A
J
Frost:—These
are
income
tax
appeals
in
respect
of
each
of
the
appellants’
1968
and
1969
taxation
years.
The
appeals
came
on
for
hearing
in
Saskatoon,
Saskatchewan
on
Monday,
December
4,
1972
and
it
was
agreed
by
the
parties
that
they
should
be
heard
together
on
common
evidence
as
the
facts
in
each
case
are
the
same.
In
1958
the
appellants
purchased
a
10-acre
farm
for
their
ageing
parents
outside
the
city
limits
of
Saskatoon.
The
farm
had
a
7-room
house
on
it
and
was
serviced
with
power
but
no
other
facilities
were
available.
The
parents
of
the
Dobroskay
brothers
had
farmed
from
1910
to
1947
when
they
decided
to
retire
and
live
at
Saskatoon
where
their
three
sons
were
engaged
in
the
operation
of
an
auto
body
shop.
The
parents
and
three
sons
were
a
closely
knit
family
group
and
as
time
went
on
the
sons
became
increasingly
concerned
for
the
wellbeing
of
their
ageing
parents
especially
as
their
mother
seemed
unhappy
about
city
life.
It
was
decided
that
the
best
solution
to
the
problem
would
be
to
locate
a
small
parcel
of
land
not
too
far
from
the
Dobroskays’
business
where
the
parents
could
live
out
the
balance
of
their
lives
in
surroundings
not
too
dissimilar
from
those
they
had
become
accustomed
to
during
their
37
years
of
active
farming.
A
suitable
10-acre
plot
was
located
and
the
Dobroskay
brothers
made
an
initial
offer
of
$15,000
but
reduced
it
later
to
$13,000.
The
second
offer
of
$13,000
was
accepted.
Shortly
after
the
purchase,
Mrs
Helen
Dobroskay,
the
mother
of
the
three
appellants,
became
ill
and
was
admitted
to
the
Saskatchewan
Hospital,
North
Battleford
on
March
3,
1959
suffering
from
arteriosclerosis
and
general
senility—frustrating
the
plans
of
her
three
sons
to
provide
for
the
welfare
of
their
parents
by
purchasing
the
small
farm.
At
the
time
of
the
purchase
there
was
little
or
no
speculation
in
the
area
although
the
City
of
Saskatoon
had
for
many
years
adopted
the
policy
of
buying
farms
for
subdivision
purposes.
The
Board
allowed
several
newspaper
clippings
to
be
introduced
in
evidence.
An
extract
from
one
newspaper
under
date
of
March
26,
1958
(Exhibit
R-4)
reads
as
follows:
City
approves
Purchase
of
Half
Section
of
Land
for
Future
Residences
City
Planner
Bill
Graham
said
the
land
is
to
be
made
into
a
residential
subdivision
eventually,
but
that
it
would
not
be
subdivided
and
offered
for
Sale
to
home
builders
for
at
least
5
years.
Evidence
as
to
secondary
intention
was
adduced
by
both
parties.
The
appellants
endeavoured
to
show
that
it
was
their
intention
to
use
part
of
the
10-acre
plot
for
their
body
shop
business
but
that
this
intention
was
frustrated
when
the
City
of
Saskatoon
took
in
the
area
and
the
development
plan
adopted
by
the
City
did
not
permit
the
establishment
of
light
industry
or
a
body
shop
in
the
10-acre
replotting
scheme.
The
respondent
on
the
other
hand
adduced
evidence
to
indicate:
(1)
that
the
appellants
bought
the
land
with
the
intention
of
subdividing
it
right
away,
and
(2)
that
the
City
of
Saskatoon
had
for
a
long
time,
in
fact
as
far
back
as
the
1920’s,
followed
the
practice
of
buying
land
outside
the
city
and
subdividing
the
land
into
individual
lots
and
that
the
policies
of
the
City
of
Saskatoon
were
of
some
importance
and
had
a
bearing
on
the
instant
case.
Most
of
the
main
facts
of
the
case
were
well
established
indicating
clearly
that
the
appellants
were
not
traders
in
real
estate,
had
a
primary
motivation
in
buying
the
10-acre
plot
outside
the
City
of
Saskatoon
limits
to
provide
a
small
farm
for
their
ageing
parents,
and
had
no
alternative
but
to
sell
the
land
on
a
lot-by-lot
basis
for
residential
building
after
the
Citv
of
Saskatoon
extended
its
boundaries.
Another
important
fact
came
out
in
evidence,
namely,
that
no
lots
were
sold
until
8
years
after
the
date
of
purchase.
Exhibit
R-1
(an
application
for
an
$18,000
loan
signed
by
a
Mr
Cooper)
contains
the
following
words:
Market
value
of
this
security
should
increase
in
value
in
the
near
future
due
to
the
present
residential
development
adjacent
to
the
acreage
involved.
