Guy
Tremblay
[TRANSLATION]:—The
case
at
bar
was
heard
at
Montreal,
Quebec
on
June
10,
1977.
1.
Point
at
Issue
It
must
be
decided
whether
the
profit
of
$16,179.09
derived
from
a
sale
of
lands
made
by
the
appellant
on
March
20,
1970,
less
than
a
month
after
the
date
of
purchase,
is
taxable.
At
that
time
the
appellant
had
as
a
partner
in
the
transaction
a
company
the
purpose
of
which
was
to
buy
and
sell
land.
2.
Burden
of
Proof
The
appellant
has
the
burden
of
showing
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
derives
not
from
one
particular
section
ot
the
Income
Tax
Act
but
from
a
number
of
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
Ft
IV
S
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.
Facts
3.1
The
appellant,
a
nurse,
is
the
wife
of
Mr
Jean
Yves
Lortie,
bailiff
of
the
Superior
Court
of
Quebec.
3.2
The
appellant,
in
her
testimony,
stated
that
she
did
not
take
part
in
the
transactions
which
are
the
subject
of
the
present
dispute
except
by
signing
the
contracts
in
the
place
where
she
was
told
to
sign
and
by
providing
the
sum
of
$7,500.
For
the
negotiations
she
relied
on
her
husband.
This
was
her
first
investment.
3.3
The
sum
of
$7,500
which
she
provided
was
not
borrowed.
It
was
the
result
of
her
savings.
These
savings
were
supposed
to
have
accrued
from
her
work
from
the
time
when
she
became
a
nurse
in
1962
until
her
marriage
in
May
or
June
1966,
at
a
salary
of
$65
to
$70
a
week.
3.4
Mr
Jean
Yves
Lortie,
the
appellant’s
husband,
was
in
fact
the
appellant’s
principal
witness.
The
notarized
transactions
concerning
this
case
may
be
described
as
follows:
(a)
On
February
27,
1970
the
appellant
and
Les
Entreprises
Marcal
Inc
purchased
from
Claude
Campeau
lots
166,
167
and
168
of
the
official
cadastral
survey
of
St-Colomban,
County
of
Deux-Montagnes.
These
lots,
according
to
the
contract,
had
an
area
of
312
acres.
The
price
written
on
the
deed
was
$60,000.
The
sum
of
$38,800
was
acknowledged
to
have
been
paid,
and
the
balance
of
$21,200
was
to
be
paid
in
the
following
way:
$5,000
on
December
31,
1970
and
$16,200
on
December
31,
1971.
Messrs
Jean
Yves
Lortie
and
Omer
Lortie,
his
brother,
became
joint
and
several
guarantors
with
the
purchasers.
This
contract,
filed
as
No
A-1,
was
registered
the
same
day
as
No
137-974.
(b)
On
February
28,
1970,
another
contract,
a
counter-letter,
was
made
between
the
same
parties,
stipulating
that
the
amount
of
$60,000
appearing
on
the
preceding
contract
was
not
the
real'amount
paid
for
lots
166,
167
and
168.
The
real
amount
was
$46,800,
the
same
amount
as
appeared
on
the
promise
of
sale
concluded
between
the
parties
on
January
22,
1970.
A
copy
of
this
document
was
filed
as
No
A-2.
According
to
evidence
given
by
the
respondent’s
representative
in
his
affidavit,
this
contract
was
registered
at
Deux-Montagnes
on
the
same
day,
February
28,
1970,
as
No
147-005.
The
Board
doubts
this.
The
contract
(Exhibit
A-1)
bore
the
number
137-974
and
had
been
registered
on
February
27.
How
could
a
contract
have
been
registered
the
following
day,
February
28,
as
No
147-005?
Does
this
mean
that
more
than
9,000
deeds
were
registered
in
one
day
in
the
registry
office
of
Deux-Montagnes?
Furthermore,
since
Exhibit
A-2
was
a
counter-letter,
it
was
in
no
one’s
interest
to
make
it
public
by
registering
it
on
the
very
day
it
was
signed.
