The
Assistant
Chairman:—The
appeal
by
Napoléon
St-Hilaire
from
assessments
for
the
taxation
years
1966,
1967
and
1969
was
heard
at
Quebec
City
on
December
7,
1972.
The
amounts
of
$45,987.76,
$12,677.99
and
$16,603.50
were
added
to
appellant’s
income
for
the
taxation
years
1966,
1967
and
1969,
respectively,
as
being
the
net
taxable
profits
on
the
sale
of
portions
of
appellant’s
farm.
Appellant
was
alleged
to
have
received
from
his
father
in
1925,
as
a
gift,
a
farm
consisting
of
Lots
549,
550,
557
and
460
in
the
register
of
the
parish
of
St-Romuald,
with
the
buildings
and
equipment
thereon.
In
1960
appellant
ceased
to
operate
his
farm.
For
calculation
purposes
counsel
for
the
respondent
admitted
that
profits
from
the
sale
of
land
on
the
farm
before
1960
were
of
a
Capital
nature,
and
that
the
book
value
in
1960
of
the
land
sold
in
1966,
1967,
1968
and
1969
was
$373,000.
In
view
of
the
circumstances
surrounding
the
sale,
dated
August
15,
1966,
of
Lots
461,
460,
401-17,
401-21,
401-47,
549,
550,
557,
558,
561,
562,
565,
641,
639,
639-4
and
639-3
to
the
Irving
refinery
for
the
sum
of
$258,749.90,
counsel
for
the
respondent
agreed
that
the
transaction
should
be
treated
as
of
a
capital
nature,
and
that
the
profits
realized
by
appellant
on
this
sale
were
to
be
regarded
as
a
capital
gain
and
not
taxable.
However,
counsel
for
the
respondent
maintains
that
all
the
other
sales
made
by
appellant
during
the
years
1966,
1967
and
1969
of
land
included
in
his
inheritance,
were
commercial
in
nature
and
taxable.
Appellant
was
the
main
shareholder
in
Napoléon
St-Hilaire
Inc
(hereinafter
referred
to
as
“the
company”),
which
carried
out
excavation
work,
digging
of
sewers
and
highway
construction,
operated
a
gravel
pit
and
sold
gravel.
An
extract
from
the
company’s
minutes
dated
December
31,
1962
shows
that
the
company
authorized
Mr
St-
Hilaire,
temporarily
and
on
its
behalf,
to
purchase
the
necessary
land
to
establish
a
residential
development
for
the
company
around
appellant’s
home.
Subsequently,
this
land
was
repurchased
from
appellant
by
the
company,
at
cost,
and
the
development
in
question
went
ahead.
It
appears
that
the
company
thus
continued
to
buy
other
land
besides
that
in
the
property
inherited
by
appellant
to
be
used
for
development
purposes,
and
streets
and
sewers
were
laid
by
the
company.
In
1965
appellant
incorporated
Les
Entreprises
St-Hilaire
Inc
for
the
purpose
of
doing
business
as
a
real
estate
and
construction
company.
At
December
31,
1969
Napoléon
St-Hilaire
Inc
owed
appellant
the
sum
of
$161,642,
and
Entreprises
St-Hilaire
Inc
owed
him
an
amount
of
$177,698.
Counsel
for
the
appellant
alleged
that
the
latter
had
incorporated
both
the
aforementioned
companies
for
the
sale
of
lots
other
than
those
included
in
the
inherited
property
of
appellant.
However,
counsel
contended
that
Mr
St-Hilaire
was
not
operating
a
business
for
the
sale
of
lands
on
his
farm,
since
at
the
time
the
property
vested
in
him
he
had
no
intention
of
reselling
the
land,
and
the
subsequent
sales
were
the
result
of
chance,
not
of
a
secondary
intent;
he
thus
concluded
that
appellant
was
only
realizing
on
his
capital.
Between
1960
and
1969
appellant
made
at
least
300
sales
of
land
from
his
inheritance.
For
the
years
with
which
this
appeal
is
concerned
the
gross
sales
amounted
to:
$43,464
in
1966,
excluding
the
sale
to
the
Irving
refinery
for
$258,749.90;
$33,467
in
1967;
and
$57,896
in
1969.
It
is
very
difficult
to
conceive
of
all
these
sales
as
being
the
result
of
chance.
In
fact,
appellant’s
companies
purchased
and
improved
land
around
his
farm
in
such
a
way
that
the
development
which
was
under
way
was
bound
to
include
the
farm.
It
should
also
be
noted
that
Mr
St-Hilaire
in
fact
had
legal
control
over
both
his
companies,
even
after
he
had
sold
the
shares.
to
his
three
sons.
During
what
might
be
called
the
“piecemeal”
period
the
owner
of
the
land
nonetheless
had
to
transfer
to
the
city
the
land
necessary
for
laying
the
streets
and
paying
for
their
construction,
which
Mr
St-Hilaire
did
in
order
to
be
able
to
sell
his
land.
According
to
Mr
St-Hilaire’s
testimony,
he
hired
and
paid
a
surveyor
to
subdivide
the
lots
and
mark
the
boundaries
of
his
land.
His
actions
taken
as
a
whole
and
the
number
of
sales
concluded
do
not
fall
within
my
definition
of
“chance”.
Whether
deliberately
or
not,
Mr
St-Hilaire
was
carrying
on
a
real
estate
business
which
was
no
different
from
the
business
operations
of
his
two
companies.
Moreover,
Mr
St-Hilaire
admitted
that
he
made
no
distinction
between
the
lots
sold
by
himself
and
those
sold
by
his
companies.
The
fact
that
the
appellant
alleged
he
was
realizing
on
his
capital
from
his
inheritance
does
not
alter
the
nature
of
the
transactions
carried
out
by
him
to
do
this.
In
my
view
the
sales
of
land
by
appellant
in
1966,
1967
and
1969,
except
for
the
sale
to
the
Irving
refinery,
are
commercial
in
nature
and
taxable.
For
these
reasons
the
appeal
is
allowed
in
part
and
the
whole
is
referred
back
to
the
Minister
for
reassessment,
taking
into
consideration
that
the
sale
of
land
to
the
Irving
refinery
in
1966
for
the
sum
of
$258,749.90
is
not
to
be
treated
as
commercial
in
nature,
and
must
be
deducted
from
appellant’s
taxable
income
for
the
taxation
year
1966.
In
all
other
respects
the
appeal
is
dismissed.
Appeal
allowed
in
part.
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