Pinard
J.—
This
is
an
appeal
brought
by
the
plaintiff
against
the
defendant
pursuant
to
subsection
165(7)
and
subsection
172(2)
of
the
Income
Tax
Act,
S.C.
1970-71-72,
c.
63
as
amended
and
in
force
at
the
relevant
time
(the
“Act”),
from
a
reassessment
for
income
tax
for
the
1987
taxation
year.
The
facts
The
relevant
facts
in
this
case
are
not
in
dispute.
They
are
set
out
in
detail
in
the
following
agreed
statement
of
facts
which
has
been
filed
with
this
Court:
1.
The
plaintiff
is
an
individual
and
resides
in
the
City
of
Calgary,
in
the
Province
of
Alberta.
2.
On
or
about
December
18,
1981
for
the
purpose
of
earning
rental
income,
the
plaintiff
became
the
beneficial
owner
of
an
undivided
interest
in
a
unit
of
a
condominium
property,
known
as
“Sun
Creek”
(hereinafter
referred
to
as
“the
property”)
in
Calgary,
Alberta,
and
the
beneficial
owner
of
certain
chattels
pertaining
thereto
(hereinafter
referred
to
as
“the
chattels”),
the
plaintiff’s
total
undivided
beneficial
interest
in
the
property
and
in
the
chattels
amounting
to
1.13478462
per
cent,
pursuant
to
an
arrangement,
the
details
of
which
are
set
out
in
Appendix
“A”,
“B”,
“C”
and
“D”
hereto.
3.
The
plaintiffs
share
of
the
total
acquisition
costs
with
respect
to
the
property
and
the
chattels
was
$90,849.
Of
this
sum,
$64,687.50
was
borrowed
on
the
security
of
a
mortgage
registered
against
his
unit
in
the
property
and
a
chattel
mortgage
on
the
chattels
pertaining
to
his
unit
in
the
property
granted
by
106114
Canada
Ltd.,
a
corporation
holding
legal
title
to
the
property
and
the
chattels
as
bare
trustee
for
the
plaintiff
and
other
beneficial
owners
thereof,
on
his
behalf,
to
Standard
Trust
Co.
and
assumed
by
the
plaintiff.
A
copy
of
the
mortgage
is
appended
hereto
as
Appendix
“E”
and
a
copy
of
the
Assumption
agreement
is
appended
hereto
as
Appendix
“F’.
Each
of
the
other
beneficial
owners
financed
a
similar
portion
of
their
respective
shares
of
the
said
total
acquisition
costs
in
a
similar
way.
4.
The
property
was
comprised
of
land,
building
and
paving.
The
building
was
depreciable
property
included
in
Class
31
of
the
Regulations
to
the
Income
Tax
Act
and
the
paving
was
included
in
Class
17.
The
chattels
were
comprised
of
furniture
and
fixtures
included
in
Class
8.
5.
The
total
income
from
the
property
failed
to
cover
the
aggregate
amounts
falling
due
under
the
said
mortgages
and
chattel
mortgages
pertaining
to
the
property
and
the
chattels,
including
the
mortgage
and
chattel
mortgage
pertaining
to
the
plaintiffs
unit
in
the
property
and
the
plaintiff
and
the
other
beneficial
owners
of
the
property
and
the
chattels
failed
to
fund
106114
Canada
Ltd.
all
of
the
resulting
deficiencies,
as
a
result
of
which:
(a)
the
amounts
falling
due
under
the
said
mortgages
and
chattel
mortgages,
including
the
mortgage
and
chattel
mortgage
pertaining
to
the
plaintiffs
unit,
were
not
paid,
as
and
when
required
therein;
(b)
Standard
Trust
Co.
brought
action
against
the
plaintiff
and
106114
Canada
Ltd.
in
the
Court
of
Queen’s
Bench
of
Alberta
on
or
about
August
25,
1986
by
statement
of
claim,
a
copy
of
which
is
appended
hereto
as
Appendix
“G”.
Standard
Trust
Co.
brought
similar
actions
against
the
other
beneficial
owners
of
the
property
in
respect
of
the
mortgages
registered
against
their
units
in
the
property.
6.
On
or
about
March
15,
1987,
the
Court
of
Queen’s
Bench
of
Alberta
issued
an
Order,
a
copy
of
which
is
appended
hereto
as
Appendix
“H”,
permitting
the
plaintiff’s
interest
in
the
property
and
the
chattels
to
be
sold
to
Standard
Trust
Co.
for
an
aggregate
amount
of
$49,000,
which
sum
represented
the
fair
market
value
thereof.
