KERR,
J.:—This
is
an
appeal
from
the
income
tax
assessment
of
the
appellant
company,
hereinafter
sometimes
called
‘‘Bel-
Conn”,
for
its
taxation
year
1962.
The
sole
issue
in
the
appeal
is
whether
the
profit
made
by
the
company
from
the
sale
of
its
one-half
interest
in
certain
real
estate,
lots
21
to
28,
inclusive,
situated
at
4th
Avenue
S.W.,
in
Calgary,
was
income
or
a
capital
gain.
Bel-Conn
was
incorporated
as
a
private
company
under
the
laws
of
Alberta
in
May
1951.
The
objects
for
which
it
was
incorporated,
as
shown
in
Exhibit
A,
include
the
purchase,
development,
lease
and
sale
of
real
estate
and
real
property.
Abraham
J.
Conn,
called
as
a
witness
on
behalf
of
Bel-Conn,
testified
that
he
is
president
and
active
manager
of
the
company
and
owns
one-third
of
its
shares.
The
only
other
shareholders
are
his
mother-in-law
and
his
sister-in-law.
He
lived
for
25
years
in
Medicine
Hat,
where
he
and
his
relatives
owned
an
older
home,
a
store,
an
apartment
building
and
five
other
business
properties,
which
he
managed.
He
moved
to
Calgary
about
fifteen
years
ago
and
since
then
sold
the
house
and
one
of
the
business
properties
in
Medicine
Hat
but
has
retained
the
other
properties.
He
sold
none
of
them
while
living
in
Medicine
Hat.
For
the
first
year
or
two
after
coming
to
Calgary
he
helped
his
sister-in-law
in
a
store
business
and
then
commenced
to
acquire
real
estate
with
the
object
of
constructing
buildings
for
rental
income.
Operating
as
active
manager
of
Minton
Apartments
Limited
he
personally
became
active
in
the
construction
business
and
bought
a
number
of
older
homes,
demolished
them
and
constructed
apartment
buildings,
nine
in
number,
on
the
land,
none
of
which
has
been
subsequently
sold.
Since
its
incorporation
in
1951
Bel-Conn
has
purchased
and
developed
in
Calgary
its
own
commercial
building,
with
stores
and
offices,
and
two
large
apartment
buildings,
the
Americana
and
the
Westerner.
These
apartment
buildings
were
constructed
in
1962.
Bel-Conn
also
purchased
the
Great
West
Saddlery
property
in
1958,
with
the
intention
of
building
on
the
land,
and
held
it
until
recently
when
it
sold
the
property
to
the
City
of
Calgary.
The
company
has
never
sold
any
of
the
property
which
it
at
any
time
owned
in
Calgary,
except
the
Great
West
Saddlery
property
and
the
4th
Avenue
property
which
is
the
subject
matter
of
this
appeal.
Bel-Conn’s
dealings
in
connection
with
the
4th
Avenue
property
began
when
one
Samuel
Katchen
approached
Conn
in
October
1959
with
a
proposal
that
they
become
partners
and
erect
a
building
on
certain
lots
then
owned
by
Katchen
at
the
corner
of
4th
Avenue
and
5th
Street
which
had
a
frontage
of
75
feet
on
4th
Avenue
and
were
known
municipally
as
604
4th
Avenue
S.W.
Conn
was
favourably
disposed
to
the
proposal
and
Bel-Conn
thereupon
purchased
from
Katchen
a
one-half
interest
in
the
property
for
$30,000.
Soon
afterwards,
still
in
1959,
Bel-Conn
and
Katchen
jointly
purchased
nearby
lots,
known
as
618
4th
Avenue,
from
one
Webber
for
$50,000,
of
which
Bel-Conn
paid
$25,000,
and
subsequently,
in
August
1960,
they
jointly
purchased
the
intervening
Stewart
property,
608
4th
Avenue,
for
$50,000,
of
which
Bel-Conn
paid
$25,000.
By
reason
of
those
three
purchases
Bel-Conn
and
Katchen
jointly
owned
all
the
lots
Nos.
