Delmer
E
Taylor:—This
is
an
appeal
against
income
tax
assessments
in
which
the
Minister
of
National
Revenue
increased
the
taxable
income
of
the
appellant
by
$5,649
and
$13,182
for
the
years
1972
and
1973
respectively,
the
amounts
being
considered
income
and
not
capital
receipts.
The
respondent
relied,
inter
alia,
upon
^sections
3,
4
and
9
of
the
Income
Tax
Act,
RSC
1952,
c
148,
as
amended
by
section
1
of
SC
1970-71-72
[c
63],
and
the
definition
of
“business”
in
section
248
of
the
said
Act.
Facts
In
1952
the
appellant
purchased
1
Z?
acres
of
land
in
Mountjoy
Township
near
Timmins,
Ontario,
being
a
portion
of
a
farm
belonging
to
Mr
Len
Barnes,
and
used
a
part
of
this
land
for
the
site
of
his
personal
dwelling
house
and
the
remainder
for
business
purposes.
In
1955
he
purchased
the
remaining
farmlands
from
Mr
Barnes,
consisting
of
approximately
8V2
acres.
A
subdivision
plan
was
registered
in
1957,
which
was
composed
of
both
a
residential
and
a
commercial
section.
In
1959
the
appellant
sold
a
portion
of
the
subject
property
to
a
local
school
board
and
during
the
period
from
1958
to
1964
several
of
the
residential
lots
were
sold.
In
1972
the
remaining
portion
of
the
subject
property
was
sold
to
a
Mr
Ross
McDuff
for
$56,000,
resulting
in
a
gain
which
has
been
treated
as
indicated
by
the
Minister.
The
appellant
still
lives
in
the
house
he
built
in
1952.
Contentions
It
was
the
position
of
the
appellant
that
both
the
acquisition
of
all
the
balance
of
the
farm
property
in
1955
and
the
subdivision
situation
developed
from
circumstances
over
which
he
had
no
control,
but
were
dictated
by
his
requirements
for
additional
property
for
his
expanding
business.
The
respondent
asserted
that:
—of
the
lands
purchased
by
the
appellant
in
1955,
that
portion
subdivided
in
the
registered
plan
of
subdivision
into
residential
lots,
including
all
of
the
land
sold
to
Ross
McDuff
in
1972,
was
purchased
by
the
appellant
with
the
intention
of
turning
the
said
land
to
account
at
a
profit;
—those
lands
sold
to
Ross
McDuff
in
1972
were
not
required
by
the
appellant
for
his
concrete
business.
Evidence
Considerable
documentation
and
information
were
submitted,
together
with
verbal
evidence
from
the
appellant
on
his
own
behalf,
and
oral
testimony
from
a
witness
for
the
respondent
which
dealt
with
circumstances
surrounding
the
purchases,
sales
subdivision
plans,
local
municipal
requirements,
etc.
There
were
certain
exhibits
which
related
to
an
examination
of
this
question
by
the
Minister
at
an
earlier
date
in
1961.
These
were:
Exhibit
R-2—Notice
of
objection
for
taxation
year
1959;
Exhibit
R-5—Copy
of
a
letter
dated
October
26,
1961
from
Ross,
Pope
&
Company
to
Director—Taxation,
DNR
re
L
O
Parnell.
The
following
significant
comments,
made
on
behalf
of
the
taxpayer,
are
contained
in
Exhibit
R-2
and
appeared
to
form
the
basis
of
the
Minister’s
assessments:
(c)
With
this
knowledge
and
the
fact
that
I
did
not
need
all
of
the
land
acquired
it
seemed
wise
to
dispose
of
certain
lots
in
order
to
reduce
the
amount
of
my
investment
and
to
provide
funds
for
the
business
.
.
.
(b)
I
was
aware
of
the
number
of
sales
that
were
possible
and
which
would
reduce
the
extent
of
my
investment
to
a
reasonable
figure.
And
from
Exhibit
R-5:
If
reference
is
made
to
Mr
Parnell’s
Notice
of
Objection
to
the
Notice
of
Re-Assessment
it
will
be
seen
that
he
refused
to
accept
the
suggestion
that
the
gain
on
the
sale
of
land
from
this
farm
was
taxable.
However
he
is
aware
now
that
the
efforts
he
would
be
required
to
make
in
order
to
uphold
his
claim
would
be
costly
both
as
to
his
time
and
money
in
that
he
would
be
required
to
incur
substantial
legal
and
other
costs
in
pursuing
his
objective
to
cancel
the
Re-Assessment.
With
this
thought
in
mind
he
is
prepared
to
accept
the
principle
that
the
gains
on
the
sale
of
this
land
are
taxable
providing
a
more
equitable
formula
is
used
to
establish
the
cost
of
the
land
sold.
Mr.
Parnell
is
prepared
to
withdraw
his
Notice
of
Objection
if
the
formula
set
forth
in
Schedule
B
is
accepted.
We
might
point
out
that
in
accepting
this
he
does
recognize
that
the
remaining
unsold
land
when
sold
is
taxable.
The
formula
used
does
establish
moreover
the
area
of
the
unsold
land
and
places
a
firm
value
upon
it.
Thus
future
taxation
of
these
land
transactions
becomes
relatively
simple
to
calculate
as
the
basic
facts
are
established
quite
firmly.
Argument
Argument
from
both
the
agent
for
the
appellant
and
counsel
for
the
respondent
dealt
with
interpreting
the
information
available,
and
detailing
the
case
law
to
be
applied.
Findings
In
my
opinion,
while
there
is
minor
information
which
could
lead
to
a
conclusion
that
the
appellant
exerted
some
effort
in
the
direction
of
subdividing
and
selling
some
of
the
subject
property,
this
information
must
be
viewed
against
the
total
background—a
small
businessman
in
a
very
rural,
somewhat
remote,
part
of
Northern
Ontario,
with
no
experience
whatsoever
in
the
real
estate
development
field.
There
is
little
if
any
evidence
that
the
expressed
desires
of
the
local
municipal
official
for
a
subdivision
were
much
more
in
1952
than
merely
a
hope
it
could
be
beneficial
to
the
area
in
the
long
term.
The
appellant’s
protestations
that
the
additional
expense
which
he
incurred
at
the
time
in
connection
with
the
subdivision
was
a
most
unwelcome
burden
to
his
small
business
are
believable,
and
appear
to
be
consistent
with
his
evidence
that
his
purpose
in
any
efforts
at
disposal
was
only
to
reduce
his
net
capital
investment.
On
the
merits
of
the
case
I
find
no
reason
to
attribute
any
other
motives
to
the
appellant’s
conduct.
The
issue
raised
by
the
apparent
acceptance
by
the
appellant
of
the
taxability
of
the
profits
involved,
as
per
the
quotations
above,
is
separate
and
in
my
view
does
not
enter
into
the
matter.
I
have
not
found
case
law,
during
a
serious
search,
which
I
would
interpret
to
deny
this
appellant
the
right
to
appeal
these
assessments.
Indeed,
considerable
weight
must
be
placed
on
a
recent
decision
of
the
Federal
Court
(Her
Majesty
the
Queen
v
Godfrey
G
S
Moulds,
[1978]
CTC
146;
78
DTC
6068)
which
touches
on
this
problem
in
rather
specific
terms.
The
respondent
in
the
instant
case
has
chosen
to
contest
this
appeal
on
its
merits
and
the
issue
of
possible
estoppel
was
more
inferred
than
directly
raised
at
the
hearing.
Decision
The
appeal
is
allowed
and
the
matter
referred
back
to
the
respondent
for
reassessment
accordingly.
Appeal
allowed.
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