D
E
Taylor:—This
is
an
appeal
heard
in
the
City
of
Toronto,
Ontario,
on
September
23,1980,
against
an
income
tax
assessment
for
the
year
1972
in
which
the
Minister
of
National
Revenue
adjusted
the
income
of
the
appellant
so
that
it
agreed
with
the
financial
statements
relevant
to
a
particular
business
operation
“Hamilton-Duke
Street
property”
(“the
property”),
in
which
the
appellant
had
an
interest.
The
notice
of
appeal
read
In
part:
The
Minister
disallowed
our
notice
of
objection
and
confirms
the
assessment
on
the
ground
that
“the
profit
in
the
amount
of
$292,220
with
respect
to
the
Hamilton-Duke
Street
property
was
properly
determined
within
the
provisions
of
subsection
9(1)
of
the
Act
and
a
recapture
of
capital
cost
allowance
in
the
amount
of
$24,720.11
was
properly
included
in
computing
the
taxpayer’s
income
within
the
provisions
of
subsection
13(1)
and
section
68
of
the
said
Act”.
We
wish
to
advise
the
Tax
Review
Board
that
it
was
always
understood
that
all
profits
from
the
Hamilton-Duke
property
was
to
be
shared
on
a
50-50
basis
and
not
as
indicated
by
the
financial
statements
submitted.
We
wish
to
point
out
that
the
property
in
question
was
an
investment
property
and
was
sold,
unsolicited,
consequently
it
was
understood
that
the
depreciable
assets
were
sold
at
net
book
values
and
the
balance
of
the
sale
price
was
to
be
applied
to
the
land
resulting
in
no
recapture
capital
cost
allowance.
The
respondent
asserted:
—At
all
material
times,
the
management
of
Penthold
Investments
Ltd
(Penthold)
and
the
appellant
was
that
of
a
joint
venture
and
not
a
partnership
founded
for
the
purpose
of
acquiring
and
selling
the
property.
—The
appellant’s
share
of
profit
realized
from
the
sale
of
the
property
is
$292,220
less
a
reserve
of
$251,468.28.
—The
appellant’s
share
of
proceeds
of
the
sale
thus
resulted
in
recapture
of
capital
cost
allowance
in
the
amount
of
$24,720.11.
The
agent
for
the
appellant
provided
the
Board
with
a
copy
of
an
“Agreement”
related
to
the
property
between
Penthold
and
the
appellant,
dated
August
20,
1968.
Also,
the
agent
presented
the
1968,
1969,
1970
and
1971
financial
statements
regarding
the
properties
and
two
pages
of
financial
information
headed
respectively
“Statement
of
Operation
for
the
year
ended
December
31,
1972
(Property
sold
March
1,
1972)”,
and
“Rental
Operation
for
the
two
months
ending
February
29,
1972”
(the
pages
were
entered
together
as
Exhibit
A-2).
It
was
the
contention
of
the
agent
for
the
appellant
that
Exhibit
A-2
was
not
consistent
with
the
“Agreement”,
nor
was
it
in
accord
with
the
manner
in
which
the
previous
years’
financial
statements
had
been
prepared.
In
effect,
the
assertion
of
the
appellant
is
that
while
he
was
credited
in
the
1972
financial
statements
with
the
amount
of
profit
in
question,
he
did
not
receive
that
amount,
or
at
least
he
was
not
properly
allowed
expenses
he
incurred
relative
to
the
property,
before
the
profit
distribution
was
calculated.
That
is
a
matter
for
the
appellant
to
establish
in
some
other
forum,
not
before
the
Board,
since
the
agreement
and
the
1972
financial
statements
support
the
Minister’s
position.
Decision
The
appeal
is
dismissed.
Appeal
dismissed.
Email this Content