(c)
On
March
20,
1970,
the
appellant
and
Les
Entreprises
Marcal
Inc
hold
lots
166,
167
and
168,
mentioned
above,
to
Im-Val
Inc
for
a
price
of
$156,000,
or
$500
for
each
of
the
312
acres.
The
vendor
acknowledged
having
received
the
sum
of
$78,000.
The
balance
of
$78,000
is
payable
in
the
following
way;
fifteen
$5,000
cheques
payable
monthly
beginning
in
June
1970,
and
a
final
cheque
for
$3,000.
A
copy
of
this
contract
was
filed
as
No
A-3.
According
to
the
respondent’s
representative,
in
his
affidavit,
this
contract
was
registered
at
Deux-Montagnes
on
the
same
day,
as
No
138-262.
(The
Board
notes
that
the
registration
numbers
are
becoming
smaller
instead
of
continuing
to
increase.
In
spite
of
the
affidavit
of
the
respondent’s
representative,
the
Board
believes
that
Exhibit
A-2
was
not
registered
on
February
28,
1970).
(d)
On
the
same:
day,
March
20,
1970,
a
counter
letter
was
signed
between
the
parties
stipulating,
among
other
things,
that
the
price
of
$156;000
stated
in
the
previous
contract
(Exhibit
A-3)
was
fictitious
and
the
real
price
was
$78,000.
The
price
of
$500
per
acre
was
thus
reduced
to
$250.
In
clause
3
of
the
counter-letter,
it
is
stated
that
the
reasons
for
which
the
parties
put
the
fictitious
price
of
$156,000
are
reasons
“absolutely
personal
to
the
parties
hereto’’.
(e)
On
December
11,
1973,
a
deed
of
retrocession
was
made
by
Im-Val
Inc
to
Les
Entreprises
Marcal
Inc
and
to
the
appellant,
regarding
lots
1
to
107
of
the
official
subdivision
of
lot
166
of
the
official
cadastral
survey
of
the
parish
of
St-Colomban.
This
retrocession
was
made
in
consideration
of
the
full
and
final
release
by
the
assignees
(Les
Entreprises
Marcal
Inc
and
the
appellant)
made
to
Im-Val
Inc
for
the
amount
of
$78.000
plus
interest
then
owing
to
the
assignees.
3.5
Les
Entreprises
Marcal
Inc,
incorporated
in
1963,
had
as
its
object
the
purchase
and
sale
of
real
estate.
The
principal
shareholders
were
Mr
Omer
Lortie
and
his
wife
Dame
Louise
Leblanc-Lortie.
This
company
conducted
about
fifteen
real
property
transactions.
3.6
According
to
the
testimony
of
Mr
Jean
Yves
Lortie,
the
purpose
of
buying
the
land
at
St-Colomban
was
to
establish
a
campground,
since
the
location
was
suitable
for
this.
The
campground
was
to
be
managed
and
supervised
by
André
Lortie,
brother
of
Jean
Yves
and
Omer
Lortie.
3.7
According
to
the
testimony
of
Mr
Jean
Yves
Lortie
and
also
of
André
Lortie,
their
family
is
made
up
of
thirteen
brothers
and
sisters.
Because
of
the
spirit
of
co-operation
which
prevails
in
the
family,
they
try
to
help
the
ones
who
are
not
yet
established.
This
is
how
they
tried
to
help
André.
Until
1969,
André
was
a
physical
education
instructor
in
the
army.
Because
of
an
accident,
he
could
not
continue
in
this
career.
He
was
hired
by
the
bailiff’s
office
where
Jean
Yves
works.
André’s
work
consisted,
among
other
things,
of
accompanying
a
bailiff
when
two
people
were
needed
to
make
a
seizure
or
something
of
the
kind.
He
did
not
enjoy
this
very
much.
In
the
autumn
of
1969,
with
a
view
to
helping
André
set
himself
up
in
business,
they
bought
a
warehouse
where
seized
objects,
among
other
things,
were
stored
while
awaiting
sale.
André
had
taken
charge
of
the
warehouse.
