Antoine Hullmann and Gabrielle Hullmann v. Minister of National Revenue, [1973] CTC 2106

The Assistant Chairman:—This is an appeal of Antoine Hullmann from the income tax assessment dated September 27, 1971 in respect of his taxation years 1963, 1964, 1965, 1966, 1967 and 1968, and from the assessment dated July 28, 1972 in respect of the 1969 taxation year. It was agreed by the parties concerned that the appeal of Gabrielle Hullmann would be heard simultaneously with that of Antoine Hullmann on common evidence.

On February 12, 1973 a notice of motion was filed with this Board by the Minister of National Revenue whereby an application was made for the striking out of the notice of appeal for the 1963, 1964 and 1965 taxation years on the grounds that the appeal was in respect of “nil” assessments for the said years.

The Board reserved its decision on the motion with the understanding that this issue would first be disposed of before a decision could be made on the merits of the appeals before it.

The respondent’s motion is based on the case of Newfoundland Minerals Ltd v MNR, [1969] CTC 639; 69 DTC 5432, in which the Exchequer Court held that neither the Tax Appeal Board nor the Exchequer Court had jurisdiction to hear an appeal from a notification that no tax was payable. It was considered in that instance that the Minister neither reassessed nor confirmed the assessment but that he vacated the assessment, and that by striking out the assessment itself and reducing it to “nil” there could not possibly be a right of appeal. The question as to whether an appeal lies from a nil assessment is an important one which can, in my opinion, seriously affect the taxpayer’s rights.

The whole matter revolves around the definition of “assessment”, and in Okalta Oils Limited v MNR, [1955] SCR 824; [1955] CTC 271; 55 DTC 1176, the Supreme Court of Canada defined an “assessment” as the amount of tax payable and held that if there were no tax there would not be an assessment and therefore there could be no appeal. However, in Anjulin Farms Limited v MNR, [1961] Ex CR 381; [1961] CTC 250; 61 DTC 1182, it was held by the Exchequer Court that there was an appeal against a nil assessment. In Newfoundland Minerals Ltd (supra) the Exchequer Court reversed its previous finding in this respect and denied the taxpayer his appeal in view of the facts peculiar to that case which had also resulted in a nil assessment. It would be difficult indeed not to agree in principle with the legality, soundness, and logic of this decision and to apply it to similar cases wherein the taxpayer’s rights in respect of an assessment for a particular year have been exhausted. If the assessment in a particular year is nil and the taxpayer has no tax to pay and no tax refund to receive, there would normally be no reason for an appeal from that assessment.

However, if in spite of a nil assessment the taxpayer’s rights pursuant to the Income Tax Act have not been exhausted in respect of the taxation year to which the nil assessment pertains, and the provisions of the Act confer rights to the taxpayer notwithstanding the nil assessment such as, for example, the right of a taxpayer to carry business losses back to a previous year or to dispute a reserve which the Minister had set up in order to arrive at the nil assessment although the taxpayer had not claimed the reserve, I am of the opinion that the taxpayer cannot be precluded from appealing the nil assessment in order to establish and exercise an existing right conferred on him by the Act because it might be of great importance to him at that time to find out how large the loss is which he may apply to the previous or future years or how great a reserve he has to account for in future years.

In my view the right to appeal from a nil assessment, or the absence of such a right, depends entirely on the facts of a given case. The facts which determined the outcome in the case of Newfoundland Mineral Ltd (supra) were obviously considerably different from those in the case at bar. In the present case, Antoine Hullmann’s rights in his 1964 nil assessment had not, in my opinion, been exhausted and I allow the appeal to stand for that year. In respect of the 1963 and 1965 nil assessments, Antoine Hullmann was not shown as having any remaining statutory rights and the appeals for those years are therefore to be quashed as requested by the respondent.

