Ralph a Sostad v. Minister of National Revenue, [1972] CTC 2129, 72 DTC 1124

A J Frost:—This appeal is from an income tax assessment in respect of the appellant’s 1966 taxation year wherein the proceeds from the sale of mineral claims, known as “Roy 1-36”, to San Doh Mines Limited, on July 29, 1966, was added to the appellant’s reported income in the sum of $25,000. Upon Notice of Objection duly signed and filed, the Minister of National Revenue confirmed the assessment on April 20, 1970 on the ground that the amount received was not income which was exempt from income tax within the meaning of subsection 83(2) of the Income Tax Act. The appeal was heard at Vancouver, BC, on May 17, 1971 by the Tax Appeal Board and is hereby disposed of by virtue of subsection 21(2) of the Tax Review Board Act.

The question to be resolved is whether the said $25,000 received by the appellant for his mineral claims was exempt under the said subsection of the Act.

The appellant is a genuine prospector who lives in Vancouver and who has prospected all his life in British Columbia, Yukon, Northwest Territories, Northern Saskatchewan, Utah (U.S.A.), New Mexico and Australia. He has held a free miner’s licence since he was 18 years of age and still prospects.

In the summer of 1952, the appellant and his brother, Gordon Sostad, prospected in the area of Poison Mountain (BC) for a period of two weeks covering an area 6 miles long by 5 miles wide, where they discovered pieces of float or rock broken off from a deposit indicating low grade copper and other mineralization. The float was on the ground that later became known as the Roy ground. No claims were staked in 1952 because the area was too isolated and the price of copper on the low side. In 1966, the appellant returned to the Poison Mountain area and did considerable prospecting and staking on behalf of others as well as on his own behalf.

The Roy claims 1-36 were prospected first and later staked on the appellant’s own behalf. The appellant sold the said Roy claims for $25,000 cash to San Doh Mines Limited under an agreement dated July 29, 1966.

On the evidence, I am satisfied that the appellant was entitled to apply the provisions of subsection (2) of section 83 of the Income Tax Act. His testimony was clear and unequivocal and was well supported by documentary evidence, including maps of the area, and it left no doubt in mind that he had prospected the Roy ground twice before he staked it, once in 1952 and later in 1966, and had expended considerable effort as a prospector before he acquired title to the property. I find too that the prospecting done in 1952 of the ground in the same area is not too remote to be excluded in considering the merits of this appeal which in my view, deserves the same treatment as that accorded in Stephen Yanik v MNR, [1971] Tax ABC 636.

Appeal allowed.