Guy
Tremblay:—This
case
was
heard
at
Halifax,
Nova
Scotia,
on
June
12,
1978.
1.
Point
at
Issue
The
point
at
issue
is
to
know
whether
the
respondent
is
justified
in
deeming
that
the
appellant
had
disposed
of
his
residence
situated
in
Dartmouth,
Nova
Scotia,
when
he
returned
to
Dartmouth
in
1974,
after
living
seven
years
in
another
owned
residence
in
Newfoundland.
As
a
result,
the
respondent
included
in
the
computation
of
the
appellant’s
income
the
amounts
of
$4,250
as
a
capital
gain
and
$12,167.17
as
recapture
of
the
capital
cost
allowance.
2.
Burden
of
Proof
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
derives
not
from
one
particular
section
of
the
Income
Tax
Act,
but
from
a
number
of
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
R
W
S
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.
Facts
The
facts
are
not
disputed.
3.1
In
March
1965,
one
month
prior
to
the
completion
of
the
construction
of
a
dwelling
house
at
33
Hazelhurst
Drive,
Dartmouth,
Nova
Scotia,
the
appellant
received
notification
of
his
impending
transfer
for
purposes
of
employment
to
Gander,
Newfoundland.
3.2
For
the
period
from
March,
1965
to
May
1967
the
appellant
and
his
family
resided
in
rental
accommodation
in
Newfoundland.
3.3
In
May
1967
the
appellant
purchased
a
home
in
St.
John’s,
Newfoundland,
and
resided
in
that
home
with
his
family.
3.4
In
January
1974,
the
appellant
with
his
family
left
Newfoundland
and
came
back
to
live
in
their
residence
in
Dartmouth.
3.5
During
the
period
between
March
1965
and
January:
1st,
1974,
the
appellant
rented
to
various
tenants
the
dwelling
house
owned
by
him
at
33
Hazelhurst
Drive,
Dartmouth,
Nova
Scotia.
In
his
income
tax
returns
for
the
taxation
years
1965
to
1973,
both
inclusive,
he
reported
the
rent
received
as
income.
3.6
The
residence
at
33
Hazelhurst
Drive
had
an
original
capital
cost
to
the
appellant
of
$22,703.50.
3.7
The
appellant,
when
filing
his
income
tax
returns
for
the
taxation
years
1965
to
1973,
both
inclusive,
represented
to
the
Minister
of
National
Revenue
that
the
said
property
was
depreciable
property
and
claimed
capital
cost
allowance
on
the
said
dwelling
as
being
a
Class
6
asset
as
defined
in
the
Income
Tax
Regulations.
3.8
The
fair
market
value
on
December
31,
1971
of
the
residence
at
33
Hazelhurst
Drive
was
$38,500.
3.9
The
fair
market
value
of
the
same
residence
on
January
1st,
1974
(when
the
appellant
commenced
to
occupy
personally
the
said
residence)
was
$47,000.
3.10
The
total
capital
gain
is
($47,000
—
$38,500)
$8,500.
3.11
The
amount
of
capital
cost
allowance
claimed
by
the
appellant
between
1965
and
1974
both
inclusive
is
$12,167.17.
3.12
By
assessment
on
December
17,
1976,
the
respondent
included
in
the
computation
of
the
appellant’s
income
the
amount
of
$12,167.17
as
recapture
capital
cost
allowance
and
$4,250
as
taxable
capital
gain.
3.13
Following
a
notice
of
objection
dated
March
7,
1977,
to
the
assessment,
the
respondent
confirmed
the
said
assessment
by
a
notification
dated
June
13,
1977.
3.14
An
appeal
dated
September
8,
1977,
was
lodged
before
the
Tax
Review
Board.
4.
Law,
Jurisprudence,
Comments
4.1
Law
The
main
sections
involved
are
45(1)
and
54(b)
of
the
new
Act:
Sec
45.
Property
with
more
than
one
use.
(1)
For
the
purposes
of
this
subdivision
the
following
rules
apply:
(a)
where
a
taxpayer,
(i)
having
acquired
property
for
some
other
purpose,
has
commenced
at
a
later
time
to
use
it
for
the
purpose
of
gaining
or
producing
income
therefrom,
or
for
the
purpose
of
gaining
or
producing
income
from.
