Noël,
J.:—This
is
an
appeal
from
a
decision
of
the
Tax
Appeal
Board
((1965),
39
Tax
A.B.C.
133,
137,
138)
dated
August
16,
1965,
which
dismissed
Harold
Diamond’s
appeal
from
the
assessments
of
income
tax
for
the
years
1957,
1958
and
1959,
Sarah
Diamond’s
appeal
for
the
years
1958
and
1959
and
Estelle
Diamond’s
appeal
for
the
years
1955,
1956,
1957,
and
1959.
Harold
Diamond’s
appeal,
as
well
as
the
appeals
of
both
his
wife,
Estelle
Diamond,
and
his
mother,
Sarah
Diamond,
were
all
heard
at
the
same
time
and
it
was
agreed
by
counsel
that
the
evidence
herein
should
apply
as
well
to
the
two
other
appellants.
There
is
no
dispute
as
to
the
figures
involved
in
these
appeals
and
the
main
issue
in
all
of
them
is
whether
the
amounts
received
by
the
appellants
from
the
sale
of
vacant
land
situated
on
the
outskirts
of
Winnipeg
are
capital
gains
or
trading
receipts.
Harold
Diamond’s
1957
assessment,
however,
is
based
entirely
on
the
assumption
made
by
the
respondent
that
his
spouse
earned
in
1957
income
in
excess
of
one
thousand
($1,000)
dollars
and
for
that
reason
he
was
not
in
1957,
by
virtue
of
paragraph
(b)
of
subsection
(2)
of
Section
26
of
the
Income
Tax
Act,
entitled
to
a
deduction
of
two
thousand
($2,000)
dollars
permitted
by
paragraph
(a)
of
subsection
(1)
of
Section
26
but
was
entitled
to
a
deduction
of
one
thousand
($1,000)
dollars
pursuant
to
paragraph
(b)
of
subsection
(1)
of
Section
26
of
the
Income
Tax
Act.
I
should
also
add
here
that
counsel
for
the
appellants
stated
at
the
trial
that
he
abandoned
the
contention
raised
in
the
case
of
Harold
Diamond
and
his
wife,
Estelle
Diamond,
that
the
money
invested
by
the
appellants
in
common
shares,
preferred
shares
and
loans
of
Portage
Drive-In
Ltd.
and
Prairie
Drive-In
Ltd.
should
be
held
to
be
deductible
as
business
losses
under
Section
27(1)
(e)
but
did
not
abandon
Sarah
Diamond’s
alternative
argument
that
if
it
is
found
that
she
has
engaged
in
a
trading
transaction
with
respect
to
the
Mclnnes
property
that
the
loss
she
has
sustained
in
the
Balstone
Farms
option
of
$15,000
be
considered
as
a
business
loss
deductible
in
accordance
with
the
provisions
of
Section
27
(1)
(e)
of
the
Income
Tax
Act.
During
the
year
1952,
Harold
Diamond
and
one
Michael
Shnier
(sometimes
called
Max),
his
brother-in-law,
decided
to
establish
two
corporations,
Portage
Drive-In
Ltd.
and
Prairie
Drive-In
Ltd.,
to
operate
drive-in
theatres
in
the
Province
of
Manitoba.
Shnier
had
some
interests
in
a
drive-in
theatre
already
in
operation
in
Winnipeg
and,
therefore,
was
experienced
in
that
type
of
business.
The
two
partners,
therefore,
sought
out
land
on
the
outskirts
of
Winnipeg
for
the
above
purpose
and
made
several
attempts
to
purchase
a
portion
(15
acres)
of
a
property
hereinafter
referred
to
as
the
Mclnnes
property,
situated
on
highway
No.
1,
municipality
of
Assiniboia,
some
three
or
four
miles
west
of
Winnipeg.
They
were
not
successful
in
purchasing
the
above
land
and
during
the
year
1952
they
purchased
another
property
slightly
west
of
the
Mclnnes
property
some
six
miles
(15
to
20
minutes)
from
the
city
of
Winnipeg.