Shortly
afterwards,
because
of
certain
circumstances,
business
at
the
warehouse
ran
into
unforeseen
difficulties.
The
warehouse
was
in
fact
sold
in
1972.
In
late
1969
or
early
1970,
André
suggested
to
Jean
Yves
that
they
should
buy
land
to
set
up
a
campground.
Their
brother-in-law,
Guy
Provencher,
could
help,
since
he
had
experience
in
this
field.
After
discussing
the
matter
with
Omer
Lortie,
they
decided
to
look
for
a
piece
of
land.
Les
Entreprises
Marcal
Inc
was
to
act
as
purchaser.
Since
the
appellant
had
liquid
assets
of
$7,500,
they
decided
to
ask
her
if
she
would
be
interested
in
investing
in
this
purchase.
She
agreed.
Lots
166,
167
and
168
of
St-Colomban
were
purchased
according
to
contract
A-1.
The
attraction
of
this
site
was
that
it
was
divided
in
two
by
a
river,
which
could
satisfy
the
campers’
needs
without
the
necessity
of
making
an
artificial
lake.
3.8
However,
immediately
after
the
purchase
problems
began
to
arise,
according
to
Mr
Jean
Yves
Lortie.
Apparently
these
problems
involved
the
area
of
the
property
and
the
felling
of
trees.
3.9
In
fact,
an
action
at
law
was
brought
in
the
Superior
Court,
district
of
Terrebonne,
by
the
former
owner,
Mr
Claude
Campeau,
against
the
purchasers
(Les
Entreprises
Marcal
Inc
and
the
appellant)
and
the
guarantors
(Omer
Lortie
and
Jean
Yves
Lortie),
claiming
the
sum
of
$11,442.53
on
the
ground,
inter
alia,
that
the
area
of
the
property
was
not
312
acres
but
350.35,
or
38.35
acres
more.
3.10
The
defendants
replied
by
denying
the
principal
action
and
presenting
a
counterclaim
of
$5,802.47
on
the
ground,
inter
alia
that
Mr
Campeau
had
felled
timber
on
lot
168
after
the
land
was
sold
without
being
entitled
to
do
so.
3.11
The
procedure
instituting
action,
namely
the
plaintiff’s
declaration
(filed
as
Exhibit
A-4),
is
dated
June
29,
1972.
The
defence
and
counterclaim
(filed
as
Exhibit
A-5)
is
dated
July
27,
1972.
3.12
The
witness,
Jean
Yves
Lortie,
explained
under
cross-examination
the
reason
for
the
counter-letter
of
February
28,
1970
(Exhibit
A-2).
This
counter-letter
established
the
real
amount
of
the
sale,
namely
$46,800
instead
of
$60,000.
The
latter
sum
had
been
shown
on
the
official
contract
signed
the
day
before,
February
27,
1970,
so
that
the
land
could
be
resold
for
a
higher
price.
3.13
The
area
of
the
land
purchased
on
February
27,
1970
and
later
sold
on
March
20,
1970
to
Im-Val
Inc
proved
to
be
increased
by
38.35
acres,
according
to
the
plans
made
by
surveyor
Jean
Blondin
(the
St-
Jérôme
town
surveyor).
Mr
Blondin’s
services
had
been
retained
by
Im-Val
Inc
on
or
about
February
10,
1970,
according
to
the
affidavit
filed
by
Mr
Pierre
W
Peron,
a
representative
of
the
respondent.
This
affidavit
had
been
accepted
as
evidence
by
agreement
and
was
filed
after
the
investigation.
Mr
Blondin’s
work
consisted
in
preparing
plans
for
subdividing
lots
166,
167
and
168,
which
are
the
subject
of
contracts
A-1,
A-2
and
A-3.
3.14
On
April
15,
1970,
according
to
Mr
Peron’s
affidavit,
the
surveyor
Blondin
submitted
his
report
and
the
plan
for
subdividing
the
lots.
3.15
On
July
13,
1970
the
plans
were
registered.
By
these
plans,
lot
166
was
subdivided
from
1
to
107,
lot
167
from
1
to
107,
and
lot
168
from
1
to
131.