a
business,
or
(ii)
having
acquired
property
for
the
purpose
of
gaining
or
producing
income
therefrom
or
for
the
purpose
of
gaining
or
producing
income
from
a
business,
has
commenced
at
a
later
time
to
use
it
for
some
other
purpose,
he
shall
be
deemed
to
have
(iii)
disposed
of
it
at
that
later
time
for
proceeds
equal
to
its
fair
market
value
at
that
later
time,
and
(iv)
immediately
thereafter
reacquired
it
at
a
cost
equal
to
that
fair
market
value;
(b)
where
property
has,
since
it
was
acquired
by
a
taxpayer,
been
regu-
larly
used
in
part
for
the
purpose
of
gaining
or
producing
income
therefrom
or
for
the
purpose
of
gaining
or
producing
income
from
a
business
and
in
part
for
some
other
purpose,
the
taxpayer
shall
be
deemed
to
have
acquired,
for
that
other
purpose,
the
proportion
of
the
property
that
the
use
regularly
made
of
the
property
for
that
other
purpose
is
of
the
whole
use
regularly
made
of
the
property
at
a
cost
to
him
equal
to
the
Same
proportion
of
the
cost
to
him
of
the
whole
property;
and,
if
the
property
has,
in
such
a
case,
been
disposed
of,
the
proceeds
of
disposition
of
the
proportion
of
the
property
deemed
to
have
been
acquired
for
that
other
purpose
shall
be
deemed
to
be
the
same
proportion
of
the
proceeds
of
disposition
of
the
whole
property;
and
(c)
where,
at
any
time
after
a
taxpayer
has
acquired
property,
there
has
been
a
change
in
the
relation
between
the
use
regularly
made
by
him
of
the
property
for
gaining
or
producing
income
therefrom
or
income
from
a
business
and
the
use
regularly
made
of
the
property
for
other
purposes,
(i)
if
the
use
regularly
made
by
him
of
the
property
for
those
other
purposes
has
increased,
he
shall
be
deemed
to
have
(A)
disposed
of
property
at
that
time
for
proceeds
equal
to
the
proportion
of
the
fair
market
value
of
the
property
at
that
time
that
the
amount
of
the
increase
in
the
use
regularly
made
by
him
of
the
property
for
those
other
purposes
is
of
the
whole
use
regularly
made
of
the
property,
and
(B)
immediately
thereafter
reacquired
the
property
so
disposed
of
at
a
cost
equal
to
the
proceeds
referred
to
in
clause
(A),
and
(ii)
if
the
use
regularly
made
by
him
of
the
property
for
those
other
purposes
has
decreased,
he
shall
be
deemed
to
have
disposed
of
property
at
that
time
and
the
proceeds
of
disposition
shall
be
deemed
to
be
an
amount
equal
to
the
proportion
of
the
fair
market
value
of
the
property
at
that
time
that
the
amount
of
the
decrease
in
use
regularly
made
by
him
of
the
property
for
those
other
purposes
is
of
the
whole
use
regularly
made
of
the
property.
54.
(b)
‘‘Capital
property”
of
a
taxpayer
means
(i)
any
depreciable
property
of
the
taxpayer,
and
(ii)
any
property
(other
than
depreciable
property),
any
gain
or
loss
from
the
disposition
of
which
would,
if
the
property
were
disposed
of,
be
a
capital
gain
or
a
capital
loss,
as
the
case
may
be,
of
the
taxpayer.
4.2
Jurisprudence
The
judgments
cited
by
the
respondent
are
as
follows:
W
Robert
Donaldson
v
MNR,
[1976]
CTC
2132;
76
DTC
1107;
Donald
Tripp
v
MNR,
31
Tax
ABC
357;
63
DTC
313;
J
C
Harel
v
Deputy
Minister
of
Revenue
of
Quebec,
80
DLR
(3d)
556;
[1977]
CTC
441;
77
DTC
5438;
Taras
T
Hnatiuk
v
The
Queen,
[1976]
CTC
632;
76
DTC
6376;
Gerald
J
Ryan
v
MNR,
[1967]
CTC
484;
67
DTC
5325;
Wilfred
Dowbiggin
v
MNR,
40
Tax
ABC
137;
66
DTC
97;
Estate
of
Albert
Arthur
Keir
v
MNR,
39
Tax
ABC
303;
65
DTC
679;
Raymond
Benedet
v
MNR,
9
Tax
ABC
445;
54
DTC
541.
4.3
Comments
As
already
stated,
the
facts
are
not
disputed.
It
is
clear
to
the
Board
that
the
appellant
had
commenced
in
the
fall
of
1964
the
construction
of
a
dwelling
house
with
the
intention
of
making
it
his
home,
his
personal
residence.
The
appellant
and
his
representative
insisted
on
that
point
at
the
hearing.
The
intention
of
the
appellant
however
in
the
present
case
had
not
the
same
influence
as
if
the
crux
of
the
matter
would
be
to
know
whether
the
profit
is
a
capital
gain
or
a
revenue.
Then
the
intention
at
the
time
of
acquisition
of
a
property
can
become
an
important
factor.
In
the
present
case,
the
deemed
disposition
provided
for
in
section
45
is
based
above
all
on
facts:
the
changing
of
the
use
of
a
property
ie
from
the
use
of
the
purpose
of
gaining
revenue
to
the
use
of
the
purpose
of
non-gaining
revenue
and
vice
versa.
On
January
1,
1972,
when
the
new
Act
applied,
the
property
in
Dartmouth
had
been
producing
revenue
for
7
years.
It
is
a
proven
and
admitted
fact
that
the
first
intention
of
the
appellant
at
the
time
of
the
construction
of
the
property
cannot
change.
It
is
proven
that
the
appellant,
has
had
those
advantages.
During
6
years,
the
losses
incurred
by
the
deduction
of
the
capital
cost
allowances
were
applied
against
his
other
income.
On
January
1,
1974,
the
changing
of
the
use
of
the
property
occurred,
that
is
from
a
property
which
was
producing
revenue
to
a
property
of
personal
residence
and
which
was
not
producing
revenue.
The
Board
cannot
see
how
the
deemed
transaction
provided
by
subsection
45(1)
cannot
be
applied,
and
consequently
the
taxable
capital
gain
of
$4,250.
4.3.2
Concerning
the
recapture
of
the
capital
cost
allowance,
it
would
have
been
applied
in
the
case
of
actual
transaction
even
if
the
old
Act
still
applied.
The
application
of
the
new
Act
with
the
deemed
transaction
results
merely
to
advance
the
recapture
of
the
capital
cost
allowance
in
the
amount
of
$12,167.17.
5.
Conclusion
The
appeal
is
dismissed
in
accordance
with
the
reasons
for
judgment
above.
Appeal
dismissed.
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