R. v. Soalta Development Ltd., [1975] C.T.C. 517, 75 D.T.C. 5359

Cattanach, J:

1 These are appeals from a decision by the Tax Review Board whereby the appeals by the defendant herein to that Board from assessments by the Minister of National Revenue for the 1970 and 1971 taxation years were allowed.

2 The assessments by the Minister were consequent upon the sale of three properties by the defendant, two of which were situate in the City of Calgary, Alberta, and the third was situate in the City of Edmonton, Alberta.

3 The Minister added to the defendant's income for its 1970 taxation year the amount of $23,000, being the gain realized by the defendant on the sale of the Edmonton property, and $39,640 being the gain realized upon the sale of one of the Calgary properties, referred to as the 6th St Property, being a total amount of $62,640 less an amount of $1,367.75 for legal fees incurred by the defendant in connection with the two sales which resulted in an addition of $61,212.25 to the appellant's income for that year by the Minister.

4 With respect to the defendant's 1971 taxation year the Minister added to the defendant's income for that year a net amount of $4,813.59 being the gain realized by the defendant upon the sale of the other property owned by it in the City of Calgary.

5 There is no dispute between the parties as to the amounts involved but the question for determination is the familiar one as to whether profits realized from the sale of these three parcels of real estate were income for the purposes of the Income Tax Act.

6 The rival contentions of the parties can be succinctly put.

7 On behalf of the defendant it is contended that the gains realized by it on the sale of the three properties were capital gains, in that the gains so realized were mere enhancements in value of capital assets owned by the defendant for the purpose of gaining rental income therefrom which by virtue of unusual circumstances prevailing it was obliged to sell and hence an enhanced price of a capital asset and accordingly not income accessable to income tax.

8 On the other hand the contention on behalf of the Minister is that the gains were made in the operation of a business or a venture in the nature of trade in that it was the defendant's intention to turn the properties to account whenever it became profitable to do so.

9 The onus of establishing that the former was the case falls on the defendant.

10 Put colloquially, were the three parcels of real estate sold by the defendant a realization of capital assets when it was no longer expedient to retain them as such, or were the three properties inventory or stock-in-trade in a venture in the nature of trade as contended by the Minister.

11 It has been repeatedly held that cases of this sort must all depend on their particular facts.

12 In the present appeals I am therefore obliged to consider the facts particularly applicable to the sale of each of the three properties and in the light of facts generally applicable to the business of the defendant and the manner in which it conducted that business.

13 The defendant was one joint stock company in a complex of some 25 companies carrying on the business of supplying or performing support services, equipment, material and business incidental or indigenous to a construction business. Eventually the top company in the pyramid of the complex became a company known as Standard Holdings Limited (hereinafter referred to as “Standard”) which, generally speaking, beneficially owned all the shares in the component companies therein including the defendant.

14 A company known as Hilson Limited was incorporated pursuant to the laws of the Province of Alberta on September 8, 1953. As of September 20, 1958, Standard became the majority shareholder. On February 4, 1963, Standard became the sole beneficial shareholder.

15 Another company was incorporated under the name of Soalta Pipeline Ltd pursuant to the laws of the Province of Alberta on May 26, 1954. As the corporate name indicates, I assume that the purpose of this company was to construct and operate a pipeline, which it never did, but rather remained relatively dormant except that it entered into a venture with Kelwood Development Ltd (a company in which Standard held 25% of the shares) in early 1955. The Kelwood venture came to a close prior to a subsequent amalgamation of Hilson and Soalta. Soalta Pipeline Ltd also owned shares in Barranca Investments Ltd (in which Standard held 50% of the shares). On the sale of the shares in Barranca the profit to Soalta Pipelines Ltd was taxed as income.

16 This transaction by Soalta Pipelines Ltd represented the acquisition of property on which townhouse condominiums were built and sold. These were carried in the financial statements as current assets and this represents the last transaction in which Soalta was engaged. In the interval the corporate name of Soalta Pipelines Ltd was changed to Soalta Development Ltd, no doubt to coincide with the business in which the company did engage.

17 On February 1, 1967, Soalta Development Ltd and Hilson Limited were amalgamated under the name of Soalta Development Ltd, the defendant herein.