21
to
28,
inclusive,
known
as
604
to
618
4th
Avenue,
at
the
corner
of
4th
Avenue
and
5th
Street,
with
200
foot
frontage
on
4th
Avenue,
and
each
party
owned
an
undivided
one-half
interest
in
the
whole
parcel
of
land.
For
its
one-half
interest
Bel-Conn
paid
a
total
of
$80,000,
plus
some
incidental
sums.
An
agreement
dated
October
30,
1959
(Exhibit
1)
between
Katchen
and
Bel-
Conn
recites
that
each
is
the
owner
of
an
undivided
one-half
interest
in
the
land
therein
described,
namely,
the
west
half
of
Lot
25,
and
the
whole
of
Lots
26,
27
and
28,
aforesaid,
and
that
they
may
acquire
other
properties
in
which
they
have
joint
interests;
and
the
agreement
provides
that
they
will
pay
equally
all
expenses
in
connection
with
the
operation
of
such
properties
and
that
should
either
party
desire
to
sell
his
interest
he
or
it,
as
the
case
may
be,
will
first
offer
the
said
interest
to
the
other
party
and
the
other
party
shall
have
one
month
within
which
to
purchase
that
interest,
and
should
any
dispute
arise
between
the
parties
respecting
the
management
or
operation
of
the
property,
or
the
price
or
terms
upon
which
it
is
to
be
sold,
or
the
development
of
the
property,
the
dispute
shall
be
referred
to
an
arbitrator.
According
to
Conn,
as
I
remember
his
testimony,
the
intention
and
sole
purpose
of
Bel-Conn
when
it
purchased
a
one-half
interest
in
the
Katchen
property
was
to
construct
a
motor
hotel
on
it.
(For
the
purposes
of
this
appeal,
the
appellant’s
intentions
and
purposes
are
considered
to
be
those
of
Mr.
Conn,
the
president,
spokesman
and
active
manager
of
the
appellant
company.
)
To
that
end
a
firm
of
architects,
L.
EK.
Baker
and
Associates,
prepared
preliminary
plans
dated
May
1960
(Exhibit
2)
for
the
proposed
motor
hotel.
The
first
plans
were
for
a
hotel
on
the
Katchen
land
with
its
75
foot
frontage
on
4th
Avenue.
Another
plan,
also
dated
May
1960,
shows
a
plot
plan
related
to
the
use
of
the
entire
200
foot
frontage
on
4th
Avenue;
another
plan,
one
of
the
sheets
in
Exhibit
5,
also
shows
use
of
the
whole
200
foot
frontage,
with
the
motel
situated
more
or
less
in
the
centre
of
the
frontage.
The
first
plans
were
for
the
original
Katchen
property,
the
later
modified
plans
were
for
that
property
and
the
Webber
and
Stewart
properties.
The
plans
showed
floors,
suites,
car
park,
swimming
pool
and
other
details,
as
shown
in
Exhibits
2
and
5.
They
were
plans
of
a
preliminary
nature,
pending
financing.
Baker
prepared
cost
estimates
of
$733,750
for
the
building
and
land,
exclusive
of
the
Stewart
lots,
and
$790,752
for
the
building
and
the
Katchen,
Stewart
and
Webber
lots,
with
certain
differences
in
the
building
itself.
Baker’s
bill
(Exhibit
7)
of
$1,081.57
dated
February
5,
1962
was
paid
out
of
rental
income
from
old
homes
which
were
on
the
lots.
Conn
told
of
efforts
to
raise
money
for
the
construction
of
the
proposed
motor
hotel.
He
went
to
Toronto
in
1960
to
seek
mortgage
money.
He
approached
two
insurance
companies,
Manufacturers
Life
and
Canada
Life
but
they
were
either
not
interested
or
proposed
terms
unsatisfactory
to
Conn.
He
had
a
meeting
with
Murray
&
Company
Limited
in
Toronto
and
that
company
agreed
to
try
to
arrange
a
loan.
In
October
of
1960
a
representative
of
the
company
visited
Calgary
to
appraise
the
property.
Exhibit
9
is
a
letter
from
Bel-Conn
to
Murray
&
Company
dated
December
8,
1960,
which
refers
to
that
visit
and
inquires
whether
the
company
is
still
interested
in
a
loan
or
has
dropped
the
idea.
