McArthur,
J.T.C.C.:—Harry
Wynberg
Jr.,
Peter
Wynberg,
and
Gerard
F.
Wynberg,
the
appellants,
appeal
under
the
informal
procedure,
the
respondent's
reassessments
of
their
1988
and
1989
taxation
years.
The
appeals
were
heard
on
common
evidence.
The
issues
arise
from
the
value
placed
on
a
property
sold
and
transferred
by
the
appellants
to
Wynberg
Landscaping
Ltd.
on
September
19,
1989.
In
May
1987
the
appellants
and
their
brother
Bernandus
purchased,
for
$75,000,
approximately
77.3
acres
of
vacant
land
located
on
Elmwood
Drive
within
the
Northern
extremities
of
the
City
of
Moncton.
At
that
time
the
four
brothers
were
equal
shareholders
of
Wynberg
Landscaping
Ltd.
The
land
was
purchased
primarily
to
provide
top
soil
and
a
place
of
operation
for
the
landscaping
company.
In
March
1989,
Bernandus
Wynberg
transferred
his
interest
in
the
property
to
his
three
brothers
based
on
a
value
of
$213,000
and
he
sold
his
shares
in
the
corporation
to
his
father
Hendrikus
for
$25,000.
On
September
18,
1989,
the
appellants
transferred
the
property
to
the
company
for
the
sum
of
$225,000.
The
respondent
takes
the
position
that
the
fair
market
value
of
the
property,
at
the
time
of
the
transfer
was
no
more
than
$113,500.
The
property
has
approximately
960
feet
of
frontage
along
Elmwood
Drive
with
a
depth
of
3,600
feet,
about
70.5
acres
are
zone
R.A.
and
2.3
acres
R.R.
It
is
relatively
high
and
dry
and
suitable
for
development.
A
deteriorated
house
and
barn
were
considered
of
little
or
no
value.
Elmwood
Drive
runs
from
the
centre
of
the
city
in
a
northerly
direction.
The
subject
land
is
situated
on
the
east
side
of
Elmwood
Drive
and
just
north
of
the
TransCanada
Highway
(highway).
The
city
centre
of
Moncton
and
major
residential
development
is
concentrated
south
of
the
highway.
At
the
time
of
purchase
any
residential
development
on
the
R.R.
zoned
lands
had
to
be
serviced
with
drilled
wells
and
septic
tanks
and
each
building
lot
required
a
frontage
of
100
feet.
In
1988
a
privately
owned
sewer
line
was
constructed
in
front
and
across
the
street
from
the
subject
lands.
The
sewer
was
owned
and
controlled
by
the
proprietors
of
a
minihome
development
about
a
mile
north
of
the
subject
lands
who,
in
their
discretion,
permitted
other
property
owners
to
hook
up
to
the
lines
for
a
$1,000
fee.
The
appellant
Harry
Wynberg,
amongst
other
matters,
gave
evidence
as
to
value,
referring
to
the
consideration
placed
on
the
lands
upon
the
purchase
of
Bernandus
Wynberg's
interest
using
a
figure
of
$213,000
and
the
sale
of
several
lots
between
1990
and
present
date
at
a
price
of
approximately
$22,000
each.
Two
of
these
lots
were
transferred
to
himself
for
$20,000
each.
The
Court
would,
of
course,
be
required
to
exercise
hindsight
to
give
weight
to
these
transfers.
A
qualified
expert
appraiser
for
the
appellants
presented
an
appraisal
wherein
he
concluded
the
market
value
of
the
property
as
of
September
1989
was
$235,000.
This
report
was
prepared
in
the
late
summer
of
1991.
The
same
witness
prepared
an
earlier
estimate
of
value
for
Bernandus
Wynberg,
the
outgoing
partner
in
September
1988.
In
that
document
he
expressed
the
opinion
that
the
market
value
of
the
subject
property
was
$213,405.
Addressing
the
later
valuation,
the
appraiser
referred
to
three
methods
used
to
evaluate
real
property.
He
used
the
direct
sales
comparison
approach
to
determine
the
market
value
(market
approach).
He
concluded
that
the
highest
and
best
use
for
the
property
was
that
of
residential
lots
along
the
Elmwood
Drive
frontage
and
future
residential
subdivision
for
the
rear
acreage.
The
appellants’
appraiser
attempted
to
compare
the
subject
lands,
with
similar
properties
in
the
vicinity.