3.16
As
a
consequence
of
the
increase
in
area
the
purchaser,
Im-Val
Inc,
had
to
pay
an
additional
amount
of
$250
per
acre,
in
compliance
with
a
clause
in
the
contract
(Exhibit
A-3)
and
the
counter-letter
changing
the
price
per
acre
from
$500
to
$250.
3.17
Because
of
difficulties
in
payment,
part
of
the
land
sold,
namely
lot
166
was
retroceded
by
Im-Val
Inc
to
the
vendors
on
December
11,
1973
(para
3.4
(e)).
3.18
On
January
31,
1975,
the
respondent
included
in
the
appellant’s
income
the
sum
of
$19,814.55;
this
sum
is
considered
to
be
the
appellant’s
commercial
income
from
the
transaction
which
is
the
subject
of
this
dispute.
3.19
On
March
18,
1975
the
appellant
filed
an
objection.
3.20
On
May
19,
1976,
the
respondent
sent
a
notification
to
the
appellant
maintaining
his
position
that
commercial
profit
and
not
capital
gain
was
involved,
but
he
also
allowed
a
reduction
of
$16,179.09
as
a
deposit
on
an
amount
payable.
3.21
On
August
17,
1976
an
appeal
was
submtited
to
the
Tax.
Review
Board.
4.
Act,
Precedents
and
Comments
4.1
Act
Sections
3,
4
and
paragraph
139(1)(e)
of
the
old
Act
may
be
useful
in
the
case
at
bar:
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
and
does
not
include
an
office
or
employment;
4.2
Precedents
A
number
of
precedents
were
principally
cited
by
counsel
for
the
respondent:
J
J
Aimé
Roy
v
MNR,
13
Tax
ABC
1;
55
DTC
273;
Leslie
Todd
v
MNR,
15
Tax
ABC
42;
56
DTC
208;
No
341
v
MNR,
15
Tax
ABC
103;
56
DTC
231;
Jacob
Spelt
v
MNR,
31
Tax
ABC
320,
63
DTC
267;
Arthur
Dansereau
v
MNR,
37
Tax
ABC
425:
65
DTC
169;
Wilfred
John
Wallace
v
MNR,
38
Tax
ABC
246;
65
DTC
310;
Evelyn
Nozick
v
MNR,
39
Tax
ABC
361:
65
DTC
687;
Leonard
Walter
Stewart
v
MNR,
41
Tax
ABC
297;
66
DTC
474;
Guerino
Romano
v
MNR,
41
Tax
ABC
302;
66
DTC
490;
Helene
Mikula
v
MNR,
42
Tax
ABC
54:
66
DTC
636;
Byron
B
Kennedy
v
MNR,
[1952]
CTC
59;
52
DTC
1070;
T
Campbell
v
MNR,
[1952]
CTC
334;
52
DTC
1187;
Toby
Barnett
v
MNR,
[1957]
CTC
355;
57
DTC
1255;
Bayridge
Estates
Limited
v
MNR,
[1959]
CTC
158;
59
DTC
1098:
Regal
Heights
Limited
v
MNR,
[1960]
CTC
384;
60
DTC
1270;
Essex
House
Limited
v
MNR,
[1961]
CTC
270;
61
DTC
1135;
Donald
C
Brown
v
MNR,
[1961]
CTC
432;
61
DTC
1255;
J-Euclide
Perron
v
MNR,
[1962]
CTC
457;
62
DTC
1288;
Samuel
Lyons
v
MNR,
[1962]
CTC
478;
62
DTC
1297;
MNR
v
James
A
Taylor,
[1956]
CTC
189;
56
DTC
1125;
Harry
C
Walker,
Walyrie
Klak
and
William
Alexander
Rueb
v
MNR,
[1963]
CTC
441;
63
DTC
1280;
MNR
v
Clifton
H
Lane
[1964]
CTC
81;
64
DTC
5049;
William
Slater
et
al
v
MNR;
[1966]
CTC
53;
66
DTC
5047;
David
Rothenberg
v
MNR,
[1965]
CTC
1;
64
DTC
255;
Harold
Diamond
et
al
v
MNR,
[1966]
CTC
670;
66
DTC
5434;
Stanley
W
Carr
v
MNR,
[1965]
CTC
334;
65
DTC
5201.
