THURLOW,
J.:—This
is
an
appeal
from
an
assessment
of
income
tax
for
the
year
1956.
In
its
fiscal
period
which
ended
in
that
year
the
appellant
realized
a
substantial
profit
on
the
sale
of
a
parcel
of
land
which
it
owned
and
in
making
the
assessment
the
Minister
treated
the
whole
of
such
profit
as
income
from
the
appellant’s
business.
The
appellant’s
case
is
that
a
portion
of
the
land
so
sold
had
been
acquired
and
held
only
as
an
investment
and
that
the
sale
of
this
portion
of
the
land
was
a
mere
realization
of
the
investment
and
the
profit
attributable
thereto
not
income
for
the
purposes
of
the
Income
Tax
Act
but
a
capital
gain.
The
appellant
was
incorporated
in
September
1953,
and
obtained
title
to
the
land
in
question
in
May
1954,
under
the
circumstances
to
be
related.
The
purchase
price
was
$250,000.
The
land
was
sold
in
a
single
transaction
in
July,
1955,
for
$840,000
and
the
appellant’s
submission
is
that
of
the
profit
so
realized
$89,453.05
was
attributable
to
the
sale
of
a
particular
part
of
the
property
which
it
had
acquired
and
at
all
material
times
held
for
the
purpose
of
erecting
apartment
buildings
thereon
to
be
held
for
investment
purposes
rather
than
for
purposes
of
development
and
sale.
The
lot
in
question
consisted
of
50
acres
of
land
in
the
Township
of
North
York
situate
about
1,000
feet
south
of
highway
401.
It
had
a
frontage
of
660
feet
on
the
eastern
side
of
Dufferin
Street
and
extended
easterly
therefrom
for
some
3,200
feet.
At
all
material
times
the
land
was
undeveloped
but,
in
January
of
1953
when
the
events
to
be
related
began,
the
eastern
portion
of
the
lot
consisting
of
about
15
acres
lying
to
the
eastward
of
a
proposed
extension
northwardly
of
Spadina
Road
was
zoned
for
single
family
dwellings
while
the
remaining
portion
was
zoned
for
multiple
family
dwellings.
Early
in
January
1953,
A.
E.
Diamond,
an
engineer,
who,
with
Joseph
Berman
was
interested
in
and
employed
by
Cadillac
Contracting
and
Developments
Limited,
was
approached
by
an
agent
seeking
to
sell
the
property
in
question
which
was
then
owned
by
Joseph
Tanenbaum.
Cadillac
Contracting
and
Developments
Limited
(to
which
I
shall
refer
as
Cadillac
and
thus
distinguish
it
from
the
appellant)
was
engaged
in
constructing
commercial
and
residential
buildings
on
developed
land.
Until
that
time
it
had
never
been
concerned
in
developing
land
itself,
that
is
to
say
in
subdividing
it,
providing
or
arranging
for
water,
sewer
and
other
services,
constructing
streets
and
generally
making
it
suitable
for
building
purposes.
Nor
had
Mr.
Diamond
had
experience
in
that
kind
of
operation.
As
Cadillac
was
not
in
a
position
to
purchase
the
Tanenbaum
land,
Mr.
Diamond
sought
to
interest
several
others
in
it
and
for
that
purpose
arranged
a
meeting
at
which
he,
Berman,
Jack
Kamin,
a
dealer
in
electrical
equipment,
Milton
Shier,
a
dealer
in
hotel
and
restaurant
equipment,
and
Harold
Gross,
a
machinery
merchant,
were
present.
At
this
meeting
it
was
arranged
that
the
group
would
try
to
purchase
the
land
for
the
purpose
of
building
apartments
thereon
and
keeping
them
for
investment.
An
agreement
was
reached
regarding
the
shareholdings
of
the
members
of
the
group
and
Cadillac
was
instructed
to
proceed
to
take
an
option
on
the
land
on
behalf
of
a
new
company
which
was
to
be
incorporated.
By
indenture
dated
January
28,
1953,
Cadillac
obtained
from
Tanenbaum
for
$2
an
option
exercisable
up
to
April
15,
1953,
to
purchase
the
property
for
$250,000,
payment
of
$225,000
of
which
was
to
be
secured
by
a
mortgage
in
favour
of
Tanenbaum
payable
two
years
from
the
date
of
closing
of
the
purchase.
In
the
indenture
it
was
provided
that
when
not
in
default
under
the
mortgage
Cadillac
should
be
entitled
to
obtain
partial
discharges
from
the
mortgage
of
portions
of
the
land
to
the
extent
of
one
acre
for
each
$4,500
which
Cadillac
might
pay
on
account
of
the
mortgage
principal
prior
to
maturity.
