Goorah v. The Queen, docket 2000-4679-IT-I (Informal Procedure)

Date: 20010516

Docket: 2000-4679-IT-I

BETWEEN:

HAMCHAND KUMAR GOORAH,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________

For the Appellant:                                 The Appellant himself

Counsel for the Respondent:              Steven D. Leckie

____________________________________________________

Reasons for Judgment

(delivered orally from the Bench on April 27, 2001 at Toronto, Ontario)

Campbell, J.

[1]            This is an appeal in respect to the Appellant's 1995, 1996 and 1997 taxation years.

[2]            The Appellant declared total income for the 1995 and 1996 taxation years in the amounts of $61,692.00 and $62,392.00 respectively. He declared total income for the 1997 taxation year in the amount of $27,068.28 after deducting $26,492.83 loss from disposition of shares and mutual funds as net business loss.

[3]            The Appellant was assessed for the 1995, 1996 and 1997 taxation years by Notices of Assessment dated May 2, 1996, April 17, 1997 and August 17, 1998 respectively.

[4]            By letter dated June 29, 1998, the Appellant made voluntary disclosure of previously unreported income for the 1995 and 1996 taxation years and requested an adjustment to include business income/expenses.

[5]            By letter dated June 23, 1998, the Appellant requested to amend his 1997 T1 to include business income/expenses.

[6]            In reassessing the Appellant for these taxation years, the Minister included gross business income and net business income for each of these years. In further reassessing for these years, the Minister reclassified gross business income reported, as employment income, disallowed the business expenses claimed and made other changes more specifically outlined in the Respondent's reply. The loss on disposition of shares and mutual funds in the amount of $26,493.00 disallowed on income account in the 1997 taxation year was reclassified as being on capital account and the amount of $33,805.00 was allowed as a capital loss.

Facts

[7]            The Appellant was employed full time during the 1996, 1997 and 1998 taxation years by Pharma Plus Drug Mart. During these years he also worked as a pharmacist part time for Southgate Pharmacy. In 1998 Southgate was audited and at this time the Appellant made voluntary disclosure of the unreported income from Southgate.

[8]            With respect to the income from Southgate, the Appellant claimed to be self-employed and deducted expenses in the amounts of $9,552.00, $10,898.00 and $6,981.00 in the 1995, 1996 and 1997 taxation years respectively. The CPP/EI ruling department determined that the Appellant was an employee of Southgate as a part-time pharmacist and that his income from Southgate was employment income. A contract between the Appellant and Mr. A. Kassam, owner of Southgate Pharmacy, was introduced as Exhibit A-1. This one page document states that the Appellant's services as a pharmacist are available on an on-call basis with the Appellant responsible for supplying his own stationary supplies, means of transportation and overalls, together with deduction of income source deductions. Time, date and remuneration were by mutual agreement.

[9]            The Appellant testified that Mr. Kassam would call him when his services at the pharmacy were required and the Appellant would have the option to work or not depending on his own availability.

[10]          The Appellant stated that as a pharmacist, he is registered and licensed under Ontario laws. He commenced working for Southgate in late 1994 but did not report his income in 1994 or 1995. A voluntary disclosure was completed in 1998. The Appellant stated that he knew he had to report this income but he did not have sufficient records and documents at the time.

[11]          The Respondent introduced as an exhibit a business questionnaire completed by the Appellant. In response to question 10 on that questionnaire, the Appellant answered "N/A" to the query "Provide a detailed projection of how you intend to develop your business operation into a profitable enterprise?"

[12]          The Appellant stated "N/A" could mean "not applicable" or "not available" without further elaboration. However, he provided the same N/A answer to several other questions in this questionnaire and it would seem reasonable by an overall reading that he intended the usual meaning "not applicable".

[13]          In 1995, 1996 and 1997 the Appellant was paid approximately $27.00 per hour for this part-time work. There were no other bonus or commission payments.

