rented
to
customers.
The
building
was
of
wood,
and
respondent’s
valuation
seems
reasonable
to
me.
During
the
hearing,
however,
respondent
admitted
that
the
hotel
fell
within
Class
6
rather
than
Class
3
of
Schedule
B
to
the
Income
Tax
Regulations,
as
stated
in
his
reply
to
the
notice
of
appeal,
and
that
appellant
would
be
entitled
to
a
maximum
depreciation
of
10%
per
annum.
(b)
Respondent
allows
depreciation
of
50%
on
the
automobile,
while
appellant
contends
that
the
automobile
is
used
almost
exclusively
for
purposes
of
his
business.
From
the
testimony
at
the
hearing
of
the
case,
I
conclude
that
depreciation
of
75%
on
the
cost
of
the
automobile
would
be
more
in
keeping
with
its
use
for
commercial
purposes.
(c)
Appellant
was
taxed
on
the
whole
amount
recovered
on
the
capital
cost
allowance
in
connection
with
the
sale
of
his
grocery,
whereas
he
claimed
that
this
amount
was
applied
against
the
cost
of
the
hotel.
Subsection
1101(1)
of
the
Income
Tax
Regulations
applies
to
the
Situation
in
this
case,
although
from
a
construction
standpoint
the
two
properties
may
be
regarded
as
falling
within
the
same
class,
namely
Class
6.
The
fact
remains
that
these
are
two
separate
and
quite
distinct
undertakings
or
businesses.
Relying
on
MNR
v
Midwest
Hotel
Company
Ltd,
[1970]
CTC
482;
70
DTC
6316
(in
which
the
decision
has
just
been
affirmed
by
the
Supreme
Court
of
Canada,
[1972]
CTC
534;
72
DTC
6440)
and
Fernand
Cameron
v
MNR,
[1970]
Tax
ABC
470;
70
DTC
1297,
I
must
hold
that
the
assessment
made
by
respondent
with
respect
to
the
amount
recovered
on
the
capital
cost
allowance
on
the
grocery
is
correct.
I
therefore
find
that
in
the
absence
of
evidence
to
the
contrary,
the
valuation
of
the
hotel
by
respondent
at
$45,000
is
reasonable;
that,
in
accordance
with
respondent’s
admission,
the
hotel
is
taken
as
falling
within
Class
6
of
Schedule
B
to
the
Income
Tax
Regulations,
and
appellant
is
entitled
to
depreciation
of
10%
per
annum
on
this
property;
that
depreciation
of
75%
rather
than
50%
should
be
allowed
on
the
cost
of
the
automobile
for
its
use
for
commercial
purposes,
and
that
the
total
amount
of
the
capital
cost
allowance
can
be
recovered
on
the
sale
of
appellant’s
grocery.
For
these
reasons
the
appeal
is
allowed
in
part
and
the
whole
referred
back
to
the
respondent
for
reassessment
to
be
made
accordingly.
Appeal
allowed
in
part.
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