Bonner T.C.J.:
1 This is an appeal from an assessment under the Income Tax Act (“Act”) for the Appellant's 1994 taxation year. In his return of income for that year the Appellant elected to report a capital gain on property (the Leland Hotel) owned by him on February 22, 1994. The designated proceeds of disposition were $150,000, the adjusted cost base was $61,000 and the elected capital gain was $89,000. The taxable capital gain, being 75% of $89,000 was $66,750.
2 It was the Appellant's expectation that the election would not give rise to any immediate liability to pay tax. The validity of that expectation rests on the operation of subsection 110.6(3) which, as required to be read for the 1994 and 1995 taxation years provided:
110.6(3) In computing the taxable income for a taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of property (other than property the capital gain or capital loss from the disposition of which is included in determining an amount under paragraph (2)(d) or (2.1)(d)) there may be deducted such amount as the individual claims, not exceeding the least of
(a) the amount, if any, by which $75,000 exceeds the total of(i) the total of all amounts each of which is an amount deducted by the individual under this subsection in computing the individual's taxable income for a preceding taxation year,
(ii) where the taxation year ended after 1987,1/3of the total of all amounts each of which is an amount deducted under this subsection in computing the individual's taxable income for a taxation year ending before 1988, and
- (iii) where the taxation year ended after 1989,1/8of the total of
(A) all amounts deducted under this subsection in computing the individual's taxable income for a taxation year ending before 1990 (other than amounts deducted under this subsection for a taxation year in respect of an amount that was included in computing the individual's income for that year because of subparagraph 14(1)(a)(v)), and
(B) the amount determined under subparagraph (ii) in respect of the individual for the year,
(b) the amount, if any, by which the individual's cumulative gains limit at the end of the year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual's taxable income for the year, and
(c) the amount, if any, by which the individual's annual gains limit for the year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual's taxable income for the year.
There was no dispute about the paragraph (a) and paragraph (c) figures; the former was $75,000 and the latter was $62,625.75 as set out in paragraph 6(k) of the Reply to the Notice of Appeal.3 The Appellant's challenge to the assessment was aimed at the paragraph 110.6(3)(b) figure, that is to say, the amount by which his cumulative gains limit at the end of 1994 exceeded the total of all amounts deducted under subsection 110.6(2) or (2.1) in computing his taxable income for 1994.
4 The term “cumulative gains limit” is defined in subsection 110.6(1) as follows:
“cumulative gains limit” of an individual at the end of a taxation year means the amount, if any, by which(a) the total of all amounts determined in respect of the individual for the year of preceding taxation years that end after 1984 for A in the definition “annual gains limit”
(b) all amounts determined in respect of the individual for the year or preceding taxation years that end after 1984 for B in the definition “annual gains limit”,
(c) the amount, if any, deducted under paragraph 3(e) in computing the individual's income for the 1985 taxation year.
(d) all amounts deducted under this section in computing the individual's taxable incomes for preceding taxation years, and
(e) the individual's cumulative net investment loss at the end of the year.
5 The paragraph (a) part of the definition is not in dispute. The Appellant asserts that the Minster of National Revenue erred in taking into account net capital losses of other years claimed by him in 1985 and 1986. His position is that:
a) his claim for those losses in 1985 and 1986 is “statute-barred” and
b) such claims, whether statute-barred or not, cannot conceivably operate to reduce his entitlement to a capital gains exemption in 1994.
6 The answer to the first contention, which I assume is based on subsection 152(4) of the Act, is that the Minister is not, in assessing tax for the Appellant's 1994 taxation year seeking to reassess tax for the earlier taxation years. He is merely taking into account in determining the Appellant's liability for tax in 1994 events which had taken place in prior years.
7 The answer to the Appellant's second contention lies in the statutory definition of the term “cumulative gains limit” set out above and in particular in paragraph (b) thereof which takes into account amounts determined for B in the definition of “annual gains limit”. In that definition B reads:
B is the total of
Although the path through the statutory maze is difficult to follow it is clear that the Minister of National Revenue was right in deducting the net capital losses of other years which had been claimed by the Appellant as required by paragraph (b) of the definition of “cumulative gains limit”. For the foregoing reasons the appeal will be dismissed.
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