Jean-Marc Champoux v. Minister of National Revenue, [1970] CTC 603, 71 DTC 5001

WALSH, J.:—The details of the real estate transactions giving rise to the present proceedings appear from the copies of the deeds filed as part of the documentary proof (Exhibit B-l) and are, moreover, admitted by the parties. The motivation which induced appellant to enter into these transactions was explained by him and his witnesses but is disputed by respondent who contends that when he purchased the property in question and subsequently sold it in a series of transactions he was engaged in an adventure in the nature of trade as a result of which the profit he made on two of these sales, with which the Court is concerned in the present proceedings, was taxable, whereas appellant contends that it was entirely fortuitous and in the nature of capital gain as when he acquired the property he did not do so with the view of subsequently disposing of same at a profit.

The facts are as follows. The appellant, Jean-Mare Champoux, is practically the sole shareholder of Champoux Automobiles Inc. and for practical purposes, any profit resulting from its operations would eventually accrue to him and, as is not unusual in such circumstances, he operated the company for all practical purposes as if it were his personal business. His drawings were made at irregular intervals, and he on his part advanced money to the company from time to time as it was required. A ledger sheet headed "‘Avances aux Officiers’’ appears on pages 9 and 10 of the documentary proof and was brought up to date by a further sheet filed as Exhibit A-1. Not only appellant himself but his father and brother have been in the automobile business in Quebec City for many years. Towards the end of 1962, appellant, who had had the British Ford agency, lost it to the Mercury dealer and had to look for a new automobile manufacturer to represent. He had been operating the British Ford agency in lower town Quebec on Dorchester Street and now succeeded in securing the American Motors Company agency but, as their Rambler agent; Auto Moderne Ltée, was located in lower town almost adjacent to where he had been operating the British Ford agency, they insisted that he locate elsewhere in the west end of Quebec in Ste. Foy or Sillery. He felt that about 125,000 square feet was the right size for an automobile agency to allow sufficient parking space for new cars, used cars acquired as trade-ins and the vehicles of salesmen and other employees, and was looking for a property of about this area. Many of the properties for sale on Boulevard Charest where he wished to locate were too large for his purposes. He finally located a property which, however, contained 167,455 square feet belonging to Les Immeubles J. M. Lortie Inc. well located for his purposes on Boulevard Charest at the foot of Cote Myrand. Another street, Branly Avenue, ran along the south-east side of the property to intersect Boulevard Charest somewhat east of it, and because of the location of the property the vendor refused to sell it except en bloc. This evidence was corroborated by Mr. Lortie who also indicated that he preferred selling to the appellant personally rather than to his company, adding that had the sale been made to the company he would then have required financial statements of the company before agreeing to it. He did not recall, however, whether the question of purchase of the property by the company had ever come up.

At about the same time, appellant was making enquiries from Traders Finance Corporation Limited, with whom his family had always dealt for over thirty years, to ascertain how much he could borrow from them to acquire land and construct the necessary building on it for his agency. He sought to borrow $160,000 but they were only willing to lend $140,000. Mr. Louis Levasseur, the Regional Director of Traders, whose evidence before the Tax Appeal Board was admitted into the record by consent of the parties and filed as Exhibit B-3, testified that their estimate was based on the fact that they believed about 300 American Motors’ cars could be sold annually by appellant’s company in the Quebee district and that their experience indicated that the amount loaned should never exceed about $50 to $60 for each vehicle sold in order to assure repayment of the loan and interest. American Motors on its part estimated a sale of 600 to 700 cars per annum, while appellant testified that his own estimate was in the area of 400 to 450 cars which, in retro- spect, proved the most accurate. Mr. Levasseur also participated in a discussion of the building plans and they were amended so that the construction of the building itself would not cost more than $100,000. This would leave $40,000 towards the cost of the land.

