A W Prociuk (orally: October 11, 1974):
1 The appellant appeals from the respondent's reassessment of his income in respect of the taxation years 1967 to 1970 inclusive, wherein his share of the net profit of $19,690.27 from the sale of a parcel of land (consisting of approximately 39.89 acres and being north of and adjacent to the northern limits of the City of Edmonton and described as legal subdivisions 4 and 5 of the south west quarter of Section 25, Township 53, Range 25, west of the fourth Meridian) was added to his income. The sale took place on June 7, 1967 and by application of section 85B of the Income Tax Act as it was then in force, the three subsequent taxation years were brought into play.
2 The appellant claims that this was an investment in land and therefore not taxable as income.
3 The appellant, a carpenter by trade, came to Canada in 1948 from Austria and commenced working at his trade. Within four years he was in the business of building houses. He acquired vacant serviced lots, built houses thereon, and sold same. He personally worked hard and long hours and, by 1959, was reasonably well off, with money available for investment.
4 He sought advice from his banker with regard to purchasing raw land for investment and, having had his own initial views confirmed, purchased the above parcel of vacant land for $52,000. As the appellant wished to retain his cash flow for his business, he called in his business acquaintance, Victor Belland, who took a one-third share in this venture. Although, according to the appellant, he could have handled the entire transaction himself, he felt he should not stretch the financial resources necessary for his construction business. In the same year, that is, 1959, he also incorporated the construction business he had previously been carrying on as a proprietorship.
5 On his inquiring at the City Hall of the City of Edmonton, he found out at the relevant time, that is, at the time of the purchase of this land, that same was not within the city limits. The evidence establishes that at the date of hearing of this appeal, that situation remains unchanged. He felt that land was the safest investment and would always appreciate in value.
6 In 1962, some three years later, a real estate firm approached him with an offer for the purchase of this land, but would not show him the offer until he signed the listing agreement; presumably to make certain that it would receive a commission if the sale went through. He signed the listing for that reason, but the sale did not go through.
7 In the intervening years he allowed a person with whom he dealt in construction matters to have storage space on a portion of this land and allowed one of his workmen to move a small house on skids onto the land as well. This workman and his family lived there for some years. In regard to the improvements on the land, he brought power onto it at a cost of $250 and dug a well at a cost of approximately $1,000. The land was kept free of weeds by an agreement with another man who took hay off the land. Taxes were approximately $87 a year at the beginning, and increased slightly over the years.
8 In 1967 he received an offer from Metropolitan Theatres (Calgary) Ltd of $95,000 for the land, which offer he and his one-third partner accepted.
9 The respondent took the position that the land was a trading asset and this purchase and sale by the appellant was a venture in the nature of trade. The respondent called no evidence. Learned counsel for the respondent ably argued that the appellant was in the business of construction, buying serviced lots, building thereon and selling same at profit; he had had it in his mind that the City would extend its boundaries north, where he would already have acquired much available land at a very low cost. Failing that, he would turn the whole parcel to account at the earliest possible time.
10 Exhibit A-6 shows smaller parcels of the adjacent subdivision which had been sold at fairly substantial profits. By analogy, the appellant could have considered subdividing his own lands and making a more substantial profit thereon, a course which he did not follow.
11 The appellant at the present time, and for some years prior to the hearing, has ceased residential construction and has been employed by another construction firm as a superintendent of commercial construction.
12 In reviewing his evidence, and having regard to his demeanour on the stand, I cannot conclude this man was a trader at any time. He was and is a zealous hard-working man. The question of one isolated transaction has been considered by this Board, its predecessor and our Courts on numerous occasions, and it is a question of fact whether or not a particular transaction is or is not a venture in the nature of trade within the meaning of the Income Tax Act. I know of no case that holds that buying raw land as an investment and later disposing of it at a profit makes it subject to income tax per se, and in this connection I would like to express my appreciation to both counsel for leaving with me for perusal the various cases to which they made reference in the course of their respective submissions.
13 The uncontradicted evidence is that the appellant started out with but one intention, to invest in land as the safest form of investment having regard to his background. He realised a profit on this investment some eight years later.
14 In my humble opinion, the appellant has established his case, and the appeal is allowed in full.
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