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Contentions For the appellant: — All of the transactions are bona fide transactions and, as such, do not constitute an indirect or direct benefit to the taxpayer. — In any event, if it were an indirect or direct benefit to the taxpayer, the taxpayer ought to be entitled to counter-account from that amount the sums actually due to the taxpayer from Garden City Press Limited, which exceeded the amount of the deemed benefit in any event. ... The appellant (even though president of GCP Ltd) had objected to this as a partner in VMS, becuase it might reflect adversely on the partnership — nevertheless, Mr Brown insisted upon it. ... He was fully aware that the account could not be collected by the corporation — to do so would put the partnership into bankruptcy. ...

. — Payments outside Ceylon made to or for the benefit of non-residents are described in subsection 8(1) of the Exchange Control Act of Ceylon as follows: Except with the permission of the Bank, no person resident in Ceylon shall, subject to the provisions of this section, make any payment outside Ceylon to or for the credit of a person resident outside Ceylon. — Payments in Ceylon made to or for the benefit of non-residents are described in section 7 of the said Act as follows: Except with the permission of the Bank, no person shall in Ceylon—(a) make any payment to or for the credit of a person resident outside Ceylon, or (b) make any payment to or for the credit of a person resident in Ceylon by order or on behalf of a person outside Ceylon, or (c) place any sum to the credit of any person resident outside Ceylon. ... The appellant has sought the permission of the Central Bank of Ceylon to receive the rental payments in question, but the Bank has refused such permission. — In accordance with subsection 31(1) of the said Exchange Control Act of Ceylon, the Bank directed that all sums otherwise payable to the appellant after his departure from Ceylon be paid into a block account at the Bank of Ceylon. In January, 1975, this direction was rescinded and no payments whatsoever have been made into the said block account subsequent to December, 1974. — He did not receive either directly or constructively any rental income from any property in Ceylon and says further that by virtue of sections 7 and 8 of The Exchange Control Act of Ceylon, the appellant was legally prevented from receiving, using or enjoying any portion of the said rental income. — In the alternative, only one-half of such rental income ought to be included in the appellant’s income in each of the relevant taxation years since the rental property which produced rental income was held by the appellant jointly with another person. — In the further alternative, the appellant is entitled to obtain the relief provided under subsection 161(6) of the Income Tax Act. — In the further alternative, the appellant is entitled to obtain the relief provided by section 126 of the Income Tax Act. — In the further alternative, the appellant is entitled to the deductions permitted by division C in connection with the said rental property in the computation of the appellant’s taxable income. ...

The appellant prejudiced his own appeal by his comments relating to the point in time when he sold the property and the reason for that sale — I quote: “reaching my investment objective, they had appreciated in value rapidly”. ... The appellant had only one continuous purpose in mind — to buy the land, to hold it, and to sell it at a profit. ... The appellant in this instance purchased land with the sole and single purpose of selling it at an appropriate time, when he was offered sufficient money to make his acquisition thereof profitable — he accomplished that. ...

Of the $40,000 purchase price, the purchasers’ solicitors paid $36,000 to Pacific and, at the request of the appellant Andrew Tulloch, on February 20, 1964, issued a cheque for the balance of $4,000 to the Main & Hastings Branch of The Royal Bank of Canada in Vancouver, which amount was deposited in the Manager’s Account at that bank. ... Being eager to complete the transaction and put the “Sea Prince” into service with as little delay as possible, Blaine Myers & Co Ltd somewhat reluctantly issued their cheque for $3,000 to the appellant personally on February 25, 1964. ... It should be noted here that, although Crescent was the party that had agreed to purchase the “Sea Prince” under the agreement of February 19, 1964, none of the transactions whereby the “Sea Prince” was eventually transferred or sold to Blaine Myers & Co Ltd was recorded in the books or financial records of Crescent. ...

The amount deductible in computing taxable income under the provisions of subsection 110.1(1) (as it reads in its application to the 1975 taxation year) is expressed as “... ... Exhibit A-2, the trade slip from N L Sandler & Co, shows that the bonds allegedly purchased were purchased from the broker as principals. 3. ... At no time did N L Sandler & Co Ltd ever become obliged to pay the said sum to the appellant. ...

. — In 1965 the appellant successfully made application to the Town of Burlington (as it then was) to rezone the property from “RA3” to “RM3” in preparation for its anticipated building on the property. — In 1966 the appellant submitted detailed construction drawings to the Town of Burlington for a multiple unit residential complex tentatively named “Glendor Court”. — From 1966 to 1971 the appellant approached many lenders with a view to seeking financing for the building of Glendor Court as a multiple unit residential rental complex. The appellant was unable to interest any lender in its development plan for the property. — In 1969, a small part of the property was sold to the Hydro-Electric Power Commission of Ontario which required same. The proceeds of disposition were treated as a receipt on account of capital and deducted from the book value of the land as carried on the books of the Corporation. — In 1972 one of the principals of the appellant became ill and was no longer able nor willing to continue promoting the development of the property. ...

