The
Chairman:—This
is
the
appeal
of
Waldemar
Probek
from
an
income
tax
assessment
in
respect
of
the
1974
taxation
year
by
which
the
respondent
added
to
the
appellant’s
income,
as
income
from
a
business
or
from
an
adventure
in
the
nature
of
trade,
a
profit
of
$11,368.75
realized
by
the
appellant
from
the
disposition
of
certain
portions.
of
a
9.5-acre
parcel
of
land.
The
appellant
appeals
from
the
Minister’s
assessment
on
the
grounds
that
the
profit
realized
on
the
said
sales
was
a
capital
gain.
Evidence
The
pertinent
facts
adduced
are:
1.
In
October
1972
the
appellant,
a
machinist,
on
payment
of
a
$5,000
deposit,
obtained
an
option
to
purchase
9.5
acres
of
land
near
the
City
of
Edmonton
for
the
sum
of
$93,000
(Exhibit
R-1).
2.
On
November
15,
1972,
by
agreement
of
sale,
the
land
was
conveyed
to
the
appellant
with
a
payment
by
the
purchaser
of
$50,000
(Exhibit
R-2).
3.
On
that
same
day,
November
15,
1972,
the
appellant
assigned:
one
undivided
quarter
interest
in
the
land
to
Sky
Investments
Ltd:
one
undivided
quarter
interest
in
the
land
to
Erhard
Ritz
and
Elfrieda
Ritz;
one
undivided
quarter
interest
in
the
land
to
F
Tonn
Construction
Co
Ltd
for
$1
;
one
undivided
quarter
interest
in
the
land
to
Waldemar
Probek
(Exhibit
R-3).
4.
The
said
9.5
acres
was
subdivided
into
19
lots
and
a
separate
2.5-acre
parcel.
The
appellant
obtained
100%
interest
in
Lots
38,
41,
42
and
45
and
held
a
quarter
interest
in
Lots
44,
51,
53
and
the
2.5-acre
parcel.
5.
On
June
30,
1974
the
appellant
sold
to
Paramount
Homes
Ltd,
whose
principal
shareholder
was
the
appellant,
Lots
38,
42
and
45
and
the
payment
for
the
lots
was
made
by
crediting
the
shareholder’s
(appellant’s)
loan
with
$15,000.
In
1974
the
appellant
also
received
$868.75
from
the
disposition
of
certain
barns
on
the
property.
In
his
income
tax
return
the
appellant
reported
a
total
capital
gain
of
$3,525.
Appellant’s
Submission
The
appellant
testified
that
his
intention
in
purchasing
the
9.5
acres
of
land
was
to
live
in
the
farm-house
situated
on
the
land
and
hold
the
rest
of
the
land
as
a
long-term
investment.
He
stated
that
he
proposed
to
finance
the
purchase
of
the
subject
property
from
the
sale
of
his
principal
residence.
The
appellant
stated
that
he
could
not
sell
his
residence
in
time
to
meet
the
terms
of
his
offer
to
purchase
and
in
order
not
to
forfeit
his
$5,000
option
payment
he
was
forced
to
sell
to
active
traders
/4
interest
in
the
9.5
acres
of
land.
Respondent’s
Submission
Counsel
for
the
respondent
contends
that
the
appellant’s
primary
or
secondary
intention
in
acquiring
the
subject
land
in
1972
was
to
resell
the
land
and
realize
a
profit
on
its
sale
and
concludes
that
the
profit,
so
realized,
was
income
from
a
business
or
from
an
adventure
in
the
nature
of
trade.
Finding
of
Facts
The
appellant,
in
cross-examination,
admitted
to
not
having
put
his
principal
residence
up
for
sale
at
any
time,
but
explained
that
having
rented
the
farm-house
on
the
subject
property
to
the
vendor
for
six
months
he
could
not
sell
his
residence.
He
also
claimed
that
not
having
the
necessary
finance
to
purchase
the
subject
property,
he
had
to
assign
the
land
so
as
not
to
lose
his
$5,000
deposit.
Although
the
declared
intention
of
the
appellant
in
trading
cases
cannot
be
overlooked,
it
must,
nevertheless,
be
substantiated
by
a
reasonable
and
credible
explanation
as
to
how
that
intention
was
to
be
carried
out.
In
my
view,
the
appellant
did
not
satisfy
the
onus
of
establishing
to
the
satisfaction
of
the
Board
that
his
only
intention
at
the
time
of
acquiring
the
subject
land
was
to
live
there
and
hold
the
remaining
land
as
a
long-term
investment.
Even
though
the
agreement
of
sale
required
that
the
appellant
rent
the
farm-house
for
six
months
to
the
vendor,
it
did
not
prevent
him
from
putting
his
residence
up
for
sale
as
soon
as
possible,
conditional
on
a
later
occupation
date.
The
appellant
made
no
effort
whatever
to
finance
the
purchase
of
the
subject
property
by
the
sale
of
his
principal
residence
and
it
is
my
understanding
that
the
appellant
has
not
yet
sold
that
residence.
The
appellant
acquired
the
9.5-acre
parcel
of
land
on
November
15,
1972.
Since
it
was
impossible
for
the
appellant
to
finance
the
purchase
by
the
sale
of
his
principal
residence,
he
must
have
intended
and
decided
to
finance
the
purchase
by
the
assignment
of
portions
of
the
land
to
known
active
realtors
prior
to
or
at
the
time
he
acquired
the
9.5
acres.
His
intention
at
that
time
could
not
possibly
have
been
to
hold
the
land
as
a
long-term
investment.
Even
though
the
appellant
did
not
have
a
trading
history,
it
is
difficult
indeed
for
the
Board
not
to
conclude
that
the
appellant’s
intention
at
the
time
he
acquired
the
land
was
to
turn
it
into
profit.
The
appellant’s
explanation
that
he
was
forced
to
assign
the
land
to
realtors
because
he
could
not
afford
to
lose
the
$5,000
option
payment
loses
a
great
deal
of
credibility
on
examining
the
appellant’s
offer
to
purchase
(Exhibit
R-1),
which
is
conditional
upon
satisfactory
financing
by
November
30,
1972,
and
the
$5,000
would
have
been
refunded
had
the
appellant
been
unable
to
arrange
financing
for
the
purchase.
On
the
basis
of
the
evidence
presented
to
the
Board,
I
cannot
but
conclude
that
the
appellant’s
intention
at
the
time
he
acquired
the
9.5-acre
parcel
of
land
was
to
turn
it
into
profit
and
the
sale
by
the
appellant
of
Lots
38,
42
and
45
as
well
as
the
sale
of
barns
situated
thereon
formed
part
of
that
intention.
I
conclude,
therefore,
that
the
profit
realized
by
the
appellant
from
the
sale
of
properties
subject
to
this
appeal
is
income
from
an
adventure
in
the
nature
of
trade
and
that
the
amount
of
$11,368.75
was
properly
added
to
the
appellant’s
1974
income.
The
appeal
is
therefore
dismissed.
Appeal
dismissed.
Email this Content