There
were
however
certain
express
limitations
on
this
right
which
it
is
not
necessary
to
set
out
but
which
to
my
mind
indicate
that
the
parties
were
contemplating
that
the
land
might
during
the
two
year
period
be
or
become
partially
or
wholly
developed
and
alienated
to
other
parties
whether
by
way
of
mortgage
or
sale
or
both.
It
was
also
provided
that
the
vendor
should
consent
to
the
registration
of
a
plan
or
plans
of
subdivision
of
the
property.
The
assignment
clause
at
the
end
of
the
document
was
in
somewhat
unusual
form
and
together
with
the
other
evidence
satisfies
me
that
it
was
contempated
that
Cadillac
would
assign
its
rights
or
some
part
thereof
to
the
company
to
be
incorporated.
After
obtaining
the
option,
Mr.
Diamond
investigated
the
scheme
to
build
apartments
more
thoroughly.
He
checked
on
the
market
for
this
kind
of
housing
and
the
availability
of
mortgage
money
to
finance
them,
on
the
suitability
of
the
area
for
multiple
family
dwellings
and
in
a
general
way
satisfied
himself
that
sanitary
sewers
and
water
would
become
available
in
due
course
to
enable
the
development
of
the
land
to
proceed.
He
had,
however,
in
reply
to
an
enquiry,
received
from
the
Township
Engineer
of
the
Township
of
North
York
a
letter
indicating
that
the
land
could
not
be
serviced
by
draining
sewage
into
a
sewer
which
had
been
constructed
for
a
housing
subdivision
south
of
the
land
in
question,
and
at
that
time
there
was
no
other
convenient
sewer
connection
available.
The
option
was
exercised
in
April
1953,
and
the
transaction
was
to
be
closed
in
May
of
that
year
but
Tanenbaum
refused
to
complete
the
transaction
and
litigation
to
obtain
specific
performance
ensued.
In
fact
the
purchase
was
not
completed
until
May
1954.
Prior
to
September
1953,
the
group
met
and
despite
the
fact
that
title
to
the
land
had
not
yet
been
obtained,
retained
the
services
of
Cadillac
to
look
after
all
the
work
required
to
have
the
land
ready
for
building
apartments
and
an
understanding
was
also
reached
that
Cadillac
was
to
build
the
apartments.
Cadillac
then
retained
the
services
of
a
firm
of
town
planning
consultants
to
plan
the
necessary
subdivision
and
also
retained
an
engineering
firm
to
plan
the
water,
sewer,
hydro
and
other
services
which
would
be
required
as
a
prerequisite
to
the
registration
of
a
plan
of
subdivision.
Without
such
a
plan
being
registered
none
of
the
land
could
be
sold
or
mortgaged
in
lots.
The
provision
of
storm
sewers
presented
no
great
problem
and
it
was
expected
that
a
water
supply
would
be
available
in
a
matter
of
a
few
months
but
sewage
disposal
presented
a
major
problem
and
with
a
view
to
solving
it,
various
municipal
authorities
were
contacted
but
without
any
immediate
success.
Early
in
December
1953,
application
was
made
in
the
name
of
Cadillac
for
approval
of
a
plan
of
subdivision
of
the
15
acres
lying
to
the
eastward
of
the
proposed
Spadina
Road
extension
into
single
family
dwelling
building
lots,
these
being
laid
off
large
enough
to
permit
the
use
of
septic
tanks
for
sewage
disposal.
The
group
at
that
time
planned
to
sell
the
eastern
portion
of
the
property
in
lots
and
to
develop
the
western
portion
for
multiple
family
dwellings.
The
application
for
approval
of
the
plan
was
refused
or
deferred
in
April
1954
on
the
ground
that
an
adequate
supply
of
water
was
not
yet
available
in
the
area.
In
the
meantime
the
town
planning
consultants
on
Cadillac’s
instructions
had
prepared
three
alternative
tentative
subdivision
plans
for
multiple
family
development
of
the
whole
of
the
area
lying
between
Dufferin
Street
and
the
proposed
Spadina
Road
extension
but
no
application
was
ever
made
for
approval
of
any
of
these
plans
as
the
problem
of
obtaining
sewer
connections
had
not
been
solved.
Nor
was
the
plan
of
subdivision
of
the
15
acre
portion
resubmitted
as
it
was
considered
that
by
the
time
that
water
would
become
available
an
answer
to
the
sewer
problem
for
the
entire
property
would
have
been
found
and
in
that
event,
the
single
family
dwelling
lots
on
the
15
acre
eastern
portion
of
the
property
could
be
smaller
in
size.
