The
Chairman:—This
is
the
appeal
of
Mr
Arthur
Ballantyne
from
income
tax
assessments
in
respect
to
the
1974
and
1975
taxation
years,
by
which
the
Minister
in
adjusting
the
appellant’s
reported
income
added
a
taxable
capital
gain
of
$7,710.75
for
1974
and
a
taxable
capital
gain
of
$245.32
for
1975.
Issue
The
adjustments
to
the
appellant’s
reported
income
stem
from
the
difference
between
the
V-day
value
attributed
by
the
appellant
to
his
147
acre
farm
in
the
Township
of
Downie
and
the
value
considered
by
the
appellant
to
have
been
the
fair
market
value
on
December
31,
1971.
In
his
notice
of
appeal
the
appellant
states:
The
appellant
sold
his
farm
on
the
outskirts
of
Stratford
by
agreement
dated
the
6th
day
of
November,
1973
for
the
sum
of
$230,000,
taking
back
a
mortgage
for
the
sum
of
$175,000
with
the
balance
in
cash.
The
appellant
filed
his
income
tax
returns
showing
an
adjusted
cost
base
of
$215,000
on
December
31,
1971,
based
upon
an
appraisal
made
shortly
thereafter
by
a
qualified
appraiser.
The
Department
used
an
adjusted
cost
base
of
$150,630,
which
is
unrealistic
and
can
not
be
justified.
In
his
assessment
the
respondent
estimated
the
value
of
the
subject
property
including
the
principal
residence
as
being
$150,000
on
Valuation
Day.
The
appellant
disposed
of
the
property
in
1974
for
$230,000
which
included
an
amount
of
$22,000
allocated
as
the
value
of
the
appellant’s
principal
residence.
The
cost
of
disposition
to
the
appellant
was
calculated
as
being
$12,495.50.
In
the
transaction
the
appellant
took
back
a
mortgage
of
$175,000
which
entitled
him
to
a
reserve
in
the
amount
of
$47,083
pursuant
to
paragraph
20(1)(n)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended.
The
respondent
using
an
adjusted
cost
base
of
$150,630
arrived
at
a
capital
gain
of
$15,421.50
for
the
1974
taxation
year
and
therefore
a
taxable
capital
gain
of
$7,710.75.
For
1975
the
respondent
added
to
appellant’s
income
the
reserve
taken
for
the
1974
taxation
year
and
allowed
again
under
paragraph
12(1)(n)
a
further
reserve
of
$46,592.35.
The
respondent’s
calculations
resulted
in
a
capital
gain
of
$490.65
and
a
taxable
capital
gain
of
$245.32
for
the
1975
taxation
year.
The
appellant
having
used
an
adjusted
cost
base
of
$215,000
as
of
V-day
contended
that
the
respondent’s
adjusted
cost
base
of
$150,630
was
unrealistic.
It
is
obvious
that
the
main
point
of
contention
is
the
value
of
the
property
as
of
December
31,
1971.
In
support
of
his
value
of
the
property
the
appellant
called
as
witness
Mr
Nelson
H
Kahle,
a
real
estate
appraiser
from
Stratford,
but
withdrew
Mr
Kahle’s
report
and
evidence
and
called
a
second
expert
witness,
Mr
Albert
F
Bowman,
an
accredited
advisor
with
the
Veterans
Land
Administration
Act.
Counsel
for
the
respondent
objected
to
Mr
Bowman’s
appearance
as
a
witness
on
the
grounds
that
being
an
employee
of
the
Federal
Government,
Mr
Bowman
could
find
himself
in
a
conflict
of
interest
position.
The
Board
overruled
the
objection
and
Mr
Bowman’s
appraisal
report
was
filed.
The
respondent
called
Mr
Richard
Vaughan,
a
senior
real
estate
appraiser
with
the
Minister
of
National
Revenue
in
Kitchener,
who
also
filed
his
report
with
the
Board.
Several
documents,
including
development
plans
for
the
area,
were
filed
and
discussed
at
the
hearing
but
the
relevant
facts
can
be
summarized
as
follows.
The
subject
property
is
located
on
the
outskirts
of
the
City
of
Stratford,
Ontario,
and
had
originally
been
used
in
its
entirety
in
farming
operations
but
at
the
pertinent
period
of
time
the
property
was
partly
zoned
as
industrial.
The
Stratford
Industrial
Commission
had
been
granted
an
option
on
the
zoned
part
(Parcel
I)
which
in
effect
“locked
in”
the
price
for
future
acquisition
by
the
Commission.
There
is
no
dispute
about
the
value
of
that
part
of
the
appellant’s
land.
Both
appraisal
reports
indicate
that
$72,000
was
the
fair
market
value
for
that
parcel
on
V-day.
