Table of Contents


Colubriale c. La Reine, 2006 DTC 2577, 2004 TCC 578

Before going on to find that a shareholder benefit had been conferred on the taxpayer by virtue of his transferring a property to a corporation of which he was a majority shareholder for a price that was 50% higher than the property's fair market value, Angers J. stated (at p. 2580):

"This Court dealt at length with the concept of market value in relation to the concept of the purchaser having a special interest, and it acknowledged that it is possible, in certain circumstances, for a purchaser to have a special interest in acquiring property for a price higher than what otherwise [it] would be prepared to pay."

On the facts here, no special value of the property to the corporation was established.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) "ought to have known" rather than "intent" standard 118

Schippmann Estate v. Schippmann, 2001 DTC 5598 (BCCA)

A commercial property, and other property of the deceased, was distributed, as to 50%, to its surviving widow on a rollover basis pursuant to s. 70(6), and as to the balance to the two surviving children. For the purpose of determining whether the residuary shares of the children ought to be charged with any deduction or adjustment for capital gains tax, or recaptured depreciation, the Court indicated that such deferred tax liability should be valued, for such purposes, at two-thirds of its computed amount.

Reiss Estate v. Canada, 99 DTC 5429 (FCA)

Given the dearth of comparable sales around the valuation date in question, the trial judge committed an error in not considering a valuation of the land in question performed by an expert expropriation review board pursuant to adversarial proceedings.

Ondrey v. The Queen, 98 DTC 6023 (FCTD)

The V-Day value of a property was determined by discounting backwards from the date it was sold (in 1973) in an arm's length sale. For these purposes, Rothstein J. considered the date the agreement of purchase and sale was entered into (on April 5) rather than the date of closing (October 31) to be the relevant date. He also declined to adjust the price upwards to take into account an agent's commission that might have been paid had the sale been made through an agent.

Bridges Brothers Ltd. v. The Queen, 89 DTC 5255 (FCTD)

The V-Day value of 2,422 acres of forest land, which was close to a site where mining exploration activity had taken place since 1954, was determined taking into account the potential value of the land for mining exploration purposes only, as opposed to its potential use as a producing mine, given the significant uncertainty that that site ever would be developed as a mining operation.

Deconinck v. The Queen, 88 DTC 6410, [1988] 2 CTC 213 (FCTD)

The V-Day value of a property was found to be $350,000 notwithstanding its purchase by the taxpayer on June 18, 1971 for $176,000 in light of evidence that the plaintiff negotiated a price that was well below a value that in the taxpayer's view reflected the highest and best use of the land as a bowling alley.

Haslam v. The Queen, 88 DTC 6081, [1988] 1 CTC 153 (FCTD)

The V-Day value of a parcel of land was determined in accordance with the cost of development method, whose use was found to be appropriate where the land was immediately capable of being developed.

Doral Holdings Ltd. v. The Queen, 87 DTC 5258, [1987] 1 CTC 398 (FCTD)

Between September 1970 and March 1971 the taxpayer entered into a number of agreements to purchase about 70 acres of land near Welland and closed the purchases in October 1971. Since the agreement for the purchase of the main parcel of agricultural land was conditional upon rezoning to permit development as a shopping centre, the price which was negotiated (and thus, the value of the package on V-Day) already reflected the value which the land assembly would have for a shopping centre development. The potential of the site as a regional shopping centre was too speculative to be given much weight.

Kelly v. Kelly (1986), 2 R.F.L. (2d) 1 (Ont HC)

In determining the husband's net family property for purposes of the Family Act (Ontario), potential tax on capital gains and recapture of depreciation that would arise on a sale of his farm assets were included as a liability on his net worth statement. The calculation of that tax liability was made on the basis that he take advantage of half of any tax losses available to him and half the $500,000 capital gains exemption.

Re Restfulcare Inc. (1986), 53 OR (2d) 673 (C.A.)

In arriving at the market value for Assessment Act purposes of lands used as a nursing home, the value of a licence issued pursuant to the Nursing Homes Act was included, notwithstanding a contention that the licence was personal property and accordingly should be excluded from the value of "real property".

