Guy
Tremblay:—
1.
Whereas
an
application
made
according
to
section
28
of
the
Federal
Court
Act
to
review
and
set
aside
the
decision
of
the
Tax
Review
Board
rendered
on
October
23,1978,
the
Federal
Court
of
Appeal
on
December
17,
1979
decided
as
follows:
The
application
is
granted,
the
determination
made
by
the
Board
in
respect
of
the
two
questions
set
forth
in
the
Minister’s
application
is
set
aside
and
the
matter
is
referred
back
to
the
Board
for
determination
on
the
basis
that
the
allocation
of
the
price
of
$185,000
between
land
and
building
must
be
made
in
the
light
of
the
Board’s
findings
concerning
the
market
value
of
the
land
and
of
the
land
with
the
building.
2.
Whereas
in
the
reasons
for
judgment,
the
Federal
Court
of
Appeal
makes
the
following
comment:
The
reason
why
Mr
Tremblay
answered
as
he
did
the
two
questions
in
respect
of
which
the
Minister
sought
a
determination
is
that
he
felt
bound
in
applying
section
68
of
the
Act
by
a
principle
of
appraisal
according
to
which,
when
built
land
is
sold
at
less
than
its
market
value,
the
price
paid
must
first
be
applied
to
the
land.
As
it
was
common
ground
that
the
price
of
$185,000
paid
for
the
property
of
Matador
Inc
was
less
than
the
market
value
of
the
bare
land,
the
Board
felt
constrained
by
this
principle,
which
it
regarded
as
a
rule
of
law,
to
conclude
that
the
whole
of
the
price
of
$185,000
had
to
be
applied
to
the
land.
It
is
clear,
in
my
view,
that
the
Board
erred
in
law
in
so
deciding.
In
allocating
the
price
of
$185,000
between
land
and
building,
the
Board
was
governed
by
section
68.
It
had
to
make
that
allocation
reasonably,
having
regard
to
all
circumstances.
It
could
not,
without
error,
make
that
allocation
by
applying
blindly
a
principle
that
was
never
intended
to
govern
the
allocation
to
be
made
under
section
68.
(The
italic
is
from
the
Board)
Section
678
reads
as
follows:
Where
an
amount
can
reasonably
be
regarded
as
being
in
part
the
consideration
for
the
disposition
of
any
property
of
a
taxpayer
and
as
being
in
part
consideration
for
something
else,
the
part
of
the
amount
that
can
reasonably
be
regarded
as
being
the
consideration
for
such
disposition
shall
be
deemed
to
be
proceeds
of
disposition
of
that
property
irrespective
of
the
form
or
legal
effect
of
the
contract
or
agreement;
and
the
person
to
whom
the
property
was
disposed
of
shall
be
deemed
to
have
acquired
the
property
at
the
same
part
of
that
amount.
(The
italics
are
from
the
Board)
3.
Whereas
the
Board
in
its
reasons
for
judgment,
rendered
on
October
23,
1978,
concerning
the
market
value
of
the
land
and
the
land
with
the
building,
accepted
the
evidence
of
the
respondent
to
the
effect
that
the
fair
market
value
of
the
whole
property
(land
and
building),
based
on
the
comparison
method,
was
$500,000,
Whereas
the
Board
also
accepted
the
evidence
(of
the
actual
appellant
and
of
the
respondent)
to
the
effect
that
the
fair
market
value
of
the
land
was
$200,000,
Whereas
the
Board
finally
accepted
the
evidence
of
the
respondent
to
the
effect
that
the
fair
market
value
of
the
building
was
the
balance
($500,000
-
$200,000)
of
$300,000,
Hence,
the
Board,
following
the
judgment
of
the
Federal
Court
of
Appeal,
states
now,
in
interpreting
section
68
of
the
Income
Tax
Act,
it
would
be
reasonable
for
the
amount
of
$185,000
to
be
allocated
proportionately
as
follows:
|
Land:
|
$74,000
|
($185,000
x
/s)
|
|
Building:
|
$111,000
|
($185,000
x
/5)
|
Consequently,
a
terminal
loss
of
$18,079.88
($129,079.88
of
undepreciated
capital
cost
of
the
building
less
$111,000)
must
be
allowed
the
vendor
Matador
Inc
for
the
taxation
year
1973
and
a
capital
cost
allowance
may
be
applied
on
$111,000
by
the
purchaser
Matador
Converters
Co
Limited
for
the
taxation
year
1973
and
the
subsequent
years.
Conclusion
The
appeals
of
the
two
appellants
are
allowed
in
part
and
the
matter
is
referred
back
to
the
respondent
in
accordance
with
the
above
reasons
for
amended
judgment.
Appeal
allowed
in
part.
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