The
security
is
located
within
the
city
limits
and
applicants
intend
subdividing
acreage
for
sale
as
individual
lots
during
1959,
with
the
proceeds
to
be
applied
to
our
mortgage
at
the
company’s
discretion.
The
above
hearsay
evidence
was
admitted
by
the
Board
but
under
oath
each
witness
expressly
denied
any
personal
knowledge
of
the
statement
and
further
denied
the
truth
of
the
facts
asserted.
The
question
in
issue
is
therefore
one
of
secondary
intention.
Were
the
appellants
motivated
to
buy
the
property
for
speculative
gain
and
what
weight,
if
any,
should
be
given
to
such
motivation?
Questions
such
as
these
are
practical
questions
of
fact
and
must
be
considered
carefully
in
the
light
of
all
the
circumstances,
It
may
well
be
that
the
appellants
had
several
reasons
for
acquiring
the
10-acre
plot
and
these
may
have
included
the
use
of
part
of
the
property
for
business
pur-
poses
and
the
eventual
resale
of
the
land
after
their
parents
could
no
longer
make
use
of
it,
but
these
reasons
do
not
necessarily
constitute
secondary
intention
as
an
important
motivating
factor.
On
the
evidence,
I
find
that
the
appellants
did
not
engage
in
an
adventure
in
the
nature
of
trade
in
respect
of
their
purchase
of
the
said
farm
plot
for
their
ageing
parents,
or
that
the
secondary
intention
alleged
by
the
respondent
gives
rise
to
the
incidence
of
taxation.
In
my
opinion,
the
doctrine
of
secondary
intention
which
in
this
case
would
give
rise
to
an
adventure
in
the
nature
of
trade
can
only
be
used
as
a
basis
for
taxation
when
it
is
crystal-clear
from
the
evidence
that
a
taxpayer
from
the
beginning
had
an
alternative
in
mind
to
be
effectively
used
if
the
primary
objective
were
frustrated.
To
give
a
capital
investment
the
additional
character
of
a
speculative
venture,
the
possibility
of
a
resale
must
unmistakably
exist
as
an
operating
motivation.
It
does
not
suffice
that
a
capital
investment
merely
contained
an
element
of
speculation
or
that
the
possibility
of
resale
had
passed
through
the
purchaser’s
mind.
Does
not
every
prudent
investor
consider
the
possibility
of
resale?
The
dual
character
of
the
transaction
must
be
obvious
and
immediate
in
order
to
play
a
role
in
the
assessment
procedure.
A
secondary
intention
should
not
be
a
long-range
intention
based
on
remote
possibilities.
Every
prudent
investor
has
his
price
and
tries
to
minimize
losses.
A
sound
investment
must
contain
some
element
of
speculation,
otherwise
it
would
not
be
considered
sound.
The
prudent
investor
endeavours
to
preserve
the
purchasing
power
of
his
dollar
through
judicious
management
of
his
investment
holdings.
For
example,
when
the
holder
of
government
bonds
lengthens
or
shortens
his.
bond
maturities
by
switching
his
holdings,
he
is
obviously
speculating
as
to
the
risk
inherent
in
the
interest-rate
structure
of
the
bond
market
but
this
activity
does
not
make
him
a
speculator.
He
is
simply
observing
one
of
the
basic
tenets
of
the
prudent
investment
management.
If
in
the
instant
appeal
it
were
found
that
the
primary
motivation
had
been
to
buy
and
hold
property
for
speculative
gain,
it
would
be
taxable.
However
the
avowed
primary
purpose
herein,
as
testified
by
the
Dobroskay
brothers,
was
to
buy
property
for
their
aged
parents.
Even
if
it
could
be
inferred
from
the
course
of
conduct
of
the
appellants
that
they
had
in
mind
the
possibility
of
eventually
selling
the
10-
acre
plot
by
subdividing
it,
such
possibility
would
not,
in
my
opinion,
necessarily
constitute
a
secondary
intention
that
would
justify
taxation
of
a
gain
which
inadvertently
came
their
way.
The
appellants
did
not
have
a
background
of
real
estate
speculation,
but
did
have
a
genuine
interest
in
acquiring
the
subject
property
for
their
parents’
use.
The
real
estate
expansion
which
eventually
engulfed
the
area
is
not
something
which
would
likely
have
been
foreseen
by
the
appellants
as
there
was
little,
if
any,
speculation
in
land
in
the
environs
of
Saskatoon
in
1958
and,
if
there
had
been,
the
appellants
were
not
consciously
and
purposely
engaged
in
it.
In
my
opinion,
the
sale
of
lots
which
eventually
followed
the
isolated
purchase
of
the
10-acre
plot
was
on
capital
account
because
the
whole
course
of
conduct
of
the
appellants
indicated
that
they
were
not
land
speculators
or
traders
and
no
inference
as
to
secondary
intention,
as
understood
for
taxation
purposes,
can
be
drawn
from
anything
the
appellants
said
or
did.
Appeal
allowed.
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