Quincaillerie Laberge Inc. v. The Queen, 95 DTC 155 (TCC)

After finding that $575,000 received by the taxpayer for agreeing to extend the term of a loan for $10,500,000, rather than exercising its rights to demand repayment thereof following a default, was income to it under s. 12(1)(x) (or s. 9(1), which had not been debated before him), Garon TCJ. went on to indicate (at p. 163) his doubts as to the correctness of a submission that an amount that normally would give rise to the realization of a capital gain could be deemed to be income by s. 12(1)(x):

"In the absence of a clear text establishing the manifest intention of Parliament, one cannot suppose that the latter wanted, through paragraph 12(1)(x), to make a fundamental, radical change to the system of capital gains and losses and convert a capital gain to income in its ordinary meaning within the context of the Income Tax Act and the case law pertaining to that Act."

A payment of $575,000 to the taxpayer by a debtor in default in consideration for an extension of the due date of the loan and the taxpayer's agreement to waive its current rights to take action on the loan, did not represent proceeds of disposition of property. Under the Quebec Civil Code, the obligation was not extinguished, but rather amended as to its term. Garon TCJ. noted (at p. 162) that the definition of "disposition" in what now is s. 248(1) "shows that a 'disposition of property' under this section entails a fundamental transfer of an interest in a property through the use of the words 'redeemed', 'canceled' and 'settled'" and that "the concept of 'disposition of property' does not seem to me more comprehensive or more extensive than that pertaining to the disposition of an interest [for purposes of the Civil Code]".