Demco Management LTD v. Minister of National Revenue, [1982] CTC 2283, 82 DTC 1248

Roland St-Onge:—The appeal of Demco Management Ltd came before me on May 28, 1981, in the City of Victoria, British Columbia.

The issue is to ascertain the amount of the taxable capital gain realized in 1976 by appraising the value of the property on V-Day.

The facts of this appeal are well set forth at paragraphs 2, 3 and 4 in the reply to the notice of appeal which read as follows:

2. Says he assessed the Appellant for 1976 by Notice thereof dated 30th May, 1978, and in so doing recomputed its income to include in the computation thereof a taxable capital gain of $200,000 on the disposition of the property known as the Aberdeen Private Hospital located at 1450 Hillside Avenue, in Victoria, British Columbia, and of the property known as 1416 Hillside Avenue, Victoria aforesaid.

3. Says in so assessing the Appellant, the Respondent acted, inter alia, upon the understated assumptions:

(a) the Aberdeen Hospital at 1450 Hillside Avenue and 1416 Hillside Avenue,

Victoria BC were at relevant times before 1976 owned by the Appellant;

(7) the Aberdeen Hospital and 1416 Hillside Avenue were sold in 1976 for $1,112,500;

(c) the properties at 1416 and 1450 Hillside Avenue had a value of $712,500 on 31st December 1971.

4. Says sometime subsequent to the Appellant’s objection to the assessment dated 30th May, 1978 the Respondent had occasion to re-examine the value of the Subject properties as at 31st December, 1971 and the properties have been revalued at $756,000 at that time. The capital gain realized upon sale of the properties is as a result of the revaluation now considered to have amounted to $356,500, rather than $400,000 as found upon assessment less disposal expenses of $14,152.41.

The Board is much more impressed by the evidence adduced by the appellant than by the respondent for six reasons:

1. There is a bona fide offer for a price of $1,100 made close to December 31, 1971, by Mr Marquardt a competitor in the business.

2. The change of Government in the fall of 1972 was in the nature to

prevent Mr Marquardt from buying the Aberdeen Private Hospital.

3. There is ample evidence to show that the value of the private hospital did not really increase from 1972 to 1976.

4. The appellant’s appraiser was much more convincing than the respondent’s appraiser.

5. The appellant’s appraiser used the income approach method which seemed to be the appropriate one in the circumstances, whereas the respondent’s appraiser was told to use the cost approach.

6. The respondent’s appraiser did not evaluate the kitchen and furniture equipment, which equipment was appraised by Mr Clark at $13,979 and $171,000 respectively.

For these six reasons the Board prefers to rely on Mr Clark’s appraisal and the value of the property on V-Day and under review, is fixed at $1,131,000.

Consequently, the appeal is allowed.

Appeal allowed.