18 In the agreement of amalgamation the objects of the amalgamated company are set forth as follows:

(a) to acquire by purchase or lease or otherwise and to own, hold, improve, develop and manage real and personal property and to mortgage, sell and convey the same;

(b) to undertake and perform contracts for the acquisition of real and personal property and any interest therein and any improvements thereto;

(c) to design, construct, execute, carry out, equip, improve, work, develop, finance, administer, manage and control works and conveniences connected with or constituting an improvement to or development of real or personal property.

19 The objects set out in the amalgamation agreement generally determine the nature of the operations contemplated. Paragraph (a) contemplates the purchase and sale of real estate. However, the fact that a particular transaction falls within the objects contemplated is merely a prima facie indication that a gain realized on that transaction is profit derived from the business but it does not follow that the particular transaction is necessarily part of the company's business.

20 The question to be determined is what business did the company carry on and not what business the company was authorized to carry on. It need not carry on any particular business even though authorized to do so.

21 The evidence adduced on behalf of the defendant was to the effect that the purpose of the incorporation of Hilson Limited was to provide a vehicle for the construction of buildings to the specifications of prospective tenants, and to lease the buildings so constructed to the tenants on a long-term basis, the actual construction of the buildings to be done by another company within the complex which had the facilities to do so. Obviously this had the effect of generating business throughout the complex.

22 Hilson Limited, although incorporated in 1953, did not embark upon this business until 1957. It was explained that the amalgamation between Hilson Limited and Soalta Development Ltd on February 1, 1967, was done for the purpose of corporate “housekeeping”, by which was meant, I assume, to rid the complex of a company which was no longer required but was possessed of share assets rather than winding up that company. In any event the evidence was that the amalgamated company continued to pursue the same objects as had been done by Hilson Limited.

23 From 1958 to 1968 Hilson Limited, in its original form and in amalgamated form, developed some 18 properties. The evidence confirms that these buildings were rented to tenants on a long-term basis and the rental agreements were devoid of options to purchase. Included in these 18 properties was an apartment building and three service stations.

24 Hilson Limited sold six properties between 1960 and 1967 four of which, including the apartment building, were developed and two were not developed and in each instance capital gains were claimed and allowed. Subsequent to amalgamation two other properties were sold. The gains upon these two sales were assessed as income and tax was paid thereon.

25 Against this background I turn to the appeal from the assessment by the Minister for the defendant's 1970 taxation year by which the Minister added an amount of $61,272.25 to the defendant's income and computed the tax accordingly. This amount was consequent upon the sale of two properties, the first property, which may be referred to conveniently as the Edmonton Property, was sold on April 30, 1969, from which a gain of $23,000 was realized by the defendant, and the second sale was that of the 6th St Property on October 14, 1969, on which sale a net gain of $38,272.75 was realized by the defendant.

26 The Edmonton Property, consisting of some 2.06 acres, was acquired by Hilson Limited in 1958 at a cost of $10,300 upon which Hilson contracted with the construction company in the complex to erect a building on a cost plus basis in the amount of $94,812.81, designed for the needs of Precision Machine & Equipment Limited, also a member of the complex and also wholly-owned by Standard Holdings, the purpose of which company was to acquire and supply specialized machinery and equipment for the construction part of the complex.

27 On April 15, 1958, Hilson Limited, which I consider as being the defendant under its name before amalgamation, leased the property to Precision Machine & Equipment Limited for a term of 20 years at an annual rental of $10,294.20. On a total cost to Hilson of $105,112.81 I compute the annual return to Hilson on its expenditure to have been approximately 10% per annum, which Hilson considered to be an economically feasible return, contemplated to be returnable over a period of 20 years, which would have been a return of 200%.

28 After three years, however, because of changes in techniques in the construction industry and other exigencies, the need for the specialized equipment which Precision Machine & Equipment Limited was incorporated to supply to the complex, of which it was part, and to other customers, disappeared with the result that the company became insolvent. It went into voluntary liquidation. Hilson accepted a surrender of the lease from Precision on February 1, 1962. After the liquidation of Precision the property was advertised for rent in newspapers and by a sign on the building. The property was never advertised for sale.

29 On February 1, 1962, a date coincident with the surrender of the Precision lease, the property was leased to Heliaric Welding and Machine Ltd for a term of 30 months, from March 1, 1962 to August 31, 1964, for a total rental of $45,000 payable $1,500 each month. For the first time Hilson included in the lease an option to purchase exercisable during the first 12 months of the lease. This option was included at the insistence of the tenant but to discourage the exercise of the option Hilson set the purchase price at $225,000 which it considered to be highly over the value of the property.