[14]          When the Appellant worked he was the only pharmacist on duty and could not leave the store until the end of his agreed work hours.

[15]          Southgate supplied a computer for the Appellant's use, together with books and reference materials which were required by law. The Appellant stated that he was not sure if the reference materials would be up-to-date and that the ultimate responsibility was for him to keep up with new information and this meant he needed a computer and an office at home.

[16]          The Appellant agreed that Southgate was responsible for the lights, heat, rent, supply of medications and drugs, and pre-printed labelling for the drugs but that he was required to supply stationary, pens and notepads for taking doctors' prescriptions called in and overalls. When asked, for example, about the supply of pens, the Appellant stated he would want his favourite pens.

[17]          The Appellant recalled one discussion with the owner of Southgate concerning insurance risks wherein he was told by the owner that he should get his own insurance. The Appellant stated he never bothered to investigate this further as to whether he was covered by Southgate for possible mistakes. He said he assumed from this conversation that he was probably not covered. However, the Appellant, whether covered by Southgate or not, never bothered to get his own insurance.

[18]          On occasion the Appellant dropped off a prescription at the end of his work day on his way home but was not paid additionally for this.

Issues

[19]          There are four issues before me. The first issue is whether the Appellant was an employee of Southgate working under a contract of service or whether he was retained under a contract for services as an independent contractor. If I decide that the Appellant is an employee, then I must decide if he is entitled to claim the meals, motor vehicle and home office expenses from his employment income. In the alternative, if I find the Appellant to be an independent contractor, then is he entitled to claim these business expenses from his business income. The third issue is whether the Appellant is in the business of trading in shares, securities and mutual funds. And the final issue is whether the Appellant is entitled to interest deductions in the respective taxation years under paragraph 20(1)(c) of the Act.

Analysis

[20]          The Minister submits that the Appellant's income from Southgate was employment income in the 1995, 1996 and 1997 taxation years and thus the amounts received by the Appellant constituted income from employment under section 5. The Appellant claims to be self-employed with respect to the income earned from Southgate and does not agree with the CPP/EI ruling that he was an employee. The Appellant has argued that this ruling failed to consider the type of profession in which he is engaged.

[21]          It was determined that the Appellant was an employee for the following reasons:

                (1) As an employer, Southgate exercised control over the Appellant and his work because:

(a)       the employer set the hours of work;

(b)      the Appellant was required to perform the services personally;

(c) the Appellant did not hire others to complete his work;

(d) the employer established the Appellant's clientele.

(2)            The employer provided the tools and equipment necessary to complete the work.

(3)            The Appellant's term of employment did not allow him to profit or expose himself to risk of loss because the Appellant:

(a)        did not establish the selling price of the goods for sale;

(b)       did not maintain an inventory of material that he used to complete the work;

(c)    was paid a flat hourly wage for the services he performed.

(4)            The nature of the work the Appellant performed is an integral part of the employer's business.

[22]          The manner in which the Court must decide whether any particular working arrangement is a contract of service and thus an employer/employee relationship, or a contract for services and thus an independent contractor relationship, has been clearly established in the case of Wiebe Door Services Ltd. v. M.N.R. 87 D.T.C. 5025. It is the definitive authority on this issue and clearly directs that a decision must be formulated after a review of "the total relationship of the parties".

[23]          It is essential that a trial judge carefully weigh all the facts using the factors and tests in Montreal v. Montreal Locomotive Works Ltd. et al [1947] 1 D.L.R. 161. The four-in-one test of Lord Wright in this case is a combination of: (1) control; (2) ownership of tools; (3) chance of profit/risk of loss; and (4) integration.