Houlden J.A. stated: "Where lands and premises have an inherent capacity for a certain type of use and a licence from the proper authorities authorizes the ultilization of that capacity, the value of the licence is a component part of the value of the land. The licence is not property but a form of governmental control, like zoning, which may enhance the value of the land for which it is issued."

Dominion Metal & Refining Works Ltd. v. The Queen, 86 DTC 6311, [1986] 2 CTC 47 (FCTD)

In 1976 an adjoining land owner ("Ogilvie") in need of expanding its facilities paid what was apparently a substantial premium over their open market price for lands of the taxpayer. Since there was no evidence that in 1971 the potential of Ogilvie as a special purchaser of the lands would be taken into account in determining the fair market value of the lands at V-Day, it was impermissible to work backward from the price actually paid by Ogilvie in 1976 in determining the V-Day value of the lands.

It was also noted that "conventional wisdom to which evaluators appear to subscribe generally fixes the economic life of an industrial building at between 40 and 50 years."

Henderson v. Executors of Karmel, [1984] BTC 330 (HC)

In determining the open market value of the assets of an estate, the assets must be considered as they were when the deceased died. Land which was rented to a company controlled by the deceased accordingly was valued as a reversion expectant on the determination of the tenancy rather than as unencumbered freehold land.

Salt v. The Queen, 84 DTC 6395, [1984] CTC 414 (FCTD)

Four months prior to V-Day the taxpayer was granted an option to acquire land from an arm's length party for $40,000, and five months after V-Day he exercised that option. The option price apparently was ignored in determining the V-Day value of the land.

Saskin v. The Queen, 84 DTC 6411, [1984] CTC 463 (FCTD)

The V-Day value of a property was determined by assuming that its value steadily increased from the dates of its acquisition to disposition in equal monthly increments.

Kusch v. The Queen, 84 DTC 6117, [1984] CTC 108 (FCTD)

"It is well settled that the one essential criterion for utilizing comparable sales as indicators of land value at a particular point in time is that the comparables be similar to and in the proximate area or location of the subject property at that time." The V-Day value indicators of the taxpayer's expert appraiser met this test.

Bibby Estate v. The Queen, 83 DTC 5148, [1983] CTC 121 (FCTD)

In a determination of the V-Day value of real property, subsequent sales of similar properties close to the valuation date may be used, provided no new information has become public knowledge in the interval and no changes in general economic conditions have occurred, that would affect the value of the property.

There is no requirement that the Department use as its expert a "neutral" appraiser, as opposed to someone who is its employee, nor that such employee's report be corroborated.

A Town Planner's opinion on value was not admissible.

Although it is necessary to look at what would be in the mind of a well-informed vendor and a well-informed purchaser as of the valuation date, and the fact that the development potential of the subject property still had not been achieved 12 years later thus cannot be taken into account, the amount for which the subject property was sold 6 years after the valuation date may be taken into account as indicating a fairly rapidly escalating trend of prices.

If the development potential of a property is between 10 and 20 years distant, only a portion of that potential should be included in the value arrived at.

Smith v. The Queen, 83 DTC 5085, [1983] CTC 69 (FCTD)

The highest and best use for 173 acres of land located, on V-Day, 30 miles south of Hamilton and 18 miles from the nearest industrial (Stelco) development was found to be farming, notwithstanding some speculation at the time that the Ontario government was planning a new urban centre for the area.

Community Shopping Developments Ltd. v. The Queen, 83 DTC 5071, [1983] CTC 60 (FCTD)

Given that the "rented opinions" of the land appraisers used in this case were unreliable, the plaintiff's original method of calculating the V-Day value of land should be adopted, which was to prorate the gain which accrued between the dates of purchase and sale on a straight line basis:

V-Day value = original cost + (total gain x number of months between purchase date and V-Day divided by number of months between purchase date and sale date).

Anyone may give his opinion as to the V-Day value of his property without qualifying as an expert witness - but no great weight need be given to that opinion.

Hunka v. The Queen, 83 DTC 5051, [1983] CTC 31 (FCTD)

The V-Day value of 147 acres of vacant land was set at $750 an acre which was based on a sale of 36 acres of adjoining land in 1965 for $500 an acre, plus a time adjustment of $250.

