William T Anderson v. Minister of National Revenue, [1980] CTC 2290, 80 DTC 1269

The Chairman:—This is the appeal of William T Anderson from an assessment in respect of the 1974 taxation year in which the Minister added to the appellant’s income an amount of $36,352 as his share of the gain on the disposition of land; allowing a reserve of $28,020 on the unpaid portion of the said profit.

Summary of Facts

The appellant, a chartered accountant, together with three associates in a group referred to as the Christopher Group, acquired on May 11, 1967 a /4 undivided interest in a section of land situated East of Scottsdale, Arizona for $90,000.

On the same day that the Christopher Group acquired its interest in the land an option to purchase the said interest was granted to Cald Developments Inc, a corporation to be formed, 62.5% of the shares to be held by the Christopher Group. Cald Developments Inc did not exercise its option and did not acquire the Christopher Group’s interest. (Exhibit A-1)

In March of 1974 an offer was received for the purchase of the whole section of land which was accepted and an amount of $1,020,544 was paid, $255,136 of which was the Christopher Group’s share of the proceeds.

Contentions

It was submitted that the appellant, represented by George F Jones, Esq, acquired his interest in the land to hold as a speculative investment but subsequently changed his intention and decided to hold it as a capital asset. Counsel suggested that we are dealing here only with the intention of the appellant who had a right to change his intention, and concludes that the appellant who had decided to hold the land was subsequently pressured and forced to sell and that the profit he realized was a fortuitous capital gain.

The respondent represented by Ms Jeane Watchuk, contended that the intention that the appellant may have had in acquiring his interest in the land must be decided on the facts and that the subsequent change in the appellant’s intention must be established. Counsel submitted that the facts do not support the appellant’s alleged change of intention and contends that the land was acquired and held with the primary intention or the alternative intent ab initio of selling at a profit. That intent was in fact carried out and counsel concludes that the appellant’s share of the profit was properly added to his income.

Finding of Facts

From the evidence it appears clear that the appellant, who was well aware that his associates in the Christopher Group had interest in and engaged in real estate transactions, acquired his share of the Christopher holdings with the intention of reselling it at a profit. The option granted to Cald Developments Inc by the Christopher Group, notwithstanding that it did not materialize is an indication that it was also the appellant’s intention at the time of acquisition to resell his interest in the undivided 1/4.

Even if one were to accept the declared secondary intention of developing the land as a Dude Ranch or as alleged by the appellant of living on his 40 acres of land, the facts necessary to support that intention simply do not exist. The appraisal study that was requested by the Christopher Group on March 10,1975 to estimate the fair market value of the land as of December 31, 1971 (Exhibit A-2), though it may have pointed out several difficulties that existed in developing the land is not a proof that any effort was made to develop it. Nor indeed does it convince me that the difficulties were insurmountable obstructions to developing the land. As to the appellant’s alleged intention of residing on his 40 acres share of the land, it is my understanding that he had never chosen or seen which 40 acres of the undivided /4 interest in the land held by the Christopher Group that he would be alloted as a residential site, and no serious negotiations were entered into with his associates with a view of dividing their undivided /4 interest in the land.

On the basis of the evidence it is very difficult to see any serious intention other than speculation in the appellant’s motive in acquiring his share of the land. The appellant has not succeeded in convincing the Board that the Minister’s assumptions of facts are ill-founded. The appeal should therefore be dismissed on those grounds.

However, on reviewing the documents the appellant in filing his notice of objection on December 10, 1976 after the 90 days prescribed in subsection 165(1) of the Income Tax Act, SC 1970-71-72, c 63, as amended, had expired, stated that his lateness in filing his objection was because he had not received his notice of reassessment until December 9, 1976. Although the taxpayer made no application for extension of time to file his notice of objection pursuant to subsection 167(1) of the Income Tax Act SC 1970-71-72, c 63, as amended, the Minister confirmed his assessment by notification dated January 12, 1978. The taxpayer filed his notice of appeal on January 29, 1978. At the hearing of the appeal no reference was made to the late filling of the notice of objection. The question that arises is whether the Board has jurisdiction to hear the appeal. In my view a notice of objection must be filed within the prescribed time or within the time granted by an extension pursuant to subsection 167(1) of the Income Tax Act before an appeal can be legally lodged with the Board. Since the notice of objection was not filed within the prescribed time and no application made to or granted by the Board for extending the time in which the notice of objection could be legally produced, the appeal before the Board is in my opinion invalid and must be dismissed for lack of jurisdiction.

The appeal is dismissed on the two grounds above stated.

Appeal dismissed.