30 On the second month of its tenancy Heliaric was unable to meet its rental payment on the due date and went into liquidation during the month of April 1962.

31 Accordingly Hilson once again, within a very short time, had the property vacant on its hands. A real estate agent was engaged to lease the property. The instructions given to the agent were specifically that the property was to be rented, not sold. The efforts of the real estate agent and extensive advertising were abortive in securing a tenant until July 1, 1964, when the Edmonton Property was leased to International Harvester Company of Canada Limited for a term of 5 years at an annual rental of $14,400. This represents a reduction in the monthly rental of $300, from $1,500 previously received to $1,200, but in view of Hilson's unfortunate experience with its second tenant and a vacancy of over two years its bargaining position was not too strong and the acceptance of a reduced rent is understandable. Again the tenant insisted upon an option to purchase which was executed by Hilson as of a date coincident with the lease.

32 The option to purchase was exercisable by International Harvester at any time during the term of the lease at a purchase price of $130,000 if exercised during the first year and the purchase price was reduced by $5,000 per year if the option was exercised in any year subsequent to the first year. As a result it would be in the fifth year of the tenancy that the purchase price would be the lowest, that is $110,000.

33 On April 30, 1969, International Harvester exercised its option to purchase the property at $110,000 in accordance with the terms of the option.

34 It was as a result of this sale that the Minister added to the defendant's income an amount of $23,000 as the gain on the sale of the land. As I have said previously, the amount is not in dispute, only the taxability thereof.

35 The circumstances surrounding the sale of the 6th St Calgary Property on October 14, 1969, bear some resemblance to the sale of the Edmonton Property.

36 In 1958 Hilson acquired property in the City of Calgary consisting of 2.7 acres.

37 Alberta Mack Truck Distribution Limited had sold trucks to the complex and was contemplating erecting a new building in Calgary to house its plant and office. It had a proposal from a Toronto based company which Standard Holdings Limited was given the opportunity to match. Apparently the complex was able to match that proposal.

38 Accordingly, Hilson undertook the construction of a building to the specifications of Alberta Mack Truck at a cost to Hilson of $129,900. Again the building was constructed for Hilson by a construction company in the complex on a cost plus basis. My best recollection of the evidence, without recourse to a transcript thereof, is that the land had been purchased by Hilson at a cost of $27,000 prior to the negotiations with Alberta Mack Truck.

39 The property, on completion of the building, on October 15, 1959, was leased by Hilson to Alberta Mack Truck for a term of 20 years at an annual net rental of $15,000. Again this represents an annual return to Hilson of approximately 10% on its expenditure.

40 Throughout the negotiations Alberta Mack Truck was adamant that it must be given an option to purchase the property, otherwise there would be no deal. Hilson, on its part, strove to avoid giving an option to purchase, but rather than lose the deal it capitulated. That was the agreement which resulted from negotiations. Even so, Hilson, by subterfuge, still sought not to give the option to purchase. It will be noted that the lease between Hilson and Alberta Mack Truck is executed under date of October 15, 1959, but the option is in a separate document executed by the parties under date of October 26, 1959.

41 The lease was forwarded to Alberta Mack Truck for its consideration by Hilson in which document the option to purchase was deliberately omitted in the hope that the omission would be overlooked by Alberta Mack Truck. This, I thought, bordered on the unethical and I therefore put that thought to the witness. It was explained to me that this was acceptable in the rough and tough jungle of the business world where each party must struggle to protect its own interests. In any event the ruse was unsuccessful because Alberta Mack Truck was quick to observe the omission and its solicitors forwarded an option to purchase agreement in the terms that had been negotiated which document Hilson had no choice but to execute and did so on October 26, 1959.

42 By its terms the option to purchase was exercisable by Alberta Mack Truck during a ten-year period from the date of the option, October 26, 1959, at a purchase price of $185,000 if exercised during the first year, the purchase price to be reduced by $5,000 per year if the option was exercised in any subsequent year.

43 On October 14, 1969, the option was exercised by Western Mack Truck & Equipment Limited, the assignee of Alberta Mack Truck, and the sale effected at the price of $140,000 in accordance with the terms of the option. This purchase price was apportioned by the Minister $73,360 to the building and $66,640 to the land. As the land was purchased by Hilson for $27,000, this resulted in a gain of $39,640 to Hilson in the sale of the land.