Some
time
later
in
1954
an
understanding
was
reached
with
the
Township
Engineer
under
which
a
connection
to
a
sewer
to
be
constructed
northward
of
the
property
would
be
approved
if
the
land
or
the
major
portion
of
it
were
rezoned
to
single
family
dwellings,
and
in
order
to
get
started
with
their
plans
it
was
decided
to
have
most
of
the
land
so
rezoned,
to
subdivide
the
portion
so
rezoned
into
single
family
dwelling
lots
and
to
sell
the
lots
if
and
when
the
plan
was
registered
but
to
retain
the
portion
not
rezoned
and
a
number
of
the
lots
adjacent
thereto
comprising
in
the
whole
about
ten
acres
fronting
on
Dufferin
Street
to
await
a
time
when
these
lots
might
be
rezoned
for
multiple
family
dwellings
in
order
to
construct
apartment
buildings
thereon.
A
plan
of
such
a
subdivision
of
all
but
1.42
acres
of
the
land
was
accordingly
prepared
and
submitted
for
approval
in
October
1954
and
in
December
1954
Cadillac
was
informed
that
the
plan
would
be
recommended
for
approval
by
the
Minister
of
Planning
and
Development
subject
to
compliance
with
certain
alterations
and
conditions.
These
included
among
others
a
requirement
that
the
appellant
convey
11
of
the
lots
to
the
township
and
a
further
requirement
that
the
appellant
enter
into
a
contract
with
the
township
for
the
construction
of
the
roads
and
sewers,
the
installation
of
services
and
payment
of
taxes.
A
by-law
of
the
township
was
subsequently
passed
rezoning
most
of
the
property
for
single
family
dwellings
but
the
1.42
acres
remained
zoned
for
multiple
family
dwellings
and
upon
registration
of
the
plan
and
installation
of
the
sewer
and
water
services
it
would
have
been
possible
to
get
started
with
the
construction
of
apartment
buildings
on
it.
At
a
meeting
of
the
shareholders
of
the
company
held
on
January
29,
1955,
it
was
decided
to
attempt
to
repurchase
from
the
township
the
11
lots
which
they
would
require
providing
that
the
price
set
by
the
township
was
below
market
price,
but
that
if
the
negotiation
of
the
repurchase
of
these
lots
would
hold
up
the
sale
of
the
land
unduly,
the
sale
of
the
other
lots
should
proceed
without
waiting
for
settlement
of
a
price
on
the
township
lots.
At
the
same
meeting
it
was
decided
that
the
1.42
acre
lot
and
lots
152
to
169
which
together
with
the
1.42
acres
made
up
about
five
acres
of
the
land
fronting
on
Dufferin
Street
would
not
be
put
up
for
sale.
In
February
1955,
the
appellant
through
several
real
estate
agents
proceeded
to
sell
to
various
purchasers
all
the
lots
in
the
subdivision
except
the
11
required
to
be
conveyed
to
the
township
and
those
which
it
had
decided
would
not
be
sold.
The
agreements
of
sale
or
most
of
them
provided
that
the
sale
should
be
null
and
void
if
the
plan
were
not
registered
by
a
particular
date.
At
this
stage
there
were
still
details
to
be
worked
out
before
the
subdivision
would
be
approved,
correspondence
was
still
going
on
with
respect
to
the
sewer
connection
and
in
view
of
the
proposed
construction
of
a
new
trunk
sew
er
in
the
vicinity
in
a
matter
of
two
or
three
years
arrangements
were
made
for
a
temporary
connection
for
the
appellant’s
subdivision
with
the
sewer
of
the
subdivision
south
of
the
property,
but
the
agreement
with
the
township
for
the
construction
of
streets
and
sewers
and
installation
of
services
etc.
had
not
yet
been
signed
nor
had
the
plan
been
finally
approved
or
registered
when,
early
in
July
1955,
the
appellant
received
through
an
agent
an
offer
of
$840,000
for
the
whole
of
the
property.
This
offer
was
large
enough
to
yield
a
profit
approximately
equal
to
what
the
appellant
could
expect
to
realize
from
the
sale
of
the
lots
of
the
subdivision
together
with
a
substantial
profit
as
well
in
respect
of
the
lots
which
they
had
not
intended
to
sell.
The
proposal
was
considered
at
a
meeting
of
the
directors
of
the
appellant
and
several
factors
entered
into
their
decision.
There
was
some
flaw
in
the
title
to
a
narrow
strip
of
the
land
bordering
on
Dufferin
Street
which
would
have
to
be
eliminated
before
the
plan
could
be
registered.