Elworthy v. The Queen, 82 DTC 6067, [1982] CTC 62 (FCTD)

The land residual technique was applied, in allocating a purchase price between building and bare land, where the best use for the land would have been to demolish the building and erect a larger one, but B.C. legislation prohibited any tampering with the existing building. The residuum thereby allocated to the bare land was small: $60,000 out of a total consideration of $230,000.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 68 40

Neder v. The Queen, 82 DTC 6022, [1981] CTC 501 (FCA)

It was found that it could not be successfully argued that the Minister's expert land appraiser had failed to have regard to the surrounding circumstances of comparative sales used for assessing the V-Day value of the subject property. In the expert's own words, "'Sales of dissimilar properties [were] discarded, sales of similar properties [were] carefully reviewed and adjusted for specific factors of dissimilarity.'"

Pappas Estate v. The Queen, 81 DTC 5178, [1981] CTC 266 (FCTD)

A building producing rental income was valued by averaging the results of a market value approach and an income approach. The market value approach involved looking at the price per square foot of usable area that buildings in the vicinity had been sold for in the 2 years before and after the valuation date. The income approach entailed capitalizing what would have been a reasonable level of net rental income for the building.

Neder v. The Queen, 80 DTC 6348, [1980] CTC 511 (FCTD)

An unaccepted offer to purchase land is not evidence of the fair market value of that land if there is some question as to whether the offer actually was made and there is no means of ascertaining whether the offeror had any knowledge as to the value of the land.

The Queen v. Mitosinka, 78 DTC 6432, [1978] CTC 664 (FCTD)

The taxpayer sold his residence to a company in the restaurant business, which was only interested in the bare land. The superstructure accordingly was removed from the land and sold for $18,500. It was found that the fact that the purchaser "assigned no functional value to the building does not mean that there was no market value in the structure", and that it was fair to infer that the purchaser, "in the price it was willing to pay to obtain the property, assigned some value in the market sense, to the structure."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence 83

See Also

Godcharles v. Agence du revenu du Québec, 2020 QCCQ 2219

retirement home valued using cost method with residual to goodwill

Quenneville, J.C.Q largely confirmed the ARQ assessments respecting the allocation of the sale of a retirement home - by the individual owners of the home (which had reached full occupancy three years' previously) and the corporate operator (jointly owned by them until two days before the sale) of the home - as between the real estate and goodwill portions of those assets. In particular, she accepted the valuation of the immovable by the ARQ valuator using the cost method (i.e., the costs of construction, plus a promoter’s notional profit of 5%, plus net GST/QST of 9.495%, minus depreciation of 4% and plus the land appreciation since purchase), with there being a consequential reduction in the residual amount to be allocated to the goodwill.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) a sale of goodwill occurred between parties acting in concert given the role of a dominant player 410
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) transaction between parties acting in concert required increased allocation to the real estate sold at shareholder level 318

Singh v. The Queen, 2019 TCC 265

FMV of home potentially reduced by spouse continuing to live there

After finding that s. 160 applied on the basis that ½ of the beneficial ownership of the family had been transferred for nominal consideration to the taxpayer by her husband, a tax debtor, MacPhee J also noted (at para. 34) that “it could be argued that the value of what was transferred by Mr. Singh should be reduced in that Mr. Singh continues to live in the family home.” However, this point was not raised.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) beneficial ownership in light of control, financing burden and title/cascading application available 512
Tax Topics - General Concepts - Ownership markers of possession, use and risk applied in ascertaining beneficial ownership 174

1542921 Alberta Ltd v Calgary (City), 2018 ABQB 607

cost approach valuation of commercial realty excludes GST

The Composite Assessment Review Boards for Edmonton and Calgary erred when, in valuing commercial properties for municipal tax purposes using the cost approach, they included GST.

Beaudet v. The Queen, 2014 TCC 52

FMV of newly-constructed building equal to direct and indirect costs

The appellant ("Beaudet") was a partnership engaged in the construction of four adjoining apartment building, which it then rented out, resulting in a self-supply at fair market value of each building (including land) under ETA s. 191(3) when the first tenant commenced occupancy.