They
established
thereon
a
drive-in
theatre
known
as
the
Circus
Drive-In
Theatre
owned
by
Portage
Drive-In
Ltd.
in
which
Harold
Diamond
and
his
wife,
Estelle
Diamond,
held
a
one-half
interest
and
Shnier
and
his
wife
held
the
other;
they
also,
some
time
later,
established
and
operated
another
drive-in
theatre
known
also
as
the
Circus
Drive-In
Theatre
owned
by
Prairie
Drive-In
Ltd.
situated
at
Portage
LaPrairie,
Manitoba,
in
which
Harold
Diamond
and
his
wife,
Estelle
Diamond,
also
held
a
one-
half
interest
and
Michael
Shnier
and
his
wife
held
the
other
half.
During
the
year
1952,
Harold
Diamond
and
Michael
Shnier,
having
been
approached
by
the
municipality
of
Assiniboia,
caused
their
respective
wives
to
acquire,
for
$1,500,
a
strip
of
real
property
(containing
five
acres)
for
which
Estelle
Diamond
paid
$750
and
Mrs.
Shnier
paid
$750.
This
land,
situated
directly
across
from
the
Circus
Drive-In
Theatre
of
Portage
Drive-In
Ltd.,
was
registered
in
the
joint
names
of
Estelle
Diamond
and
Mildred
Shnier.
Both
of
these
ladies
owned
one
share
each
of
Portage
Drive-In
Ltd.
and
Prairie
Drive-In
Ltd.
as
well
as
a
number
of
preferred
shares.
They
did
not
carry
out
the
negotiations
which
led
to
the
purchase
of
the
five
acres
which
was
carried
out
by
their
respective
husbands
nor
did
they
have
anything
to
do
with
a
number
of
sales
of
the
lots
of
this
parcel
of
land,
Estelle
Diamond
admitting,
however,
that
she
did
exactly
what
her
husband
told
her
to
do
with
respect
to
the
purchase
as
well
as
to
the
sales
and
relied
entirely
on
him
in
this
regard.
The
above
five-acre
parcel
was
sold
as
follows
:
(1)
1st
July
1953
Sale
of
lots
1-8
block
1
plan
1120
to
Engelhardt
Stelzer
for
$3,390.00
|
Profit
|
$
3,021.40
|
|
(2)
2131:
October,
1954
|
|
|
Sale
of
lots:
6
block
12
plan
1120
|
|
|
1-5
block
12
plan
1120
|
|
|
7-8
block
12
plan
1120
|
|
|
to
Henry
Schultz
and
Lloyd
Richmond
for
$11,400.00
|
|
|
Profit
|
$10,902.87
|
|
(3)
18th
August
1955
|
|
|
Sale
of
lot
22
block
1
plan
1120
to
Henry
Schultz
|
|
|
for
$200.00
|
|
|
Profit
|
$
|
125.53
|
|
(4)
19th
May
1957
|
|
|
Sale
of
lots
1-8
block
11
plan
1120
to
Canadian
Oil
|
|
|
Companies
Ltd.
for
$15,000.00
|
|
|
Profit
|
$13,344.52
|
(5)
7th
May
1958
Sale
of
lots
1-8
block
22
plan
1120
to
Max
Yale
Diamond
for
$10,000.00
|
Share
of
Profit
applicable
to
Estelle
Diamond
|
$
4,655.60
|
One
half
of
the
profit
realized
from
the
sales
of
the
above
land
only
is
applicable
to
Estelle
Diamond
of
which
$2,706.45
was
assessed
in
1955,
$2,582.26
in
1956,
$6,672.26
in
1957
and
$3,711.05
in
1959.
During
the
early
part
of
the
year
1953,
the
“Mclnnes
property”,
which
was
until
then
being
farmed,
became
vested
in
the
executors
of
its
recently
deceased
owner
and
the
executors
approached
Harold
Diamond
and
offered
the
whole
of
the
Mc-
Innes
property
(70
acres)
at
a
price
considerably
less
than
what
they
had
previously
offered
for
a
portion
of
that
property.