Secondly,
the
township
besides
requiring
the
appellant’s
agreement
to
construct
the
streets,
sewers
etc.
required
a
bond
as
well
guaranteeing
due
performance
by
the
appellant
of
its
contract.
These
were
difficulties
which
could
be
overcome
but
providing
the
bond
was
considered
to
be
something
of
a
burden.
In
addition
the
directors
were
concerned
about
the
ultimate
cost
of
the
required
installations.
Cadillac
which
was
to
do
the
work
was
prepared
only
to
assure
them
that
its
estimates
of
the
costs
were
realistic
but
they
might
fluctuate
widely
and
Cadillac
was
not
prepared
to
guarantee
that
the
estimates
would
not
be
exceeded.
These
considerations
indicated
that
the
subdivision
should
be
abandoned
and
the
offer
accepted.
On
the
other
hand
sale
of
the
whole
parcel
involved
the
abandonment
as
well
of
their
plan
to
build
multiple
family
dwellings
on
the
land
to
be
held
for
investment.
It
was
thereupon
decided
that
an
effort
should
be
made
to
see
if
the
purchaser
would
not
buy
the
property
without
the
five
acres
fronting
on
Dufferin
Street
but
that
if
the
purchaser
required
the
whole
of
the
property
the
offer
should
be
accepted
provided
arrangements
could
be
made
for
releases
from
the
several
purchasers
of
lots.
The
prospective
purchaser
insisted
on
obtaining
the
whole
50
acres
except
the
portion
required
by
the
municipality
for
the
Spadina
Road
extension
and
the
property
was
accordingly
sold
on
July
21,
1955
for
$840,000.
Most
of
the
agreements
of
sale
of
lots
had
expired
or
become
void
because
the
plan
had
not
been
registered
in
the
time
limited
but
it
was
necessary
for
the
appellant
to
purchase
releases
from
two
of
the
purchasers.
This
was
done
at
a
cost
of
$7,500
and
the
sale
was
completed
in
August
1955.
In
May
of
1955,
the
appellant
had
also
bought
a
45
acre
parcel
of
land
in
the
Township
of
Scarboro
which
it
resold
a
year
later
at
a
profit
without
subdividing
the
property.
These
were
the
only
real
estate
transactions
in
which
the
appellant
engaged,
the
profits
of
the
transactions
having
since
then
been
invested
in
other
companies.
The
appellant
has
never
had
a
place
of
business
or
employees
of
its
own.
The
objects
of
the
appellant
company
as
set
out
in
the
letters
patent
by
which
it
was
incorporated
include:
“(c)
To
acquire
by
purchase,
lease,
exchange,
concession
or
otherwise
city
lots,
farm
lands,
mining
or
fruit
lands,
town
sites,
grazing
and
timber
lands
and
any
description
of
real
estate
and
real
property
or
any
interest
and
rights
therein,
legal
or
equitable
or
otherwise,
to
take,
build
upon,
hold,
own,
maintain,
work,
develop,
sell,
lease,
exchange,
improve
or
otherwise
deal
in
and
dispose
of
such
lots,
lands,
sites,
real
estate,
real
property
and
any
houses,
apartments
or
buildings
thereon
or
any
interest
therein,
and
to
deal
with
any
portion
of
the
lands
and
property
so
acquired,
subdividing
the
same
into
building
lots
and
generally
laying
the
same
out
into
lots
and
streets
and
building
sites
for
residential
purposes
or
otherwise
;
and
to
construct
streets
thereon
and
the
necessary
sewerage
and
drainage
systems
and
to
build
upon
the
same
for
residential
purposes
or
otherwise
and
to
supply
buildings
so
erected
with
electric
light,
heat,
gas,
water
or
other
requisites.”
I
may
add
that
on
the
evidence
I
am
satisfied
that
the
plan
to
build
apartments
was
within
the
financial
capacity
of
the
parties
interested
in
the
appellant
company
because
of
the
remarkably
small
amount
of
equity
capital
required,
and
that
the
property
in
so
far
as
it
was
zoned
for
multiple
family
dwellings
was
purchased
for
that
purpose
with
intent
to
realize
profits
through
letting
the
apartments
to
tenants,
and
while
I
would
expect
that
at
that
stage
each
member
of
the
group
contemplated
the
possibilities
and
probably
also
assessed
to
his
own
satisfaction
the
prospects
both
of
selling
the
apartments
some
day
at
a
profit
and
of
selling
the
land
at
a
profit
if
the
plan
to
erect
apartments
failed,
I
do
not
regard
the
situation
as
one
in
which
it
should
be
inferred
that
the
group
would
have
purchased
or
did
purchase
the
property
as
a
speculation
looking
to
resale
or
that
the
group
when
purchasing
the
property
intended
to
turn
it
to
account
for
profit
by
any
method
that
might
be
considered
expedient
including
resale,
though
as
events
turned
out
that
appears
to
me
to
describe
what
they
did
with
it.