The vendor, Les Immeubles J. M. Lortie Inc. agreed to sell the land for $100,000, of which $40,000 was to be paid in cash and the balance over a period of six years with annual instalments of $10,000 on account of capital and interest at 6% per annum. While its deed of sale to appellant would give it an hypothee on the entire property for the balance, when appellant sold to his company part of this land to the extent of 71,472 square feet, a main-levée was given by Les Immeubles J. M. Lortie Inc. on the portion of the land sold. This enabled the company to borrow $140,000 from Traders Finance Corporation and gave it a first hypothec on the property now owned by the company. Actually, the purchase by appellant from Les Immeubles J. M. Lortie Ine. took place on April 24, 1963, his sale of part of the land to the company was on October 5, 1963, and the deed of hypothee from Traders Finance Corporation was dated October 1, 1963. It was explained in evidence that in the interval and on the basis of the assurances that the loan would eventually be made, construction of the building had proceeded on the property, but that. Traders Finance had presumably withheld the formal loan until this was completed to make sure that no privileges for workmen or suppliers of materials would be registered. It was explained by Mr. Levasseur in his evidence that in the interval the company had become indebted to Traders Finance for some $35,000 in connection with the financing of automobile purchases and that they had tolerated ‘the nonpayment of the sum by the company, so in effect this had become an advance on account of the loan.

On the company’s ledger sheet entitled "‘Avances aux Offi- ciers" we find a debit of $40,000 on April 30, 1963, which was evidently the sum used by appellant to make the down payment on the purchase of the property. On September 30, 1963, we find a credit of $42,883.20 which is evidently the amount due to him by the company on its purchase of part of the property from him. It is agreed that on this resale of part of the property to the company, appellant made neither profit nor loss (paragraph 10, Agreed Statement of Facts, Exhibit B-2). It is also agreed that on October 5, 1963, the same date as the sale by appellant to the company, he exchanged a small parcel of land with the Seminary of Quebee as the result of a change in location of a street. No consideration was paid by either party in connection with this exchange and it does not affect the issue before us, although the sale by appellant to the company included the property received in this exchange, which may account for the delay of some four days between the completion of the deed of hypothee and the actual deed of sale giving the company title to the property hypothecated in security for the loan. All the transactions were carried out by the same notary who no doubt held the Traders Finance cheque until the transactions were finally completed.

For two years during 1963 and 1964, appellant continued with the Rambler agency he had acquired from American Motors Company but he found it was not as profitable as he had anticipated. In fact, the company lost $13,992.49 in 1963 and $37,454.82 in 1964. In January 1964, the company therefore eave notice to American Motors of intention of cancellation’ of the ageney agreement effective November 2, 1964. Appellant negotiated with Chrysler Corporation to obtain an agency to represent them and succeeded in doing so but only subject to certain conditions which they imposed. They felt that the amount of land owned by the company was insufficient and required appellant to sell an additional 40 foot wide strip to the company. This involved an area of some 15,772 square feet. The sale was made for the price of $18,696.15. When asked to explain how this price was arrived at, appellant explained that this was the exact amount of his debit balance with the company as of November 17, 1964, the date of the sale. This appears from the ledger sheet at page 9 in the documentary proof. This sale resulted in a profit to him of $5,632.95, which has been included in his income by respondent and is one of the sums involved in the present appeal. Counsel for respondent; however, conceded that it was not contended that the price represented anything but a normal increase in the value of the property in the interval since appellant had acquired it and that the question of this sale being a non-arm’s length transaction between appellant and the company was not an issue.

Chrysler Motors also required, as a condition of granting the agency, an exchange of leases between the company and it whereby the company would lease Chrysler its property (including the additional amount acquired) for ten years and it would then lease the property back to the company. The advantage in this from Chrysler’s point of view was that as a condition of its lease back to the company, the company had to continue to be a Chrysler dealer so that if, for any reason, the company lost or gave up this agency then the sublease would be null and void but the principal lease would still hold good and Chrysler could install another dealer on the premises. Furthermore, as a condition of the said leases, a second lease was entered into on the same day whereby the company undertook to continue to use part of the remainder of the land (although still owned by appellant) as a used car lot and if it failed to do so undertook to build a used car office on the additional 40 foot strip just acquired. Actually, in practice, the company had been using the remainder of the land owned by appellant while he had the Rambler agency and continued to do so while he was a Chrysler dealer, but Chrysler wished to be assured that the company could continue to do so at least as long as appellant continued to own same.