As
a
matter
of
fact,
the
offer
made
by
Harold
Diamond
and
his
partner
for
15
acres
of
the
Mclnnes
property
in
1952
went
as
high
as
$1,000
an
acre
but
the
owner
then
would
not
part
with
the
land
for
less
than
$1,200
an
acre.
The
executors,
after
his
death,
offered
the
whole
of
the
70
acres
for
approximately
$12,450
and
they
bought
it.
Harold
Diamond
and
Michael
Shnier,
as
well
as
the
two
corporations,
were
at
this
time
without
funds
and
in
order
to
provide
for
the
purchase
of
this
property,
the
appellant
convinced
his
mother,
Sarah
Diamond,
to
put
up
the
money,
which
she
did.
Upon
completion
of
this
purchase,
the
property
was
transferred
from
the
Mclnnes
estate
to
Michael
Shnier
on
October
19,
1953,
and
then
registered
in
the
name
of
Sarah
Diamond
on
November
7,
1953.
On
October
1,
1954,
an
agreement
was
signed
between
Sarah
Diamond,
Michael
Shnier
and
Harold
Diamond,
whereby
Sarah
Diamond
(1)
undertook
not
to
sell
the
Mclnnes
lands
before
October
1,
1958,
without
the
consent
of
‘both
Michael
Shnier
and
Harold
Diamond;
(2)
agreed
that
if
before
October
1,
1958,
Michael
Shnier
and
Harold
Diamond
brought
to
her
a
purchaser
for
cash
of
the
lands
and
Michael
Shnier
and
Harold
Diamond
both
authorized
her
in
writing
to
sell
the
land
to
the
purchaser
she
would
agree
to
sell
provided
the
amount
of
the
purchase
price
was
such
that
after
deducting
the
moneys
she
paid
for
the
lands
together
with
costs
incurred
by
her
and
all
moneys
expended
by
her
for
taxes
and
maintenance
of
said
lands
and
interest
on
all
moneys
paid
out
by
her
at
4%
from
the
date
of
respective
payment,
it
would
be
sufficient
to
leave
her
with
a
profit
of
at
least
$5,000.
It
was
further
stipulated
in
this
agreement
that
‘‘in
the
event
the
profit,
after
deducting
income
tax
she
may
have
to
pay
(sic)
by
reason
of
said
sale
of
the
lands
exceeds
$5,000
but
does
not
exceed
$15,000,
she
agrees
to
divide
such
excess
in
equal
shares’’
between
Michael
Shnier,
Harold
Diamond
and
herself.
Any
excess
over
$15,000
was
to
be
divided
equally
between
the
three
of
them;
(3)
she
agreed
that
if
at
any
time
before
she
sold
the
land
Michael
Shnier
and
Harold
Diamond
together
would
tender
to
her
in
cash
two-thirds
of
the
moneys
paid
by
her
for
the
purchase
of
the
said
lands
plus
two-thirds
of
the
costs
incurred
by
her
in
obtaining
title
to
said
lands,
plus
two-thirds
of
all
taxes
and
other
moneys
that
she
had
to
expend
in
respect
to
said
lands,
plus
the
interest
then
she
shall
transfer
to
each
of
Michael
Shnier
and
Harold
Diamond
an
undivided
one-third
interest
in
the
said
lands.
On
May
11,
1956,
Harold
Diamond
wrote
to
Michael
Shnier
referring
to
the
above
agreement
and
in
paragraphs
2
and
3
of
this
letter
stated
:
“I
further
agree
to
act
along
with
you
on
your
decisions
in
order
to
exercise
that
agreement
in
our
behalf.
It
is
specifically
understood
that
Harold
Diamond
does
not
have
to
abide
by
a
decision
of
Max
Shnier
to
sell
the
land
unless
the
total
sale
price
is
a
minimum
of
$1,250
per
acre.
It
is
also
understood
that
whatever
profit
or
loss
is
made
on
the
sale
of
this
land,
both
Max
Shnier
and
Harold
Diamond
will
share
equally.’’