[24]          In citing the Wiebe Door case as the definitive authority on this issue, the Federal Court of Appeal in Moose Jaw Kinsmen Flying Fins Inc. v M.N.R. 88 D.T.C. 6099 stated:

                ...we view the tests as being useful subordinates in weighing all of the facts relating to the operations of the Applicant. This is now the preferable and proper approach for the very good reason that in a given case, ...one or more of the tests can have little or no applicability. To formulate a decision then, the overall evidence must be considered taking into account those of the tests which may be applicable and giving to all the evidence the weight which the circumstances may dictate.

[25]          With respect to the first test of "control", it is clear that it is a contract between Southgate and the Appellant himself in respect to his services as a pharmacist. It is for his services, what he can provide and no one else. The agreement between them was drafted as an "on-call basis" for the Appellant. There is no reference to other pharmacists or employees to fulfil the contract.

[26]          The Appellant argued that he had the ultimate control because he could decide not to accept the offer to work if Southgate called him. I do not accept that this meant the ultimate control resided with the Appellant. Southgate was the initiator of the contact when the Appellant's services were required. Once the Appellant accepted the invitation to work and commenced his shift, he was bound to stay and work his hours until his shift was finished. He recited one incident where, due to family illness, he wanted to leave prior to his shift ending but before he was able to leave he contacted Mr. Kassam, Southgate's owner, to come in to replace him.

[27]          I agree with counsel for the Respondent that if there was control by the Appellant, it was only control over whether or not to accept a work shift. Once he commenced his shift however he had no control over the hours he worked.

[28]          The Appellant made deliveries on a number of occasions after his shift ended and fulfilled this additional obligation with no remuneration. This is indicative of an employer/employee relationship. The Appellant was paid an hourly rate determined by the number of hours worked. Southgate dictated the hours worked once shifts were accepted.

[29]          The evidence indicated that the hourly rate was based on a market standard and then entered into by contract. Southgate had control over the amount the Appellant was paid and this occurred for the three years in issue as the market rate remained basically the same. Any assistants required in the workplace were hired by Southgate and not the Appellant. The Appellant is a highly trained individual subject to statutory regulations and guidelines. It is within these guidelines that Southgate would require the Appellant to perform his duties. The Appellant may have had some control over the minute detail of the job, such as the order of fulfilling the prescriptions, but it was Southgate in the end that had the right to exercise the control.

[30]          With respect to the second factor of this four-fold test, i.e. ownership of tools, the employer, Southgate, provided all necessary materials except uniforms and a more comprehensive computer system which the Appellant stated he required at home to keep abreast of information in his field. The Appellant referred also to a pen and notepads, however he left the impression that it would be available although it might not be of the type or quality he wanted to use.

[31]          Other than the foregoing, Southgate supplied a computer system, information and materials and drugs and medications. It was clear that the clientele was that of Southgate's. The basic items required by him to perform his duties were made available through the employer, Southgate, at the employer's premises. The Appellant provided his services in the form of his personal knowledge and this was why the appellant was hired.

[32]          In respect to the third factor, chance of profit/risk of loss, the Appellant received no bonus or commission. His remuneration was based solely on an hourly rate, which hourly rate was determined by the market rate. There was an inference that this is what a pharmacist would be paid as an employee and in fact the evidence suggests this occurred over the three year period. The Appellant could increase his profit by working more hours but this was dependent on being asked to work by Southgate and further confined by his full-time employment obligations with another pharmacy.

[33]          The contract signed with Southgate enlisted his personal services as a pharmacist and his remuneration was based on this alone and on no other factor.

[34]          I also refer to the answer provided to question 10 on page 4 of the business questionnaire which the Appellant completed. His answer of N/A to this question is not the response an independent contractor running his or her own business would normally provide. The Appellant received his hourly remuneration regardless of his productivity or the success of the business.

[35]          In respect to the risk factor, the Appellant argued that he assumed the risk as he obtained no insurance. The evidence which the Appellant provided here was unclear and unsatisfactory. There was no definite evidence as to whether Southgate had insurance to cover the Appellant. The Appellant never bothered to inquire about the employer's policy. The agreement between them is silent on this point. The inference I draw is that he obtained no insurance because he was comfortable that there was no risk to him personally or he would have at a minimum initiated further steps of looking into this issue, the policies, the costs, etc.