For
the
present
purpose
the
relevant
provisions
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
are
Sections
3,
4
and
139(1)
(e)
which
provide
as
follows
:
“3.
The
income
of
a
taxpayer
for
a
taxation
year
for
the
purposes
of
this
Part
is
his
income
for
the
year
from
all
sources
inside
or
outside
Canada
and,
without
restricting
the
generality
of
the
foregoing,
includes
income
for
the
year
from
all
(a)
businesses,
(b)
property,
and
(c)
offices
and
employments.
4.
Subject
to
the
other
provisions
of
this
Part,
income
for
a
taxation
year
from
a
business
or
property
is
the
profit
therefrom
for
the
year.
139.
(1)
In
this
Act,
(e)
‘business’
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment.”
The
problem
to
be
determined
is
whether
for
income
tax
purposes
the
whole
of
the
profit
realized
by
the
appellant
on
the
sale
of
the
Tanenbaum
property
was
income
from
its
business
within
the
meaning
of
these
provisions,
without
any
deduction
therefrom
being
made
in
respect
of
such
portion
of
the
profit
as
could
be
regarded
as
attributable
to
the
sale
of
the
five
acres
fronting
on
Dufferin
Street.
The
test
to
be
applied
for
resolving
the
question
is
that
stated
in
Californian
Copper
Syndicate
v.
Harris,
5
T.C.
159
at
page
166,
where
the
Lord
Justice
Clerk
after
speaking
generally
of
the
distinction
between
a
gain
which
was
not
assessable
to
income
tax
and
a
gain
from
a
trade
which
was
assessable
and
after
giving
the
buying
and
selling
of
lands
or
securities
speculatively
in
order
to
make
gain
as
the
simplest
example
of
what
is
trading
said
:
“What
is
the
line
which
separates
the
two
classes
of
cases
may
be
difficult
to
define,
and
each
case
must
be
considered
according
to
its
facts;
the
question
to
be
determined
being—Is
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realising
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit-making?”
In
seeking
an
answer
to
this
question
it
is
I
think
necessary
to
have
regard
to
the
whole
of
the
facts
of
the
particular
case
and
not
merely
to
some
of
them
though
of
course
not
all
of
them
may
be
of
equal
importance.
The
present
case
for
example
is
not
to
be
regarded
as
one
in
which
the
only
material
facts
are
that
a
property
was
purchased,
or
purchased
in
part,
for
an
investment
purpose
and
subsequently
sold
for
more
than
the
appellant
paid
for
it.
There
is
much
more
to
the
picture
than
that
and
in
reaching
a
conclusion
the
other
features
of
the
situation
must
be
considered
as
well.
The
appellant
is
a
corporation
the
objects
of
which
are
broad
enough
to
include
among
others
carrying
on
business
for
profit
both
by
acquiring
and
holding
investments
in
real
estate
and
by
dealing
in
real
estate
and,
as
I
view
the
evidence,
from
the
time
of
its
acquisition
of
the
Tanenbaum
property
in
May
1954,
if
not
earlier,
the
appellant
had
property,
consisting
of
the
eastern
15
acres
of
the
property,
which
it
had
acquired
for
the
purpose
of
development
and
sale
and
was
engaged
in
a
business
which
at
least
included
developing
and
dealing
in
land.
I
am
also
of
the
opinion
that
the
sale
of
the
property
made
in
July
1955
was
a
sale
in
the
course
of
that
business.
Insofar
as
the
transaction
involved
the
sale
of
the
45
acres
or
thereabouts
which
had
been
subdivided
into
lots
for
the
purpose
of
sale,
the
fact
that
the
agreements
of
sale
to
purchasers
were
abandoned
and
the
property
sold
in
a
single
transaction—in
which
all
the
effort
which
had
been
put
into
the
subdivision
of
the
land
came
to
naught—would
not
in
my
opinion
make
such
sale
any
the
less
a
sale
in
the
course
of
the
appellant’s
business
of
dealing
in
land
and
more
particularly
do
I
think
this
is
so
in
view
of
the
fact
that
the
decision
to
accept
the
offer
was
based
on
considerations
relating
to
the
trading
activities
of
the
appellant
and
that
in
order
to
take
advantage
of
the
offer
the
appellant
took
steps
to
obtain
releases
from
two
purchasers
and
thus
‘‘matured’’
the
property
for
the
purpose
of
carrying
out
the
particular
transaction.
