Bonner,
T.C.J.:—This
is
an
appeal
from
an
assessment
of
income
tax
for
the
1979
taxation
year.
The
notice
of
assessment
indicates
that
the
respondent
included
$154,800
in
the
computation
of
income
as
“Income
from
the
adventures
in
the
nature
of
trade-disposal
of
Leduc
Property".
The
sole
issue
in
this
appeal
is
whether
the
gain
was
income
or
capital.
Early
in
1976
Harvey
Skov
and
Stanley
Hrychuk
decided
to
go
into
business
together.
Each
became
a
50
per
cent
shareholder
in
the
appellant
company.
In
June
of
that
year
the
appellant
commenced
to
carry
on
the
business
of
a
dealer
in
recreational
vehicles.
A
parcel
of
land
in
Leduc,
Alberta,
which
was
owned
by
Mr.
Hrychuk
and
his
wife
was
selected
for
use
for
the
purposes
of
the
business.
A
former
service-station
building
on
the
property
was
suitable
for
the
storage
of
parts
and
the
servicing
of
the
vehicles.
The
land
area
was
adequate
for
the
storage
and
display
of
recreational
vehicles
held
for
sale.
A
lease-option
agreement
was
formed
between
Mr.
and
Mrs.
Hrychuk
as
lessors-optionors
and
the
appellant
as
lessee-optionee.
The
lease
was
for
a
five-year
term
ending
April
30,
1981.
The
option
entitled
the
appellant
to
purchase
the
land
for
$300,000.
The
appellant
had
the
right
to
exercise
the
option
at
any
time
during
the
currency
of
the
lease.
The
agreement
provided
that
the
option:
.
..
Shall
be
exercised
by
Airway
Acceptance
Corporation
Ltd.
only
upon
the
approval
and
decision
of
Harvey
Skov,
being
the
owner
of
one-half
of
the
issued
shares
of
Airway
Acceptance
Corporation
Ltd.
The
decision
of
Harvey
Skov
as
an
Officer
and
Director
of
Airway
Acceptance
Corpration
Ltd.
shall
be
final
and
binding
as
to
whether
Airway
Acceptance
Corporation
Ltd.
shall
exercise
its
within
option.
Mr.
Skov
stated
that
this
provision
was
designed
to
enable
him
to
prevent
the
eviction
of
the
appellant
at
some
time
after
the
development
of
a
successful
business
on
the
site.
In
the
fall
of
1976
differences
arose
between
Messrs.
Skov
and
Hrychuk.
It
became
plain
that
their
association
could
no
longer
continue.
Uncertainty
resulting
from
the
combat
threatened
to
undermine
the
appellant’s
line
of
bank
credit.
Early
in
1977
an
agreement
was
reached
between
Mr.
Skov
and
Mr.
Hrychuk
calling
for
the
purchase
by
Mr.
Skov
of
Mr.
Hrychuk's
shares
of
the
appellant.
Mr.
Skov
required
$60,000
in
cash
to
make
the
purchase.
George
Akers,
who
had
acted
as
Mr.
Skov's
lawyer
in
connection
with
the
dispute,
offered
to
obtain
for
Mr.
Skov
the
money
needed
to
make
the
purchase.
Mr.
Akers
formed
a
group
of
six
people,
himself
included,
each
of
whom
was
to
put
up
$10,000.
Mr.
Skov
seemed
to
regard
the
transaction
as
involving
a
loan
to
him
with
the
company's
option
to
purchase
the
Leduc
land
to
be
transferred
to
the
lenders
as
"security".
He
said
that
he
was
to
reacquire
50
per
cent
of
the
option
upon
“repayment”
of
the
$60,000.
No
provision
was
made
for
the
payment
of
interest
on
the
$60,000.
Mr.
Skov
did
not
appear
to
view
as
in
any
way
remarkable
the
proposed
use
of
the
appellant's
property,
the
option,
in
connection
with
a
loan
made
to
him
in
his
personal
capacity.
A
numbered
corporation,
100419
Properties
Ltd.,
was
utilized
in
connection
with
the
transaction.
The
issued
capital
of
that
company,
12
shares,
was
divided
equally
among
the
six
persons
who
had
each
put
up
$10,000.
Mr.
Skov
caused
the
appellant
to
assign
to
the
numbered
company
its
lease
and
option
to
purchase
the
Leduc
property.
He
was
given
an
option,
which
he
apparently
held
as
nominee
of
the
appellant,
to
purchase
one
share
from
each
of
the
six
shareholders
of
the
numbered
company
upon
payment
of
the
$10,000
per
share.
The
share-purchase
option,
according
to
the
written
agreement
between
Mr.
Skov,
the
six
investors
and
the
numbered
company,
was
exerciseable:
.
.
.
at
any
time
up
to
but
not
after
fifteen
(15)
clear
days
following
the
giving
of
notice
by
the
Company
to
Skov
that
the
Company
intends
to
exercise
its
option
to
purchase
the
above
described
lands.
The
numbered
company
then
“sublet”
the
property
to
the
appellant
for
a
term
which,
according
to
the
agreement,
was
to
commence
on
March
1,
1977,
and
end
on
April
30,
1981,
or:
..
on
the
date
which
the
Company
exercises
its
option
and
gains
title
to
the
lands,
whichever
event
shall
first
occur.
The
written
agreement
between
Mr.
Skov,
the
numbered
company
and
the
group
of
six
did
not
contain
any
covenant
by
Mr.
Skov
to
repay
money
nor
did
it
contain
any
reference
to
a
loan.
Mr.
and
Mrs.
