Couture,
C.J.T.C.
[Translation]:—This
is
an
appeal
from
an
assessment
dated
May
7,
1986
for
the
1985
taxation
year.
On
July
16,
1984,
the
appellant
disposed
of
a
business
that
she
operated
in
Laval,
in
the
province
of
Quebec,
by
the
notarized
deed
of
sale.
This
business
was
sold
for
$66,775,
divided
as
follows:
|
Equipment
and
accessories:
|
$20,000
|
|
Inventory:
|
16,775
|
|
Goodwill:
|
30,000
|
|
$66,775
|
The
sale
price
was
payable
$10,000
in
cash
and
the
balance
in
equal
instalments,
including
principal
and
interest,
over
five
years.
For
the
1985
taxation
year
the
appellant
reported
a
portion
of
the
annual
payment
which
she
had
received,
that
is,
the
$6,000
attributable
to
the
sale
of
the
goodwill
as
a
capital
gain,
$3,000
of
which
was
taxable,
and
also
claimed
a
$3,000
capital
gain
exemption.
The
respondent
treated
the
$3,000
as
income
from
a
business
arising
out
of
the
sale
of
eligible
personal
property
under
the
provisions
of
subsection
14(1)
of
the
Income
Tax
Act
(the
Act).
I
do
not
hesitate
to
admit
that
the
goodwill
of
a
business
is
eligible
capital
property
and
not
capital
property
as
argued
by
the
appellant
and
that
the
proceeds
of
disposition
of
such
property
are
subject
to
the
provisions
of
subsection
14(1)
of
the
Act.
The
proceeds
of
disposition
of
capital
property
alone
give
rise
to
a
capital
gain
under
the
provisions
of
subparagraph
39(1)(a)(i),
which
read
as
follows:
39.
Meaning
of
capital
gain
and
capital
loss.
(1)
For
the
purposes
of
this
Act,
(a)
a
taxpayer's
capital
gain
for
a
taxation
year
from
the
disposition
of
any
property
is
his
gain
for
the
year
determined
under
this
subdivision
(to
the
extent
of
the
amount
thereof
that
would
not,
if
section
3
were
read
without
reference
to
the
expression
"other
than
a
taxable
capital
gain
from
the
disposition
of
a
property"
in
paragraph
(a)
thereof
and
without
reference
to
paragraph
(b)
thereof,
be
included
in
computing
his
income
for
the
year
or
any
other
taxation
year)
from
the
disposition
of
any
property
of
the
taxpayer
other
than
(i)
eligible
capital
property.
Accordingly,
under
the
provisions
of
subsection
14(1)
half
of
the
proceeds
of
disposition
of
eligible
capital
property
is
exempt
from
income
tax,
while
the
second
half
must
be
included
in
the
income
of
the
vendor
as
income
from
a
business.
For
these
reasons
the
assessment
made
by
the
respondent
is
valid
and
the
appeal
must
be
dismissed.
Appeal
dismissed.
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