Soon after appellant gave up the American Motors Rambler agency in November 1964, that company began negotiating with him to buy the remainder of his property so that it would continue to have a dealership in the vicinity which was important to it as for two years its customers had been dealing with appellant there. He refused their earlier offers, allegedly because he wished to keep the remainder of the land for the eventual expansion of his own dealership. At one time, he testified, they offered to buy him some land across the street but he refused. Finally, they made him an offer to buy part only of his remaining land fronting on Boulevard Charest with aecess at the rear to Branly Avenue being shown as re-subdivision lot 119-11-9 on the plan filed (pages 80 and 81, documentary proof) but leaving him a lot 130 feet in depth by 100 feet in width fronting on Branly Avenue shown as re-subdivision lot 119-11-10 on the plan, which he could use for further expansion and which, in fact, he did begin using acording to his evidence immediately after his sale to American Motors Company. He was selling about 800 cars a year as a Chrysler dealer as against 450 which he had been selling previously as a Rambler dealer. The sale eventually made to American Motors on March 26, 1965, involved 69,867 square feet for a price of $87,333.75. He testified he only made the sale after refusing earlier offers from them, when they agreed to leave him a portion of his property designated as subdivision 119-11-10. Their offer was too generous to refuse and his company needed the money. He and his company were now left with about 105,000 square feet (100,000 would seem to be a more accurate figure). In addition to this, however, he had continued to retain some land in lower town on Dorchester Boulevard, where his British Ford dealership had formerly been located, which he continued to use as a body shop. It had been his original intention to sell this and to carry out all the company’s activities from the property on Boulevard Charest but after making the sale to American Motors Company he then found it convenient to retain the property in lower town and do the body work there. He also said that the municipality owned the strip of land alone the service road adjacent to Boulevard Charest which bounded his property and made no objection to his parking cars on this, which gave him the use of about 10,000 to 15,000 additional square feet. Also, since there was little traffic on Branly Avenue, his employees were able to park their cars there. Out of the proceeds of the sale to American Motors, the sum of $50,000 was used to pay the balance due on the hypothee to Les Immeubles J. M. Lortie Inc. in order to obtain a main-levée on same.

Appellant testified that he did not consider it a disadvantage to his business to have the American Motors Company dealership adjacent to his as his experience indicated that in many cities whole rows of automobile dealers locate beside each other and a sort of market is created for potential purchasers of cars who go to look at different makes all within the same neighbourhood. He further testified that with respect to real estate transactions, he has never bought or sold real estate except his own home, nor has his company dealt in real estate.

It is common ground between the parties that appellant realized a net profit of $5,632.95 on the second sale to the company on November 17, 1964 of the 40 foot strip of land, re-subdivision lot 119-11-11 adjacent to the property he had previously sold to the company on October 5, 1963, and a further profit of $42,413.55 by the sale on March 26, 1965 to American Motors Canada Limited of re-subdivision lot 119-11-9. The question to be decided is whether these profits constituted capital gain for him or whether they should be included in his taxable income for the years in question as resulting from adventures in the nature of trade within the meaning of Sections 3, 4 and 139(1) (e) of the Income Tax Act. All profit realized from the liquidation of investments whether by an individual or by a corporation is not necessarily taxable. In the leading case of Irrigation Industries Limited v. M.N.R., [1962] S.C.R. 346; [1962] C.T.C. 215, Martland, J. referred with approval to a general statement of principle by Lord Buckmaster in Leeming v. J ones f [1930] A.C, 415 at 420 where he stated:

-; an accretion to capital does not become income merely because the original capital was invested in the hope and expectation that it would rise in value; if it does so rise, its realization does not make it income.

He also refers to the statement of Rowlatt, J. at an earlier stage in the same case when, in referring it back to the Commissioners, he stated :

. I commend the Commissioners to consider what took place in the nature of organizing the speculation, maturing the property, and disposing of the property, and when they have considered all that, to say whether they think it was an adventure in the nature of trade or not.

In the case of Paul Racine, Amédée Demers and Francois Nolin v. M.N.R., [1965] D.T.C. 5098; ([1965] C.T.C. 150), where the three appellants purchased the assets of a bankrupt company, forming a new company to acquire most of the assets but retaining the real estate in their personal names, and after operating and improving the business for a few months sold both the real estate and the shares in the new company at a profit, Noel, J. held that these were capital gains in the realization of investment and that the transaction was essentially the purchase of a business and its subsequent resale at a profit. At page 5100 he states :

I am of the opinion that, for the purposes of taxation, this manner of proceeding can not affect the character of the transaction. In effect, from the point of view of taxation, this transaction would be exactly the same if the appellants had simply purchased everything in their own name.