[36]          And, finally, the fourth factor, the integration test. I refer to the decision in Hennick v. Canada [1995] F.C.J. 294, where it was found that the work done by the Respondent formed an integral part of the curriculum of the Conservatory. The business of teaching music was ultimately that of the intervenor and not of the Respondent who was one of the instructors who contributed to the institution's reputation.

[37]          This is similar to the present case. If the Appellant worked his shift, he was paid his hourly rate but it was Southgate that profited. The Appellant remained merely one of a number of pharmacists (some of whom worked full-time and some of whom worked part-time), who worked in Southgate's employment and under Southgate's ultimate supervision and control.

[38]          The Appellant has not provided sufficient evidence to refute the reasons stated in the CPP/EI ruling. After reviewing the total relationship of the parties, I conclude that the Appellant was employed by Southgate Pharmacy as its employee and earned employment income, as the reasons stated in the ruling meet the conditions established in Wiebe Door.

[39]          The second issue, deductibility of expenses from employment income, is governed by section 8 of the Act. I have concluded that the Appellant is an employee and earned employment income. The question I must decide is whether he is entitled to any deductions under section 8.

[40]          The taxation of employment income is on a "gross" basis without deduction, unless the deduction is specifically authorized.

[41]          Subsection 8(2) limits the deduction of expenses from employment income to those specifically authorized by the Act. The Appellant has stated that he incurred these expenses to earn commission income.

[42]          In his assumptions the Minister states that the Appellant was not required to maintain an office at home or to pay motor vehicle expenses in the performance of his duties of employment. The Minister also submitted that the Appellant was not normally required to carry on the duties of the office or employment away from the employer's place of business.

[43]          Respondent's counsel referred me to paragraph 8(1)(f) and the cases of Verrier v. The Queen, 88 D.T.C. 6478 and McKee v. The Queen, 90 D.T.C. 6205. This paragraph creates a special advantage for commission salespeople ordinarily required to carry on their duties away from their employer's place of business. The facts simply do not establish that the Appellant is a commission salesman for this section to apply.

[44]          The agreement between the Appellant and Southgate was silent with respect to maintaining an office in the Appellant's residence. In addition, there was no evidence to suggest that the Appellant required an office in his home to properly perform his work duties at Southgate. He stated he required this in-home office to personally keep abreast of recent developments within his profession.

[45]          Although the agreement does refer to the Appellant supplying his means of transportation, other than a vehicle to get the Appellant to and from work, he did not require a vehicle during the shifts he worked. He did drop off prescriptions on rare occasions but testified it was on his way home from work.

[46]          The Appellant has not adduced sufficient evidence to show that he was required to maintain an office at home and pay motor vehicle expenses as part of carrying out his duties away from the employer's place of business.

[47]          I am satisfied on the facts that any reference to transportation in the written agreement was simply a reference to the Appellant supplying his own means to get to and from his shifts at Southgate.

[48]          For meals to be deductible under subsection 8(4) the meal must be consumed while the employee is required to be away for at least 12 hours from the municipality in which his employer's establishment is located and to which he ordinarily reports for work. For the purposes of subsection 8(4) "ordinarily" means "in most cases", "usually", or "as a general rule". Again, there was absolutely no evidence adduced to support such a deduction.

[49]          The Minister also disallowed the deduction of annual professional dues from income in the 1995, 1996 and 1997 taxation years within the meaning of subparagraph 8(l)(i)(i).

[50]          The Appellant argued that those expenses were paid to maintain access to journals from the U.K. These annual professional dues were not expended to maintain his professional status as recognized by law and therefore not properly included as a deduction from income in those years.

[51]          I turn now to a consideration of the third issue of whether the Appellant is in the business of trading in shares, securities and mutual funds.