A
deficiency
judgment
was
also
granted
against
106114
Canada
Ltd.
in
the
amount
of
$23,874.09,
as
at
March
16,
1987.
Similar
orders
were
issued
in
respect
of
the
other
beneficial
owners
of
the
property
and
the
chattels.
7.
The
actions
against
the
beneficial
owners
of
the
property
and
the
chattels
on
the
covenant
to
pay
contained
in
the
said
mortgages,
including
the
action
against
the
plaintiff,
were
consolidated
by
Order
of
the
Court
of
Queen’s
Bench
of
Alberta
of
July
21,
1988
and
the
hearing
of
such
action
has
been
adjourned
sine
die.
8.
Standard
Trust
Co.
did,
in
the
course
of
the
plaintiffs
1987
taxation
year,
acquire
the
beneficial
ownership
of
the
interest
of
the
plaintiff
in
the
property
and
the
chattels,
for
the
aggregate
amount
of
$49,000
and
on
the
terms
contained
in
the
said
Order
of
the
Court
of
Queen’s
Bench
of
Alberta.
9.
The
plaintiff
regarded
the
sale
price
of
$49,000
as
his
proceeds
of
disposition
of
his
interest
in
the
property
and
the
chattels
and,
in
computing
his
income
for
the
1987
taxation
year,
calculated
a
terminal
loss
with
respect
to
the
depreciable
portion
thereof,
in
the
amount
of
$15,366.
10.
The
principal
sum
owing
on
the
mortgage
registered
against
the
plaintiffs
unit
in
the
property
in
favour
of
Standard
Trust
Co.
as
at
the
time
of
the
said
sale
was
$64,085.90.
11.
Interest
was
payable
on
the
mortgage
and
chattel
mortgage
in
favour
of
Standard
Trust
Co.
pertaining
to
the
plaintiffs
unit,
as
well
as
on
the
mortgages
and
chattel
mortgages
pertaining
to
the
units
owned
by
the
other
beneficial
owners,
at
the
rate
of
14
per
cent
per
annum,
calculated
semi-annually,
payable
both
before
and
after
maturity.
Interest
was
also
payable
on
a
second
mortgage
secured
against
the
property
in
favour
of
Imperial
Financial
Services
Ltd.
at
the
same
rate.
For
the
period
commencing
January
1,
1987
and
ending
with
the
entry
of
the
said
Order
of
the
Court
of
Queen’s
Bench
of
Alberta,
during
which
time
the
property
continued
to
be
rented
out,
gross
rental
income
for
the
property
was
$89,740
and
expenses
amounted
to
$231,034.
Of
this
latter
sum,
$207,176
was
attributable
to
interest
expense
payable
on
the
said
mortgages
in
favour
of
Standard
Trust
Co.
and
the
mortgage
in
favour
of
Imperial
Financial
Services
Ltd.;
$169,992
being
payable
to
Standard
Trust
Co.
on
account
of
interest
and
$37,184
being
payable
to
Imperial
Financial
Services
Ltd.
on
account
of
interest.
The
plaintiffs
share
of
the
said
interest
expense
for
the
period
was
$2,354
($1,932
being
payable
to
Standard
Trust
Co.
and
$422
being
payable
to
Imperial
Financial
Services
Ltd.)
and
the
plaintiff,
applying
paragraph
20(1
)(c)
of
the
Income
Tax
Act,
deducted
this
amount
in
computing
his
income
from
the
property
and
the
chattels
for
the
1987
taxation
year.
The
balance
of
expenses
for
the
period,
$23,958,
was
attributable
to
costs
of
operating
the
property
as
a
rental
property.
12.
The
plaintiff
had
no
reasonable
expectation
to
earn
a
profit
from
the
property
and
the
chattels
in
his
1987
taxation
year.
13.
In
reassessing
the
plaintiff
for
the
1987
taxation
year
the
Minister
of
National
Revenue,
applying
paragraph
79(c)
of
the
Income
Tax
Act,
regarded
the
amount
of
$63,785
as
the
principal
sum
owing
on
the
said
mortgage
in
favour
of
Standard
Trust
Co.
and
consequently,
as
the
plaintiffs
proceeds
of
disposition
of
his
interest
in
the
property
and
chattels
and
consequently
reduced
the
plaintiffs
terminal
loss
in
respect
of
Class
31
of
the
depreciable
property
(buildings)
from
$15,366
to
$581.
