Ronald Francis Theres Maclsaac v. Minister of National Revenue, [1974] CTC 223, 74 DTC 6188

Sheppard, DJ:—The issue is whether the interest of the appellant was purchased by him as an investment and the profit realized was capital as the appellant contends or whether at the time of purchase there was an alternative intention of resale at a profit within Regal Heights Ltd v MNR, [1960] CTC 384; 60 DTC 1270, so as to make the profit taxable income as assessed by the Minister.

The Glenayr Apartment from which the profit arose consisted of four or five apartments situate in Nanaimo. In 1965 that apartment was purchased by Goodwin, Ney and the appellant and in 1967, two years later, was resold at a profit for which the appellant has been assessed one-third, the extent of the interest received by him.

Goodwin is a chartered accountant, employed by the Nanaimo Realty Limited and is a close friend of the appellant. Ney is manager of the insurance department at the Nanaimo Realty Limited.

The appellant has testified that he bought as an investment; that the apartment block proved uneconomical in that four to five units required the bookkeeping expense of an apartment block of twenty units. Accordingly the apartment block was resold and was later replaced by premises which contained a butcher shop and also a repair shop in which the tenant and family lived overhead.

The relationship of the three purchasers Goodwin, Ney and the appellant was that of partners and each partner had an equal share, that is, one-third. Also, the majority would carry in any decision to which the partnership might come in purchasing. The partnership relied in this instance on the decision of Goodwin and Ney. Questions 26 to 30 of the appellant’s examination for discovery appear as follows;

26 Q. And how would it come to your attention that— A. Well, he just would tell me what was being done whenever I asked him as a fait accompli or Sign here, please.

27 Q. Do I take it you were leaving the acquisition of properties or this property to the judgment of Mr Ney and/or Mr Goodwin? A. Pretty well Goodwin completely, yes.

28 Q. Had you been associated with them before? A. Yes. I was in a syndicate group with them in some other apartments as well as this one.

29 Q. And so the purchase of Glenayr, in so far as you were concerned, amounted to Mr Goodwin saying, We have something that we think we should all purchase; and you said, Fine, I will rely on your judgment. Go ahead and do so? A. Right.

30 Q. And I suppose you contributed to the purchase price? A. That's right, yes, my share.

The appellant made no inspection of the apartment block and in fact he has never been within the Glenayr.

As the appellant has purchased an interest in the partnership assets and as the partnership decision was determined by a majority of the partners, therefore the question must be whether the majority—that is, Goodwin and Ney—at the time of the purchase had the alternative Intention of reselling at a profit: Racine, Demers and Nolin v MNR, [1965] CTC 150; 65 DTC 5198, per Noël, J (now Associate Chief Justice) at 159 [5103].

Here the question must be, not whether the appellant acquired his interest as an investment, but whether the profit realized by the partnership on the resale is taxable income by reason of the two partners Goodwin and Ney having bought the apartment with the alternative intention of reselling at a profit. Goodwin and Ney were associated in a realty company, the Nanaimo Realty Limited, and as such could readily see whether the full purchase price was realized and whether the property could be replaced to advantage.

The onus is on the appellant to prove some error in the assessment: RWS Johnston v MNR, [1948] SCR 486; [1948] CTC 195; 3 DTC 1182, per Rand, J at 489 [203] and Kellock, J at 490 [205].

On the evidence, no error in the assessment has been proven and therefore the appeal is dismissed with costs payable by the appellant to the respondent.