[52]          In computing income in his 1997 taxation year, the Appellant declared total income in the amount of $27,068.28 after deducting a $26,492.83 loss from the disposition of shares and mutual funds as a net business loss.

[53]          The Minister has submitted that the Appellant was not in the business of trading in shares, securities and mutual funds, accordingly disallowed the loss and reclassified it as being on capital account. The amount of $33,805.00 was allowed as a capital loss, the net capital loss being $25,353.00.

[54]          The factual determination to be made in this appeal is whether the losses from the disposition of the shares and mutual funds are on income or capital account.

[55]          The Respondent's counsel referred me to the Supreme Court decision in Irrigation Industries Ltd. v. M.N.R. 62 D.T.C. 1131. This case involved an isolated purchase and sale, at a profit, of shares of a mining corporation. It was held that, on the facts, the transaction was not an adventure in the nature of trade, consequently the profit was a capital gain.

[56]          Judge Cartwright summarized the general propositions that were formulated in M.N.R. v. Taylor, 56 D.T.C. 1125 to determine whether or not a particular transaction constituted an adventure in the nature of trade. Since the assessment in issue was predicated on the assumption that the Appellant was not in the business of trading in shares, the Court must consider whether the Appellant's dealing in shares was to an extent that it constituted the carrying on of a business.

[57]          Section 11 of the Interpretation Bulletin - Transactions in Securities, (February 29, 1984) under the title "Disposition of Securities - Income or Capital", lists some of the factors to be considered in ascertaining whether the taxpayer's conduct indicates the carrying on of a business.

[58]          Similar factors have been considered by the Federal Court - Trial Division in Happy Valley Farms Ltd. v. The Queen 86 D.T.C. 6421 in the context where a property sold is land, not shares. In determining whether a gain or loss is of an income or capital nature the Court comments were to the effect that the question of intention is what generally influences the finding of the Courts.

[59]          For the Appellant to claim a business loss in the disposition of these mutual funds and shares, there must be an element of business to it. I believe the evidence is clear here. The Appellant is not carrying on a business. Therefore, the issue becomes whether he purchased those funds as an adventure in the nature of a trade.

[60]          Judge Martland in Irrigation Industries Ltd. v. M.N.R. stated:

                It is difficult to conceive of any case, in which securities are purchased, in which the purchaser does not have at least some intention of disposing of them if their value appreciates to the point where their sale appears to be financially desirable. If this is so, then any purchase and sale of securities must constitute an adventure in the nature of trade, unless it is attempted to ascertain whether the primary intention at the time of purchase is to retain the security or to sell it. This, however, leads to the difficulty mentioned by my brother Cartwright that the question of taxability is to be determined by seeking to ascertain the primary subjective intention of the purchaser at the time of purchase.

                I cannot agree that the question as to whether or not an isolated transaction in securities is to constitute an adventure in the nature of trade can be determined solely upon that basis. In my opinion, a person who puts money into a business enterprise by the purchase of the shares of a company on an isolated occasion, and not as a part of his regular business, cannot be said to have engaged in an adventure in the nature of trade merely because the purchase was speculative in that, at that time, he did not intend to hold the shares indefinitely, but intended, if possible, to sell them at a profit as soon as he reasonably could. I think that there must be clearer indications of 'trade' than this before it can be said that there has been an adventure in the nature of trade...

[61]          It is necessary to look at more than the taxpayer's statement or what it has been, to a review of the surrounding factors and evidence and the taxpayer's actions that support these endeavours.

[62]          Irrigation Industries went on to state:

                Corporate shares are in a different position because they constitute something the purchase of which is, in itself, an investment. They are not, in themselves, articles of commerce, but represent an interest in a corporation which is itself created for the purpose of doing business. Their acquisition is a well recognized method of investing capital in a business enterprise.