In commenting on the doctrine of secondary intention, he states at page 5103 :

. . . It is not, in fact, sufficient to find merely that if a purchaser had stopped to think at the moment of the purchase, he would be obliged to admit that if at the conclusion of the purchase an attractive offer were made to him he would resell it, for every person buying a house for his family, a painting for his house, machinery for his business or a building for his factory would be obliged to admit, if this person were honest and if the transaction were not based exclusively on a sentimental attachment, that if he were. offered a sufficiently high price a moment after the purchase, he would resell. Thus, it appears that the fact alone that a person buying a property with the aim of using it as capital could be induced to resell it if a sufficiently high price were offered to him is not sufficient to change an acquisition of capital into an adventure in the nature of trade. In fact, this is not what must be understood by a "secondary intention" if one wants to utilize this term.

In the case of Sutton Lumber and Trading Company Limited v. M.N.R., [1953] 2 8.C.R. 77; [1953] C.T.C. 237, it was held that the evidence disclosed that the business carried on and intended to be carried on by the company had not at any time been that of purchasing and selling timber lands or interest in such lands but rather that of manufacturing cedar lumber from the properties in the mill to be operated in the Clayoquot District; that the sale was of a capital asset which was not required and did not fit into the company’s plans for the opera- tion of its main properties and the profit resulting from the sale was not assessable to excess profits tax under the Act. This case cited with approval the leading case of Californian Copper Syndicate v. Harris (1904), 5 T.C. 159, where it was stated:

It is quite a well settled principle in dealing with questions of assessment of Income Tax, that where the owner of an ordinary investment chooses to realise it, and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit in the sense of Schedule D of the Income Tax Act of 1842 assessable to Income Tax. But it is equally well established that enhanced '_ values obtained from realisation or conversion of securities may be so assessable, where what is done is not merely a realisation or change of investment, but an act done i in what is truly the carrying on, or carrying out, of a business.

The case of Ster ling Paper Mills 1770. v. M. N. R., [1960] C.T.C. 215, resembles the present case to a considerable extent. The appellant, in order to acquire the paper mill which it desired, was forced to buy with it certain wood lots for which it had no use, so after the purchase it embarked on a vigorous campaign to sell the wood lots. It was held that they were not included in the transaction so that they might be disposed of at a profit or for the purposes of trading in wood lots or timber-cutting rights but were part and parcel of the entirety of the capital assets acquired. The appellant was not in the business of buying or selling wood lands or trading in timber-cutting rights and had no intention of so doing, and that the attempts to dispose of the wood lots were to recoup part of the amount invested in the total assets and that on the facts the appellant did not deal with the wood lots in the same way as a trader in timber limits would have proceeded, so that there was no commercial animus and the profit was capital and the appeal was allowed, In rendering judgment, Fournier, J. stated at page 226:

The hereinabove cited decisions demonstrate clearly that a person who owns properties or commodities and deals with them in the same way as a dealer is considered as engaged in trading activities or that his transaction is an adventure or concern in the nature of trade and the profits derived therefrom taxable. If not, they were considered as the sale of a capital asset or disposal of an investment and the profits realized, if any, non taxable. I believe this to be the best test to be applied to the facts and circumstances of each case wherein it must be determined that the result of a transaction is of a capital or income nature. But this must be considered with the test of intention at the time of purchase or acquisition and disposal of the assets, whether property or commodity.

In the case of Warn ford Court (Canada) Limited v. M.N.R., [1964] Ex. C.R. 944; [1964] C.T.C. 175, where the appellant purchased a property for income-producing purposes and subsequently made a quick resale as the result of a completely unexpected offer to purchase the property which was too great for him to resist, Jackett, P. found on the evidence that the resale of the property was not a possibility contemplated by the appellant at the time it entered into the agreement to purchase the property and, hence, the appeal was allowed, there being no indication of secondary intention as in the case of Regal Heights Limited v. M.N.R., [1960] S.C.R. 902; [1960] C.T.C. 384.