14.
The
Minister
of
National
Revenue
also,
applying
paragraph
20(1
)(c)
of
the
Income
Tax
Act,
disallowed
the
interest
expense
of
$2,354.
15.
The
parties
are
in
agreement
that
if
the
plaintiffs
share
of
the
proceeds
of
disposition
of
the
property
and
chattels
were
$49,000,
as
asserted
by
the
plaintiff,
the
plaintiffs
terminal
loss
in
respect
of
Class
31
of
depreciable
property
(buildings)
was
$15,366.
16.
The
parties
are
also
in
agreement
that
if
the
plaintiffs
share
of
the
proceeds
of
disposition
of
the
property
and
chattels
were
$64,085.90,
as
is
now
asserted
by
the
Minister
of
National
Revenue,
the
Minister’s
reassessment,
as
outlined
in
paragraph
13
herein,
is
correct
in
the
result.
17.
Finally,
the
parties
are
in
agreement
that
if
the
interest
expense
for
the
1987
taxation
year
is
deductible
under
Paragraph
20(l)(c),
as
is
asserted
by
the
plaintiff,
then
the
deductible
amount
is
$2,354.
The
Issues
There
are
two
issues
before
this
Court
in
this
action:
(a)
whether
on
the
foregoing
facts
the
plaintiffs
proceeds
of
disposition
of
the
property
amounted
to
$49,000,
as
asserted
by
the
plaintiff,
or
$64,085,
as
now
asserted
by
the
defendant,
and
(b)
whether
the
interest
of
$2,354
which
accrued
as
the
plaintiffs
share
of
the
interest
on
the
mortgage
and
chattel
mortgage
on
the
property
between
January
1,
1987
and
the
time
of
the
order
of
the
Court
of
Queen’s
Bench
of
Alberta
was
deductible
in
computing
the
plaintiffs
income
for
the
1987
taxation
year.
Analysis
The
first
issue
involves
the
determination
of
the
plaintiffs
proceeds
of
disposition
and
requires
the
consideration
of
the
following
provisions
of
the
Act:
Paragraph
13(21)(d)
13(21)(d)
“proceeds
of
disposition”
of
property
includes
(i)
the
sale
price
of
property
that
has
been
sold,
(ii)
compensation
for
property
unlawfully
taken,
(iii)
compensation
for
property
destroyed
and
any
amount
payable
under
a
policy
of
insurance
in
respect
of
loss
or
destruction
of
property,
(iv)
compensation
for
property
taken
under
statutory
authority
or
the
sale
price
of
property
sold
to
a
person
by
whom
notice
of
an
intention
to
take
it
under
statutory
authority
was
given,
(v)
compensation
for
property
injuriously
affected,
whether
lawfully
or
unlawfully
or
under
statutory
authority
or
otherwise,
(vi)
compensation
for
property
damaged
and
any
amount
payable
under
a
policy
of
insurance
in
respect
of
damage
to
property,
except
to
the
extent
that
such
compensation
or
amount,
as
the
case
may
be,
has
within
a
reasonable
time
after
the
damage
been
expended
on
repairing
the
damage,
(vii)
an
amount
by
which
the
liability
of
a
taxpayer
to
a
mortgagee
is
reduced
as
a
result
of
the
sale
of
mortgaged
property
under
a
provision
of
the
mortgage,
plus
any
amount
received
by
the
taxpayer
out
of
the
proceeds
of
such
sale,
and
(viii)
any
amount
included
in
computing
a
taxpayer’s
proceeds
of
disposition
of
the
property
by
virtue
of
paragraph
79(c);
Paragraph
54(h)
54(h)
“proceeds
of
disposition”
of
property
includes,
(i)
the
sale
price
of
property
that
has
been
sold,
(ii)
compensation
for
property
unlawfully
taken,
(iii)
compensation
for
property
destroyed,
and
any
amount
payable
under
a
policy
of
insurance
in
respect
of
loss
or
destruction
of
property,
(iv)
compensation
for
property
taken
under
statutory
authority
or
the
sale
price
of
property
sold
to
a
person
by
whom
notice
of
an
intention
to
take
it
under
statutory
authority
was
given,
(v)
compensation
for
property
injuriously
affected,
whether
lawfully
or
unlawfully
or
under
statutory
authority
or
otherwise,
(vi)
compensation
for
property
damaged
and
any
amount
payable
under
a
policy
of
insurance
in
respect
of
damage
to
property,
except
to
the
extent
that
such
compensation
or
amount,
as
the
case
may
be,
has
within
a
reasonable
time
after
the
damage
been
expended
on
repairing
the
damage,
(vii)
an
amount
by
which
the
liability
of
a
taxpayer
to
a
mortgagee
is
reduced
as
a
result
of
the
sale
of
mortgaged
property
under
a
provision
of
the
mortgage,
plus
any
amount
received
by
the
taxpayer
out
of
the
proceeds
of
such
sale,
(viii)
any
amount
included
in
computing
a
taxpayer’s
proceeds
of
disposition
of
the
property
by
virtue
of
paragraph
79(c),
and
(ix)
in
the
case
of
a
share,
an
amount
deemed
by
subparagraph
88(2)(b)(ii)
not
to
be
a
dividend
on
that
share,
(ix.l)
(Repealed
by
1986,
c.
