Search - connection

., [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. ... 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. 74 In summary, the appeal with respect to the defendant's 1970 taxation year is: (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. ...

The benefit of the Contract was later assigned to the Appellant with the consent of Wood. t) In or about June of 1987, Wood anticipated that the Municipal District of Rocky View intended to down-zone the Land, and, by the aforesaid Contract, Wood employed the services of the Appellant in order to oppose the down-zoning of the Land, and, if successful, thereafter to take all such steps as may be necessary to obtain approval to subdivide the Land into 30 lots. u) The obligations of the Appellant were to: ii) to make representations to regulatory authorities as required in connection with design control relating to the Land; iii) to assist in co-ordinating road, water, gas, power, landscaping and act as casual supervisor of construction, and to assist in subdividing the Land into 30 lots; iv) to supply his services to assist the owner with an application to subdivide the Land into the Owner's Acreage and as many two acre parcels as may be permitted. v) In the event the Appellant was successful in opposing the down-zoning of the Land and the Land was subdivided, the consideration or fee payable to the Appellant was the grant to him of 2 two acres lots to be selected by him, at the time registration of such lots was possible. w) The Appellant was successful in opposing the down-zoning of the Land by September 13, 1988. ... The Consultant hereby agrees to act as a “casual” supervisor of construction (i.e. road, water, power, gas, etc.) in connection with any construction required in order to achieve subdivision of the Lands, “.. ...

In connection with the latter, the acquisition and drilling of unproven lands is sometimes referred to in the oil industry as “wild-catting”. ... In this latter connection, Mr. Cox for the appellant stated that the appellant is currently receiving a small income of about $300 a month from the ‘‘carried interests’’ obtained through the Becket interests in these properties. ...

In dealing with the unanimous finding of the Board in respect of the nature of the article in issue counsel for the appellant limited himself to simply declaring that he disagreed with the conclusions reached by the third member, who, later, dissented on the question of similarity but attacked the declaration of the other two members on the ground that they misdirected them- selves and committed an error in law, because, as appears by their repeated reference to ‘‘onus’’, they completely misunderstood the difference between the significance of the word ‘‘onus’’ when used in connection with the construction of a statute and when employed in relation to evidence. ... For reasons which I mentioned, in connection with the nature of the Moirs Graham Sandwich it was a very different article from that which the appellant purchased from Marvens. ...

In a dairy farming business, or a sheep rearing business, where the principal objects are the production of milk and calves or wool and lambs, though there are also sales from time to time of the parent stock, a clearance or realization sale of all the stock in connection with the sale and winding up of the business gives no indication of the profit (if any) arising from income; and the same might be said of a manufacturing business which was sold with the leaseholds and plant, even if there were added to the sale the piece goods in stock, and even if those piece goods formed a very substantial part of: the aggregate sold. • 73 Where, however, a business consists, as in the present case, entirely in buying and selling, it is more difficult to distinguish between an ordinary and a realization sale, the object in either case being to dispose of goods at a higher price than that given for them, and thus to make a profit out of the business. ... Scott in connection with a tax question which arose in respect of the taxation of the appellant for a previous year. ...

McDonald; it seems to have been operated in connection with the gambling clubs. ... McDonald in connection with claims for unpaid income tax. I gather that it was necessary to show his net worth at that date and, accordingly, Mr. ...

Woodward had had the idea of setting up a tax exempt pensions society under Section 5(1) (h) of the Income War Tax Act, R.S.C. 1927, ce. 97, which read, in part, as follows: “5. (1) (h) In case of a trust established in connection with, or a corporation incorporated for the administration of an employees’ superannuation or pension fund or plan, the income from the investment of the superannuation or pension funds shall be exempt if the trustee or corporation so elects.’’ and that before the appellant was incorporated discussions were held with the Department at Ottawa with a view to ascertaining the requirements of such a society. ... In this connection I am unable to accept the submission of counsel for the appellant that its purpose in operating the share sale scheme was to provide shares to Woodward company employees at cost and that the making of a profit out of the operation was merely incidental. ...

Well I don’t remember what they said but they agreed to it anyway because we signed the agreement that way. ’ ’ And in connection with Exhibit 3 he was asked: “Q. ... Maber, the real estate agent, in connection with this matter of taxes stated that on the date of the take-over, January 4, 1955, he went down to the town office, checked the taxes and obtained the amount for 1954. ...

In consideration of the issue and allotment to the participants and/or their nominees 373,541 fully paid non-assessable shares in the capital stock of York as constituted after the reorganization of York the participants do hereby assign, transfer and convey unto York all of their right, title, estate and interest in and to the said Canadian Superior Agreement subject only to terms of the Adair Agreement and also the interest of the participants in the East Innisfail Trust Account with the Canada Trust Company, Calgary, Alberta, and in and to all wells heretofore drilled thereon and all equipment used in connection therewith and in all production obtainable therefrom. 3. ... In this connection, it should be recalled that, as appears by paragraph 4 of agreement Exhibit 7 supra, if the appellant succeeded in raising the bid price on the Stock Exchange to 20¢ per share Joanne and the creditors would have been entitled to sell 100,000 of the option shares and if it advanced to over 25^ to sell 200,000 more, if it exceeded 30¢ to sell another 200,000 and, if the price reached 35^ or more to sell sufficient of the 300,000 remaining shares to fully satisfy the option price. ...

C.R. 299; [1964] C.T.C. 504, dealt with the point as follows: “Now although this interpretation was given in connection with Section 39 of the Income Tax Act, I can see no reason why it should not apply as well to Section 139 (5a) of the Act in which case Lee could not have control of the appellant corporation as he held only 50% of its shares and, therefore, could not be said to have a number of shares such that he carries with it the right to a majority of the votes in the election of the board of directors or that his shareholding in the company was such that ‘he was more powerful than all the other shareholders in the company put together in general meeting’ as set down by Cameron, J. in Vancouver Towing Company Limited v. ... I find it impossible to adopt the view that a person who, by having the requisite voting power in a company subject to his will and ordering, can make the ultimate decision as to where and how the business of the company shall be carried on, and who thus has, in fact, control of the company’s affairs, is a person of whom it can be said that he has not in this connection got a controlling interest in the company. ...