Negotiations
between
Bel-Conn
and
Murray
&
Company
continued
into
1961,
as
shown
by
a
letter
from
Conn
to
Murray
&
Company
dated
April
17,
1961
(Exhibit
11),
in
which
there
is
also
reference
to
a
conversation
between
Murray
&
Company
and
Mrs.
Sara
Belsberg,
one
of
the
shareholders
of
Bel-Conn,
on
her
recent
trip
to
Toronto.
Conn
said
that
by
February
1961
Katchen
was
impatient
with
the
slow
progress
being
made
and
through
Melton
Real
Estate
was
in
touch
with
Chatered
Investments
Limited
(hereinafter
called
“Chartered”),
an
Edmonton-based
company.
Exhibit
12
is
a
letter
dated
February
13,
1961
from
Chartered
to
Messrs.
Helman,
Fleming
and
Neve,
for
attention
of
Mr.
Fleming,
who
was
solicitor
for
Bel-Conn
and
Katchen
in
this
connection,
in
which
Chartered
proposed,
inter
alia,
that
Bel-Conn,
Katchen
and
Chartered
form
a
new
company,
that
50%
of
the
company
would
be
held
by
Chartered,
that
the
4th
Avenue
property
be
placed
in
the
new
company
at
$240,000
and
that
a
125-suite
apartment
building
be
constructed
on
the
land
at
a
cost
not
exceeding
$1,240,000,
with
Chartered
providing
a
mortgage
and
having
management
control
(an
apartment
building
of
that
size
was
built
on
the
land
after
it
was
sold).
This
letter
was
considered
at
a
meeting
in
Mr.
Fleming’s
office
on
February
15,
1961
and
among
those
in
attendance
were
Fleming,
Conn,
Katchen,
J.
L.
Harris,
president
of
Chartered,
and
M.
Melton
of
Melton
Real
Estate.
The
proposal
was
discussed
at
considerable
length,
as
shown
by
Exhibit
13,
a
memorandum
respecting
the
meeting.
There
were
subsequent
meetings
also
and
Chartered’s
proposal
was
under
active
consideration.
However,
Conn
said
that
by
November
1961
he
was
sick
of
Chartered’s
proposal
;
he
had
taken
it
to
his
accountant
who
raised
questions
respecting
it
and
made
an
analysis
of
the
financial
possibilities
of
the
project
(Exhibits
E
and
F),
and
advised
Conn
against
it;
he
had
never
been
a
partner
with
anyone
other
than
his
own
relatives
and
he
felt
obliged
to
protect
them
on
this
occasion;
he
thought
that
it
would
not
be
wise
for
Bel-Conn
to
have
only
a
one-quarter
interest
in
the
apartment
project;
and
he
was
not
satisfied
with
its
financial
prospects.
Dealings
with
Chartered
came
to
a
conclusion
early
in
1962.
In
a
letter
dated
January
2,
1962
(Exhibit
G),
Chartered
wrote
as
follows
to
Katchen
and
Bel-Conn
:
We
have
now
completed
preparations
to
proceed
with
the
construction
of
a
125-suite
apartment
on
your
property
on
the
North-
West
corner
of
4th
Avenue
and
5th
Street
South
West.
We
are
ready
to
proceed
on
the
original
basis
whereby
1)
a
company
is
formed
in
which
we
each
own
50%
of
the
shares.
2)
You
place
the
land
in
the
company
at
$240,000.00
to
be
secured
by
a
company
note
plus
our
perusual*
notes
for
one-half
the
amount.
83)
Chartered
Investments
obtains
mortgage
financing
and
advances
to
the
new
company
whatever
funds
are
necessary
to
complete
the
building
over
and
above
the
first
mortgage
of
$925,000.00.
In
the
event
that
you
no
longer
wish
to
proceed
with
this
arrangement
we
are
prepared
to
purchase
your
land
for
$50,000.00
cash
with
the
balance
to
be
secured
by
a
second
mortgage
to
be
repaid
at
$1,000.00
per
month
from
the
term
of
completion
with
the
balance
to
be
paid
three
years
from
completion
in
a
lump
sum.
