Teskey,
T.C.C.J.:—
The
appellant
elected
to
have
his
appeals
from
reassessment
for
the
years
1989
and
1990
heard
pursuant
to
the
informal
procedure.
Facts:
The
facts
are
not
in
dispute
and
are
simply
this.
The
appellant,
a
full-
time
university
professor,
on
February
2,
1989
purchased,
for
$138,792
a
noninterest
bearing
promissory
note
from
the
Province
of
British
Columbia
maturing
on
October
27,
1989,
which
had
a
face
value
of
$150,000,
which
he
sold
on
May
2,
1989
for
$141,
381.
The
gain
on
the
transaction
being
$2,549.
On
May
2,
1989
the
appellant
purchased,
for
$152,078.60
a
non-interest
bearing
Government
of
Canada
treasury
bill
maturing
on
April
27,
1990,
which
had
a
face
value
of
$170,000.
On
maturity
the
appellant
received
from
the
Government
of
Canada,
upon
redemption
of
the
note,
the
sum
of
$170,000
resulting
in
a
gain
of
$17,921.33.
The
issue
herein
is
how
these
two
sums
of
$2,589
in
1989
and
$17,921.32
in
1990
are
to
be
treated
for
tax
purposes.
The
appellant's
position
is
that
in
1989
he
made
an
election
pursuant
to
subsection
39(4)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act"),
and
therefore
both
securities
are
deemed
to
be
capital
property
resulting
in
the
gain
therefrom
should
be
considered
as
a
capital
gain.
The
respondent
relies
upon
section
16
and
the
decision
of
my
sister
judge
in
O’Neil
v.
M.N.R.,
91
D.T.C.
692.
Normally
I
would
feel
bound
to
follow
the
O'Neil
decision.
However,
nowhere
in
this
decision
was
subsection
39(4)
discussed
or
considered.
The
two
treasury
bills
therein
were
both
held
until
maturity.
I
am
satisfied
that
the
Province
of
British
Columbia’s
note,
bought
and
sold
in
1989,
was
a
Canadian
security
and
falls
within
the
provisions
of
subsection
39(4).
This
then
takes
it
out
of
the
O'Neil
decision.
I
am
also
satisfied
that
subsection
16(1)
does
not
apply.
This
subsection
only
applies
when
the
gain
can
reasonably
be
regarded
as
part
income
and
part
capital.
The
gain
herein
must
be
regarded
as
all
one
or
the
other.
Because
subsection
39(4)
of
the
Act,
that
is
"disposed
of"
within
the
meaning
of
the
provisions
of
subsection
39(4),
that
the
security
(the
note)
is
deemed
to
have
been
a
Capital
property,
thus
the
gain
is
capital
in
nature.
Thus
the
gain
in
1989
of
$2,589
was
a
capital
gain.
In
regards
to
1990,
subsection
39(4)
does
not
come
to
the
appellant's
aid.
I
believe
that
the
words
"dispose
of"
in
this
provision
mean
sell.
In
1990
the
appellant
did
not
dispose
of
the
Canadian
treasury
bill,
it
was
redeemed.
It
matured,
it
was
due.
The
appellant
thereof
did
not
"dispose
of"
the
treasury
bill,
he
simply
collected
what
was
due
to
him.
Having
come
to
this
conclusion
that
subsection
39(4)
does
not
assist
the
taxpayer
in
1990,
I
then
feel
bound
by
the
O'Neil
decision
and
so
follow.
The
1989
appeal
is
allowed,
the
matter
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
on
the
basis
that
the
gain
of
$2,589
on
the
British
Columbia
note
shall
be
treated
as
a
capital
gain.
The
1990
appeal
is
dismissed.
Appeal
allowed
in
part.
Email this Content