On
July
7,
1958,
Michael
Shnier
and
Harold
Diamond
wrote
to
Sarah
Diamond,
c/o
Nitikman
&
Nusgart,
solicitors,
referring
to
the
agreement
of
October
1,
1954
between
her
and
both
of
them
and
to
the
clauses
contained
in
the
agreement,
advising
her
that
they
believed
that
Diamond
Agencies
Ltd.
are
desirous
of
purchasing
the
said
land
at
the
price
of
$1,250
per
acre
and
we
do
hereby
authorize
and
instruct
you
to
execute
in
favor
of
the
said
Diamond
Agencies
Ltd.,
and
to
deliver
to
its
solicitor,
Max
Yale
Diamond
.
..
an
option
to
purchase
said
lands
for
the
price
of
one
thousand
two
hundred
and
fifty
($1,250)
dollars
per
acre,
the
option
to
be
in
such
form
and
on
such
terms
as
you
see
fit
.
..’’.
The
option
which
you
are
to
grant
will
be
from
yourself
and
the
two
of
us,
and
we
will
join
in
the
execution
of
the
said
option
’
On
October
9,
1958,
Harold
Diamond,
Michael
Shnier
and
Sarah
Diamond
wrote
to
Messrs.
Nitikman
and
Nusgart
in
connection
with
the
transfer
by
Sarah
Diamond
of
the
Mclnnes
land
stating
that
these
solicitors
would
receive
cash
in
the
sum
of
$29,278.25
‘‘being
the
balance
of
the
cash
payment
in
respect
of
the
aforesaid
transfer
which
they
would
be
authorized
to
disburse
by
paying
to
Sarah
Diamond
the
sum
of
$19,867.06,
and
after
deducting
their
fees
of
$1,000
plus
disbursements,
by
dividing
the
balance
remaining
into
three
equal
parts,
one
part
to
Sarah
Diamond,
one
to
Harold
Diamond
and
one
to
Michael
Shnier.
On
the
same
day,
October
9,
1958,
Sarah
Diamond,
Michael
Shnier
and
Harold
Diamond
entered
into
another
agreement
whereby,
after
referring
to
the
agreement
of
October
1,
1954,
the
option
to
Diamond
Agencies
Ltd.
and
the
sale
to
the
latter
of
the
Mclnnes
land,
the
parties
therein
confirm
that
the
said
sale
is
at
and
for
the
price
and
sum
of
$86,500
payable
$30,000
in
cash
and
the
balance
to
be
secured
by
a
mortgage
from
the
said
Diamond
Agencies
Ltd.
in
favour
of
the
appellant,
Sarah
Diamond
and
Michael
Shnier
for
$56,500
and
interest
at
6%
per
annum.
The
parties
also
agreed
therein
that
out
of
the
cash
payment
of
$30,000,
Sarah
Diamond
shall
be
paid
firstly
all
monies
she
paid
for
the
lands
with
costs
incurred
by
her
and
interest,
Nitik-
man
and
Nusgart
shall
be
paid
their
legal
fees
and
disbursements
and
any
balance
remaining
shall
be
divided
equally
between
the
three
parties.
It
is
to
be
noted
that
the
amount
of
$5,000
to
be
paid
to
Sarah
Diamond
in
the
previous
agreement
has
now
been
deleted
and
she
now
shares
equally
with
the
other
two
partners.
The
agreement
contains
a
further
clause
3(a)
and
(b)
which
reads
as
follows:
3.
The
parties
further
agree
that
the
monies
secured
by
the
real
property
mortgage
shall,
when
realized,
be
disbursed
and
divided
as
follows:
(a)
There
shall
be
paid
firstly
to
the
Party
of
the
First
Part
(Sarah
Diamond)
all
monies
which
the
said
Party
of
the
First
Part
shall
be
required
to
pay
and
shall
pay
by
way
of
income
tax
payable
by
her
by
reason
of
the
sale
of
the
said
lands;
(sic)
(b)
the
balance
of
the
monies
shall
be
divided
equally
between
the
Parties
of
the
First,
Second
and
Third
Part.’’