The respondent’s motion is allowed in part and the appeal in respect of the 1963 and 1965 nil assessments is quashed. The appeal in respect of the 1964 nil assessment is to be decided on its merits. The appeals now before the Board in respect of the taxation years 1964, 1966, 1967, 1968 and 1969 were lodged by Antoine Hullmann and Gabrielle Hullmann. The principal issue in these appeals is to determine whether the sale of real estate was the realization of a new taxable capital gain or whether the properties had been acquired for the purpose of turning them into account and whether by their course of conduct they carried on an adventure in the nature of trade.

The relevant facts are as follows: Antoine Hullmann immigrated to Canada in 1959 and proceeded to buy four rooming houses—two on Admiral Road, one on Kendal Road and one on Marlborough Avenue in Toronto. In 1960 the appellant bought a 50-unit apartment building at 77 Spencer Avenue. In 1962 Gabrielle Hullmann arrived in Canada from Switzerland and both she and Antoine Hullmann moved into the 77 Spencer Avenue Building. At that time the rooming houses, except the one at 145 Marlborough Avenue, were sold. In 1964 the appellants sold the Spencer Avenue apartment and bought a 108-unit apartment building on Jameson Avenue, Toronto. The sale of one building and the purchase of the other were transacted on the same day by the same real estate agent and can be considered as a “switch” in which the amount derived from the sale of one building went to pay for the purchase of the other. In 1966 and 1967 Gabrielle Hullmann became ill and returned temporarily to Switzerland. There is on record a medical certificate dated in 1972 declaring that Gabrielle Hullmann was ill. In 1966 Antoine Hullmann, Gabrielle Hullmann and a Mr Zlamour bought property on York Street which was sold again in 1970 at a profit of $90,000. The appellant also bought land in Oshawa in that year. Expropriation proceedings were commenced in 1970. In 1967 Antoine Hullmann, in partnership with Gabrielle Hullmann and a Mr Salamin, acquired properties on Gowan Avenue and Richview Side Road, both of which were subsequently sold.

In 1968 the Jameson apartment building was sold and Antoine Hullmann and Gabrielle Hullmann incorporated Fornet Limited—each holding 50% of the shares. Fornet Limited purchased land in Kitchener and Pickering which sold at a profit. In the same year Antoine Hullmann and Gabrielle Hullmann acquired a 2/3 interest in Hulad Developments which owned land in Acton.

The issue to be decided is one of facts and these facts must be appreciated in their entirety. I do not consider that telescoping the facts on the two transactions involving the apartment building properties on Spencer Avenue and Jameson Avenue to the exclusion of the other facts of the case is a fair representation of the activities of Antoine and Gabrielle Hullmann since 1959.

From the purchase of the rooming houses and their sale, the purchase of the apartment buildings on Spencer Avenue and Jameson Avenue, the purchase and sale of land on York Street, Oshawa, the acquisition and sale of the Gowan Avenue and Richview Side Road properties, the incorporation of Fornet and the partnership in Hulad, all form part of a consistent pattern or scheme of trading in lands and buildings without there being any valid indication that the acquisition of any of these properties, including the apartment buildings on Spencer Avenue and Jameson Avenue, were acquired for long-term investments.

From the evidence adduced in these appeals, I conclude that Antoine and Gabrielle Hullmann acquired the properties which are the subject matter under consideration for the purpose of resale and not for a long-term investment, that their conduct in these transactions was that of an adventure in the nature of trade, and that the profits realized from the sales of these properties were properly included in the income of Antoine and Gabrielle Hullmann for the 1964, 1966, 1967, 1968 and 1969 taxation years.

The appeal of Antoine Hullmann is therefore dismissed. For the reasons given in my decision re Antoine Hullmann, the appeal of Gabrielle Hullmann in respect of the 1964, 1966, 1967 and 1968 taxation years is dismissed. As to the appeal in respect of Gabrielle Hullmann’s 1969 taxation year, it has neither been shown nor argued that Gabrielle Hullmann had an interest at stake in appealing this nil assessment, and for that reason and the reasons set out above, the appeal for 1969 is quashed.

Appeals quashed in part, dismissed in part.