Bonner, T.C.J.:—This is an appeal from an assessment of income tax for the appellant's 1979 taxation year. Prior to 1975 the appellant resided in Vancouver. In 1975 he travelled to Florida where he bought a yacht. He and his wife then embarked on a voyage through the Caribbean to the Pacific by way of the Panama Canal and along the west coast of North America to Vancouver where they made their home. The voyage lasted for about a year. In 1979 the appellant sold the yacht. The respondent made the assessment now under appeal on the basis that the adjusted cost base of the yacht was $153,689.25 and that the appellant therefore realized a capital gain of $11,310.75 on the sale.
In this notice of appeal the appellant asserted that:
... after the boat returned to Canada and to put it in a more saleable condition we spent $5,000 refinishing the exterior and $6,000 to put in new transmissions.
It was his position that those expenditures formed part of the adjusted cost base.
The boat had twin motors and transmissions. During the voyage from Florida to Vancouver the transmissions were damaged. As a result it was necessary to replace one of them with a rebuilt unit and to make extensive and costly repairs to the other. The work was done after completion of the voyage.
With respect to the refinishing cost, the appellant testified that when purchased the yacht was six years old and after that period in the Florida sun the finish had reached 80 to 90 per cent of its life expectancy. He said that for that reason and in order to repair damage caused on the voyage from Florida to Vancouver he had the vessel refinished.
The evidence given by the witness Lanyon suggests that damage done to the finish during the voyage was rather severe. He referred to damage caused by spills of diesel oil, by rubbing against commercial refuelling docks, by tying down equipment by means of fasteners which penetrated the finish and, finally, by a dinghy which came loose, bounced around and broke through the finish. Thus, damage from use made a significant contribution to the need for the refinishing. I assume too that the new finish would have deteriorated, as finishes do, up to the time of sale.
The appellant’s representative argued that although the yacht was used for personal reasons,
. . . the prime purpose of buying the yacht in Florida and transporting it to Canada was to make a profit, therefore, the direct cost of transporting the yacht over and above personal use is part of the adjusted cost base.
She submitted further that:
... the adjusted cost base is the real cost to the taxpayer immediately before disposition which in fact includes all capital and transportation costs.
The first branch of the argument fails on at least two grounds. Firstly, it is inconsistent with the evidence. The appellant testified:
We went to Florida on the idea of staying out of the country for a year, making ourselves a non-resident, and bringing back a 50 foot Hatteras, and using it here and selling it, which we did. That’s basically it. At no time was it my intent to make any money out of it.
Secondly, the decision of the Federal Court of Appeal in Her Majesty The Queen v. Geoffrey Stirling, [1985] 1 C.T.C. 275; 85 D.T.C. 5199, is authority for the proposition that a capital gain is to be computed in accordance with the special rules laid down in the Income Tax Act and not according to the rules which govern the computation of income from a business or property. The ordinary meaning of the words .. the capital cost to him of the property ...” to be found in the definition of the term “adjusted cost base” contained in subparagraph 54(a)(i) of the Income Tax Act does not encompass the cost of repairing or replacing or refurbishing parts of the property which have been worn or damaged or have deteriorated from use, misuse or the passage of time during the period of ownership. The amounts now in question, far from being part of the capital cost of the yacht, were quite simply part of the cost of using the yacht for a pleasure cruise.
The appellant's agent asserted as well that the refinishing cost was one made “.. . specifically for the purpose of making the disposition.” That claim rests, I assume, on subparagraph 40(1)(a)(i) of the Income Tax Act which permits the deduction in the computation of a taxpayer's gain for a taxation year from the disposition of any property of “.. . any outlays and expenses to the extent that they were made or incurred by him for the purpose of making the disposition.” The evidence does not support a finding that the refinishing work was done for the purpose required by subparagraph 40(1)(a)(i). This claim also fails.
At the hearing the appellant expanded his claim to encompass further costs falling into three categories. The first included the cost of a trip to Miami made prior to the purchase and with a view to determining whether a purchase was feasible, the cost of travelling to Miami to take delivery of the yacht and the cost of registering the yacht. None of these items, in my view, forms a part of the capital cost to the appellant of the property sold.
The second category included the amounts alleged to be the cost of supplies and equipment bought for or installed on the vessel after it was purchased and either consumed during the voyage or sold with the vessel in 1979. The appellant exhibited confusion when asked whether he had already been allowed deductions for the items included in this category. The respondent appended to his reply to notice of appeal a detailed listing of the costs which he assumed had formed part of the adjusted cost base of the property sold. In the absence of persuasive evidence that the amounts claimed were not allowed on assessment there is no basis for finding error in the assessment.
The final category is one described as “ADDITIONAL CLAIM FOR COST OF TRANSPORT”. It covers what is said to be a part of the cost of making the voyage from Florida to Vancouver. It includes wages paid to crew, offshore mooring costs, disposable fuel tanks and some repairs made as a result of damage which occurred during the course of the voyage. This claim fails for the reasons given previously with respect to the transmission repairs and refinishing costs.
For the foregoing reasons the appeal will be dismissed.
Appeal dismissed.
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