Harold
Diamond’s
share
of
the
profit
from
the
sale
of
the
Mclnnes
property
was
$22,295.85
of
which
$7,718.91
was
assessed
in
1958
and
$14,863.08
in
1959
and
Sarah
Diamond’s
share
of
the
profit
was
$25,551.91
of
which
$8,846.17
was
assessed
in
1958
and
$17,033.66
in
1959.
It
appears
clearly
from
the
above
that
the
Mclnnes
property
was
purchased
on
a
partnership
basis
by
Harold
Diamond,
Michael
Shnier
and
Sarah
Diamond,
with
the
latter
supplying
the
funds
and
all
eventually
dividing
equally
the
profit
realized
from
its
sale.
It
is
true
that
Sarah
Diamond
seems
to
have
played
a
passive
and
silent
role
in
this
matter
but
as
she
was
content
to
leave
the
handling
of
the
jointly
held
property
to
the
other
two
she
should
be
in
no
different
position
than
they
are.
If
the
true
nature
of
that
transaction
is
a
business
transaction,
any
profit
derived
therefrom
by
any
of
them
should
be
held
taxable
(compare
M.N.R.
v.
C.
H.
Lane,
[1964]
C.T.C.
81).
It
also
appears
that
although
Estelle
did
not
know
why
she
was
purchasing
an
interest
in
the
5-acre
property,
her
husband
Harold
knew
and
as
she
relied
entirely
on
him
in
purchasing
the
interest
as
well
as
in
selling
the
land,
the
latter’s
intention
and
actions
also
become
relevant
in
determining
the
nature
of
the
transactions
which
allowed
her,
over
a
period
of
years,
to
benefit
from
the
profitable
sales
of
the
land.
The
position
taken
by
the
appellants
herein
is
that
the
profits
realized
from
the
sale
of
the
5-acre
parcel
as
well
as
the
Mclnnes
property
are
all
non-taxable
as
capital
gains;
that
the
5-acre
property
acquired
by
the
two
wives
was
to
be
used
to
build
a
motel,
a
service
station
and
a
drive-in
restaurant
and
that
the
Mclnnes
property
acquired
by
Sarah
Diamond
in
partnership
with
Harry
Diamond
and
Max
Shnier
was
for
the
purpose
of
establishing
thereon
a
pitch
and
putt
golf
course,
a
stock
car
racing
track
and,
according
to
Harold
Diamond,
it
was
also
a
good
purchase
in
that
it
prevented
a
competitive
drive-in
theatre
from
establishing
itself
on
this
land
which
was
closer
to
Winnipeg
than
their
drive-in
theatre.
The
appellant,
Harold
Diamond,
admits
that
no
specific
arrangements
had
been
made
to
finance
these
projects
and
that
the
two
partners
were
hoping
to
be
able
to
obtain
sufficient
funds
from
the
operations
of
their
two
drive-
in
theatres.
He
stated
that
in
no
case
did
they
attempt
to
sell
the
land
outright
but
that
they
were
trying
to
develop
Assiniboia
to
attract
people.
He
further
stated
that
they
had
no
fixed
objective
but
were
trying
with
a
lot
of
ideas.
The
evidence
discloses
that
the
two
partners
had
arranged
no
financing
for
the
establishment
of
a
restaurant
or
a
motel,
had
no
plan
or
drawings
prepared
and
were
merely
toying
with
the
idea
that
if
their
drive-in
theatre
operations
were
profitable,
they
could
consider
such
developments.
In
cross-examination,
he
was
at
one
stage
referred
to
his
evidence
before
the
Tax
Appeal
Board,
p.
109
of
the
transcript,
and
agreed
that
he
had
then
stated
that
it
was
in
their
mind
that
if
they
could
not
use
the
property
‘‘we
would
have
to
say
that
we
would
have
to
sell
it.’’
The
appellant’s
explanation
as
to
why
they
did
not
go
ahead
with
all
these
projects
but
sold
the
land
instead
is
that
when
they
started
their
drive-in
theatre
business
they
were
confident
that
they
could,
based
on
the
happy
experience
of
Michael
Shnier
in
the
North
Main
Drive-In
operation
in
which
he
held
an
interest
prior
thereto,
anticipate
a.
substantial
profit;
their
estimation
was
that
they
would
earn
between
$65,000
to
$75,000
annually
which
was
40%
of
what
the
North
Main
Theatre
had
been
doing
and
this
would
have
enabled
them
to
realize
their
projects.
