Lamarre
Proulx,
T.C.J.:—These
appeals
were
heard
on
common
evidence.
The
point
is
to
determine
whether
the
income
from
the
sale
of
land
must
be
considered
a
capital
gain
or
a
commercial
type
gain.
The
respondent
claims
that
these
are
commercial
type
deals,
while
the
appellants
claim
that
they
are
a
long-term
investment.
The
appellants
testified
that
on
January
19,
1974,
they
acquired
some
land
in
the
Charlesbourg
area
as
a
long-term
investment
to
create
a
pension
fund
since,
in
their
words,
"the
value
of
land
never
goes
down,
so
that
it
is
the
best
investment
anyone
can
make”.
According
to
the
appellants,
the
only
objective
of
this
investment
was
to
resell
the
land
in
subdivided
lots
at
the
time
when
it
became
most
profitable,
around
the
time
of
their
retirement.
After
certain
events,
they
immediately
proceeded
to
follow
a
subdivision
plan
for
the
land
in
question
and
as
early
as
April
24,
1974,
a
subdivision
project
was
presented
to
them.
(Exhibit
A-3)
What
was
the
original
intention
of
the
appellants
and,
whatever
the
reasons
for
which
such
an
original
intention
could
not
be
carried
out,
they
became,
or
would
have
later
become,
through
this
land
development
project,
traders
in
real
estate,
or
traders
in
similar
matters.
The
sale
of
lots
is
the
sale
of
items
which
are
part
of
a
stock
and
of
a
trading
nature.
This
is
not
a
case
of
a
resale
of
land
as
purchased
or
approximately
as
purchased.
This
is
the
sale
of
lots
subdivided
at
the
request
of
the
appellants.
Whether
this
land
development
project
of
some
fifty
odd
lots
and
a
few
streets
took
place
immediately
or
in
20
years
this
would
not
have
changed
the
trading
aspect
of
the
firm,
nor,
therefore,
the
nature
of
the
income
from
the
sale
of
the
subdivided
lots.
The
appellants
are
or
would
have
become
traders
in
lots
and
the
income
from
the
sale
is
a
commercial
type
income,
not
a
capital
income.
See
Turnbull
v.
M.N.R.,
[1984]
C.T.C.
2800;
84
D.T.C.
1720.
In
that
decision,
a
farmer
had
subdivided
part
of
his
land
into
lots.
Judge
Taylor
of
this
Court
ruled
that,
in
so
doing,
the
farmer
had
converted
an
asset
of
a
capital
nature
into
an
inventory
asset.
See
also
ruling
in
Chin
et
al.
v.
M.N.R.,
[1980]
C.T.C.
2296;
80
D.T.C.
1246.
It
is
always
useful
to
review
the
classic
test
established
by
the
Californian
Copper
Syndicate
Ltd.
v.
Harris
(1904),
5
T.C.
159
at
165
to
determine
whether
a
profit
from
the
sale
of
an
asset
is
a
capital
or
an
income
gain.
"[I]s
the
sum
of
gain
that
has
been
made
a
mere
enhancement
of
value
by
realizing
a
security,
or
is
it
a
gain
made
in
an
operation
of
business
in
carrying
out
a
scheme
of
profit-making?”
It
is
rather
obvious
that,
in
the
case
under
study,
the
gain
is
due
to
the
subdivision
of
the
land
into
lots
and
the
selling
of
such
lots.
This
subdivision
and
these
sales
constitute
an
operation
of
business.
The
lots
make
up
the
inventory
of
the
appellants.
The
appeals
are
dismissed.
Appeals
dismissed.
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