In
view
of
the
present
uncertainty
of
your
position
we
do
not
think
in
advisable
to
proceed
with
building
permits
until
we
have
reached
a
firm
agreement
on
the
procedure
from
this
point.
Bel-Conn
and
Katchen
sent
a
joint
reply
dated
January
16,
1962
(Exhibit
H)
stating
that
rather
than
enter
into
the
company
undertaking
with
Chartered
they
would
prefer
to
sell
the
land
to
Chartered;
and
they
offered
to
sell
it
on
certain
terms,
including
a
total
purchase
price
of
$240,000,
$80,000
to
be
paid
on
transfer
of
title
and
the
balance
to
be
paid
at
the
rate
of
$3,333.33
per
month
commencing
on
March
1,
1963
with
interest
at
6%.
This
led
to
a
sale
of
the
property
by
Bel-Conn
and
Katchen
to
Paris
Investments
Limited,
a
new
company
formed
by
Chartered,
for
$240,000
under
an
agreement
dated
February
1,
1962
(Exhibit
14).
Bel-Conn’s
share
of
the
selling
price
was
one-half,
$120,000.
Bel-Conn
and
Katchen
paid
a
commission
to
Melton
Real
Estate.
In
his
testimony
Conn
was
insistent
that
the
purpose
of
Bel-
Conn’s
venture
with
Katchen
was
to
build
and
operate
a
motor
hotel,
that
it
was
Chartered
that
proposed
construction
of
an
apartment
building
rather
than
a
motor
hotel,
and
that
the
decision
to
sell
the
property
was
made
only
after
Conn
decided
that
Chartered’s
proposal
would
not
be
good
for
Bel-Conn.
Conn
said
that
he
had
known
Katchen
for
some
years
but
that
the
acquaintanceship
was
social,
he
did
not
know
him
well
and
did
not
know
the
type
of
business
he
was
engaged
in
or
his
financial
situation.
Bel-Conn
paid
for
its
share
of
the
4th
Avenue
property
with
money
borrowed
from
the
bank
for
that
purpose.
No
efforts
to
obtain
mortgage
money
to
finance
the
construction
of
the
proposed
motor
hotel
were
made
until
after
Bel-Conn
purchased
an
interest
in
the
Katchen
property.
They
did
not
expect
to
obtain
one
hundred
per
cent
financing,
likely
not
more
than
sixty
to
sixty-five
per
cent.
There
were
houses
on
the
several
lots
of
land
and
they
were
rented
and
paid
their
way
during
the
time
that
Bel-Conn
and
Katchen
owned
the
property.
The
hearing
of
this
appeal
was
commenced
before
Mr.
Justice
Cattanach
on
November
17,
1968
and
on
that
date
Mr.
Katchen
gave
evidence.
At
the
hearing
before
me
his
evidence
was
read
into
the
record
and
received
as
part
thereof
by
order
of
the
Court
and
agreement
of
the
parties.
As
to
his
occupation
in
1959,
Katchen
said:
I
was
a
speculator.
I
mean,
I
wasn’t
a
real
estate
operator.
I
was
a
trader.
I
still
am.
I
am
still
an
investor
and
I
trade
in
real
estate.
He
said
that
in
1958
or
early
1959
he
acquired
certain
lots
on
4th
Avenue
with
the
intention
to
develop
the
property
and,
if
he
could
not
develop
it,
to
sell
it.
He
approached
Conn
with
a
proposal
to
build
an
apartment
hotel
on
the
land
following
which
Bel
Conn
purchased
a
one-half
interest
in
that
property,
and
later
he
and
Bel-Conn
together
bought
the
Webber
and
Stewart
properties.
I
quote
his
testimony
in
that
respect
from
the
transcript
of
the
hearing,
as
follows:
DIRECT
EXAMINATION
BY
MR.
HYNES:
Q.
Mr.
Katchen,
did
you
late
in
1958
or
early
in
1959,
acquire
certain
property
in
Calgary?
A.
Yes.
Q.
Could
you
describe
the
property,
please?
A.