The
first
year
of
operation,
however,
turned
out
to
be
disappointing
in
that
a
loss
after
depreciation
of
$488.49
was
incurred
in
1952
and
a
small
profit
of
$471.59
was
realized
after
depreciation
in
1953.
The
business
then
started
to
deteriorate
towards
the
end
of
1953-1954
and
declined
drastically
after
1954.
It
was
operated
at
a
loss
until
1956
and
then
the
land
and
the
fixtures
were
sold
to
Western
Theatres
Limited
for
$82,000
in
1957.
Harold
Diamond
explained
this
unfortunate
turn
of
events
because
of
the
advent
of
television
in
1954,
its
novelty,
people
preferring
to
stay
home
and
watch
television
rather
than
going
out
to
see
a
movie.
Their
operations
were
also
hampered
by
the
fact
that
they
could
only
get
last
run
films
after
every
theatre
in
Winnipeg
had
shown
them.
Harold
Diamond
and
Estelle
Diamond
later
sold
their
shares
in
Portage
Drive-In
Ltd.
for
$4,000
and
in
Prairie
Drive-In
Ltd.
for
$18,500.
The
appellant
Harold
Diamond
then
entered
into
a
new
business,
the
cold
storage
business
and
is
still
in
it.
Now,
although
the
lack
of
funds
may
be
explained
why
some
of
these
projects
did
not
materialize,
the
evidence
discloses
that
a
sale
made
as
early
as
July
1,
1953,
1.e.,
when
the
two
partners
should
have
been
confident
that
their
drive-in
theatre
operations
would
be
successful,
could
not
be
explained
for
this
reason
and
that
is
the
sale
made
to
Engelhardt
Stelzer
for
$3,390.
This
gentleman
was
in
the
restaurant
business
and
approached
the
two
partners
with
the
idea
of
establishing
on
the
property
a
drive-in
restaurant.
Now,
although
here
Harold
Diamond
claimed
that
their
intention
was
to
set
up
a
restaurant
operation
themselves,
they
do
not
appear
to
have
resisted
at
all
Stelzer’s
appeal
to
purchase
land
for
this
very
purpose.
I
might
also
add
that
after
buying
the
land
he
did
not
build
a
restaurant
on
it.
The
only
conclusion
one
can
arrive
at
in
this
case
is
that
one
of
the
motivations
of
the
two
husbands
in
purchasing
the
land
was
to
sell
it
whenever
feasible
and,
of
course,
this
is
what
they
did
at
a
profit
of
$3,021.40.
The
sale
of
the
lots
to
Henry
Schultz
on
October
21,
1954,
at
a
price
of
$11,400
and
at
a
profit
of
$10,902.87,
as
well
as
the
sale
to
the
same
purchaser
of
lot
22,
block
1,
plan
1120,
for
$200
at
a
profit
of
$125.53
is
also
significant
in
that
the
purchaser,
according
to
his
evidence,
was
approached
on
a
job
by
Mr.
Shnier
who
offered
to
sell
him
the
property.
This,
of
course,
occurred
in
1954,
when
business
was
declining
and
when
the
partners
needed
funds,
but
here
again
the
conduct
of
Mr.
Shnier
is
consistent
with
an
intention
of
a
relatively
quick
resale.
The
conduct
of
the
partners
with
regard
to
the
sale
made
to
Canadian
Oil
Companies
Ltd.
of
lots
1-8,
block
11,
plan
1120,
for
$15,000
at
a
profit
of
$13,344.52
on
May
19,
1957,
although
also
at
a
time
when
they
needed
funds,
does
not
indicate
any
real
and
serious
intention
to
establish
a
filling
gas
station
on
the
property.
Indeed,
their
only
attempt,
according
to
Harold
Diamond,
to
establish
a
gas
station
was
when
he
discussed
this
possibility
with
Canadian
Oil
the
year
before
but
did
nothing
to
establish
it.
