The
Chairman:—The
appeal
of
Donald
Macaulay
is
from
an
assessment
in
respect
of
the
1975
taxation
yar
in
which
the
appellant,
having
evaluated
his
principal
residence
at
$62,500
objected
to
the
Minister’s
allocation
of
$37,200
for
the
residence
in
calculating
the
capital
gain
resulting
from
the
disposition
of
the
property.
Issue
On
August
1,
1975
the
appellant
sold
his
50-acre
farm
and
residence
in
the
Black
Creek
area
of
Vancouver
Island
for
$125,000.
In
reporting
his
income
for
the
1975
taxation
year
the
appellant
claimed
a
taxable
capital
gain
of
$683
after
allocating
the
disposition
of
the
sale
as
follows:
|
Proceeds
of
Sale
of
Black
Creek
Property
.
.
.
|
$125,000
|
|
Less
principal
residence
|
|
62,500
|
|
$
62,500
|
|
Less
Adjusted
Cost
Base
|
$53,860
|
|
|
50%
of
outlays
&
expenses
of
$9,513.50
|
4,757
|
58,617
|
|
3,833
|
|
Less
reserve
|
|
2,517
|
|
Total
Capital
Gain
|
|
1,366
|
|
Taxable
Capital
Gain
|
$
|
683
|
4.
By
notice
of
reassessment
dated
November
28,
1977
the
Respondent
re-
assessed
the
Appellant
adding
$4,424
to
the
taxable
capital
gain
with
respect
to
the
sale
of
the
property
described
in
paragraph
2
herein
based
on
the
following
calculations:
The
Minister’s
assessment
is
based
on
the
assumption
that
the
V-day
value
of
the
property
excluding
the
principal
residence,
the
shed
and
4
acres
of
land
was
$50,000.
The
Minister
further
assumed
that
the
fair
market
value
of
the
property
(excluding
the
principal
residence,
the
shed
and
4
acres
of
land)
was
$87,800
as
of
the
date
of
sale
in
1975.
In
interpolating
this
value
in
the
capital
gain
calculations
the
Minister
arrived
at
and
assessed
the
appellant
for
a
taxable
capital
gain
of
$5,107
as
compared
to
the
taxable
capital
gain
of
$683
calculated
and
reported
by
the
appellant
for
1975.
The
appropriate
reserves
under
subsection
40(1)
of
the
Income
Tax
Act,
SC
1970-71-72,
c
63,
as
amended
had
been
taken
in
each
calculation.
|
Proceeds
of
Sale
of
Black
Creek
Property
|
$125,000.00
|
|
Less
principal
residence
|
|
|
Land
|
$20,000
|
|
|
House
|
$17,000
|
37,000.00
|
|
|
Shed
|
|
200.00
|
37,200.00
|
|
$
87,800.00
|
|
Less
Adjusted
Cost
Base
|
|
|
Land
|
$50,000
|
50,000.00
|
|
|
70%
of
total
outlays
&
expenses
|
|
6,659.80
|
56,659.80
|
|
Gain
on
disposition
|
|
$
31,140.20
|
|
Less
Reserve
|
|
20,926.21
|
|
Total
Capital
Gain
|
|
$
10,213.99
|
|
Taxable
Capital
Gain
|
|
$
|
5,107.00
|
The
question
to
be
decided
is
whether
the
value
of
the
appellant’s
residence,
shed
and
residential
acreage
is
$62,500
or
one-half
of
the
total
selling
price
of
the
whole
property
as
claimed
by
the
appellant
or
whether
the
value
of
the
residence,
shed
and
acreage
is
$37,200
claimed
by
the
respondent.
The
respondent
did
not
dispute
the
tax
exemption
for
the
appellant’s
residential
property
but
contends
that
at
$62,500
the
appellant
has
grossly
exaggerated
it’s
fair
market
value.
Summary
of
Facts
The
appellant
testified
that
in
1946
he
had
purchased
under
the
Veteran’s
Land
Act
plan
a
large
tract
of
land
in
the
Comox
district
and
that
in
July
of
that
year
build
a
36
x
26
wood
frame
house
which
he
improved
in
1957,
the
photographs
of
which
can
be
seen
in
Exhibit
R-5,
Mr
W
H
Southward’s
appraisal
report
requested
by
the
respondent.
Over
the
years
the
appellant
had
cleared
some
land
on
which
a
car
track
and
a
small
beach
were
operated
but
which
was
closed
in
1968.
In
1969
the
appellant
constructed
a
4-hole
golf
course
and
cleared
the
land
necessary
for
a
9-hole
golf
course
but
never
did
realize
this
project.
The
appellant,
who
has
the
onus
of
establishing
that
the
fair
market
value
of
the
residential
property
used
by
the
Minister
in
calculating
the
capital
gain
is
wrong,
did
not
have
an
appraisal
made
of
the
subject
property.
He
did
however,
for
purposes
of
comparison,
refer
to
sales
of
land
he
had
made
prior
to
the
disposition
of
the
subject
property.