6,
subsection
27(2).)
but
notwithstanding
any
other
provision
of
this
Part,
does
not
include
(x)
any
amount
that
would
otherwise
be
proceeds
of
disposition
of
a
share
to
the
extent
that
such
amount
is
deemed
by
subsection
84(2)
or
(3)
to
be
a
dividend
received
and
is
not
deemed
by
paragraph
55(2)(a)
or
subparagraph
88(2)(b)(ii)
not
to
be
a
dividend,
or
(xi)
any
amount
that
would
otherwise
be
proceeds
of
disposition
of
property
of
a
taxpayer
to
the
extent
that
such
amount
is
deemed
by
subsection
84.1(1)
or
212.1(1)
to
be
a
dividend
paid
to
the
taxpayer;
and.
...
Section
79.
Mortgage
foreclosures
and
conditional
sales
repossessions.
Where,
at
any
time
in
a
taxation
year,
a
taxpayer
who
(a)
was
a
mortgagee
or
other
creditor
of
another
person
who
had
previously
acquired
property,
or
(b)
had
previously
sold
property
to
another
person
under
a
conditional
sales
agreement,
has
acquired
or
reacquired
the
beneficial
ownership
of
the
property
in
consequence
of
the
other
person’s
failure
to
pay
all
or
any
part
of
an
amount
(in
this
section
referred
to
as
the
“taxpayer’s
claim”)
owing
by
him
to
the
taxpayer,
the
following
rules
apply:
(c)
there
shall
be
included,
in
computing
the
other
person’s
proceeds
of
disposition
of
the
property,
the
principal
amount
of
the
taxpayer’s
claim
plus
all
amounts
each
of
which
is
the
principal
amount
of
any
debt
that
had
been
owing
by
the
other
person,
to
the
extent
that
it
has
been
extinguished
by
virtue
of
the
acquisition
or
reacquisition,
as
the
case
may
be;
(d)
any
amount
paid
by
the
other
person
after
the
acquisition
or
reacquisition,
as
the
case
may
be,
as,
on
account
of
or
in
satisfaction
of
the
taxpayer’s
claim
shall
be
deemed
to
be
a
loss
of
that
person,
for
his
taxation
year
in
which
payment
of
that
amount
was
made,
from
the
disposition
of
the
property;
(e)
in
computing
the
income
of
the
taxpayer
for
the
year,
(i)
the
amount,
if
any,
claimed
by
him
under
subparagraph
40(1
)(a)(iii)
in
computing
his
gain
for
the
immediately
preceding
taxation
year
from
the
disposition
of
the
property,
and
(ii)
the
amount,
if
any,
deducted
under
paragraph
20(1
)(n)
in
computing
the
income
of
the
taxpayer
for
the
immediately
preceding
year
in
respect
of
the
property,
shall
be
deemed
to
be
nil;
(f)
the
taxpayer
shall
be
deemed
to
have
acquired
or
reacquired,
as
the
case
may
be,
the
property
at
the
amount,
if
any,
by
which
the
cost
at
that
time
of
the
taxpayer’s
claim
exceeds
the
amount
described
in
subparagraph
(e)(i)
or
(ii),
as
the
case
may
be,
in
respect
of
the
property;
(g)
the
adjusted
cost
base
to
the
taxpayer
of
the
taxpayer’s
claim
shall
be
deemed
to
be
nil;
and
(h)
in
computing
the
taxpayer’s
income
for
the
year
or
a
subsequent
year,
no
amount
is
deductible
in
respect
of
the
taxpayer’s
claim
by
virtue
of
paragraph
20(l)(l)
or
(p).
