THORSON,
P.:—These
appeals
are
against
the
income
tax
assessments
levied
against
the
appellants
respectively
for
the
year
1958
whereby
the
Minister
in
each
case
added
to
the
amount
of
reported
taxable
income
the
sum
of
$18,333.33
as
the
share
of
the
profit
resulting
from
a
certain
transaction
into
which
the
appellants
had
entered
as
partners.
Each
appellant
filed
a
notice
of
objection
to
his
assessment
and
each
was
confirmed
by
the
Minister.
Thereupon,
each
appellant
appealed
to
the
Tax
Appeal
Board
which
dismissed
his
appeal.
It
is
from
the
decisions
of
the
Tax
Appeal
Board
(28
Tax
A.B.C.
449,
452)
that
the
present
appeals
are
respectively
taken.
Pursuant
to
an
order
made
on
the
opening
of
the
hearing
the
three
appeals
were
heard
together.
The
facts
of
the
transaction
from
which
the
profits
referred
to
were
made
by
the
appellants
are
not
in
dispute.
The
appellant
Walker
is
a
real
estate
agent
with
a.
wide
and
long
experience
in
Edmonton.
In
April
of
1954
he
purchased
a
lot
in
Jasper
Place,
a
rapidly
expanding
suburb
of
Edmonton,
described
as
Lot
1,
Block
14,
in
the
Townsite
of
Jasper
Place,
191
K.S.,
for
the
sum
of
$2,600.
It
had
belonged
to
Mayor
Stone
of
Jasper
Place
who
was
anxious
to
get
rid
of
it.
Mr.
Walker
stated
that
he
had
planned
to
hold
it
and
possibly
build
a
motel
on
it
and
operate
the
motel,
but
there
was
a
change
in
this
intention
in
August
of
1955
when
he
formed
a
partnership
with
the
appellants
Klak
and
Rueb
for
the
development
of
the
property
for
hotel
purposes.
It
was
agreed
by
the
partners
that
they
would
jointly
develop
the
property
by
the
construction
of
a
hotel
on
it,
each
contributing
one-third
of
the
equity
capital,
and
that
they
would
then
operate
the
hotel,
each
taking
one-third
of
the
profits.
The
property
in
question
was
admirably
suited
for
the
intended
development
and
Mr.
Walker
sold
it
to
the
partnership
for
$10,000.
On
the
profit
realized
on
the
sale
he
paid
income
tax.
With
the
intended
purpose
in
mind
the
appellants
negotiated
with
the
Alberta
Liquor
Control
Board
and
succeeded
in
obtaining
its
approval
of
the
lot
as
a
hotel
site.
Jasper
Place
at
the
time
was
a
town
of
14,000
people
and
growing
rapidly.
There
was
a
great
flow
of
traffic
along
the
Jasper
highway
on
which
the
lot
faced
and
industrial
and
business
expansion
was
taking
place
in
the
town.
The
appellants
later
obtained
the
Board’s
approval
in
principle
of
the
proposition
that
the
Town
of
Jasper
Place
would
support
the
proposed
hotel
and
a
beer
licence.
The
appellants
prepared
preliminary
sketches
and
final
plans
for
a
hotel
building
on
the
lot
and
obtained
the
Board’s
approval
of
the
plans
as
suitable
and
acceptable
for
licensed
premises.
They
also
advertised
in
the
Jasper
Place
newspaper
their
intention
to
build
a
hotel
and
apply
for
a
beer
licence.
They
applied
for
and
obtained
an
interim
development
permit
from
Jasper
Place
Interim
Development
Board.
After
obtaining
estimates
on
the
cost
of
the
building
they
applied
for
and
obtained
a
building
permit
permitting
construction
and
between
February
3,
1956,
and
April
1,
1956,
they
actually
started
construction
by
clearing
and
levelling
the
site
and
making
an
excavation
for
the
basement.
The
estimated
cost
of
the
hotel
building
after
the
Alberta
Liquor
Control
Board
had
considered
an
earlier
estimate
was
$220,000.
Tentative
arrangements
were
made
with
Credit
Foncier
in
August
of
1955
for
a
mortgage
loan
of
$100,000,
possibly
$125,000.
The
partners
were
to
provide
the
balance,
Messrs.
Klak
and
Rueb
contributing
$72,500
and
Mr.
Walker
$36,250.
Messrs.
Klak
and
Rueb.
found
that
they
were
unable
to
raise
the
amounts
which
they
had
expected
from
two
assets
which
they
had
valued:
at
$18,000
and
$20,000
respectively
with
the
result
that
they
were
able
to
contribute
only
$28,500
instead
of
the
$72,500
which
had
been
contemplated
as
the
amount
of
their
contribution.
This
reduced
amount
of
$28,500,
together
with
Mr.
Walker’s
contribution
of
$36,250
made
only
$64,750
available
for
the
enterprise
which
in
turn
reduced
the
amount
of
the
mortgage
that
they
could
raise.