Property
on
4th
Avenue
West,
north-west
corner,
King
property.
Mr.
Hynes:
Do
you
object
if
I
lead
the
witness
on
the
lot
number?
Mr.
Laycraft:
No,
proceed.
Mr.
Hynes:
Q.
Would
that
be
the
west
half
of
lot
25,
all
of
lots
26,
27
and
28,
block
14,
plan
Al,
Calgary?
A.
I
believe
so,
yes.
THE
COURT:
Would
you
mind
repeating
that?
Mr.
Hynes:
The
west
half
of
lot
25,
all
of
lot
26—
Mr.
Laycraft:
You
are
not
correct,
sir.
Mr.
Hynes:
My
lord,
I
am
in
error
in
the
lot
numbers.
My
learned
friend
here
has
a
map,
a
sketch
of
the
property
and
I
believe
the
corner
property
first
acquired
by
Mr.
Katchen
is
Lots
21,
22
and
23
in
block
14?
A.
Yes,
the
first
one.
Q.
Is
that
correct,
Mr.
Katchen?
A.
I
believe
so.
I
haven’t
got
the
lot
numbers
but—75
feet—
Q.
Was
it
a
75
feet—
A.
75
feet
on
the
corner.
Q.
Could
you
tell
the
court
what
you
had
in
mind
for
the
property
when
you
bought
it?
A.
I
had
in
mind
to
develop
it,
but
my
first
intentions
were
to
develop
it.
If
I
couldn’t
develop
it,
I
would
sell
it.
THE
COURT:
First
intention
was
to
develop.
Mr.
Hynes:
Was
to
develop
it.
If
he
couldn’t
develop
it,
he
was
to
sell
it.
If
he
couldn’t
develop
it,
his
intention
was
to
sell
it.
THE
COURT:
First
intention
to
develop.
If
he
couldn’t
develop,
he
was
to
sell
it.
Mr.
Hynes:
That’s
right.
Q.
Did
you
later
acquire
more
property
in
the
vicinit
?
A.
Yes,
I
did,
sir.
Q.
Would
this
be
the
west
half
of
lot
25,
all
of
lots
26,
27
and
28
in
block
14?
A.
Yes
sir.
It
is
the
Webber
property,
the
Webber
property.
Q.
What
had
you
in
mind
for
that
property?
A.
Well,
I
had
the
same
thing
in
mind.
I
hadn’t
sold
the
other.
I
was
planning
on
developing
it.
Q.
How
did
you
become
associated
with
Bel-Conn
Limited?
A.
Mr.
Conn,
Mr.
Conn
and
I
have
been
old
friends.
I
have
known
him
for
a
long
time,
and
I
knew
he
was
in
the
business
and
I
approached
him
on
a
proposition
and
I
sold
him
the—I
sold
him
a
half
interest
in
the
King
property,
which
was
the
first
property,
and
we
went—we
joined
in
on
the
other
property
to—with
the
intent
to
develop
the
property.
Q.
After
joining
together
with
Bel-Conn
Limited
on
this—
A.
Yes.
Q.
—transaction,
did
you
later
acquire
further
property?
A.
Yes,
we
did,
sir.
Q.
Would
that
be
the
east
half
of
lot
25
and
all
of
lot
24?
A.
Yes
sir.
Q.
In
block
14?
A.
Yes
sir.
That’s
the
Stewart
property.
Q.
Now,
how
did
you
acquire
that?
Together?
A.
Together,
yes
sir.
Q.
What
had
you
in
mind
for
this
assembled
group
of
properties?
A.
We
were—we
were
going
to
develop
it.
We
had
in
mind
to
develop
it.
Q.
How
were
you
planning
on
developing
it?
A.
Well,
we
had
in
mind
an
apartment-hotel,
and
we
had
plans,
plans
drawn
up.
We
made
a
feasibility
study
and
we
put
a
lot
of
work
into
it,
and
then
we
were—we
were
approached
through
Melton’s
with
Charter,
Charter
Investments,
came
down
and
made
us
a
proposition
which
the
evidence—I
mean,
will
prove
out
that,
and
after
considerable
discussions
and
meetings
and
plans
and
feasibility
studies,
also
management,
who
was
going
to
manage
it,
we—or
I
came
to
the
conclusion,
I
didn’t
want
any
part
of
it
so
I
decided
to
sell.
