M J Bonner:—This is an appeal from assessments of income tax for the appellant’s 1971, 1972 and 1973 taxation years. The assessments in issue are described in the Agreed Statement of Facts filed by the parties at the hearing. It read as follows:
AGREED STATEMENT OF FACTS
The parties hereto, by their solicitors, admit the following facts, provided that the admission is made for the purposes of this appeal only and provided further that the parties may adduce further and other evidence relevant to the issues and not inconsistent with this agreement.
1. The appellant was incorporated on June 2, 1959, under the laws of the Province of Manitoba, for the purpose of carrying on the general business of land assembly and development, which business it, in fact, did carry on from the year of its incorporation through to the end of its 1973 taxation year.
2. The appellant, between the date of incorporation and 1962, acquired acreage by land assembly located in the then Municipality of Assiniboia (now part of Metropolitan Winnipeg), registered plans of subdivision in relation to the acreage, installed streets, sewers, pavement and other local improvements and between 1963 and 1968 had on hand for sale and/or lease 322 serviced residential lots in a Subdivision known as “Heritage Park”.
3. Of the total number of serviced residential lots, 172 were sold outright.
4. In the years 1963 to 1968, both inclusive, the appellant leased under 50 year land leases a total of 160 serviced residential lots as follows:
1963 — 33
1964 — 66
1965 — 29
1966 — 95
1967 — 25
1968 — 2
160
5. In each instance the terms of the ground lease giving rise to the leasehold provided, inter alia:
(a) the ground rent was fixed at a set annual amount for the full 50 year term; (b) the leasehold tenant was granted an irrevocable option to purchase the serviced residential lot leased thereunder at a fixed price set at the outset of the lease at any time during the term of the ground lease (ie 50 years);
(c) at the end of the term (ie 50 years), if the leasehold tenant has not exercised his purchase option, the leasehold rights expire, and any buildings built on the serviced residential lot leased thereunder become the property of the landlord. The form of such ground lease is annexed as Schedule “A”.
6. The aforesaid ground leases were all registered in the Winnipeg Land Titles Office resulting in the issuance of certificates of leasehold title for each leased serviced residential lot.
7. The initial lease in each instance was entered into between the appellant as lessor and Metropolitan Homes Ltd as lessee, which built a house on each leased lot. When the house was sold to a home buyer, Metropolitan Homes Ltd assigned its interest in the lease to the home buyer.
8. Single family residences have been erected on each of the 160 leased serviced residential lots, the cost of the construction of which has been financed by loans from Central Mortgage and Housing Corporation (CMHC) upon the security, inter alia, of a real property mortgage registered against the leasehold title and assumed by each homeowner. In protection of its secured position, CMHC collects from each leasehold tenant, its mortgagor, (in addition to principal, interest and real property taxes) the annual ground rent due under such tenant’s ground lease and remits the same to the landlord (the appellant).
9. Each ground lease is freely assignable by the tenant (including the tenant’s option to purchase the serviced residential lot leased to him and/or her by the appellant) during the term thereof, and the tenant’s leasehold title is, similarly, freely transferable to subsequent purchasers of the residence erected on the said serviced lot.
10. The appellant, throughout the course of this development treated all revenue produced by sales of the serviced residential lots referred to in paragarph 3 herein as income and reported it as such and paid tax thereon.
11. Insofar as the leaseholds are concerned, in each instance the appellant removed the lots in question from inventory and transferred them to its capital account and carried them on its books as a capitalized fixed asset from the time of lease to the present date.
12. From the date of leasing to the present time and specifically during the years under assessment, all ground rents paid to the appellant by the ground lease tenants have been treated as income, reported as income and the tax thereon paid.
13. From the date that the serviced residential lots were ready for leasing, to the end of 1973, the last year under assessment five leasehold tenants (of the aforesaid total of 160) had exercised their purchase options as follows: 1971 — 1
1972 — 1
1973 — 3
5
14. To the date of the hearing of this appeal 10 further leasehold tenants (out of remaining total of 155) have exercised their purchase options as follows: 1974 — 1
1975 — 1
1976 — 1
1977 — 4
1978 — 3.
10
15. The appellant, upon the exercise of their purchase options by ground lease tenants, treated the revenue therefrom as capital gains on the sales of capital assets.
16. By Notices of Assessment, respectively dated December 16, 1975, November 10, 1975 and February 11, 1976, the appellant was re-assessed by the respondent with respect to its aforesaid capital gain treatment of the net revenue it received upon the exercise of their purchase options by ground lease tenants by the addition of the following respective amounts, being the net proceeds of the lot purchases so made during the respective taxation years:
| Number of Lot | Net Proceeds Added |
| Taxation | Purchase Options | to Appellant’s |
| Year | Exercised | Taxable Income |
| 1971 | 1 | $ 5,844.04 |
| 1972 | 1 | 4,266.73 |
| 1973 | 3 | 12,800.19 |
17. By Notices of Objection filed on January 21, 1976, and February 19, 1976, the appellant objected to the said assessments.
18. On April 18, 1977, the respondent notified the appellant that it had confirmed the assessments for the 1971, 1972, and 1973 taxation years.
The evidence in this appeal was heard immediately after that in the appeal of Dartmouth Developments Ltd (77-704), (hereinafter called “Dartmouth”). In this case Miles Robinson was sole beneficial shareholder of the appellant. The subdivision developed by the appellant was in a municipality then separate from that developed by Dartmouth. Viva voce evidence was given by the solicitor and one time secretary of the appellant. Mr Robinson died prior to the hearing. That evidence showed that all material facts pertaining to the leasing program entered into by the appellant were the same as those in the Dartmouth case. Here, as in the Dartmouth appeal, there was one business.
The arguments advanced by the parties to this appeal were identical to those advanced in the Dartmouth appeal. For the reasons given in that case, this appeal must also be dismissed.
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