Paragraph
13(21)(d)
above
applies
to
the
disposition
of
depreciable
property
and
paragraph
54(h)
above
applies
to
the
disposition
of
capital
property.
In
both
sections
the
relevant
provisions,
namely
(i),
(vii)
and
(viii)
are
identical.
For
reasons
of
simplicity,
therefore,
I
will
refer
to
them
as
“provision
(i)”,
“provision
(vii)”
and
“provision
(viii)”,
it
being
understood
that
such
reference
will
always
involve
both
the
more
general
provi-
sions
they
belong
to,
namely
paragraph
13(21)(d)
and
paragraph
54(h).
The
plaintiff
first
relies
on
“provision
(vii)”.
In
that
regard,
he
contends
that
the
property
was
sold
to
the
mortgagee
pursuant
to
a
Court
Order
under
the
laws
of
Alberta
with
the
result
that
the
amount
of
his
liability
to
the
mortgagee
was
reduced
by
$49,000
which
was
the
price
approved
by
the
Court
for
the
purchase
of
the
property
by
the
mortgagee.
Accordingly,
he
submits
that
his
proceeds
of
disposition
amounted
to
$49,000.
In
the
alternative,
the
plaintiff
relies
on
“provision
(i)”.
In
that
regard,
he
contends
that
the
property
was
sold
pursuant
to
a
Court
Order
under
the
laws
of
Alberta
at
a
sale
price
that
was
stipulated
by
the
Court
to
be
$49,000
and
accordingly
that
amount
would
be
the
proceeds
of
disposition.
In
the
further
alternative,
the
plaintiff
relies
on
“provision
(viii)”.
In
that
regard,
he
submits
that
his
proceeds
of
disposition
determined
under
paragraph
79(c)
would
be
equal
to
the
amount
by
which
his
liability
has
been
reduced
or
extinguished
by
virtue
of
the
acquisition
by
the
mortgagee,
this
amount
being
the
sale
price
of
$49,000.
For
her
part,
the
defendant
submits
that
the
plaintiff’s
proceeds
of
disposition
were
properly
calculated
pursuant
to
paragraph
79(c)
of
the
Act
as
directed
by
“provision
(viii)”.
Dealing
first
with
the
plaintiff’s
last
submission
that
the
proceeds
of
disposition
determined
under
paragraph
79(c)
would
be
equal
to
the
amount
by
which
the
liability
of
the
plaintiff
has
been
reduced
or
extinguished
by
virtue
of
the
acquisition
by
the
mortgagee,
I
am
of
the
view
that
paragraph
79(c)
does
not
require
for
its
operation
that
“the
principal
amount
of
the
taxpayer’s
claim”
referred
to
in
its
second
and
third
lines
be
“extinguished
by
virtue
of
the
acquisition...
[of
the
mortgaged
property
by
“the
taxpayer”]”
(where,
on
the
facts
in
the
present
case,
the
Standard
Trust
Co.
stands
for
“the
taxpayer”).
It
is
clear
to
me
that
this
requirement
of
extinguishment
necessarily
applies
to
those
principal
amounts
referred
to
in
the
line
of
paragraph
79(c)
following
the
word
“plus”.
Consequently,
I
agree
with
the
defendant’s
submission
that
the
word
“it”
in
the
phrase
“to
the
extent
that
it
has
been
extinguished
by
virtue
of
the
acquisition...”
in
the
last
two
lines
of
paragraph
79(c)
can
grammatically
refer
only
to
the
“principal
amount”
in
the
immediately
preceding
clause
in
the
third
line
of
this
paragraph
commencing
with
the
word
“plus”.
Had
the
legislator
intended
to
refer
to
“the
principal
amount”
referred
to
in
the
second
line
of
that
paragraph,
as
well
as
to
“the
principal
amount”
referred
to
in
its
fourth
line,
he
would
have
used
the
word
“they”
instead
of
“it”.
Furthermore,
as
noted
by
the
defendant,
while
in
the
English
language
usage
“a
creditor’s
claim”
and
“a
debt...owing
by
the
debtor”
are
both
“debts”,
it
is
noteworthy
that
the
legislator
has
chosen
not
to
use
the
word
“debt”
when
referring
to
the
creditor’s
interest
on
the
one
hand
and
the
debtor’s
obligation
on
the
other;
rather,
he
has
chosen
to
keep
these
two
concepts
separate
and
to
confine
the
extinguishment
aspect
to
the
latter.