I
thought
the
best
thing
for
us
to
do
was
to
sell.
The
proposition
referred
to
by
Katchen
was
the
previously
mentioned
proposal
by
Chartered
Investments
for
sale
of
the
property
to
a
new
company
in
which
Chartered
would
have
a
fifty
per
cent
interest
and
Bel-Conn
and
Katchen
would
have
the
other
fifty
per
cent.
He
was
not
dissatisfied
with
the
feature
of
a
twenty-five
per
cent
interest
in
the
new
company,
but
the
feasibility
study
and
Conn’s
reaction
to
it
prompted
him
to
sell.
He
said
that
he
and
Conn
were
old
friends,
he
knew
Conn
as
a
developer
and
operator
of
apartments,
and
approached
him
in
order
to
use
Conn’s
knowledge
in
that
respect
in
connection
with
the
development
of
the
4th
Avenue
land.
A
well-qualified
Calgary
real
estate
agent,
Aubrey
Edwards,
was
called
as
an
expert
witness.
He
testified
that
in
1959
the
property
concerned
was
in
a
downtown
area
of
Calgary
that
had
a
speculative
character,
and
that
there
was
fairly
heavy
land
speculation
in
that
area;
the
property
was
at
that
time
a
good
site
for
a
motor
hotel
and
since
then
the
large
Regency
Towers
apartment
building
has
been
built
on
it
and
the
Caravan
Motor
Hotel
has
been
built
only
about
one
block
away.
The
appellant’s
contention
is
that
it
entered
into
the
agreement
with
Katchen
and
acquired
the
one-half
interest
in
the
4th
Avenue
property
as
a
capital
investment
for
the
purpose
of
earning
income
and
not
for
speculative
purposes
or
with
the
intention
that
its
interest
would
be
sold;
that
its
entire
business
activity
has
been
the
purchase
and
development
of
real
property
so
as
to
yield
rental
income
and
it
is
not
and
never
has
been
a
trader
in
real
property;
that
the
opportunity
to
sell
its
interest
arose
during
the
course
of
its
usual
practice
in
developing
the
property,
and
the
gain
realized
by
it
upon
the
sale
of
the
property
was
a
fortuitous
gain
upon
realization
of
a
capital
asset
and
was
not
income
within
the
meaning
of
Sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act.
It
was
submitted
on
behalf
of
the
appellant
that
no
emphasis
should
be
placed
upon
the
fact
that
Katchen
had
traded
in
real
estate,
for
the
status
of
trader
is
not
a
contagion
transmitted
to
all
with
whom
the
trader
becomes
associated;
that
the
appellant
company
is
a
private
company
owned
by
close
relatives
and
its
past
history
of
no
real
estate
sales
and
of
steady
and
continuous
real
estate
development
and
the
history
of
the
project
in
question
establish
the
transaction
as
capital
in
nature:
and
the
gain
derived
as
a
capital
gain.
The
respondent
contends
that
the
profit
realized
by
the
appellant
from
the
sale
of
its
interest
constituted
part
of
its
income
since
it
was
a
profit
from
a-
business
or
an
adventure
in
the
nature
of
trade
within
the:
meaning
of
the
said
sections
of
the
Income
Tax
Act.
The
evidence
establishes,
in
my
opinion,
that
when
Bel-Conn
first
bought
an
undivided
one-half
interest
in
thé
Katchen
lots
and
then
proceeded
to
purchase
jointly
w
Katchen
the
remainder
of
the
4th
Avenue
property,
and
for
some
time
thereafter,
there
was
a
definite
intention
on'the
part
of
both
of
‘them,
if
they
could
make
the
necessary
arrangements
for
financing,
to
construct
a
motor
hotel
on
the
land
and
operate
it
as
a
revenueproducing
property.
