A
J
Frost:—This
is
an
income
tax
appeal
in
respect
of
the
appellant’s
1967
and
1968
taxation
years.
Upon
Notices
of
Objection
duly
filed
and
signed,
the
Minister
of
National
Revenue
confirmed
the
assessments
on
the
ground
that
the
amount
of
$12,200
received
from
Medi-Dent
Service
Limited
(hereinafter
referred
to
as
“Medi-Dent”)
for
dental
equipment
was
not
proceeds
of
disposition
of
depreciable
property
within
the
meaning
of
paragraph
20(5)(c)
of
the
Income
Tax
Act
and
therefore
there
is
no
amount
required
to
be
included
in
computing
appellant’s
1967
income
pursuant
to
the
provisions
of
subsection
20(1)
of
the
Act;
that
accordingly
for
the
purpose
of
paragraph
11
(1)(a)
of
the
Act
and
section
1100
of
the
Income
Tax
Regulations
the
undepreciated
capital
cost
of
the
appellant’s
property
of
Class
8
of
Schedule
B
to
the
Income
Tax
Regulations
has
been
properly
determined
in
accordance
with
the
provisions
of
paragraph
20(5)(e);
that
payments
amounting
to
$3,810.96
made
to
Medi-Dent
claimed
as
deductions
from
1968
income
were
capital
outlays
within
the
meaning
of
paragraph
121(1)(b)
of
the
Act;
that
the
deductions
claimed
by
the
appellant
in
respect
of
the
said
payments
would
unduly
or
artifically
reduce
the
appellant’s
1968
income
within
the
meaning
of
subsection
137(1)
of
the
Act.
The
appeal
of
Albert
Selina,
a
partner
of
the
appellant,
was
heard
at
the
same
time
on
common
evidence.
Both
appeals
came
on
for
hearing
on
May
27,
1971
at
Victoria,
BC
by
the
Tax
Appeal
Board
as
it
was
then
constituted.
The
appellant,
a
dental
practitioner,
carried
on
his
profession
in
the
County
of
Victoria,
British
Columbia
on
a
partnership
basis
with
Dr
Albert
J
Selina.
In
February
1967,
the
partners
sold
their
dental
equipment
by
two
bills
of
sale
absolute
for
$16,000
and
$8,400
to
Medi-Dent,
a
company
incorporated
under
the
laws
of
the
Province
of
Ontario,
with
its
head
office
in
Hamilton,
Ontario,
and
immediately
thereafter
leased
back
the
subject
equipment
on
a
rental
basis.
The
question
before
the
Board
is:
did
the
appellant
depart
so
far
from
what
might
be
regarded
as
a
normal
professional
business
practice
that
the
transaction
complained
about
by
the
Minister
must
be
regarded
as
artificial?
Counsel
for
the
respondent
contended
that
the
appellant
was
not
entitled
to
deduct
moneys
paid
to
Medi-Dent
as
a
rental
expense,
as
the
whole
transaction
was
a
sham
and
a
simulacrum;
that
the
whole
purpose
of
the
transaction
was
to
artificially
reduce
income
within
the
meaning
of
subsection
137(1);
that
the
expense
was
not
reasonable;
and
that
in
any
event
the
payments
were
of
a
capital
nature.
lt
was
established
in
evidence
that
the
equipment
was
sold
by
the
appellant
to
Medi-Dent
at
its
appraised
value
in
an
arm’s
length
transaction.
The
evidence
further
showed
that
there
was
not
the
slightest
sign
of
fraud
or
improper
conduct
in
anything
that
the
appellant
did.
In
my
opinion,
the
sale
was
a
well-documented
properly
negotiated
legal
transaction
between
strangers.
The
appellant
was
not
a
shareholder
or
officer
of
Medi-Dent
and
had
no
financial
interest
in
the
company.
No
evidence
was
adduced
to
show
any
unusual
relationship
between
the
appellant
and
Medi-Dent,
or
that
the
value
placed
on
the
equipment
was
unrealistic.
The
only
evidence
before
the
Board
as
to
value
was
a
sworn
testimony
of
the
appellant.
To
suggest,
as
counsel
for
the
respondent
did
in
his
pleadings,
that
the
undepreciated
capital
cost
of
the
equipment
was
the
fair
market
value
is
untenable.
The
onus
of
proof
concerning
value
shifted
from
the
appellant
to
the
respondent
during
the
course
of
the
hearing,
and
the
Minister
was
unable
to
prove
to
the
Board
that
he
was
right
in
any
of
his
assumptions
as
to
value
or
otherwise.
I
find
no
ground
which
would
support
a
conclusion
on
my
part
that
the
transaction
between
the
appellant
and
Medi-Dent
was
of
an
artificial
nature.
Appeal
allowed.
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