The
Chairman:—This
is
the
appeal
of
Sproule
Insurance
Services
Limited
from
an
income
tax
assessment
in
respect
of
the
1971
taxation
year.
By
notice
of
assessment
dated
October
4,
1973
the
Minister
of
National
Revenue
disallowed
an
amount
of
$16,252
claimed
by
the
appellant
as
operational
expenses
incurred
for
the
purchase
of
prospect
lists.
The
respondent
contends
that
the
appellant
purchased
an
insurance
agency
business
as
a
going
concern
for
$16,252
and
that
that
outlay
was
in
account
of
capital
and
non-deductible
pursuant
to
paragraph
12(1)(b)
of
the
Income
Tax
Act.
As
a
result
of
negotiations
between
Robert
Calhoun
and
the
appellant
an
agreement
was
reached
whereby
the
appellant
purchased
from
Robert
Calhoun
the
list
of
policies,
business
records
and
all
insurance
policies
written
or
to
be
written
up
to
and
including
December
31,
1969.
(Exhibit
A-1.)
In
a
letter
signed
by.
Athol
Sterling
of
the
legal
firm
of
Sterling
and
Devlin,
it
is
claimed
that
he
had
been
asked
to
draft
the
agreement
in
a
manner
which
would
qualify
the
purchase
price
in
the
agreement
as
a
deductible
operational
expense.
It
seems
clear
from
the
facts
of
this
appeal
that
the
vendor
intended
to
sell
and
the
purchaser
agreed
to
buy
only
an
insurance
list
of
500
names.
There
is
no
evidence
that
the
appellant
purchased
a
business
as
a
going
concern.
On
the
contrary
the
evidence
is,
that
the
vendor
did
not
sell
his
name.
He
expressly
wished
to
retain
his
insurance
licence
which
he
in
fact
did
and
steps
to
that
effect
were
taken
in
the
agreement
so
as
to
comply
with
the
Ontario
Department
of
Insurance
Regulations.
The
agreement
did
not
contain
any
clause
prohibiting
the
vendor
to
engage
in
the
sale
of
insurance
policies
in
any
location
or
for
any
period
of
time
and
it
is
on
record
that
the
appeilant
subsequently
used
his
licence
for
that
purpose.
On
the
basis
of
the
evidence
I
must
come
to
the
conclusion
that
what
was
intended
to
be
sold
and
purchased
by
the
parties
to
the
transaction
and
what
was
effectively
sold
was
an
insurance
list
and
nothing
more.
In
my
opinion
an
insurance
list
is
not
a
tangible
asset
of
an
enduring
nature.
The
prospective
clients
on
the
list
can
cancel
their
insurance
policies
or
not
renew
them
with
the
purchaser’s
firm
and
some
risk
to
the
purchaser
in
my
view
is
involved
in
such
a
purchase.
In
my
opinion
we
are
dealing
here
with
expenditures
made
by
the
appellant
in
the
course
of
his
business
which
does
not
add
to
his
capital
assets
in
any
way
but
which
does
permit
him
to
increase
the
income
from
his
business.
The
facts
in
this
appeal
are
quite
different
from
those
in
the
cases
cited
by
counsel
for
the
respondent
in
that
in
this
instance
the
agreement
of
purchase
and
sale
is
directed
exclusively
to
the
acquisition
of
the
vendor’s
insurance
list
which
does
not
affect
in
any
way
the
vendor’s
legal
capability
of
continuing
in
his
business
as
an
insurance
salesman.
I
conclude
therefore
that
the
appellant
did
not
purchase
an
insurance
agency
business
as
a
going
concern
but
that
the
appellant
incurred
operational
expenses
in
the
pertinent
year
in
the
amount
of
$16,252
in
the
acquisition
of
an
insurance
list
with
which
he
hoped
to
increase
his
business
income.
The
appeal
is
therefore
allowed.
Appeal
allowed.
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