However,
there
was
a:
very
‘real
problem:
of
how
and
where
to
obtain
the
necessary
money
to
build:
Bel-Conn
borrowed
from
the
bank
the
money
to
buy
.its
one-half:
interest
in
the
lots,
a
sum
in
the
order
of
:$80;000,
but
it
was
necessary
to
seek
elsewhere
the
much
greater.
sum,
upwards,
of
ten
‘times
as
much
according
to
the.
architect’s
estimate,
required
for
the
complete
project.
Katchen
was
a
speculator
and
a
trader
in
real
estate.
Conn
was
knowledgeable
and
experienced:
in
the
real
estate
field,
for
he
had
bought:
and
developed
properties.
Both
were
experienced
businessmen.
To
me
it
seems
to
be
unrealistic
to
think
that
they
‘were
not
well
aware
of
the
problem
of
financing
when
they
began
their
venture
or
hat:the
sale
of
the
property
for
profit
was
not
also
contemplated:
by
them
as
at
least
one
of
the
alternative
ways
in
which
the:
property:
could
be
turned
to
account
for
profit
if
the
motor
hotel
project
were
not
proceeded
with
by
reason
of
lack.
of,
financés
or
even
of
à
decision
of
one
of
them
to
sell
or
a
dispute
between
them.;,
Katchen
testified
that
he
and
Conn
were
old
friends,
he
had
known
Conn
for
a
long
time
and
knew’
him
as
a
successful
operator
of
apartments.
Conn
professed
to
have
known
Katchen
only
socially,
not
well,
and
did
not
know
the
type
of
business
interest
he
was
in
or
that
he
was
a
trader
in
real
estate.
But
he
was
willing
to
join
with
him
in
a
major
venture.
I
think
that
Conn
was
understating
his
knowledge
of
Katchen
‘and
of
Katchen’s
business
as
a
trader
in
real
estate.
However,
the
fact
that
Katchen
was
a
trader
in
real
estate
does
not
necessarily
lead
to
a
conclusion
that
the
acquisition
of
the
4th
Avenue
property
was,
on
the
part
of
either
of
them,
in
the
nature
of
a
trading
venture
and
not
a
capital
investment.
Neither
does
Conn’s
and
Bel-Conn’s
activity
in
developing
and
operating
apartments
and
other
buildings
for
rental
revenue
necessarily
lead
to
a
conclusion
that
this
particular
venture
was,
on
Bel-
Conn’s
part,
an
activity
of
that
kind.
I
do
not
regard
as
significant
in
the
determination
of
this
appeal
the
fact
that
the
objects
for
which
Bel-Conn
was
incorporated
include
the
purchase
and
sale
of
real
estate.
The
question
is
not
what
powers
the
company
had,
but
what
it
actually
did,
and
whether
the
profit
which
resulted
to
it
from
the
sale
of
the
4th
Avenue
property
was
a
capital
gain
or
was
a
profit
derived
from
an
adventure
or
concern
in
the
nature
of
trade
and
was
therefore
income
from
a
business
within
the
meaning
of
Sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act.
There
is
not
doubt
that
at
the
time
Bel-Conn
acquired
an
interest
in
the
property
concerned
it
was
a
good
site
for
a
motor
hotel
and
also
that
it
was
in
an
area
of
Calgary
which
had
a
speculative
character
and
in
which
there
was
fairly
heavy
speculation
in
land.
The
problem
of
obtaining
the
money
necessary
for
the
motor
hotel
project
was
not
investigated
before
Katchen
and
Bel-Conn
joined
in
the
venture.
Granted
that
the
development
of
the
motor
hotel
project
would
be
a
major
undertaking
which
could
not
be
quickly
arranged,
and
granted
also
that
there
was
some
rental
revenue
coming
from
the
several
old
homes
on
the
property,
nevertheless
it
seems
to
me
that
their
efforts
to
obtain
financing
for
their
motor
hotel
project
were
pressed
with
something
less
than
vigour
and
expedition.
If
their
sole
or
governing
intention
was
to
construct
a
motor
hotel
as
a
revenue-producing
asset,
I
would
think
that
they
would
have
shown
more
activity
than
they
did
to
achieve
that
objective.
If,
on
the
other
hand,
they
had
in
mind
the
alternative
of
a
sale
at
a
profit,
there
would
be
less
incentive
to
expedite
the
hotel
project.