The
only
feature
which
has
given
me
any
doubt
on
this
aspect
of
the
matter
is
the
question
of
whether
the
inclusion
in
the
transaction
of
the
five
acres
which
were
not
formerly
for
sale
could
(assuming
these
to
have
been
at
that
time
an
asset
of
a
capital
as
opposed
to
one
of
a
trading
nature)
on
the
principle
of
Doughty
v.
Commissioner
of
Taxes,
[1927]
A.C.
327,
stamp
the
whole
transaction
as
one
outside
the
scope
of
the
appellant’s
business.
I
do
not
however
think,
even
on
that
assumption,
that
such
is
the
effect
of
including
the
five
acres
in
the
transaction
for
the
completion
of
the
transaction
did
not
put
the
appellant
out
of
the
business
of
dealing
in
real
estate
since
it
then
had
on
hand
the
Scarboro
property
which
so
far
as
appears
was
not
acquired
for
any
purpose
other
than
that
to
sell
it
for
a
profit—
which
was
what
was
ultimately
done
with
it—and
the
transaction
itself
in
which
the
Tanenbaum
property
was
sold
was
in
no
sense
a
Slump
sale
of
an
undertaking
but
simply
a
sale
of
land
which
was
a
kind
of
transaction
characteristic
of
a
business
of
dealing
in
land.
But
finding
as
I
do
that
the
sale
of
the
Tanenbaum
property
was
a
transaction
in
the
course
of
the
appellant’s
business
of
dealing
in
land
appears
to
me
still
to
leave
not
satisfactorily
answered
the
question
why
any
profit
attributable
to
the
five
acre
portion
of
the
property
which
had
not
previously
been
for
sale
should
be
regarded
as
profit
from
the
business
since
I
do
not
think
it
necessarily
follows
as
a
matter
of
course
that
because
the
five
acres
(assuming
still
that
they
were
in
a
different
category
from
the
rest
of
the
property)
were
sold
in
a
transaction
of
the
appellant’s
business,
the
sum
received
therefor
could
not
be
regarded
as
a
mere
realization
of
the
value
of
the
five
acres.
The
answer
however
in
my
opinion
appears
from
the
transaction
itself
and
the
circumstances
surrounding
it
and
in
particular
the
reasons
why
the
property
was
sold.
It
can
I
think
be
regarded
as
established
as
a
general
proposition
that
the
mere
fact
that
a
property
has
been
purchased
without
any
intention
of
making
profit
by
reselling
it
will
not
necessarily
result
in
any
sale
subsequently
made
being
a
mere
realization
rather
than
a
sale
in
an
operation
of
business
in
carrying
out
a
scheme
for
profit
making.
Thus
in
Cooksey
and
Bibbey
v.
Rednall,
30
T.C.
514,
where
the
appellants
had
bought
a
farm
for
farming
purposes
and
sold
it
14
years
later
and
had
been
assessed
on
the
profit
realized
on
the
sale,
the
appellants
having
in
the
meantime
been
engaged
in
trading
in
land,
Croom-Johnson,
J.,
in
the
course
of
a
judgment
allowing
the
appeal
said
at
page
919:
“I
have
no
doubt
that
if
there
had
been
evidence
here
that
at
some
time
after
the
original
purchases
of
a
lot
of
this
property
these
two
gentlemen
together
had
gone
in
for
a
system
of
land
development
with
regard
to
that
or
part
of
it,
it
would
have
been
open
to
the
Commissioners
to
find
that
they
had
turned
what
had
been
an
investment
into
the
subject-matter
of
a
trading
in
land.
It
does
not
follow
necessarily
that
they
would
so
find,
because
it
may
be
that
the
Commissioners
would
come
to
the
conclusion
that
the
partnership
had
not
traded
but
was
merely
realising
a
capital
asset.
Everything
must
depend
on
the
exact
circumstance.’’
Again
in
Dunn
Trust
Limited
v.
Williams,
[1950]
T.R.
271,
Vaisey,
J.,
in
a
judgment
reversing
the
Commissioners’
finding
that
the
profits
from
certain
sales
of
shares
arose
from
the
company’s
trading
in
shares
said
at
page
273:
‘First
of
all,
we
have
the
definite
finding
that
these
shares
were
purchased
in
1940,
not
with
the
intention
of
dealing
in
those
stocks
and
shares,
but
with
the
object
of
finding
a
permanent
investment—or
at
least,
the
word
‘permanent’
is
not
used,
but
an
investment
of
a
portion
of
the
company’s
reserves.