He
commenced
from
the
premise
that
the
property
had
sewer
services,
although
requiring
drilled
wells,
and
the
frontage
zoned
rural
residential
could
be
subdivided
into
75
foot
residential
building
lots
immediately
and
the
rear
acreage
zoned
rural
area
to
be
developed
for
residential
use
sometime
in
the
future.
He
referred
to
the
possibility
of
industrial
use
sometime
in
the
future
as
a
second
alternative.
In
the
majority
of
instances,
the
appraiser
referred
to
comparables
in
more
densely
developed
areas
closer
to
the
centre
of
the
city
serviced
by
municipal
water
and
sewer.
He
arrived
at
a
value
of
$126,900
for
11
front
lots
with
75
feet
frontage
and
$112,000
for
the
remaining
rear
lands
that
he
calculated
to
be
80
acres
at
$1,400
per
acre.
The
total
parcel
was
rounded
at
a
value
of
$235,000.
The
Minister
presented
evidence
of
value
as
of
September
19,
1989,
through
a
qualified
appraiser
with
Revenue
Canada.
He
also
chose
the
direct
sales
comparison
approach
and
determined
that
the
highest
and
the
best
use
of
the
lands
was
residential
development
along
Elmwood
Drive
for
the
R.R.
zoned
area
and
future
development
for
the
large
R.A.
zone
parcel
at
this
point,
their
similarities
ended.
The
respondent's
expert
viewed
the
property
as
very
rural
in
nature,
not
to
be
compared
with
active
residential
development
to
the
south
of
the
TransCanada
Highway
and
to
be
considered
without
sewer
or
water
services.
He
discounted
the
sewer
line
because
it
was
privately
owned
and
controlled.
He
chose,
as
comparable,
lands
in
the
less
populated
and
undeveloped
area
north
of
the
highway.
The
appellants’
comparable
properties
were
predominately
located
to
the
south
of
the
highway
in
residential
developed
areas
with
available
water
and
sewer
services.
The
respondent
analyzed
sales
of
vacant
land
north
of
the
highway
and
within
a
radius
of
approximately
one
and
one-half
miles
of
the
property.
The
respondent
concluded
eight
lots
at
$14,000
per
lot
totalling
$112,000.
After
discounting
the
gross
selling
price
for
a
variety
of
documented
reasons,
he
reduced
the
net
value
for
the
purposes
of
his
report
to
$50,000.
He
concluded
that
the
rear
(70.5
acres)
had
a
market
value
of
$63,450
being
$900
per
acre
for
a
total
for
the
entire
parcel
of
$113,500.
I
accepted
the
accuracy
of
the
acreage
presented
by
the
respondent
rather
than
that
of
the
appellants.
In
analyzing
the
evidence
and
reports
of
the
appraisers,
including
related
exhibits
I
have
great
difficulty
in
accepting
one
to
the
exclusion
of
the
other.
Both
relied
on
comparables
but
having
commenced
from
a
different
premises,
both
chose
different
properties.
The
appellants’
witness
viewed
the
property
as
being
serviced
by
the
equivalent
of
municipal
services
and
used
comparables
closer
to
the
city
centre
on
the
south
side
of
the
highway
in
or
about
active
subdivisions
with
municipal
services.
The
respondent's
witness
viewed
the
lands
as
not
serviced
and
rural
in
nature
and
used
country
lots
as
comparables
which
were
closer
to
the
property
and
several
miles
from
the
appellants’
comparables.
Generally,
these
two
basic
different
approaches
gave
rise
to
the
wide
gap
in
values.
The
analysis
used
by
each
expert
differed
in
many
respects.
I
do
not
intend
to
review
the
detail
used
by
each
expert
in
arriving
at
his
conclusion
except
to
mention
there
was
a
considerable
gap
between
them.
Counsel
for
the
appellants
directed
attention
to
the
sales
after
the
relevant
date.
After
concluding
that
the
general
rule
is
not
to
take
anything
into
consideration
that
occurred
after
the
relevant
date,
Judge
Brulé
in
Ample
Investments
Ltd.
v.
M.N.R.,
[1990]
2
C.T.C.
2217,
90
D.T.C.
1748
(T.C.C.)
at
page
2219
(D.T.C.
1750)
stated:
.
.
the
Courts
have
accepted
the
limited
use
of
hindsight
in
cases
where
conditions
have
not
materially
changed
in
the
interim.
Judge
Nolan
of
the
Supreme
Court
in
the
matter
of
Roberts
v.
The
Queen,
[1957]
S.C.R.
28,
6
D.L.R.