4.3
Comments
4.3.1
The
precedents
and
legal
theory
have
long
since
formulated
certain
key
points
to
be
considered
when
deciding
whether
profits
are
commercial
or
capital
in
nature.
The
English
Commission
on
taxation,
which
made
its
report
in
1955,
established
six
points
(badges
of
trade):
1
the
object
of
the
sale:
2
the
duration
of
ownership;
3
the
number
of
similar
transactions
by
the
same
person;
4
work
done
in
connection
with
the
property..;
5
the
circumstances
which
caused
the
sale;
6
intention.
4.3.2
Canadian
precedents
consider
almost
the
same
factors:
1
intention;
2
the
relationship
between
the
transaction
and
the
taxpayer’s
business;
3
nature
of
the
transaction
and
goods
involved
in
it;
4
number
and
repetition
of
transactions:
5
the
objects
of
the
corporation.
4.3.3
In
the
case
at
bar,
the
factors
to
which
the
parties
refer
are
the
following:
(a)
intention:
—
the
intention
was
to
invest,
says
the
appellant;
—,
the
purchase
was
made
with
a
view
to
resale,
says
the
respondent;
(b)
duration
of
ownership:
—
the
period
of
one
month
between
purchase
and
sale
is
indicative,
says
the
respondent,
of
commercial
profit;
—
circumstances
made
it
necessary
to
sell
so
quickly,
explains
the
appellant;
(c)
partnership
with
Les
Entreprises
Marcal
Inc:
—
Les
Entreprises
Marcal
Inc
has
as
its
object
the
purchase
and
sale
of
land;
the
appellant
does
not
hold
shares
in
Les
Entre-
prises
Marcal
Inc;
she
is
not
a
person
connected
with
this
company
and
is
a
legal
person
independent
of
the
company;
(d)
number
of
transactions:
—
this
is
the
appellant’s
only
transaction;
according
to
the
respondent,
it
is
at
least
an
adventure
in
the
nature
of
trade
(paragraph
139(1
)(e))
;
(e)
object
of
the
sale:
—
by
its
nature
a
piece
of
land
is
usually
an
object
of
investment,
especially
if
one
plans
to
set
up
a
campground
on
it-^however,
it
can
be
an
object
of
trade
if
the
investment
was
only
a
pretext,
or
if
the
buyer
changed
his
mind
too
readily.
4.3.4
At
first
glance,
what
strikes
the
Board
is
perhaps
this
very
readiness
with
which
the
buyers
suddenly
changed
their
minds
about
the
campground
and
decided
to
sell.
The
reasons
given
(the
area
of
the
land
was
inadequate
and
there
were
problems
about
felling
timber)
do
not
appear
very
convincing.
As
for
the
timber,
no
evidence
was
given
that
the
problem
arose
suddenly
the
day
after
the
contract
was
signed.
On
the
contrary,
the
evidence
has
shown
that
the
problem
materialized
on
July
27,
1972,
more
than
two
years
after
the
contract
was
signed,
at
the
time
of
the
defence
proceeding
and
counterclaim
against
the
action
brought
by
Mr
Claude
Campeau.
As
to
the
area
of
the
land,
thirty
acres
more
or
less
could
not
make
a
great
difference.
This
land
had
in
fact
been
inspected
by
the
parties
involved
and
considered
to
be
large
enough
for
a
campground.
Ascertaining
the
exact
acreage
was
then
a
minor
point
as
regards
carrying
out
the
plan.
The
Board
wonders
why
the
surveyor,
Blondin,
began
surveying
on
February
15,
1970,
between
the
promise
of
sale
signed
on
January
22,
1970
(paragraph
3.4(b))
and
the
signature
by
the
appellant
and
her
partners
of
the
notarized
contract
on
February
27,
1970;
and
he
had
been
hired
by
Im-Val
Inc,
the
future
buyer.
