Estate of Charlotte Mogee Tooley v. Minister of National Revenue, [1972] CTC 2107, 72 DTC 1106

Roland St-Onge:—This appeal was heard in Saskatoon, Province of Saskatchewan, on October 9, 1970 by the Tax Appeal Board as it was then constituted, and is from an assessment dated November 21, 1968 wherein a tax in the sum of $2,638.82 was levied in respect of the estate of the above deceased under the Estate Tax Act.

Charlotte Mogee Tooley died on December 31, 1967, and her executors filed an estate tax return showing the total value of assets of the estate to be $55,190.62. Included in the return were certain lands, reported as being valued at $37,500, but the Minister of National Revenue contended that the fair market value of this property at the time of her death was $43,000.

The land is located in Connaught Municipality, approximately one mile from the village of Ridgedale, and is valued for property tax purposes at $7,550. At the hearing one of the executors, Mr Raymond Tooley, who is a son of the deceased and a professional engineer, testified along with three farmers concerning the topographical features as well as the value of the subject land. On behalf of the respondent a Mr A H Macdonald, an accredited appraiser with the Appraisal Institute who had been working as an appraiser for the Department of Veterans Affairs since 1945, filed his written report as Exhibit R-2.

When Mr Tooley appraised the land he divided it into three parcels, placing a value on each parcel as follows:

Prior to his mother’s death the farm property was leased on a cropshare basis (one-third, two-thirds) and the net income for the years 1964 to 1969 inclusive was as follows:

Consequently, he utilized these figures when making his appraisal using the income approach method. He also referred to sales which had taken place in the area prior to his mother’s death to illustrate the alternative “comparison” method of valuation.

Upon cross-examination, he admitted that a certain amount of breaking work had been done before his mother’s death with the result that by December 31, 1967, the cultivated acreage had been increased by 24 acres. He stated that the figures he used for the purpose of evaluating the three parcels were the same as those used by the municipality in 1967, whereupon he was informed by counsel for the respondent that he had used the figure of “380” as the number of cultivated acres when appraising the property at the time of his mother’s death, whereas the municipality had been using a figure of “404” since the year 1958 so that there was a difference of 24 cultivated acres. He was asked to explain how he had arrived at a figure of $1,600 as the average income for a year when only two figures were below $1,600, and the total amount below the $1,600 was not more than $150. He also learned with respect to the nil income shown for the year 1969 that an appraiser does not deduct the interest on a loan when evaluating property. The evidence also showed that when Mr Tooley used the comparison method, he did not examine the titles in order to ascertain prices, but merely made inquiries from people in the area. He did not measure the cultivated acres nor was he aware of the sale index factor or of the amount of income produced by any of the properties he used for purposes of comparison.

Three farmers who knew the area testified, corroborating Mr Tooley’s testimony as to the value of the land, but upon cross-examination one of them stated that land values had dropped drastically since 1967 and many people who bought land in 1966 and 1967 at high prices later regretted having done so. Another farmer who had purchased a parcel of land in June, 1966, at a price of $9,000 stated that he would have asked $12,000 for it in 1967, or about 25% more than he paid for it. Finally, all admitted that they had never appraised property before and that they had no qualifications for appraising real property.

As may be seen, the appellant’s evidence was very weak and to make matters worse, despite a very intensive cross-examination (more often encountered in criminal cases), counsel for the appellant not only failed in his attempt to disqualify Mr Macdonald as an expert, but succeeded in confirming my belief that the latter had made all necessary inquiries, depended on reliable information and had used proper recognized methods when making his appraisal. Furthermore, it has to be remembered that according to subsection 58(1) of the Estate Tax Act the value of the assets must be appraised at the time of the death, and a substantial part of the appellant’s evidence deals with the value of the land prior to and after that date.

Even though the three farmers corroborated Mr Tooley’s evidence as to the value of the land it is, in my opinion, very difficult for them to appraise a property at a specific time in the past. On the contrary, an appraiser with Mr Macdonald’s experience would be more capable of appraising an asset easily and precisely at a fixed point in time, and especially when dealing with a property which, as is the case here, has known so great a fluctuation in value.

According to the evidence adduced, it is wiser to rely on the appraisal of an expert rather than that of Mr Tooley who failed to use the proper recognized method of appraising land.

As to the farmers’ testimony, a part thereof corroborated the expert’s appraisal with respect to the value of the land as at December 31, 1967, and it would seem more reasonable to rely on the expert’s written appraisal than to take into account the evidence of witnesses who admitted having no qualifications for the appraisal of real property.

For the above reasons, the appeal is dismissed.

Appeal dismissed.