Dealing
with
Murray
&
Company
continued
intermittently
into
1961.
Katchen
and
Bel-Conn
also
gave
serious
consideration
during
a
period
of
about
a
year,
from
February
1961
to
January
1962
to
a
proposal
of
Chartered
Investments
for
a
sale
of
the
property
to
a
proposed
new
company,
in
which
Katchen
and
Bel-Conn
would
have
a
one-half
interest,
and
the
construction
of
an
apartment
building
on
the
site.
This
proposed
sale
of
the
property
was
obviously
considered
by
Katchen
and
Bel-Conn
during
most
of
that
lengthy
period
as
an
alternative
to
the
motor
hotel
project.
They
eventually
made
a
counter
proposal
to
Chartered
Investments
for
an
outright
sale
of
the
property,
which
was
accepted.
Certain
efforts
and
activities
of
Katchen
and
Conn,
e.g.,
the
preparation
of
preliminary
plans
by
an
architect,
and
Conn’s
trip
to
Toronto
to
seek
financing,
lend
support
to
their
contention
that
when
they
joined
in
the
venture
their
objective
was
to
build
and
operate
a
motor
hotel
on
the
property;
and
that
the
purchase
of
the
property
was
an
investment;
also,
after
the
sale
of
the
property,
Bel-Conn
constructed
and
operated
two
other
apartment
buildings
in
Calgary
and
used
the
profit
from
the
sale
of
the
4th
Avenue
property
in
doing
so.
I
am
satisfied
that
they
had
the
objective
of
a
motor
hotel
as
a
preferred
objective,
but,
in
my
opinion,
the
evidence
as
to
the
circumstances
and
the
whole
course
of
the
appellant’s
conduct
points
to
a
conclusion,
and
I
so
find,
that
the
appellant
purchased
an
interest
in
the
4th
Avenue
property
with
the
overall
intention
of
turning
it
to
account
for
profit,
preferably
by
constructing
and
operating
a
motor
hotel
if
the
money
necessary
to
finance
such
a
project
could
conveniently
be
borrowed,
but,
if
that
money
could
not
be
obtained,
by
turning
the
property
to
account
in
some
other
acceptable
way,
including
sale.
Having
regard
to
the
nature
and
courses
of
the
venture;
the
knowledge,
experience
and
business
activities
of
Katchen
and
Conn;
the
location
of
the
property
in
a
downtown
area
of
Calgary
in
which
there
was
fairly
heavy
land
speculation;
the
magnitude
of
the
probable
cost
of
the
proposed
motor
hotel;
the
known
impossibility
of
building
it
without
large
borrowings
;
the
lack
of
prior
investigation
in
respect
of
the
possibility
of
obtaining
the
money
to
build;
Bel-Conn’s
borrowing
from
the
bank
to
buy
an
interest
in
the
property;
the
somewhat
limited
extent
of
the
activities
and
efforts
of
the
partners
to
proceed
with
the
motor
hotel
project;
their
negotiations
with
Chartered
Investments
during
a
later
period
of
about
a
year
on
a
proposal
that
involved
a
sale
of
the
property,
and
their
counter
offer
of
an
outright
sale
at
a
substantial
profit,
which
was
accepted;
I
cannot
but
conclude
that
when
Bel-Conn
purchased
an
interest
in
the
property
it
was
with
a
preferred
intention
of
building
a
motor
hotel,
if
moneys
necessary
therefor
could
be
obtained,
and
with
a
secondary
intention
of
selling
the
property
at
a
profit
if
it
were
not
possible
to
carry
out
the
preferred
intention
or
if
an
election
were
made
not
to
do
so.
The
result,
in
my
view,
is
that
the
sale
by
the
appellant
of
its
interest
in
the
property
was
a
sale
in
the
course
of
an
adventure
by
it
in
the
nature
of
trade
and
the
profit
resulting
to
it
therefrom
is
income
from
a
business
within
the
meaning
of
Sections
3,
4
and
139(1)
(e)
of
the
Income
Tax
Act
and
is
taxable.
The
appeal
is,
therefore,
dismissed
with
costs.
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