[63]          There is a presumption when one is purchasing shares that they are an investment vehicle of a capital nature and when one looks to mutual funds this would be even more of an indicator that one is not purchasing on a speculative basis in a company but it is the holding of many shares in different companies. Such a presumption can be rebutted if sufficient factors are produced to indicate that the taxpayer was engaged in an adventure in the nature of a trade.

[64]          The case of Mandryk v. The Queen, 89 D.T.C. 5062 refers to this presumption but goes on to state that it can be rebuttable by the taxpayer.

[65]          In the case before me I am dealing with an isolated transaction of a mutual fund, held for more than one year. The Appellant stated that he purchased it based on rumours at that time and it was in the approximate period of the Bre-X hype.

[66]          A Statement of Investment Portfolio as of June 30, 1996 of Scotia Excelsior Precious Metals Fund was entered as an exhibit. It contained a portfolio review worded as follows:

                Despite the strength of the market, we felt valuations were becoming excessive. We have moved to a more defensive structure, taking profits in a number of exploration investments and allowing our cash position to build.

                The Fund's cash and short-term position remains high as we allow the speculative fervor of the market to subside. As valuations of both bullion and gold stocks become more attractive, we plan to move back into a more fully invested position.

[67]          This stated portfolio position and objective is contrary to the Appellant's stated intention which was to speculate in gold stocks. The Fund had moved out of and away from that base and had increased its cash position base.

[68]          I agree with the Respondent counsel's view that this would be an inappropriate investment in light of the Appellant's stated intention. The intention of this portfolio would appear to be long term as its stated intent was to move out of speculative investments and establish stability through their cash positions in a short term position. This portfolio's review is inconsistent with the Appellant's intention to speculate in the short term.

[69]          The statement of investment portfolio as of December 31, 1996, entered as an exhibit, states its intention as follows:

                The current structure of the Fund emphasizes the larger capitalization issues and growth-oriented gold producers. In spite of the occasional excitement generated by speculative exploration plays, the Fund's exposure to these issues will remain at reduced levels pending the return of a better risk-return environment.

[70]          According to this wording one cannot conclude that this is a fund that is in any way speculative. Its focus is growth, which supports that it is an investment product.

[71]          Happy Valley Farms Ltd., sets out the tests to be used in determining whether a gain is of an income or capital nature. These tests include:

1.      The nature of the property sold. Although virtually any form of property may be acquired to be dealt in, those forms of property, such as manufactured articles, which are generally the subject of trading only are rarely the subject of investment. Property which does not yield to its owner an income or personal enjoyment simply by virtue of its ownership is more likely to have been acquired for the purpose of sale than property that does.

2.    The length of period of ownership. Generally, property meant to be dealt in is realized within a short time after acquisition. Nevertheless, there are many exceptions to this general rule.

3.        The frequency or number of other similar transactions by the taxpayer. If the same sort of property has been sold in succession over a period of years or there are several sales at about the same date, a presumption arises that there has been dealing in respect of the property.

4.        Work expended on or in connection with the property realized. If effort is put into bringing the property into a more marketable condition during the ownership of the taxpayer or if special efforts are made to find or attract purchasers (such as the opening of an office or advertising) there is some evidence of dealing in the property.

5.        The circumstances that were responsible for the sale of the property. There may exist some explanation, such as a sudden emergency or an opportunity calling for ready money, that will preclude a finding that the plan of dealing in the property was what caused the original purchase.

6.        Motive. The motive of the taxpayer is never irrelevant in any of these cases. The intention at the time of acquiring an asset as inferred from surrounding circumstances and direct evidence is one of the most important elements in determining whether a gain is of a capital or income nature.

[72]          Happy Valley Farms, after listing these tests, states that:

                While all of the above factors have been considered by the Courts, it is the last one, the question of motive or intention which has been most developed. That, in addition to consideration of the taxpayer's whole course of conduct while in possession of the asset, is what in the end generally influences the finding of the Court.