He
mentioned
in
particular
the
sale
of
88
acres
in
1971
for
$63,000
and
in
1972
the
sale
of
67.5
uncleared
land
for
$190,000.
The
respondent,
on
the
other
hand,
had
an
appraisal
made
of
the
property
by
Mr
W
H
Southward
(Exhibit
R-5),
in
which
he
established
its
fair
market
value
as
of
V-day.
In
his
appraisal
Mr
Southward
reports
that
the
50-acre
property
irregular
in
shape
is
situated
in
a
sparsely
settled
area
of
Black
Creek
with
a
3,600
feet
of
river
frontage
on
the
Oyster
River.
About
A
of
the
property
is
more
or
less
cleared,
the
remainder
is
in
bush
or
trees.
In
1971
the
property
was
in
an
unorganized
territory
and
no
zoning
existed
and
its
best
and
highest
use
at
that
time
was
a
holding
acreage
property.
In
his
appraisal
report
Mr
Southward
used
6
comparable
sales.
1.
The
sale
of
84
acres
of
Doyle
Road
adjoining
the
subject
property
to
the
north
for
$63,000
($750
per
acre).
This
sale
is
no
doubt
the
one
referred
to
by
the
appellant
from
memory.
(Exhibit
R-6)
2.
The
sale
of
129
acres
of
land
also
on
Doyle
Road
in
January
1969
for
$58,000
($450
per
acre).
3.
The
sale
of
41.58
acres
on
Tsolum
River
Road
in
August
1972
for
$39,000
($938
per
acre).
4.
The
sale
of
51.2
acres
on
Orr
Road
in
August
1972
for
$50,000
($976
per
acre).
5.
The
sale
of
64
acres
on
Macaulay
Road
in
June
1971
for
$25,000
($391
per
acre).
6.
The
sale
of
two
parcels
of
land
on
Condensary
Road
in
October
1971
for
$70,000
($751
per
acre).
As
can
be
seen
from
the
maps
produced
as
exhibits
and
the
maps
included
in
the
appraisal
reports,
sales
1
and
2
are
very
close
to
the
subject,
and
the
date
of
all
the
sales
are
in
a
time
period
sufficiently
close
to
December
31,1971.
The
6
comparable
sales
used
in
the
appraisal
appear
to
me
to
be
a
reasonable
indication
of
the
value
of
land
in
1971.
It
is
my
understanding
that
the
sale
for
$190,00
of
67.5
acres
of
land
referred
to
by
the
appellant
was
not
used
in
the
appraisal
report
because
it
was
a
non-arm’s
length
transaction.
But
even
the
non-waterfront
acreage
totaling
100
acres
of
that
parcel
was
sold
at
$200
an
acre,
Exhibit
R-7.
Further,
25
non-waterfront
acres
in
the
area
sold
for
$580
an
acre;
50.10
acres
sold
for
$449
an
acre
and
25
acres
sold
for
$600
an
acre
in
1972,
Exhibit
R-8.
On
the
basis
of
the
6
sales
comparable
to
that
of
subject
the
adjusted
price
per
acre
ranged
from
a
low
of
$610
per
acre
to
$978
per
acre.
After
making
appropriate
adjustments,
Mr
Southward
estimated
the
fair
market
value
of
the
subject
land
on
December
31,
1971
at
$932
an
acre
for
a
total
of
$46,000
but
rounded
the
figure
to
$50,000.
The
depreciated
value
of
the
residence
was
estimated
on
the
basis
of
a
replacement
cost
approach
as
set
out
in
the
appraisal
report
to
be
$16,420,
which
updated
results
in
a
depreciated
value
of
$22,550
for
the
residence.
In
his
conclusion,
Mr
Southward’s
evaluation
of
the
fair
market
value
of
the
property
as
of
V-day
is
$66,500.
|
Allocated
land
|
$50,000
|
|
Residence
|
$16,500
|
|
Total
|
$66,500
|
|
In
July
1,1975
the
Allocated
land
|
$102,450
|
|
Residence
|
$
22,550
|
|
Total
|
$125,000
|
In
computing
the
capital
gain
realized
from
the
disposition
of
the
subject,
the
Minister
used
a
fair
market
value
of
not
less
than
$87,000
for
the
land
as
of
August
1,
1975
allowing
a
value
of
$37,200
for
the
principal
residence,
4
acres
of
land
and
the
shed.
From
the
appellant’s
evidence,
the
appraisal
report,
the
photographs
and
the
pertinent
exhibits,
the
allocation
of
values
between
the
land
and
the
residential
area
in
the
process
of
disposition
appear
to
me
to
be
reasonable
and
equitable.
The
appellant
did
not
succeed
in
establishing
to
the
satisfaction
of
the
Board
that
the
Minister
was
wrong
in
assessing
his
taxable
capital
gain
at
$5,107
for
the
1975
taxation
year.
The
appeal
must
therefore
be
dismissed.
Appeal
dismissed.
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