The
intent
on
the
part
of
the
legislator
has
been
placed
beyond
doubt
by
the
French
language
version
of
paragraph
79(c).
Indeed
it
is
well
established
that
for
bilingual
legislation
an
ambiguity
in
the
meaning
of
a
provision
in
one
of
the
official
languages
may
be
resolved
by
recourse
to
the
parallel
provision
in
the
other
official
language.
This
so-called
“shared
meaning
rule”,
as
stated
by
Driedger,
has
been
adopted
in
numerous
cases
to
resolve
ambiguities
in
one
or
both
language
versions
or
to
clarify
the
scope
of
vague
terms.
The
French
language
version
of
paragraph
79(c)
reads:
Article
79:
Forclusion
d’hypothèques
et
reprise
de
biens
qui
ont
fait
l’objet
d’une
vente
conditionnelle.
Lorsque,
à
une
date
quelconque
pendant
une
année
d’imposition,
un
contribuable
qui
(a)
était
créancier
hypothécaire
ou
autre
d’une
autre
personne
qui
avait
auparavant
acquis
des
biens,
ou
(b)
avait
auparavant
vendu
des
biens
à
une
autre
personne
en
vertu
d’un
contrat
de
vente
conditionnelle,
a
acquis
ou
a
acquis
de
nouveau
le
beneficial
ownership
ou
la
propriété
de
ces
biens
par
suite
d’un
défaut
de
paiement
total
ou
partiel,
de
la
part
de
l’autre
personne,
d’une
somme
(appelée
dans
le
présent
article
la
“créance
du
contribuable”)
que
celle-ci
doit
au
contribuable,
les
règles
suivantes
s’appliquent:
(c)
doivent
être
inclus
dans
le
calcul
du
produit
tiré
par
l’autre
personne
de
la
disposition
des
biens
en
question,
le
principal
de
la
créance
du
contribuable
plus
toutes
les
sommes
dont
chacune
constitue
le
principal
d’une
dette
qui
avait
été
due
par
cette
autre
personne
dans
la
mesure
où
cette
dette
a
été
éteinte
du
fait
de
l’acquisition
ou
de
la
nouvelle
acquisition,
selon
le
cas;
The
French
language
version
of
paragraph
79(c)
substitutes
the
words
“cette
dette”
for
the
word
“it”
in
the
English
language
version,
thus
leaving
absolutely
no
doubt
that
what
is
referred
to
is
the
“dette”
in
the
fourth
line,
while
the
phrase
“le
principal
de
la
créance
du
contribuable”
before
the
word
“plus”
in
the
French
language
version
takes
the
place
of
“the
principal
of
the
taxpayer’s
claim”
in
the
English
language
version
in
the
same
place
in
paragraph
79(c).
Consequently,
the
words
“a
été
éteinte”
in
the
second
last
line
in
the
French
language
version
can
only
refer
to
“le
principal
d’une
dette”
in
that
part
of
that
paragraph
starting
with
“plus”,
and
not
to
“le
principal
d’une
créance”
in
that
part
which
precedes
“plus”.
Similarly,
the
parallel
words
in
the
English
language
version,
i.e.
“has
been
extinguished”
can
only
refer
to
“the
principal
amount
of
any
debt”
in
the
third
and
fourth
lines
of
that
paragraph,
and
not
to
“the
principal
amount
of
the
taxpayer’s
claim”
in
the
second
and
third
lines.
In
view
of
the
fact
that
there
is
no
apparent
contradiction
between
the
two
language
versions
of
paragraph
79(c)
and
given
the
remarkable
clarity
of
the
French
language
version,
I
find
that
Parliament
has
clearly
expressed
its
intention
in
the
words
it
has
used
in
the
statute
and
therefore
there
is
no
need
for
further
construction
(see
Multiform
Mfg.
Co.
v.
R.
(sub
nom.
R.
v.
Multiform
Mfg.
Co.),
[1990]
2
S.C.R.
624,
79
C.R.
(3d)
390,
at
page
629
(C.R.
394)
per
Lamer
C.J.).