In the case of Wolf Von Richthofen v. M.N.R., Jackett, P. stated the principle at page 546:

Putting the matter another way, where a person carries on business as a trader in real estate and some other business at the same time, if he buys a parcel of land for re-sale at a profit and does so re-sell it, the resulting profit is a profit from his trading business even though he found a use for the land in his other business during the period that he owned it; but, on the other hand, a profit that he makes upon the sale of land acquired for the sole purpose of being used, and that has in fact been used, as part of the capital assets of the other business is not, as such, a profit from his business as a trader in real estate, and the length of the period between purchase and sale of a parcel of land by such person is not relevant except in so far as it is some indication as to whether the land was inventory of the trading business or a capital asset of the other business.

In the case of M.N.R. v. James A. Taylor, [1956] C.T.C. 189, where various tests were set out to determine whether a transaction is an adventure in the nature of trade, it was held that the singleness or isolation of the transaction, the absence of an organization set up to carry it into effect, or even the fact that the transaction is totally different in nature from any of the other activities of the taxpayer and that he has never entered upon a transaction of that kind before or since, does not of itself take it out of the category of being an adventure in the nature of trade. It was further held at page 211 :

And a transaction may be an adventure in the nature of trade although the person entering upon it did so without any intention to sell its subject matter at a profit. The intention to sell the purchased property at a profit is not of itself a test of whether the profit is subject to tax for the intention to make a profit may be just as much the purpose of an investment transaction as of a trading one.

In that case, respondent bought a large quantity of lead for future delivery when the company by whom he was employed refused to do this as a matter of policy. He expected to sell it in due course to the company which required lead and had been having difficulty with its Canadian supplier in obtaining the quantities it needed. The taxpayer also thought that by arranging this purchase abroad, pressure could be brought on the Canadian supplier who, he felt, had not been treating the company fairly. His remuneration was by way of salary plus a percentage of profit so he stood. to benefit by any profits made by the company. The Court decided that it was clear that he had purchased the lead with the intention of selling it to the company. It was argued that he did not enter into the transaction with the intent of making a profit for himself on the sale of the lead to the company but the Court held that, even if that was conceded, it was manifest that he had a profit-making intention if not immediately then certainly for the future both for the company and for himself.

This case was followed in two cases which somewhat resemble the present one. In the first of these, Stephen Sura v. M.N.R.,

[1967] C.T.C. 363, appellant was a builder, his building operation being carried on by a corporation which he controlled. He normally purchased the land required and resold it to the corporation at cost. However, on the deal before the Court he had found it impossible to arrange for the financing so that the land in question was idle for six vears and he then resold it at a substantial profit: He argued that because the land had been acquired for the corporation’s use rather than his own and had never been put to its intended use, the profit was not income from a business. It was held by Jackett, P. that this was not a ease of profit from a purely speculative acquisition of land nor was it a case of an acquisition for a primary purpose that was also motivated by an anticipation that, in any event, the property acquired could be turned to advantage at a profit (secondary intention), but that it was a case where property was acquired for use in the current operation of a business and for no other reason. The learned judge looked upon the land as one of the ingredients in the manufacturing of a finished product, namely the houses the company built and sold, and considered that the land had been acquired in the course of the operation of a profit-making business and was still being held as part of the assets of the business when it was sold and that the acquisition was, from the taxpayer’s point of view, a transaction of a business character designed to result in an ultimate benefit to him inasmuch as he would be entitled, as principal shareholder, to whatever profits the company made.

The second case to which I refer is that of Robert James Randolph Russell and Clifford W. Tanner v. M.N.R., [1963] C.T.C. 280, where the two appellants, who owned all the shares of a transportation business, bought à 16.5 acre tract of land in the name of the wife of one of the appellants with the intention of using part of the land for the corporation’s purposes and selling the unneeded portion. They did ‘this in a number of transactions over several years and were taxed on the profits as being acquired as the result of an adventure in the nature of trade. In: rendering judgment, Cattanach, J. stated at page 287 :

On the facts above recited the issue to be resolved is whether the land was bought by the appellants to serve the Company’s interest and the possibility of sale of the surplus at a future time was in the nature of a salvage operation and not a scheme of profit making, or whether the appellants’ whole course of action was indicative of dealing in real estate, not only with respect to the land surplus to the Company’s need, but also with respect to the land eventually sold to the Company.