44 This amount, when added to the gain of $23,000 on the sale of the Edmonton Property, is $62,640 from which the Minister deducted legal expenses of $1,367.75 incurred with respect to both sales, which leaves an amount of $61,272.25 which the Minister added to the defendant's income for its 1970 taxation year.

45 I have reached the conclusion that the gain realized by the defendant on the sale of the 6th St Calgary Property was properly included by the Minister in the income of the defendant for its 1970 taxation year and I reach that conclusion on the basis of the decision of the Supreme Court of Canada MNR v Edgeley Farms Limited, [1969] S.C.R. 603, [1969] C.T.C. 313, 69 D.T.C. 5228. This was an appeal from a decision of the President of the Exchequer Court of Canada, now the Chief Justice of the Federal Court of Canada, in Edgeley Farms Limited v Minister of National Revenue, [1968] 2 Ex. C.R. 375, [1968] C.T.C. 240, 68 D.T.C. 5174.

46 In 1959 Edgeley Farms Limited was incorporated to purchase 350 acres of land. The land was in the path of urban development and was a good buy. However at the time of acquisition the company had not decided what to do with the land. It was farmed for a very short time and then in 1960 the company leased the land for a term of 25 years. The lease contained an option to the tenant to purchase the land in whole or in 10-acre parcels. In 1962 part of the land was sold at a profit under the option agreement. The President made the following comments at pages 376–7 [241, 5174]:

No attempt was made before me to support the contention put forward at earlier stages of the matter, and suggested in the notice of appeal to this court, that the property was acquired for the purpose of continuing the farming business carried on on the land by the previous owners.

Clearly, as I have said, the land was acquired because it was a good “buy”. Its potential value was obvious. What the appellant would do with it was not decided at the time of acquisition. The incorporators were well to do and could afford to bide their time. What the appellant would do with the land would depend on what opportunities presented themselves. I have no doubt that, if the guiding mind of the appellant were to have frankly answered questions at the time of acquisition, he would have agreed that the appellant might itself, at an appropriate time, erect on the land buildings suitable for the developing neighbourhood, with a view to renting them or selling them; he would also have agreed that, if the right opportunity or opportunities arose, the appellant might sell some or all of the property, and he would also have agreed that a really attractive bare land leasing proposal would receive careful consideration by the appellant. In other words, the land was not dedicated at the time of acquisition to any particular use. It might end up as stock-in-trade of a trading business or as the subject of a venture in the nature of trade. It might end up as the site for an income-producing building. It might end up as revenue-producing bare land.

In those circumstances, had the acquisition merely been followed by the 1962 sale, I should have had no doubt that the resultant profit was a profit from a business within the extended meaning of that word as used in the Income Tax Act. In effect, the appellant would have dedicated the land, or at least that part of it that it sold, to the carrying on of a trading business or a venture in the nature of trade.

47 Mr Justice Judson, speaking for the Supreme Court of Canada, after quoting the facts found by the President as I have quoted them above, then went on to say at page 606 [315, 5229]:

The ratio of the judgment under appeal is that the company had committed itself to holding the land as income producing land for 25 years and that the option clause in no way constituted a dedication of the land to a trading operation. Here, I think, there is error.

When the company gave this lease and option its earlier indecision was resolved. This is not the “bare land leasing proposal” referred to in the quoted reasons for judgment. The option, in my opinion, is all important. It was the method which the company adopted in putting through its real estate transactions. The property was in a rapidly developing area. The mortgages given back when the property was purchased provided for partial discharges on 5 acre lots. The option was granted within 17 months from the date of acquisition of the property and provided for the purchase of 10 acre parcels. The issue in this appeal is whether the company was selling its land in the course of the operation of a business for profit. It undoubtedly was and the gains in question are income.

48 For the purposes of the present appeal with respect to the sale of the 6th St Property I repeat for the purpose of emphasis Mr Justice Judson's statement that “The option, in my opinion, is all important”. Obviously the option is an absolute indication of a willingness by the Hilson Company to sell however unwilling that option may have been granted. Assuming that the land was purchased by Hilson prior to the beginning of the negotiations with Alberta Mack Truck, which is the assumption more favourable to the defendant, then Hilson had no specific plans for its use. The land was not dedicated at the time of acquisition to any particular use. It could become stock-in-trade or it could be used as the site for an income-producing building.