They,
therefore,
had
to
look
elsewhere
for
assistance.
They
found
it
through
Gateway
Agencies
who
put
them
in
touch
with
Mr.
Louis
Donald
who
agreed
to
put
up
the
other
necessary
funds
to
build
the
intended
hotel
on
the
understanding
that
a
corporation
should
be
formed
in
which
75
per
cent
of
the
shares
should
be
issued
to
him
and
25
per
cent
to
the
partners
and
that
the
partners
should
transfer
the
lot
to
the
company
and
prepare,
procure
and
pay
for
plans
and
specifications
for
the
erection
of
a
hotel
on
it
and
assign
them
to
the
company
in
return
for
which
the
partners
should
receive
from
the
company
a
promissory
note
payable
on
demand
for
$62,500.
An
agreement
embodying
this
understanding
was
entered
into
on
May
15,
1956,
between
the
partners
on
the
one
hand
and
Mr.
Donald
on
the
other.
Under
this
agreement
the
partners
were
not
required
to
put
up
more
money
than
they
had
available.
Mr.
Walker
explained
that
the
partners
made
this
arrangement
because
Mr.
Donald
had
experience
in
the
hotel
business
and
they
would
not
have
to
look
further
for
some
one
having
such
experience.
The
amount
of
$62,500
subsequently
received
by
the
partners
resulted
in
a
profit
to
them
of
$44,500,
after
the
deduction
of
$10,000
paid
to
Mr.
Walker
for
the
property,
$2,000
paid
to
Gateway
Agencies
as
a
commission
for
finding
Mr.
Donald
and
$6,000
paid
for
the
plans
and
specifications,
which
profit
was
divided
into
shares
of
$14,833.33
each
which
amount
was
included
in
each
of
the
assessments
under
appeal.
It
was
contended
for
the
appellants
that
the
lot
had
been
acquired
as
a
fixed
capital
asset
to
form
part
of
a
business
and
that
the
profit
realized
by
the
partners
on
its
sale
was
a
capital
gain,
that
the
failure
of
Messrs.
Klak
and
Rueb
to
realize
what
they
had
expected
had
frustrated
their
original
plans
and
forced
them
to
sell
to
the
company
referred
in
the
agreement
with
Mr.
Donald
and
that
such
frustration
took
the
transaction
out
of
the
ambit
of
Section
139(1)
(e)
of
the
Act
with
the
result
that
the
profit
made
was
not
taxable.
The
case
for
the
appellants
was
carefully
presented
by
counsel
for
them
but
I
do
not
agree
with
the
contention
put
forward
by
him.
In
my
opinion,
the
profit
realized
by
the
appellants
was
plainly
profit
from
a
business
within
the
meaning
of
the
term
“business”
as
defined
in
Section
139(1)
(e)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148,
and,
therefore,
taxable
under
Sections
3
and
4
of
the
Act.
Section
139(1)
(e)
defines
‘‘business’’
as
follows
:
“139.
(1)
In
this
Act,
(e)
‘business’
includes
a
profession,
calling,
trade,
manufacture
or
undertaking
of
any
kind
whatsoever
and
includes
an
adventure
or
concern
in
the
nature
of
trade
but
does
not
include
an
office
or
employment.”
In
my
judgment,
the
true
nature
of
the
transaction
from
which
the
profits
in
question
were
made
was
that
of
a
business
enterprise
for
the
purpose
of
making
a
profit.
This
was
not
a
case
of
capital
gain
at
all.
The
appellants
as
partners
acquired
the
lot
in
question
for
the
purpose
of
the
business
enterprises
on
which
they
embarked
and
as
part
of
it.
Their
business
enterprise
was
clearly
within
the
ambit
of
the
term
‘‘undertaking’’
in
the
statutory
definition.
And
it
is
not
correct
to
say
that
they
were
frustrated
in
their
plans
and
forced
to
sell.
All
that
happened
was
that
when
Messrs.
Klak
and
Rueb
found
themselves
unable
to
realize
the
amounts
expected
by
them
from
the
assets
on
which
they
had
counted
the
partners
looked
elsewhere
and
found
the
means
of
completing
their
undertaking
in
Mr.
Donald.
The
business
enterprise
on
which
they
had
embarked
took
a
different
turn
from
that
which
they
had
originally
intended.
Moreover,
the
term
‘‘adventure
or
concern
in
the
nature
of
trade’’
is
wide
enough
to
include
the
business
activity
into
which
they
entered.
In
my
opinion,
the
Minister
was
clearly
right
in
assessing
the
appellants
as
he
did.
Their
respective
appeals
must,
therefore,
be
dismissed
with
costs,
but
in
view
of
the
fact
that
the
appeals
were
heard
together
the
costs
will
include
only
one
set
of
counsel
fees
to
be
apportioned
equally
between
the
three
appellants.
Judgment
accordingly.
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