He then refers to the Californian Copper Syndicate (supra.) case. At page 288 he states:

. . . It was the acknowledged intention of the appellants to sell the land required by the Company to it and to dispose of the surplus. In my view, therefore, the land acquired by the appellants was the subject of trade and was so purchased for that purpose.

He then points out that the sales were negotiated through the intervention of a real estate agent, were consistently continued for a period of six years, and that the land reserved for the use of the company was the inferior portion of the land which left the surplus abutting paved streets, and accordingly more attractive, for sale to prospective purchasers and that the sales were not made, with two possible exceptions, to purchasers whose proximity would inure to the benefit of the company.

I believe that these cases can be distinguished, however. In the Taylor case, the lead bought by the taxpayer was clearly intended for resale in its entirety to the company by which it would be used as an ingredient in its finished products and contribute to the profit made by the company and, hence, indirectly to a certain extent by the taxpayer. In the Sura case, here again the land was treated as if it would become part of the inventory of the company and part of its finished product, the houses to be built on it, and the Court pointed out that as principal shareholder he would be entitled to whatever profits the company made. In the Russell and Tanner case, the appellants seem to have dealt with the land in such a manner as to indicate their intention to make a profit on the resale of the portion of the land not required by the company. I consider that the Taylor and Sura cases differ from the present one in that neither the appellant, Jean-Mare Champoux, nor his company were in any way dealers in land. so that the land, even if it had been. bought in the name of the company, could not have been considered as part of its stock in trade or used by it as part of a product it was manufacturing. In the Russell and Tanner ease the appellants had actively sought to sell the surplus land through a real estate agent, selling only the less desirable land to the company and had made a considerable number of such sales, whereas in the present case the appellant can give a reasonable explanation as to why he made the sales in each instance, and his dealing with the land does not indicate that it was bought with the intention of making a profit on the resale of the surplus. I believe, on the contrary, that the facts of this case more closely resemble the eases of Racine, Demers and Nolin, Sutton Lumber and Trading Company Limited, Sterling Paper Mills Inc., Warnford Court (Canada) Limited, and Wolf von Richthofen (supra.).

Appellant’s evidence to the effect that he atempted to buy a lesser quantity of land for his company is corroborated by Mr. Lortie and is unrefuted. This is certainly not the conduct of a man who hopes to make a profit by buying more land than he requires for his business purposes and then selling the surplus. His explanation as to why the land was bought in his name rather than in that of the company is clear and not unreasonable. He was only able to borrow a maximum of $140,000 for the company from Traders Finance of which $100,000 was to be used for the building’ (evidence of Mr. Levasseur, page 12). Since this would leave only $40,000 to go towards the land and the whole area he was forced to buy cost $100,000, he bought it in his own name, reselling to the company only as much as it could afford to buy (an area of 71,472 square feet for which it paid him $42,883.20). It is true that he himself paid only $40,000 cash when he bought the land, the balance of $60,000 being payable over six years with interest, and it is possible that the company could have bought the land itself on the same conditions, but almost certainly he would have been required to intervene to personally guarantee the payment of the loan. Mr. Lortie, while not going so far as to say that he would not have sold to the company, indicated that he preferred to sell to appellant personally and it is likely that Traders Finance Corporation also preferred to make a straight loan of $140,000 to the company guaranteed by hypothec on the land purchased by it from appellant without having ‘the company also saddled with indebtedness for a further $60,000 to Les Immeubles J. M. Lortie Inc. guaranteed by hypothec on the remainder of the property which would have been owned by it had the purchase been made in its name. From the practical point of view, appellant did not sell the company only 71,472 square feet because this was all that it required, but rather because this was approximately all it could purchase from the proceeds of the loan from Traders Finance and, in effect, it made little difference since, as owner of the remaining land, he could and did permit the company to use it in the same manner as if all the land had been purchased by the company itself. The company paid for the gravelling of the land and may have paid some of the carrying charges and taxes on it although this was not made too clear in the proof. In any event, he received no rent from the company for the use of it and it is conceded that no profit was realized by him from this initial sale to the company. In view of these explanations, which I accept, I do not attribute any great significance to the fact that the land was purchased by appellant personally rather than in the name of the company. Nevertheless, it seems very doubtful that if all the land had been bought in the name of the company, and the sale subsequently made by the company to American Motors of a part of the land which it considered surplus to its requirements, any attempt would have been made to tax this as income in the hands of the company especially in view of the findings in the Sutton Lumber and Trading Company Limited and Sterling Paper Mills cases (supra.). Respondent’s counsel argued that it was more advantageous from a taxation point of view for appellant to purchase the land in his own name, as if the company had purchased it and on resale had realized a profit which was accepted as being capital gain, appellant could nevertheless get this out of the company only by declaration of a dividend. It is going too far afield from the issues in this case to speculate what would have been the ultimate taxation consequences to appellant in this hypothetical situation, or the effect of the application of Section 105A of the Income Tax Act if the same had been used by the company, and I am satisfied that this was not in the mind of the appellant nor one of the factors which induced him to buy the property initially in his own name.