49 Following so closely upon the acquisition of the land as to be almost coincident therewith the negotiations with Alberta Mack Truck began. From the outset of these negotiations Alberta Mack Truck insisted upon an option to purchase the land and building to be constructed thereon. It is for these reasons that I have concluded that this particular parcel of land was not a capital asset in the hands of Hilson but rather that it was stock-in-trade from which it follows that the appeal by the Minister with respect to this particular parcel for the defendant's 1970 taxation year must be allowed.

50 However I have reached a different conclusion with respect to the Edmonton Property.

51 On that property a building was built by Hilson to the specifications of a tenant and upon the completion of the building the property was leased to that tenant for a time of 20 years at a rental yielding a satisfactory return. Accordingly that land became the site of a revenue-producing building and the property became a capital asset in the hands of Hilson.

52 In my opinion that category did not change as is possible in certain circumstances which do not prevail here.

53 The first tenant for whom the building was erected entered into a long-term lease but became insolvent before the expiry of the lease. The defendant then had on its hands a vacant building. The evidence is clear that the defendant directed its efforts to leasing the building and not towards its sale.

54 It is true that in the lease to the second tenant, Heliaric, there was an option to purchase included at the insistence of the tenant. In view of the difficulty Hilson experienced after the premature termination of the first lease it is not surprising that Hilson would meet the requirements of a prospective tenant, such as an option to purchase. Heliaric did not prove to be a financially reliable tenant. It could not meet its first month's rent on the due date. While there is no evidence on the subject, nevertheless I am certain that Hilson made some investigation of the tenant and no doubt realized it was a struggling company and Hilson could therefore reasonably expect that the option to purchase would not be exercised nor was it exercised by this tenant.

55 The third tenant was a responsible one. When the lease was negotiated with this tenant by Hilson the property had been vacant for some time and was producing no revenue. For this reason, even though Hilson may have preferred to retain the property, it is not surprising that the option to purchase was included in the leasing arrangement at the insistence of the tenant. Hilson had no reasonable alternative but to concede. The option is an indication of Hilson's willingness to sell at that time. There was the possibility that the lease might not be exercised.

56 In view of the conclusions I have reached that upon the acquisition of the land there was no purpose of profit-making by resale, there would be no impediment to the defendant subsequently concluding that it would be to its advantage to dispose of the property as it did. That was the effect of the option to purchase which was exercised by the tenant at a time advantageous to it.

57 Accordingly, the profit so realized was, in my opinion and for the reasons indicated, an accretion to capital.

58 It therefore follows that the appeal by the Minister with respect to the Edmonton Property must be dismissed.

59 There now remains for consideration the third transaction, that is the sale of property in the City of Calgary conveniently referred to as the 3rd St Property. This property was sold by the defendant on March 19, 1970, and upon the sale of the land the defendant realized the next sum of $4,813.59 which the Minister added to the defendant's income for its 1971 taxation year and assessed tax accordingly.

60 This property came into the possession of the defendant by a circuitous route.

61 When Precision Machine and Equipment Limited, which was a wholly-owned subsidiary of Standard, went into voluntary liquidation in 1962 it was indebted to Standard in the amount of $70,000 for advances. Standard took the 3rd St Property, owned by Precision, in satisfaction of that indebtedness.

62 The building on the land was of little value and suitable only for storage purposes. Standard did nothing with the property other than to rent it for storage purposes to sundry tenants for short periods which produced negligible returns.

63 On July 28, 1968, BACM Industries Ltd in an arm's length transaction acquired the assets of Standard Holdings by the purchase of all the issued and outstanding shares of Standard. However, certain assets of Standard were excepted from the sale to BACM. They were Canadian Pipe Lines Construction Co Ltd, of which Standard owed 50% of the shares and the remaining 50% were owned by US residents and Chinook Shopping Centre of which Standard was the manager and owner of 75% of the shares. The shares of these companies owned by Standard were purchased by the common shareholders in proportion to their shareholdings. Further, BACM did not wish to purchase the properties owned by the defendant and accordingly the shareholders of Standard purchased from Standard all the issued and outstanding shares of the defendant. All such shares were owned by Standard.

64 BACM did not wish to purchase two properties which were owned by Standard, one of which was the 3rd St Property in Calgary.

65 Accordingly, such property was purchased by the shareholders of Standard from Standard for $70,000, that is at its cost to Standard.