Now
that
the
plaintiff’s
interpretation
of
paragraph
79(c)
has
been
set
aside,
I
intend
to
deal
with
the
applicability
of
the
same
provision
to
the
present
case.
Paragraph
79(c)
clearly
contemplates
the
situation
in
the
present
case
where
the
beneficial
ownership
of
the
plaintiffs
property
was
acquired
by
a
mortgagee
in
consequence
of
the
plaintiff’s
failure
to
pay
all
or
any
part
of
an
amount
owing
by
him
to
the
mortgagee.
Accordingly,
there
must
be
included
in
computing
the
plaintiff’s
proceeds
of
disposition
of
the
property
pursuant
to
that
provision,
the
principal
amount
of
the
mortgagee’s
claim,
i.e.
$64,085.
Because
paragraph
13(21)(d)
and
paragraph
54(h)
both
provide
that
“proceeds
of
disposition”
of
property
include:
(viii)
any
amount
included
in
computing
a
taxpayer’s
proceeds
of
disposition
of
the
property
by
virtue
of
paragraph
79(c);
I
consider
that
the
Minister
of
National
Revenue
was
justified
in
the
reassessment
of
the
plaintiffs
income
for
the
1987
taxation
year
on
the
basis
that
the
plaintiffs
proceeds
of
disposition
of
the
property
included
the
full
amount
of
the
plaintiffs
principal
indebtedness
to
the
mortgagee
at
the
time
the
latter
acquired
the
property
pursuant
to
the
Order
of
the
Court
of
Queen’s
Bench
of
Alberta.
Turning
to
the
plaintiffs
first
two
submissions
regarding
the
first
issue,
it
is
true
that
the
situation
in
the
present
case
involves
“the
sale
price
of
property
that
has
been
sold”,
as
stated
in
“provision
(i)”,
and
that
it
could
even
possibly
involve
“an
amount
by
which
the
liability
of
a
taxpayer
to
a
mortgagee
is
reduced
as
a
result
of
the
sale
of
mortgaged
property
under
a
provision
of
the
mortgage”,
as
stated
in
“provision
(vii)”
which
itself
also
involves
“the
sale
price
of
property
that
has
been
sold,”
as
stated
in
“provision
(i)”.
However,
there
is
nothing
in
paragraph
13(21)(d)
or
paragraph
54(h)
which
expressly
gives
precedence
to
any
of
the
subparagraphs
or
paragraphs
over
others.
Under
such
circumstances,
proper
statutory
interpretation
requires
that
the
specific
prevail
over
the
general.
Sullivan,
in
Driedger
on
the
Construction
of
Statutes,
supra,
at
page
186,
expresses
the
following:
Where
two
provisions
are
in
conflict
and
one
of
them
deals
specifically
with
the
matter
in
question
while
the
other
is
of
general
application,
the
conflict
may
be
avoided
by
applying
the
specific
provision
to
the
exclusion
of
the
more
general
one.
The
specific
prevails
over
the
general;
it
does
not
matter
which
was
enacted
first.
There
can
be
no
question,
in
the
case
at
bar,
that
“provision
(viii)”
is
more
specific
than
“provision
(vii)”
and
“provision
(i)”.
For
all
these
reasons,
I
conclude,
with
respect
to
the
first
issue,
that
on
the
facts
of
this
case,
the
plaintiffs
proceeds
of
disposition
of
the
property
amounted
to
$64,085,
as
now
asserted
by
the
defendant,
so
that
the
reassessment
under
appeal,
as
outlined
in
paragraph
13
of
the
agreed
statement
of
facts,
is
correct
in
result.
The
second
issue
concerns
the
deductibility
of
interest
and
requires
the
consideration
of
paragraph
20(1
)(c)
of
the
Income
Tax
Act,
which
provides
as
follows:
Section
20.
Deductions
permitted
in
computing
income
from
business
or
property.