Hrychuk
were
approached
for
their
consent
to
the
assignments
and
they
demanded
certain
changes
as
the
price
of
that
consent.
The
term
of
the
lease
and
period
for
exercise
of
the
option
which
they
had
granted
were
amended
so
as
to
end
on
November
1,
1979,
and
the
consideration
payable
in
the
event
of
the
exercise
of
the
option
was
increased
by
$25,000.
Messrs.
Skov
and
Hrychuk
had
purchased
a
property
at
Westlock,
Alberta,
on
which
the
appellant
carried
on
business
selling
a
brand
of
recreational
vehicle
different
from
that
sold
at
Leduc.
Operations
at
this
location
ceased
and
the
property
was
sold.
Mr.
Skov
used
his
share
of
the
proceeds
from
the
sale
of
the
Westlock
lands
to
pay
the
$60,000
consideration
necessary
to
secure
six
shares
in
the
numbered
company
which
six
shares
were
regarded
as
representing
in
effect
a
one-half
share
of
the
option
to
buy
the
Leduc
lands
from
Mr.
and
Mrs.
Hrychuk.
The
precise
date
upon
which
the
Westlock
lands
were
sold
was
not
given.
The
formal
transfer
of
the
lands
was
made
in
August
of
1978.
At
the
end
of
June
1978
an
unsolicited
offer
to
purchase
the
Leduc
property
was
made.
Negotiations
followed
and
an
agreement
to
sell
the
Leduc
property
to
Denco
Investments
Ltd.
and
Tredavco
Investments
Ltd.
was
entered
into
on
July
19.
The
resulting
sale
gave
rise
to
the
profit
now
in
issue.
In
considering
whether
a
purchase
and
resale
of
property
are
made
in
the
course
of
an
adventure
in
the
nature
of
trade
the
intention
which
is
relevant
is
intention
at
the
time
of
purchase.
In
Racine,
Demers
and
Nolin
v.
M.N.R.,
[1965]
C.T.C.
150
at
158,
65
D.T.C.
5098
at
5103,
Noël,
J.
had
this
to
say:
To
give
to
a
transaction
which
involves
the
acquisition
of
capital
the
double
character
of
also
being
at
the
same
time
an
adventure
in
the
nature
of
trade,
the
purchaser
must
have
in
his
mind,
at
the
moment
of
the
purchase,
the
possibility
of
reselling
as
an
operating
motivation
for
the
acquisition;
that
is
to
say
that
he
must
have
had
in
mind
that
upon
a
certain
type
of
circumstances
arising
he
had
hopes
of
being
able
to
resell
it
at
a
profit
instead
of
using
the
thing
purchased
for
purposes
of
capital.
|
Counsel
for
the
appellant
submitted
that
|
.
.
here
we
are
talking
about
|
|
the
time
of
acquisition
of
the
option
in
1976.
|
The
purpose
of
the
appellant
|
corporation
in
acquiring
the
option
was,
he
said,
to
protect
itself
by
ensuring
that
it
would
have
business
premises
for
the
long-term.
He
pointed
out
that
the
property
was
one
on
which
business
premises
existed
and
that
use
of
the
property
for
purposes
of
the
appellant’s
business
was
in
fact
made
continuously
from
June
of
1976
until,
by
special
arrangement,
a
few
weeks
after
the
formal
closing
of
the
sale
transaction
in
November
of
1978.
Mr.
Skov’s
evidence
was
that
he
had
no
knowledge
of
a
change
in
road
pattern
which
appears
to
have
been
of
great
importance
to
the
value
of
the
property.
Mr.
Skov
did
not
investigate
the
zoning
of
the
property
or
any
other
matters
relevant
to
its
development
potential.
In
short,
so
the
submission
went,
the
conduct
of
Mr.
Skov
as
directing
mind
and
will
of
the
appellant
was
not
that
of
a
trader
and
was
inconsistent
with
the
existence
at
the
outset
in
1976
of
any
intention
to
resell.
This
analysis
is
faulty
in
that
it
ignores
the
fact
that
the
transfer
of
the
option
to
the
numbered
company
which
represented
the
investor
group
was
made
in
circumstances
and
on
terms
which
were
inconsistent
with
a
future
reacquisition
of
the
option
in
order
to
secure
premises
for
the
purposes
of
carrying
on
the
business
of
a
dealer
in
mobile
homes.
Further,
it
ignores
the
fact
which
in
my
view
is
of
overriding
importance,
namely,
that
the
option
was
exercised
by
the
numbered
company
in
order
to
acquire
the
land
so
that
it
could
be
resold
at
a
profit
to
Denco
and
Tredavco.
What
is
in
question
here
is
the
nature
of
the
profit
realized
on
the
sale
of
the
land.
It
was
not
the
option
which
was
sold.
The
"moment
of
purchase”
of
the
land
to
which
reference
is
made
in
the
jurisprudence
is
the
moment
when
the
taxpayer
becomes
legally
bound
to
buy.
In
this
case
it
was
the
moment
when
the
option
was
exercised.
The
appellant
did
not
at
that
moment
bind
itself
to
buy
in
order
to
carry
out
an
intention
to
acquire
the
land
for
use
as
a
site
for
its
business.
The
decision
of
the
Supreme
Court
of
Canada
in
Hill-Clark-Francis
Limited
v.
M.N.R.,
[1963]
C.T.C.
337;
63
D.T.C.
1211
affirming
the
decision
of
the
Exchequer
Court,
[1960]
C.T.C.
303:
60
D.T.C.
1245,
is
determinative.
The
appeal
will
therefore
be
dismissed.
Appeal
dismissed.
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