Roland
St-Onge:—This
appeal
was
heard
in
the
City
of
Calgary
in
the
Province
of
Alberta
by
the
Tax
Review
Board
on
March
16,
1972
and
involves
the
1965
and
1967
taxation
years.
The
main
shareholder
of
the
appellant
company,
Mr
E
P
Morasch,
a
carpenter
residing
in
Calgary,
testified
that
in
his
youth
he
had
lived
on
a
farm
and
ever
since
1942
had
had
in
mind
the
purchase
of
the
farm
which
he
eventually
bought
in
the
year
1957.
About
the
year
1947
he
sold
hardware
for
a
while
and
then
began
buying
lots
from
the
city
on
which
to
erect
houses
to
sell
at
a
profit.
In
1952
he
caused
the
appellant
company
to
be
incorporated
to
carry
on
the
construction
business.
In
1957
Mr
Morasch
personally
purchased
a
quarter
section
of
land
approximately
20
miles
from
the
City
of
Calgary,
and
the
company
began
to
curtail
its
construction
activities.
On
May
18,
1959
Mr
Morasch
sold
personally
25
acres
to
a
Mr
Kvicala
for
$7,000,
and
on
April
19,
1960
his
company
sold
25
acres
to
a
Mr
Selinger
for
$12,500,
and
tax
was
paid
on
the
gains
in
both
cases.
Approximately
three
years
after
he
purchased
the
land
the
witness
decided
to
move
onto
the
farm
and
built
a
house
thereon.
His
first
farming
endeavour
was
the
raising
of
poultry
but
this
did
not
turn
out
to
be
very
profitable.
He
then
tried
raising
horses.
He
purchased
a
horse
at
a
price
of
$4,000
and
two
mares
for
about
$2,000
or
$3,000
for
breeding
purposes.
He
also
sowed
grass
seed
on
a
10-acre
piece
of
land
and
erected
some
fences
on
the
property.
However,
he
knew
nothing
about
raising
horses
and,
consequently,
this
last
endeavour
was
no
more
profitable
than
the
first.
He
carried
on
this
unsuccessful
farming
operation
for
a
period
of
about
18
months
in
1961-62,
and
according
to
his
own
testimony
he
went
deeper
into
debt
to
the
extent
that
when
he
received
a
summons
for
a
plumbing
account
he
decided
to
quit
farming
and
sell
his
land.
At
the
time
he
made
that
decision,
the
real
estate
business
was
on
the
decline
in
the
area.
In
the
year
1960
the
remainder
of
the
land
was
transferred
to
the
company.
In
1965
the
company
advertised
and
sold
this
remainder
in
three
different
parcels:
25
acres
to
a
Mr
Wathen
for
$11,000;
25
acres
to
a
Mr
Rurar
for
$24,900;
and
35
acres
to
Kouitz
&
Golden
for
$39,000
—
realizing
a
gain
of
$49,674.
Upon
cross-examination,
Mr
Morasch
stated
that
the
land
was
surveyed
before
it
was
transferred
to
his
company;
that
during
his
18
months
on
the
farm
the
appellant
company
did
not
carry
out
any
construction
activities;
that
almost
immediately
after
the
acquisition
of
the
farm
he
sold
the
two
lots
because
he
did
not
need
them
for
his
farming
operation;
that
when
he
acquired
the
farm
his
intention
was
to
live
on
it;
and
that
one
of
the
reasons
for
selling
was
his
illness.
Mrs
Morasch
corroborated
her
husband’s
testimony
and
added
that
she
was
not
very
capable
of
working
on
a
farm.
During
that
period
she
obtained
permanent
employment
in
order
to
help
pay
the
debts
and
explained
that
both
she
and
her
husband
had
worked
very
hard
to
make
a
nice
place
out
of
their
new
residence.
She
enjoyed
the
farm
except
for
the
horse-breeding
operation
but
said
they
had
to
quit
because
of
her
husband’s
illness
and
also
on
account
of
the
debts.
Counsel
for
the
appellant
argued
that
the
remaining
land
was
inventory
for
the
appellant
company
which
was
a
genuine
investment
business.
Although
Mr
Morasch
disposed
of
two
unneeded
parcels
of
land
it
did
not
prevent
the
appellant
company
from
realizing
capital
gain
because
the
land
was
not
acquired
for
the
purpose
of
turning
it
to
account
but
for
the
purpose
of
raising
poultry
and
breeding
horses.
Unfortunately,
Mr
Morasch’s
illness
forced
them
to
give
up.
Counsel
for
the
respondent
argued
that,
as
soon
as
Mr
Morasch
acquired
the
land
near
Calgary,
he
sold
two
parcels
thereof
and
paid
tax
thereon,
and
that
this
was
an
adventure
in
the
nature
of
trade.
He
gave
up
his
practice
as
a
real
estate
dealer,
transferred
the
land
to
his
company
which
was
not
very
active
for
a
while
but
which
became
active
again
about
a
year
or
so
later,
and
occupied
the
farm
for
a
brief
period
of
time.
According
to
the
evidence
adduced,
the
land
was
transferred
to
a
construction
company
which
took
the
necessary
steps
to
sell
it
at
a
profit.
The
company
did
not
hold
the
land
very
long;
it
did
the
neces-
cary
advertising
and
sold
it
at
a
substantial
profit.
Mr
Morasch
had
been
personally
buying
and
selling
land
and
houses
for
himself
as
well
as
for
others,
and
the
transferring
of
the
land
to
his
company
to
be
sold
at
a
profit
—
a
company,
part
of
whose
business
had
also
been
the
buying
and
selling
of
properties
—
does
not
constitute
a
means
of
preventing
taxation
of
the
gains.
In
my
opinion,
because
of
the
course
of
conduct
of
the
appellant
company
and
that
of
its
main
shareholder,
the
gain
under
discussion
should
be
considered
taxable
and,
consequently,
the
appeal
is
dismissed.
Appeal
dismissed.
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