[73]          With respect to the first test, the nature of the property sold, the stated objective of this fund was to move away from speculative stocks and move toward safer product growth investments. It was not a stock in a company here, it was a mutual fund, holding different stocks in varying proportions. I agree with counsel for Respondent when he stated that a mutual fund by its very nature is to provide security through multiple companies so that if one company fails, the fund as a whole is still viable.

[74]          With respect to the second test, length of period of ownership, the Appellant held the mutual fund for over a year period. Although he stated that his objectives were quick profit, he held this fund for over a year. The Appellant was not sure how much the fund increased but it had made a profit. It was indicative of long term.

[75]          With respect to test 3, frequency or number of other similar transactions by the taxpayer, there is no frequency or similar transactions here. This alone is not sufficient to tip the scales. All factors must be considered.

[76]          Test 4, work expended on or in connection with the property realized, is more applicable to land. Mutual funds by their very nature rely generally upon professional management to oversee them and fees are charged for this. From the portfolios one can see that professional managers were buying stocks for growth and moving away from a speculative base. I agree with the Respondent's counsel that the Appellant has not shown that as a whole, precious metals were speculative at that time. There was no evidence adduced as to what weightings the mutual fund contained in respect to gold, silver or platinum producers. There is no evidence that any effort was expended in deciding that this fund was the right choice. The evidence was that he had done nothing except to purchase the fund. No steps were taken to change the fund in light of stated portfolio objectives. On the other hand, traders investigate the market rumours, investigate the market generally and complete research, etc. The Appellant did cite economics as a reason for choosing a mutual fund. Yet he invested some $60,000.00 which certainly would be sufficient to purchase on a speculative nature.

[77]          Test 5, circumstances responsible for the sale of the property. The sale did not occur within the Appellant's short term speculative range, nor did it occur within his plan for 50% growth within a year. It occurred after a year. I agree with the Respondent's counsel that the inference can be drawn that the Appellant sold because of continued losses and consequent diminishing investment value.

[78]          The last test, motive or intention at the time of acquiring an asset as inferred from surrounding circumstances and direct evidence, is one of the most important elements in determining whether a gain is of a capital or income nature. Happy Valley Farms states:

                ...That, in addition to consideration of the taxpayer's whole course of conduct while in possession of the asset, is what in the end generally influences the finding of the Court.

[79]          The Appellant's conduct is indicative of buying the investment and holding it. There were no short term sales. This fund was owned by the Appellant's wife but she was not present to provide evidence of her intention or to be cross-examined with respect to the fund, her reasons for purchasing, or evidence that her intentions were the same as the Appellant's stated intention. The Appellant stated that his wife held the funds so that, under his instructions and in his absence, she could take action.

[80]          The Appellant was assessed with the gain under section 74.2 of the Act on the basis that these funds were provided to his wife without consideration and a capital gain was attributed back to him.

[81]          After a review of all the factors to be considered, as they relate to the evidence before me, I conclude that this fund did not have sufficient of the characteristics necessary for it to be an adventure in the nature of a trade. It had clearly all the earmarks of an investment. I infer from the evidence that the purchase of this fund was motivated by return on investment rather than a quick profit.

[82]          And finally with respect to the last issue of carrying charges and interest claimed by the Appellant in the 1995, 1996 and 1997 taxation years, he admitted that there was a personal element to these loans as some of it was on a line of credit which was also used personally. The Appellant argued that the personal portion should be ignored as it was minimal.

[83]          The issue is whether the amounts claimed for those years has been supported. There was not sufficient evidence adduced and I conclude that the carrying charges and interest claimed as deductions from income were not interest on borrowed money used for the purpose of gaining or producing income from a business or property within paragraph 20(1)(c) of the Act.

[84]          The appeal is accordingly dismissed.

Signed at Ottawa, Canada, this 16th day of May 2001.

"D. Campbell"

J.T.C.C.