20(1)
Notwithstanding
paragraphs
18(l)(a),
(b)
and
(h),
in
computing
a
taxpayer’s
income
for
a
taxation
year
from
a
business
or
property,
there
may
be
deducted
such
of
the
following
amounts
as
are
wholly
applicable
to
that
source
or
such
part
of
the
following
amounts
as
may
reasonably
be
regarded
as
applicable
thereto:
(c)
Interest.-an
amount
paid
in
the
year
or
payable
in
respect
of
the
year
(depending
upon
the
method
regularly
followed
by
the
taxpayer
in
computing
his
income),
pursuant
to
a
legal
obligation
to
pay
interest
on
(i)
borrowed
money
used
for
the
purpose
of
earning
income
from
a
business
or
property
(other
than
borrowed
money
used
to
acquire
property
the
income
from
which
would
be
exempt
or
to
acquire
a
life
insurance
policy),
(ii)
an
amount
payable
for
property
acquired
for
the
purpose
of
gaining
or
producing
income
therefrom
or
for
the
purpose
of
gaining
or
producing
income
from
a
business
(other
than
property
the
income
from
which
would
be
exempt
or
property
that
is
an
interest
in
a
life
insurance
policy),
(iii)
an
amount
paid
to
the
taxpayer
under
(A)
an
Appropriation
Act
and
on
terms
and
conditions
approved
by
the
Treasury
Board
for
the
purpose
of
advancing
or
sustaining
the
technological
capability
of
Canadian
manufacturing
or
other
industry,
or
(B)
the
Northern
Mineral
Exploration
Assistance
Regulations
made
under
an
Appropriation
Act
that
provides
for
payments
in
respect
of
the
Northern
Mineral
Grants
Program,
or
(iv)
borrowed
money
used
to
acquire
an
interest
in
an
annuity
contract
to
which
section
12.2
applies,
or
would
apply
if
the
contract
had
a
third
anniversary
in
the
year,
except
that,
where
annuity
payments
have
commenced
under
the
contract
in
a
preceding
taxation
year,
the
amount
of
interest
paid
or
payable
in
the
year
shall
not
be
deducted
to
the
extent
that
it
exceeds
the
amount
included
under
section
12.2
or
paragraph
56(1
)(d.
1)
in
computing
the
taxpayer’s
income
for
the
year
with
respect
to
his
interest
in
the
contract,
or
a
reasonable
amount
in
respect
thereof,
whichever
is
the
lesser;
It
is
evident
that
paragraph
20(1)(c)
of
the
Act
requires
for
its
applicability
that
a
business
or
property
be
a
source
of
income.
If
for
one
reason
or
another
such
a
business
or
property
has
effectively
ceased
to
be
source
of
income,
an
interest
expense
relating
thereto
is
no
longer
deductible
(see
Emerson
v.
R.
(sub
nom.
Emerson
v.
The
Queen),
[1985]
1
C.T.C.
324,
85
D.T.C.
5236
(F.C.T.D.),
at
page
325
(D.T.C.
5237);
affirmed
[1986]
1
C.T.C.
422,
86
D.T.C.
6184
(F.C.A.),
at
page
423
(D.T.C.
6185)).
It
is
also
well
established
that
in
order
to
have
a
source
of
income
one
must
have
a
reasonable
expectation
of
profit
(see
Moldowan
v.
R.
(sub
nom.
Moldovan
v.
The
Queen),
[1978]
1
S.C.R.
480;
[1977]
C.T.C.
310,
77
D.T.C.
5213,
at
page
485
(C.T.C.
313;
D.T.C.
5215)).
In
view
of
the
fact
that
in
the
present
case
Standard
Trust
Co.
brought
its
mortgage
foreclosure
action
against
the
plaintiff
and
the
other
beneficial
owners
of
the
property,
represented
by
corporate
agents,
in
August
1986
as
a
result
of
the
default
of
the
plaintiff
and
the
other
beneficial
owners,
and
given
the
admission
by
the
plaintiff
that
throughout
the
1987
taxation
year
he
had
no
reasonable
expectation
of
earning
a
profit
from
the
property,
it
is
clear
to
me
that
such
property
had
effectively
ceased
to
be
source
of
income
from
at
least
the
beginning
of
the
plaintiffs
1987
taxation
year.
Consequently,
the
interest
of
$2,354
which
accrued
as
the
plaintiff’s
share
of
the
interest
on
the
mortgage
and
chattel
mortgage
on
the
property
between
January
1,
1987
and
the
time
of
the
Order
of
the
Court
of
Queen’s
Bench
of
Alberta
was
not
deductible
pursuant
to
subparagraph
20(l)(c)(i)
in
computing
the
plaintiff’s
income
for
the
1987
taxation
year,
and
hence
prohibited
as
a
deduction
under
paragraph
18(1
)(b)
of
the
Act.
Conclusion
For
all
the
above
reasons,
the
action
or
appeal
will
be
dismissed
with
costs.
The
plaintiff’s
appeal
is
dismissed
with
costs.
Appeal
dismissed
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