This admission reduces to $11,925 the sum of $17,285 in additional income estimated by the respondent, not including profits from Lots No 1 and No 2. 3.40 For the years in question, taxable income declared and amounts added (not considering gains resulting from the sale of property) read as follows: 3.41 Using a revised balance sheet for the years 1968 to 1972, prepared by the respondent and produced as Exhibit A-10, an accountant who was a witness for the appellant, Mr Ouellet, showed the acquisition of assets for various years for the sum of $11,925, including inter alia: Declared Added Added 1969 $5,757.57 $2,106.48 1970 $9,352.11 $4,619.19 1971 $6,166.39 $5,216.72 1972 $6,706.54 $5,344.59 Boat and motor $ 525.00 1970 Garage $2,250.00 1972 Cottage $3,653.92 1970 Improvement to cottage $ 953.00 1972 Investments $ 800.00 1971 3.42 As regards the additional income of $11,925, the appellant said that he does not admit to it, but he submitted that it would have cost too much to prepare an adequate defence. 4. ... They will be cited below if necessary. 5.2 The following precedents, part of which were cited by counsel, were examined by the Board: (1) MNR v James A Taylor, [1956] CTC 189; 56 DTC 1125; (2) Californian Cooper Syndicate v Harris (1904), TC 159; (3) MNR v Valclair Investment Co Ltd, [1964] CTC 22: 64 DTC 5014; (4) Hope Hardware & Building Supply Co Ltd v MNR, [1967] CTC 120; 67 DTC 5085; (5) Bronze Memorials Ltd v MNR, [1967] CTC 41; 67 DTC 5052; (6) Charles Emile Marquis v MNR, [1972] CTC 2398: 72 DTC 1328; (7) Georgia Gulf Estates Ltd v MNR, [1968] CTC 10; 68 DTC 5026; (8) John S Davidson v MNR, [1968] CTC 136; 68 DTC 5086; (9) Napoléon St-Hilaire v MNR, [1973] CTC 2064; 73 DTC 54; (10) Robert D Tate et al v Her Majesty The Queen, [1974] CTC 731; 74 DTC 6559; (11) Progress Management Co Ltd v Her Majesty The Queen, [1975] CTC 244; 75 DTC 5174; (12) Roy M Power v Her Majesty The Queen, [1975] CTC 580; 75 DTC 5388; (13) Ball Brothers Ltd v MNR, [1975] CTC 2312; 75 DTC 236; (14) Grant P Kyllo v MNR, [1975] CTC 2243; 75 DTC 194; (15) Golden Oak Investments Ltd v MNR, [1975] CTC 2220; 75 DTC 180. (16) Investors Leaseholds Ltd v MNR, [1976] CTC 2211; 76 DTC 1163; (17) John Cragg v MNR, [1951] CTC 322; 52 DTC 1004; (18) Regal Heights Ltd v MNR, [1960] CTC 384; 60 DTC 1270; (19) Clemow Realty Ltd v Her Majesty The Queen, [1976] CTC 129; 76 DTC 6094; (20) Vaughn Theodore Neilson et al v MNR, [1976] CTC 2032: 76 DTC 1035; (21) Hans Reicher v Her Majesty The Queen, 76 DTC 6001; (22) Glengate Investments Ltd v MNR, 31 Tax ABC 369; 63 DTC 322; (23) No 145 v MNR, 10 Tax ABC 69; 54 DTC 110: (24) John Cyril Williscroft v MNR, 7 Tax ABC 118; 52 DTC 344. 5.3 Lot No 1 In examining facts to determine whether or not a capital gain is involved, the courts have always considered the objective test and the subjective test, without necessarily always using these terms. ...

He also sold for B & H Homes and S & S Homes (SN p 42). He said that with Camelot he “did a little of the sales work, but I really didn't sell very many of my own houses. ... It’s to — it establishes, in my mind, the normal interest accruing to ownership really. ... “It was widely held that it would not be — this would not be possible after 1971.” ...

Contentions The appellant contended that: — the loan made to it by the Bank of Montreal on June 22, 1977 constituted borrowed money which was in fact used for the purpose of earning income from a business, and that — the amounts of $2,905.56 and $10,216.03 paid by the appellant in respect of interest in its 1977 and 1978 taxation years respectively, were paid by the appellant pursuant to a legal obligation to pay interest on borrowed money used for the purpose of earning income from business and were proper deductions under the provisions of subparagraph 20(1)(c)(i) of the Income Tax Act. The respondent contended that: — the interest amounts were not paid on borrowed money used for the purpose of earning income from a business or property within the meaning of subparagraph 20(1)(c)(i) of the Act. ... It was not possible for him to determine with certainty that the $100,000 from the Bank of Montreal had gone to pay part of the $116,200 loan to the Thompsons, or to the retirement of the bank loan — both transactions had taken place in the regular company bank account at about the same time. ...

The decision was based solely on insurance broking and not on tax consideration because “... ... Law — Cases at Law — Analysis 4.01 Law The main provisions of the Income Tax Act involved in the present case are sections 3, 4, 9; subsection 245(1) and paragraphs 18(1)(a) and (e). ... It was experienced — it managed about 10 captive insurance companies in Bermuda. 4. ...