A reasonable explanation has also been given for the second sale to the company of 15,772 square feet on which it is agreed that he realized a profit of $5,632.95. This sale resulted from the insistence of Chrysler Motors, and presumably was a condition of the company’s being given this dealership. The price seems to have been fixed in a haphazard manner and as a matter of convenience at a figure which would equal his indebtedness to the company at the time, and the judgment of the Tax Appeal Board goes at some length into this non-arm’s length transaction referring to Sections 8(1) and 137(2) and (3) of the Income Tax Act. However, this is not an issue before me nor is there any evidence as to the value of the property at the date of this sale to enable a determination to be made as to whether the company in fact conferred a benefit on appellant in a non-arm’s length transaction by paying him this price. In fact, this sale was made a year and one-half after appellant’s purchase of the said property and it is likely that the construction of the building by the company on the adjacent land and general commercial development of the area in the interval had increased the value of the property to this extent. Respondent’s counsel at the hearing conceded that no attempt has been made to claim that this was an improper price, but merely that it represented a profit as the result of an adventure in the nature of trade by appellant. The fact that it was appellant’s company which was the purchaser therefore rather than a company dealing at arm’s length, as in the case of the later sale by appellant to American Motors, does not affect the issue.

In the case of the sale to American Motors, appellant explained why that company was most anxious to acquire the property in question and perhaps even to pay more than it was worth at the time in order to provide a continuing service to its customers in that area. They at first attempted to buy all his remaining property and when he refused this they agreed to take only this part of it which he was prepared to sell, and to pay him a price which he considered too good to refuse. It is likely that when appellant was initially compelled to buy some 167,000 square feet, or about 42,000 square feet more than the 125,000 square feet he considered ideal for the purposes of his business, he may have considered that eventually he would resell this surplus, but there is no indication that he took any active steps to do so. On the contrary, he let his company continue to use it and subsequently such part of it as was left after the second sale to the company which was forced on him by Chrysler Motors, and he refused the initial offers from American Motors Company to buy his remaining property. It was they who approached him, asking him to sell and he at first refused until they agreed to leave him at least part of it and pay him what he considered an exceptionally good price. I do not consider that the mere holding out for as good a price as possible is an act of trading. When he bought the property he certainly intended to sell a substantial part of it to his own company, but he made no attempt to make a profit on the initial sale and it is clear that he did not make the second sale in order to realize a profit but solely because Chrysler Motors required him to sell the additional land to the company, and then he did so at what was apparently the going price for the land at that time. These transfers between him and the company are not in my view indications that he bought the land with the intent of trading in it, the initial purchase in his name rather than in the name of the company having been made as the result of business convenience. I do not consider, therefore, that appellant’s course of conduct in dealing with the land was that of a trader, but rather that he was fortunate in being able to dispose of a capital asset at a profit resulting from American Motors’ need for this property, and that he did nothing. to promote this sale. The profits realized by appellant from the two sales therefore appear to me to be fortuitous and not as the result of an adventure in the nature of trade embarked on by him at the time he purchased the property in question.

The appeal is accordingly allowed, with costs.