(2d)
305
at
page
36
(D.L.R.
313),
commented:
In
my
view,
evidence
of
a
sale
after
the
enactment
can,
in
the
absence
of
special
circumstances,
be
relevant
to
the
value
prior
to
the
enactment.
Mr.
Harry
Wynberg
Jr.
gave
evidence
to
the
effect
that
consent
to
hook
up
to
the
private
sewer
line
for
two
lots
was
given
as
early
as
October
1989,
putting
in
doubt
the
approach
taken
by
the
respondent's
witness
who
completely
discounted
the
value
of
the
private
sewer.
The
Court,
obviously,
must
be
cognisant
for
whose
benefit
the
appraisals
were
prepared.
While
real
property
appraising
is
not
expected
to
be
an
exact
science,
it
is
disappointing,
in
the
case
at
bar,
to
see
such
divergent
conclusions.
It
is
difficult
to
comprehend
that
two
qualified
real
estate
appraisers,
both
with
many
years
of
experience,
be
over
100
per
cent
apart
in
their
conclusion
as
to
the
value
of
the
same
parcel
of
land
on
a
given
day.
To
quote
Judge
Brulé
again
in
Ample,
supra,
at
page
2220
(D.T.C.
1750)
he
stated
:
In
situations
such
as
this,
it
is
comforting
to
follow
the
comments
made
by
Mr.
Justice
Walsh,
in
Bibby
v.
The
Queen,
[1983]
C.T.C.
121,
83
D.T.C.
5148
(F.C.T.D.)
at
page
131
(D.T.C.
5157):
While
it
has
frequently
been
held
that
a
Court
should
not,
after
considering
all
the
expert
and
other
evidence,
merely
adopt
a
figure
somewhere
between
the
figure
sought
by
the
contending
parties,
it
has
also
been
held
that
the
Court
may,
when
it
does
not
find
the
evidence
of
any
expert
completely
satisfying
or
conclusive,
nor
any
comparable
especially
apt,
form
its
own
opinion
of
valuation,
provided
this
is
always
based
on
the
careful
consideration
of
all
the
conflicting
evidence.
The
figure
so
arrived
at
need
not
be
that
suggested
by
any
expert
or
contended
for
by
the
parties.
Having
considered
all
of
the
evidence
as
to
value,
I
have
come
to
the
conclusion
that
the
appellants
have
over
stated
and
the
respondent
under
stated
the
value.
A
figure
somewhere
in
between
that
sought
by
the
contending
parties
is
called
for.
The
Court
places
a
value
on
the
subject
property,
as
of
September
19,
1989
of
$170,000.
The
appellants'
capital
gain
and
capital
gains
deduction
to
be
calculated
on
a
value
of
$170,000.
There
remains
an
issue
with
respect
to
the
shareholders'
loan.
The
dispute
is
whether
the
shareholders'
benefit
of
$15,406
be
added
to
the
taxpayers'
incomes
for
taxation
year
1988
pursuant
to
subsection
15(2)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act").
The
respondent
maintains
that
the
appellants
did
not
successfully
rebut
the
respondent's
conclusion,
after
an
audit
of
the
corporation,
that
there
was
in
1988
taxation
year
a
shareholders'
benefit
totalling
$15,406
which
was
not
paid
within
one
year.
The
appellants’
position
is
that
the
shareholders’
loans
were
extinguished
upon
the
transfer
of
the
property
by
the
appellants
to
the
corporation
in
1989,
given
a
market
value
of
$225,000.
Subsection
15(2)
is
designed
to
prevent
the
tax
free
distribution
of
corporate
profits
to
the
shareholders
by
way
of
loans.
The
principal
amount
of
the
loan
is
to
be
included
in
income
unless
it
is
repaid
within
one
year
from
the
end
of
the
taxation
year
in
which
it
is
made.
I
find
that
there
existed
as
shareholders'
benefit
as
of
year
end
January
31,
1989,
of
$15,406
($5,135
for
each
of
the
three
appellants).
I
find
that
the
net
value
of
the
property,
transferred
to
the
corporation
by
the
appellants
in
September
of
1989,
be
applied
to
reduce
or
extinguish
the
shareholders'
loans
at
year
end
January
31,
1989
($15,406).
The
net
value,
of
course,
is
based
on
a
fair
market
value
of
$170,000.
The
matter
is
referred
back
to
the
Minister
for
reconsideration
and
reassessment.
The
appellants’
counsel
is
entitled
to
costs.
Appeal
allowed
in
part.
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