Brulé,
T.C.J.:—
Issue
The
issue
is
whether
the
profit
realized
by
the
appellant
on
the
purchase
and
subsequent
sale
of
real
estate
near
Blane
Lake,
Saskatchewan,
is
to
be
included
in
her
1981
taxation
year
as
ordinary
income
or
capital
gain.
Facts
The
appellant
purchased
farm
property
in
1977
for
$75,000.
The
purchase
was
financed
100
per
cent
through
a
loan
from
her
father
with
interest
at
10
per
cent
per
annum.
The
farm
was
rented
and
the
appellant
received
$5,500
in
1977,
and
$7,200
in
each
of
the
1978,
1979
and
1980
years.
In
1981
the
property
was
leased
for
$9,000
with
an
option
to
purchase.
The
option
was
exercised,
the
owner
sold
for
$115,000
resulting
in
a
gain
of
$34,063
which
was
assessed
by
the
Minister
as
being
taxable.
Analysis
From
the
evidence
it
was
obvious
that
the
appellant’s
father
was
the
person
primarily
involved
in
the
purchase
of
the
property,
the
leasing
of
it
and
the
sale.
He
was
in
the
real
estate
business
and
the
property
was
listed
by
his
company
at
the
time
it
was
purchased.
He
provided
the
funds
for
his
daughter.
During
the
time
the
property
was
held
by
the
appellant
there
were
a
few
listings
offering
it
for
sale,
but
according
to
the
appellant
such
listings
indicated
a
price
at
which
it
would
not
sell.
The
idea
of
having
the
listings
was
to
help
the
father
and
also
the
appellant’s
brother-in-law
to
attract
people
and
get
an
inventory
of
clients
who
were
interested
in
the
area.
In
May
of
1980
the
property
was
listed
at
$137,500
and
no
offers
were
presented.
Later
the
property
was
leased
with
an
option
to
purchase
at
$115,000
which
option
was
exercised.
The
appellant
believed
the
land
was
a
good
investment,
but
obviously
relied
exclusively
on
her
father.
She
did
not
put
any
money
down
and
knew
that
the
rental
would
not
cover
interest
payments
to
her
father
and
property
taxes.
There
was
no
provision
for
capital
repayments.
While
the
appellant
relied
on
her
father,
nevertheless
the
property
was
in
her
name.
She
was
an
economics
graduate
and
had
worked
in
her
father's
real
estate
office
and
was
a
shareholder
of
his
company.
She
should
have
known
of
the
effects
of
the
multiple
listing
agreements
and
the
vulnerability
of
granting
an
option
agreement.
In
the
case
of
Pierce
Investment
Corp.
v.
M.N.R.,
[1974]
C.T.C.
825;
74
D.T.C.
6608
there
is
the
following
passage
by
Walsh,
J.
of
the
Federal
Court
—
Trial
Division
at
831
(D.T.C.
6612):
I
am
also
of
the
view,
as
has
been
expressed
in
other
cases,
that
while
the
evidence
of
the
witnesses
is
helpful
in
endeavouring
to
determine
their
intentions,
their
actual
conduct
and
the
steps
they
took
to
carry
out
these
intentions
gives
a
much
better
indication
of
what
they
actually
were.
Without
intending
to
cast
any
aspersions
on
the
credibility
of
the
witnesses
in
the
present
case
it
is
nevertheless
evident
that
in
any
case
where
a
distinction
must
be
made
between
a
transaction
which
constitutes
an
adventure
in
the
nature
of
trade
and
one
which
leads
to
a
capital
gain,
one
must
expect
the
witnesses
to
insist
that
their
intentions
were
solely
to
make
an
investment
and
that
the
idea
of
reselling
the
property
at
a
profit
had
never
occurred
to
them
even
as
a
secondary
intention
at
the
time
of
making
the
original
investment,
but
was
merely
forced
on
them
subsequently
by
some
event
beyond
their
control.
If
they
were
not
in
a
position
to
testify
to
this
effect
they
would
have
little
or
no
ground
for
appealing
against
the
assessment.
Such
testimony
took
place
in
this
case,
but
the
conduct
of
the
appellant
and
the
transaction
must
be
weighed
against
the
oral
evidence
presented.
The
granting
of
the
option
agreement
was
not
beyond
the
appellant’s
control.
Considering
the
entire
situation
as
objectively
and
realistically
as
I
am
able
to,
I
think
that
a
substantial
element
of
speculation
on
the
appellant's
part
was
involved
in
purchasing
the
property
and
the
circumstances
do
not
clearly
stamp
the
operation
with
the
character
of
an
investment.
I
think
that
the
appellant,
was
aware
in
acquiring
the
property
with
no
personal
investment,
then
leasing
it
at
a
loss,
except
perhaps
in
the
final
year
when
to
get
a
higher
rental
a
reasonably
priced
option
was
given,
and
allowing
various
listings
of
the
property
by
her
father,
a
knowledgeable
real
estate
agent,
that
the
property
could
be
sold
at
a
profit.
While
this
may
have
only
been
a
secondary
intention,
nevertheless
it
was
present
and
as
a
result
I
find
that
the
Minister
was
correct
in
his
assessment.
The
appeal
is
therefore
dismissed.
Appeal
dismissed.
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