They
ended
once
again
by
selling
the
lots
to
Canadian
Oil
for
the
site
and
herein
again
the
only
conclusion
one
can
arrive
at
from
such
conduct
is
that
if
the
two
partners
intended
to
build
a
gasoline
station
on
this
land,
they
surely
must
have
also
had
an
alternative
of
selling
to
build
if
they
could
not
go
ahead
with
their
plan.
The
balance
of
the
5-acre
parcel
was
disposed
of
on
May
7,
1958,
to
Max
Yale
Diamond
for
$10,000.
It
therefore
appears
that
the
totality
of
this
5-acre
parcel
was
disposed
of
from
1953
to
1958
with
none
of
the
various
projects
intended
by
tthe
partners
realized,
nor
from
the
evidence
can
I
see
that
any
of
the
purchasers
of
the
land
used
it
for
any
particular
development.
In
my
opinion
the
above
evidence
is
not
sufficient
to
rebut
the
obvious
inference
from
all
the
circumstances
that
at
least
one
of
the
motivating
reasons
for
the
acquisition
of
the
vacant
5-acre
land
was
the
hope
and
expectation
that
it
would
be
possible
to
dispose
of
of
it
at
a
profit
and,
of
course,
if
that
was
one
of
the
motivating
reasons,
profits
made
upon
subsequent
disposition
of
the
property
are
taxable
in
accordance
with
Regal
Heights
Ltd.
v.
M.N.R.,
[1960]
S.C.R.
902;
[1960]
C.T.C.
384.
I
now
come
to
the
purchase
and
sale
of
the
Mclnnes
70-acre
property
purchased
in
1953
and
sold
at
a
profit
of
approximately
$74,000
in
1958.
It
appears
from
the
evidence
that
although
the
partners
did
not
need
this
land
for
their
business,
it
was
too
good
a
bargain
to
resist.
They
had
failed
to
buy
15
acres
for
$15,000
in
1952
and
they
were
offered
the
whole
of
the
70
acres
for
$12,500
in
1953.
The
appellant’s
plans
to
use
this
property
are
still
more
nebulous
and
uncertain
than
those
of
the
5-acre
parcel.
Harold
Diamond
states
he
wrote
to
a
company
who
owned
a
golf
course
near
Chicago
to
obtain
some
information
but
the
short
golf
course
or
driving
range
never
materialized
and
although
he
claims
he
had
some
conversations
with
a
man
interested
in
setting
up
a
stock
car
racing
track,
nothing
ever
came
of
that
either.
A
portion
of
the
land
was
rented
one
year
to
man
who
operated
a
driving
range
who,
however,
failed
to
pay
any
rent.
A
man
was
found
who
leased
the
land
on
a
share
crop
basis
and
the
net
revenue
from
this
operation
totalled,
before
municipal
taxes,
$932.54
for
the
years
1954-1956-1957.
Here
again
the
inference
is
inescapable
from
all
the
circumstances
that
at
least
one
of
the
motivating
reasons
for
the
acquisition
of
this
land
was
the
hope
and
expectation
that
it
could
be
disposed
of
at
a
profit.
This
conclusion
is
further
supported
by
the
agreement
between
Sarah
Diamond,
Harold
Diamond
and
Michael
Shnier
of
October
1,
1954,
where
the
intention
to
sell
is
confirmed
by
the
measures
taken
therein
to
insure
a
proper
distribution
of
profits
in
the
event
of
a
sale
and
where
Mrs.
Sarah
Diamond’s
tax
liability
in
the
case
of
a
sale
of
the
land
is
even
provided
for.
The
appellant,
Harold
Diamond,
embarked
on
a
number
of
ventures
in
connection
with
a
housing
development
and
the
promotion
of
a
gas
company.
He
also
acted
for
his
brother,
Larry
Diamond,
in
taking
a
$5,000
option
on
the
Fink
property
for
the
purpose
of
purchasing
this
177-acre
property
on
which
his
brother,
a
real
estate
broker
and
land
developer,
intended
to
set
up
a
housing
development
for
Air
Force
families.