Now,
that
finding
of
the
General
Commissioners
undoubtedly
involves
this,
that
that
object
and
that
intention
must
have
been
departed
from;
but
there
was
no
evidence
to
show
how
or
when
or
by
whom
it
was
departed
from,
and
I
have
the
greatest
difficulty
in
discovering
how
or
when
or
by
whom
the
General
Commissioners
decided
that
that
change
of
object,
and
that
change
of
intention,
had
been
effected.
That
is
the
first
thing.
The
finding
that
these
stocks
or
shares
had
been
purchased
with
that
object
seems
to
me
to
be
a
finding
which,
in
order
to
justify
the
conclusions
of
the
General
Commissioners,
must
have
been
followed
by
a
further
finding
that
at
some
time,
in
some
manner,
by
some
operation
or
other,
the
object
had
been
reversed
and
the
intention
fundamentally
altered.
So
far,
I
have
found
in
very
difficult
to
discover
upon
what
the
General
Commissioners
can
have
based
the
decision
that
the
realisation
of
these
shares
produced
profits
out
of
the
trading
of
the
company.
Then,
when
I
look
at
the
statement
of
the
sales
which
resulted
in
producing
the
profits
which
have
been
held
to
be
the
subject
of
tax,
I
find,
as
I
have
already
stated
in
passing,
explanations
given
as
to
why
and
how
and
for
what
purpose
these
shares
were
sold;
and
I
find
that
the
purposes
indicated
are
quite
inconsistent
with
the
purposes
which
should
animate
those
who
direct
the
fortunes
of
a
trading
company
when
they
are
effecting
sales
of
that
company’s
stock-in-trade,
be
it
investments
or
be
it
any
other
kind
of
property
;
because
I
find
that
the
General
Commissioners
go
out
of
their
way
to
state,
not
that
the
securities
were
disposed
of
in
the
ordinary
course
of
business
or
because
they
thought
that
that
would
produce
a
desirable
profit,
or
because
they
thought
that
it
was
a
trading
operation
which
was
financially
beneficial
to
the
company,
but
I
find
the
statement
that
they
were
disposed
of
under
the
circumstances
which
are
set
out
in
the
stated
case.
These
circumstances
were
as
follows.
First,
in
one
case,
Mr.
Kerman
ceased
to
be
associated
with
the
management
of
the
company
whose
shares
were
in
question,
and
the
control
had
changed,
‘whereon
it
was
decided
[presumably
by
the
board
of
directors,
or
by
the
managing
director]
not
to
continue
to
hold
the
shares
of
the
company’.
That
seems
to
me
to
be
a
statement
which
is
almost
a
direct
negative
of
the
ordinary
and
inevitable
and
common-form
motive
which
actuates
the
mind
of
those
who
are
dealing
with
the
stock-in-trade
of
a
trading
company.
Then,
with
regard
to
certain
other
investments,
another
block
of
these
holdings,
the
stated
case
says:
‘After
the
death
of
Mr.
Kerman,
it
was
decided
that
these
shares
were
not
suitable
investments
[not
that
they
could
be
productively
sold,
or
turned
to
good
account
by
being
sold
at
a
profit,
but
that
they
were
not
‘‘suitable
investments”,
which
I
agree
is
an
ambiguous
expression]
and
these
shares
were
accordingly
sold’
—'accordingly’.
Finally,
the
last
item
was
the
small
sum
received
on
the
liquidation
of
the
Chosen
Corporation,
which
was
of
no
significance,
because
that
was
a
sum
which
the
company
had
no
option
to
refuse,
and
which
came
to
it,
so
to
speak,
without
any
active
decision
on
the
part
of
the
company.
’
’
In
that
case
it
was
apparent
that
the
first
two
sales
of
the
shares
were
made
for
simple
realization
motives
alone
and
in
the
third
case
the
company
whose
shares
were
held
had
gone
into
liquidation
and
the
realization
was
brought
about
without
any
decision
by
the
taxpayer.
The
situation
is
different
here.
There
was
first
of
all
no
desire
to
realize
the
company’s
investment
in
the
five
acres
and
no
occasion
for
doing
so
apart
from
the
considerations
which
led
to
the
decision
to
sell.
Secondly,
apart
from
the
attractiveness
of
the
offer
those
considerations,
being
concerned
with
the
subdivision
project,
were
all
related
to
the
trading
aspect
of
the
appellant’s
affairs
and
none,
save
the
difficulty
in
the
title,
had
any
relation
to
the
five
acres
or
the
plan
to
build
apartments
thereon.