Furthermore,
Mr
Blondin
was
hired,
according
to
the
evidence,
not
only
to
calculate
the
area
of
the
land
but
also
to
prepare
plans
for
subdividing
lots
166,
167
and
168
(paragraph
3.13).
How
could
Im-Val
Inc
have
given
him
such
instructions
if
it
were
not
already
certain
that
it
would
acquire
the
land?
When
the
^surveyor
submitted
his
report
on
April
15,
1970,
the
appellant
and
her
partners
had
already
resold
the
land
as
of
March
20.
This
series
of
facts
does
not
help
the
appellant
to
discharge
the
burden
which
rests
with
her;
rather,
it
makes
the
Board
sceptical
as
to
the
intention
underlying
this
transaction.
The
only
effect
of
the
admission
by
Jean
Yves
Lortie,
the
appellant’s
husband
and
principal
representative,
that
the
fictitious
price
of
$60,000
was
shown
on
the
contract
(A-1)
so
that
the
land
could
be
resold
at
a
higher
price,
is
to
change
the
Board’s
scepticism
into
a
certainty
that
the
intention
to
sell
was
already
present
when
the
contract
of
purchase
was
made
on
February
27,1970.
4.3.5
Though
the
foregoing
paragraph
has
already
settled
the
basic
question
in
the
case,
the
Board
wishes
to
emphasize
one
point
which
leaves
it
sceptical:
the
source
of
the
money.
The
Board
would
have
understood,
if
the
appellant
had
received
gifts
from
her
husband
over
the
years.
However,
it
has
difficulty
understanding
how
over
about
4
years,
from
1962
to
1966
(paragraph
3.3),
she
could
have
accumulated
the
sum
of
$7,500
with
a
salary
of
$65
to
$70
a
week
(paragraph
3.3).
On
$3,500
in
these
years,
could
someone
pay
for
food,
accommodation,
clothes
and
taxes
and
manage
to
save
$6,000
in
4
years?
(The
sum
of
$6,000;
carefully
invested,
could
have
grown
to
$7,500
in
January
1970.)
It
is
possible,
but
only
in
very
special
circumstances
which
the
appellant
had
the
burden
of
proving.
The
Board
is
far
from
being
convinced
that
the
money
was
given
to
the
appellant
by
Mr
Jean
Yves
Lortie
or
Les
Entreprises
Marcal
Inc
for
the
purposes
of
this
transaction.
Nonetheless
it
remains
sceptical,
because
of
the
weakness
of
the
evidence,
that
it
could
really
have
belonged
to
the
appellant.
4.3.6
The
Board
does
not
doubt
that
there
was
a
spirit
of
co-operation
among
members
of
the
Lortie
family.
It
believes
that
in
the
fall
of
1969
they
really
did
discuss
plans
for
a
campground
to
help
the
appellant’s
brother-in-law.
However,
it
also
believes
that
overly
favourable
circumstances
caused
the
plan
to
be
changed.
4.3.7
The
transaction
which
is
the
subject
of
the
present
dispute
was
the
only
one
in
which
the
appellant
took
part.
This
fact
by
itself
cannot
make
the
Board
conclude
that
a
capital
gain
was
involved;
neither
can
the
fact
that
she
personally
did
not
know
what
she
was
doing,
and
only
took
part
in
the
transaction
by
signing
her
name
and
contributing
the
money
(paragraph
3.2).
She
was
in
fact
acting
through
her
agent,
her
husband,
who
took
care
of
everything
and
knew
everything
about
the
transaction.
He
even
knew
enough
to
increase
the
price
fictitiously
in
order
to
sell
at
a
higher
price.
4.3.8
In
view
of
the
burden
of
proof
which
rested
with
the
appellant,
and
considering
that
the
appellant
did
not
discharge
this
burden,
the
Board
must
conclude
that
this
was
at
least
an
adventure
or
concern
in
the
nature
of
trade.
5.
Conclusion
The
appeal
is
dismissed
in
accordance
with
the
above-mentioned
reasons
for
judgment.
Appeal
dismissed.-.
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