The
dispute
arises
as
to
the
value,
of
what
was
called
Parcel
II
of
the
property
consisting
of
agricultural
land,
the
farm
house
and
other
buildings.
The
basic
question
being
whether
Parcel
II
should
be
considered
for
purposes
of
evaluation
as
potentially
industrial
and/or
residential
as
claimed
by
the
appellant,
or
whether
it
should
be
evaluated
as
agricultural
land.
The
respondent’s
appraiser
Mr
Vaughan
evaluated
the
property
on
the
basis
that
its
highest
and
best
use
was
“agricultural”
because
it
was
located
outside
the
city
limits
and
had
not
been
officially
zoned
as
either
industrial
or
residential.
Mr
Vaughan’s
V-day
value
of
the
Parcel
II
property
was
$78,000
including
the
residence,
the
acre
lot
and
the
outbuildings
which
he
valued
at
$17,000.
Mr
Bowman,
the
appellant’s
expert
appraiser,
used
as
the
highest
and
best
use
of
the
property
‘‘as
future
development
land
for
industrial
or
residential
property”.
As
a
result,
he
evaluated
the
land
at
$130,000
and
the
residence,
barns
and
one
acre
of
land
at
$18,800.
On
reviewing
both
appraisal
reports
it
would
appear
that
one
appraiser
puts
more
stress
on
some
comparable
sales
than
the
other,
but
there
are
no
differences
in
the
sales
which
would
significantly
change
the
basic
fair
market
value
of
land
in
the
proximity
of
the
subject
property
on
V-day.
Indeed,
if
one
were
to
eliminate
the
anticipation
factor
from
Mr
Bowman’s
appraisal,
the
evaluation
of
the
property
by
both
appraisers
would
not
be
substantially
different.
The
question
to
be
determined
now
is
whether
in
the
circumstances
of
this
appeal
an
anticipation
of
change
in
the
usage
of
the
subject
of
land
was
justified
and
to
what
degree.
The
appellant
contends
that
the
best
and
highest
use
of
the
subject
land
was
future
development
land
for
industrial
or
residential
property
which
was
according
to
the
appraiser,
evident
from
1957,
and
it
is
on
this
basis
that
the
property
was
evaluated
by
Mr
Bowman.
It
can
be
said
that
all
vacant
land
wherever
it
may
be
situated
has,
in
varying
degrees,
some
potential
for
development.
However,
the
price
of
surrounding
land
will
rise
in
direct
proportion
to
the
degree
of
expectancy
or
certainty
that
a
planned
development
will
take
place
in
the
area
in
a
foreseeable
period
of
time.
Counsel
for
the
respondent
rejected
as
a
valid
principle
and
basis
of
evaluation,
a
general
anticipation
of
change
in
use
of
the
land
and
I
agree
with
this
position.
Unless
the
facts
and
the
circumstances
as
of
December
31,
1971
relative
to
a
future
development
in
the
area
are
sufficiently
established
to
warrant
a
degree
of
certainty
and
to
justify
a
realistic
expectation
that
the
development
will
be
carried
out,
the
mere
anticipation
of
change
in
the
use
of
land
becomes
purely
speculative,
and
has
little
or
no
effect
on
the
market
value
of
land.
As
of
V-day,
as
pointed
out
by
the
respondent,
not
only
were
there
no
necessary
municipal
services
installed
for
the
development,
but
the
required
zoning
by-laws
were
not
passed.
Although
the
use
of
retrospection
in
establishing
the
value
of
a
property
as
of
Valuation
Day
is
no
more
acceptable
for
the
Board
than
it
is
for
appraisers,
the
fact
that
the
proper
zoning
of
the
land
and
the
required
municipal
services
for
the
projected
development
had
not
yet
been
made
after
a
period
of
some
eight
years
emphasize
the
necessity,
in
evaluating
property,
of
having
on
Valuation
Day
truly
convincing
and
unmistakeable
indicators
which
justify
a
reasonable
expectation
that
the
potential
development
of
the
area
will
be
realized
within
the
foreseeable
future.
Anything
less
than
that
would
be
in
the
realm
of
pure
speculation
which
cannot,
in
my
opinion,
be
a
valid
basis
for
arriving
at
V-day
value
of
property.
In
this
appeal
neither
the
appellant
nor
his
appraiser
have
succeeded
in
establishing
that
at
December
31,1971
there
existed
factors
which
justified
a
reasonable
anticipation
or
expectation
that
the
land
use
in
the
area
of
the
subject
property
would
be
changed
within
the
foreseeable
future.
I
conclude
therefore
that
the
appellant
has
not
discharged
the
onus
of
proving
that
the
respondent’s
assessment
is
wrong
and
the
appeal
must
therefore
be
dismissed.
Appeal
dismissed.
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