In
my
view
the
sale
of
the
five
acres
in
these
circumstances
cannot
be
dissociated
from
the
trading
considerations
which
prompted
the
sale
of
the
whole
property.
(Vide
Atlantic
Sugar
Refineries
v.
M.N.R.,
[1948]
Ex.
C.R.
622;
[1948]
C.T.C.
326;
[1949]
S.C.R.
706;
[1949]
C.T.C.
196.)
Finally,
whatever
may
have
been
the
intention
of
the
group
with
respect
to
the
property
at
the
time
of
its
purchase,
it
is
apparent
that
the
intention
with
which
it
was
bought
was
a
flex-
ible
one
and
that
it
changed
from
time
to
time
while
the
property
was
held.
At
the
outset
the
plan
was
to
subdivide
and
sell
the
eastern
15
acres
and
to
develop
the
remaining
35
acres
by
building
apartment
buildings
to
be
held
for
investment.
When
it
turned
out
that
this
plan
involved
delay,
the
purpose
changed
and
it
was
decided
to
subdivide
and
sell
all
but
ten
acres
of
the
land
and
to
build
apartments
on
ten
acres
only.
This
alone
was
a
considerable
change
of
the
original
scheme
but
the
scheme
was
still
further
altered
when
the
decision
was
made
to
retain
only
five
acres
for
the
investment
purpose.
The
decision
to
subdivide
into
single
family
dwelling
lots
and
sell
30
of
the
35
acres
originally
intended
for
apartments
was
based
simply
on
business
considerations
relating
to
the
question
of
how
best
to
turn
the
property
to
account
for
profit,
for
nothing
prevented
the
group
from
waiting
until
sewer
capacity
became
available
to
serve
apartment
buildings
on
the
whole
35
acres
except
the
practical
considerations
of
the
loss
and
expense
attending
the
holding
of
the
land
for
an
uncertain
period,
and
the
uncertainty
as
to
what
the
market
for
apartment
space
might
be
when
that
time
came.
When
this
decision
had
been
reached,
a
new
plan
of
subdivision
was
prepared
and
the
scheme
proceeded
to
the
point
where
ultimately
the
lots
were
sold
subject
always
to
the
registration
of
the
plan.
Had
the
plan
been
registered
and
these
sales
completed
there
would
I
think
be
no
doubt
that
profit
from
them
would
have
been
income
and
yet
the
intention
at
the
time
of
purchase
with
respect
to
the
land
so
subdivided
and
sold
had
been
the
same
as
that
which
the
group
had
for
the
five
acres.
I
think
that
such
profit
would
have
been
income
because
the
land
so
subdivided
and
sold
had
become
the
subject
matter
of
a
trading
in
land.
The
next
change
of
intention
did
not
involve
the
preparation
of
yet
another
plan
of
subdivision
but
in
effect
involved
simply
the
abandonment
of
all
that
had
been
done
and
the
sale
of
the
whole
property
but
it
too
was
dictated
by
practical
considerations
concerned
in
my
view
entirely
with
the
trading
activities
of
the
company.
Regardless
of
what
had
been
intended
earlier,
when
this
decision
was
made
and
carried
out
the
property
in
my
opinion
was
being
dealt
with
as
a
single
trading
asset
with
a
single
trading
intention
with
respect
to
the
whole
of
it
and
I
can
see
nothing
about
the
transaction
or
the
circumstances
in
which
it
was
carried
out
which
establishes
or
even
suggests
that
the
appellant’s
investment
in
the
property,
insofar
as
it
can
be
said
to
have
related
to
the
five
acres,
was
merely
being
realized.
By
the
time
the
offer
was
accepted
that
too
had
become
part
of
the
subject
matter
of
a
trading
in
land.
The
situation
as
I
view
it
is
thus
one
in
which
at
the
material
time
the
appellant
was
engaged
in
a
business
of
dealing
in
land
and
in
the
course
of
that
business
sold
a
property
which
though
originally
in
part
acquired
for
an
investment
purpose
had
for
trading
considerations
rather
than
for
the
purpose
of
mere
realization
been
dealt
with
in
its
entirety
as
the
subject
matter
of
a
trading
transaction.
In
these
circumstances
the
whole
of
the
money
received
for
the
property
was
in
my
opinion
a
trading
receipt
and
the
profit
therefrom
a
gain
made
in
the
operation
of
the
appellant’s
business
in
carrying
out
its
scheme
for
profit
making.
The
profit
was
accordingly
income
within
the
meaning
of
the
Income
Tax
Act
and
was
properly
assessed.
The
appeal
therefore
fails
and
it
will
be
dismissed
with
costs.
Judgment
accordingly.
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