66 In August 1969 the 3rd St Property was transferred by the shareholders, who had acquired this property and the shares of the defendant from Standard, to the defendant at a price of $70,000 which was the identical price at which those shareholders had acquired the property from Standard.

67 From August 1969 to March 1970 the 3rd St Property was leased to several tenants for storage purposes at negligible returns.

68 The 3rd St Property was located in an area affected by urban blight. For this reason the area was the subject of an urban renewal scheme by the City of Calgary. The building on the site was of little value and further it was dilapidated. The urban renewal scheme was later implemented by the City of Calgary and resulted in a restoration of the area by the construction of a complex of municipal government buildings, such as a public library, a new city hall, a municipal court house and the like.

69 From the foregoing the fact is that the defendant acquired the 3rd St Property in August 1969. It immediately put the property up for sale by listing it with a real estate agent at a price of $75,000. Some seven months after its acquisition by the defendant the property was sold on March 19, 1970, to the Calgary Police Association for the asking price of $75,000. As previously indicated the net gain to the defendant on the sale of the land was $4,813.59 and there is no dispute between the parties as to the amount.

70 In commenting on the 3rd St Property the learned member of the Tax Review Board characterized this transaction by the defendant as a “marginal situation”. By that expression I assume he meant that the transaction was susceptible of falling on either side of the line which divides land acquired to make a profit from the sale thereof and land acquired to produce revenue from the use thereof. The use of language such as “marginal situation” implies that the question is borderline and in that event it seems to me that the taxpayer may not have been successful in discharging the onus cast upon it to demolish the assumptions on which the assessment was based. The learned member must have found that the onus was satisfied because he concluded the latter to have been the case.

71 On the evidence before me I have reached an opposite conclusion. On the facts as recited above there was no evidence from which it could be concluded that the land was acquired by the defendant for the purpose of producing rental income. Rather the land appeared unwanted by the defendant. It was obliged to acquire it by force of the circumstances outlined. From its location and the dilapidated condition of the building upon it and the prior experience there was little likelihood of the land and building producing revenue commensurate with its cost to the defendant. There was no dedication at the time of its acquisition to the use of producing revenue therefrom. On the contrary the property was forthwith offered for sale and sold shortly after it was so offered.

72 In my opinion the gain realized by the defendant on the sale of this property was a profit from a “business” within the meaning of sections 3 and 4 of the Income Tax Act as extended by paragraph 139(1)(e) thereof, and therefore properly assessed by the Minister as income to the defendant.

73 The appeal by the Minister with respect to the defendant's 1971 taxation year is therefore allowed.

• (1) dismissed with respect to the gain of $23,000 realized upon the sale of the Edmonton Property; and

• (2) allowed with respect to the gain of $39,640 realized upon the sale of the 6th St Calgary Property.

75 The net amount added to the defendant's income was the total of $23,000 and $39,640, less an amount of $1,367.75 for legal fees in connection with both sales. Since I have dismissed the appeal with respect to the gain of $23,000 on the sale of the Edmonton Property and allowed the appeal with respect to the sale of the 6th St Calgary Property, it follows that the deduction of legal fees in the amount of $1,367.75, which was attributable to both sales, must be apportioned.

76 The appeal with respect to the assessment for the 1970 taxation year is, as indicated above, allowed in part and the assessment is referred back to the Minister for reconsideration and reassessment in accordance with these reasons.

77 There were in effect two appeals with respect to the defendant's 1970 taxation year combined in one statement of claim, the first with respect to the Edmonton Property and the second with respect to the 6th St Calgary Property. A total amount of $61,212.25 was added by the Minister to the defendant's income for that year as a consequence of both transactions which resulted in an increase in the tax payable in the total amount of $32,543.14. By a rough computation I would compute the tax payable with respect to each transaction to be in excess of $5,000 but less than $50,000 and accordingly if the appeals were segregated with respect to each transaction both would fall within Class II of the Tariff of Fees. The taxpayer was successful on the first matter and the Minister was successful on the second matter.

78 I take as a premise that the costs of the parties will be substantially equal and I estimate that the time devoted to each matter at trial was approximately equal. That being so the costs in the two transactions effectively offset each other and accordingly no costs will be allowed to either party.

79 With respect to the appeal of the assessment for the defendant's 1971 taxation year, as indicated above and for the reasons outlined above, the appeal is allowed. That being so Her Majesty is entitled to Her taxable costs applicable to the appeal for that year.