The
development
did
not
go
through
and
Larry
Diamond
lost
the
$5,000
option
money.
Harold
Diamond’s
expectation
of
profit
from
this
venture
was
that
he
was
to
work
in
the
project
as
a
field
man
and
would
receive
shares
in
the
company
to
be
incorporated.
In
my
view,
neither
of
these
ventures
are
particularly
relevant
or
helpful
in
determining
the
main
issue
in
these
appeals
which
depends
rather
upon
the
proper
analysis
of
the
transactions
which
gave
rise
to
these
appeals.
They
do
indicate,
however,
the
business
ability
and
enterprise
of
Harold
Diamond,
one
of
the
appellants,
who,
although
confined
to
a
wheel
chair,
has
entered
into
a
number
of
enterprises
one
of
which,
however,
ended
in
a
loss
of
a
deposit
of
$15,000
advanced
by
his
mother,
Sarah
Diamond,
and
for
which
she
is
claiming
a
deduction
under
Section
27
(1)
(e)
of
the
Income
Tax
Act.
In
1956
he
indeed
caused
a
deposit
to
be
made
of
$15,000
for
the
purchase
of
Balstone
Farms
situated
behind
the
drive-in
theatre,
at
a
time
when
he
was
acting
for
The
Great
Plains
Gas
Company.
The
land
was
to
be
used
for
a
housing
and
industrial
development
and
was
expected
to
create
a
market
for
the
company’s
gas.
This
money
had
been
obtained
from
his
mother,
Sarah
Diamond,
in
whose
name
the
option
was
registered.
She,
however,
stated
that
she
had
expected
no
profit
from
this
deal
which
would
go
all
to
her
son
Harold
and
hoped
only
for
the
return
of
her
money.
The
money,
however,
was
lost
when
the
financial
company
withdrew
its
backing
and
the
option
was
dropped.
Sarah
Diamond
now
claims
this
$15,000
as
a
loss
to
offset
the
profits
made
in
the
sale
of
the
McInnes
property
in
the
event
these
profits
are
held
to
be
taxable.
She
stated
that
‘‘if
(she)
has
engaged
in
an
act
of
business
with
respect
to
the
Mclnnes
property,
that
the
Balstone
Farms
option
should
be
similarly
construed
as
an
act
of
business
and
the
loss
incurred
in
the
sum
of
$15,000
is
therefore
a
business
loss
for
the
taxation
year
1957
and
deductible
in
accordance
with
the
provisions
of
Section
27
(1)
(e)
of
the
Income
Tax
Act.
I
would
gladly
comply
with
her
request
if
the
above
loss
could
be
considered
as
a
business
loss.
However,
in
view
of
the
evidence
adduced
by
her
and
confirmed
by
Harold
Diamond,
that
is
not
possible.
Indeed,
it
appears
that
the
amount
of
$15,000
was
simply
turned
over
to
Harold
Diamond
by
Sarah
Diamond
upon
his
request
as
an
accommodation.
She
loaned
him
this
money
and
expects
to
get
it
back
and
never
hoped
to
participate
in
the
profits
had
the
option
been
accepted
and
the
property
purchased.
The
sole
beneficiary
would
have
been
Harold
Diamond
and
Sarah
Diamond’s
alternative
argument
must,
therefore,
be
denied.
Having
regard
to
the
evidence
adduced
in
this
case
as
a
whole
it
appears
clearly
to
me
that
one
of
the
motivating
reasons
which
caused
them
to
acquire
these
lands
in
1952
and
1953
was
a
hope
and
expectation
that
they
could
resell
them
at
a
profit.
In
any
event,
I
am
not
convinced
by
the
evidence
that
the
appellants
have
discharged
the
onus
of
showing
that
such
was
not
one
of
their
motivating
reasons.
It
therefore
follows
that
the
appellants’
appeals
fail
and
are
dismissed
with
costs.
The
respondent,
however,
will
be
entitled
to
the
cost
of
one
appeal
only
as
these
appeals
were
heard
together
on
the
same
evidence.
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