Lamarre J found that in "an ideal competitive market" (para. 81), the fair market value of a building would consist only of costs including indirect costs such as advertising and leasing costs and the builder's construction management fees (see para. 79). Here, there was no evidence of elements such as zoning restrictions which would establish a significantly higher value for the four buildings as a whole, so that there should be no upward adjustment over such costs.

In particular, she included financing and notional project management fees costs (estimated at 1.5% and 5% of total costs), and advertising expenses. Excluded from costs were cost overruns due to substandard ground conditions and a reduction (equal to the remediation cost) was made for problems relating to a leaking roof and substandard soundproofing.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) FMV of newly-constructed building equal to direct and indirect costs and excluded developer's profit margin 303

Henco Industries Limited v. The Queen, 2014 DTC 1161 [at 3528], 2014 TCC 192

deference to taxpayer's figure within appraiser's range of values

The taxpayer disposed of a property to a related company for $800,000. The taxpayer's appraiser had estimated the property's value to be $850,000, based on an estimated value range of $786,590 to $898,960, and the Minister assessed under s. 69 on the basis that the taxpayer's proceeds of disposition were $850,000. C Miller J stated (at para. 131):

Real estate appraisals, especially where there are exceptional non-market forces at work, cannot be precise. A range of value makes eminent sense. And, where a taxpayer has designated a value that ultimately is found to fall within the range of reasonable fair market value, I see no reason to disturb that figure. $800,000 it is.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence parol evidence rule not applying to surrounding evidence/press releases admitted 239
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) compensation received in course of business but not in course of earning income 192
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital payment to withdraw from business was not an eligible capital amount 146
Tax Topics - Income Tax Act - Section 23 - Subsection 23(1) land ceased to be inventory through sterilization rather than business cessation 184
Tax Topics - Income Tax Act - Section 3 compensation payment for destroyed business was non-taxable 171
Tax Topics - Income Tax Act - Section 9 - Compensation Payments compensation payment for destroyed business was non-taxable 171

Vine Estate v. The Queen, 2014 DTC 1088 [at 3130], 2014 TCC 64

rent-controlled apartment

The fair market value of a Toronto apartment building was in issue because of its deemed disposition on the taxpayer's death. In rejecting the valuation of the Minister's expert, Campbell J noted that his valuation arrived at through the discounted cash flow method assumed that an unrealistically large number of tenants would vacate, thereby permitting rent increases. Campbell J stated (at para. 57):

Common sense dictates that, based on practicalities, tenants paying below-market rents would not vacate their units to relocate to at-market rentals, except in exceptional circumstances and [provided] they could not otherwise be forced out.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence expert tainted by reading previous reports 113

Desjardins v. The Queen, 2010 TCC 521 (Informal Procedure)

new apartment building valued at cost rathr than lower valuation based on cap rate

At issue was the fair market value of a newly-constructed 180-unit apartment building in in Sainte-Thérèse when the first tenant o=took possession. The Minister’s expert appraiser relied on the estimated replacement cost, as to which the actual cost of $16.03 million (before all GST, QST and rebates) was representative. The appellant’s expert preferred an income approach (i.e., applying a cap rate to normalized income) of $14,9 million. Both experts agreed that the comparison method was unreliable due to there being no close comparables.

In preferring the Minister’s cost approach, Favreau J stated (at paras. 33-35):

I doubt that a building contractor or any business person with the expertise and knowledge required to carry out a project of such scope would agree to sell a new construction at a lower price than the actual cost in the context of a strongly rising property market.

The evidence did not show that there were excesses in the cost of construction or any specific problems with soil contamination or with the connection infrastructure with municipal services, or any errors of development or construction.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) new apartment building valued at cost rather than lower income-based valuation 214

Boulet v. The Queen, 2010 DTC 1015 [at 2602], 2009 TCC 261

binding NAL agreement suppressed land's FMV

On September 18, 1998, the taxpayers both personally and on behalf of a land development corporation to be incorporated in the future (the "Company") agreed to submit on behalf of the Company an offer to purchase a property for development, and agreed (under rights referred to as the "Options") that upon their request, the Company would transfer to each of them certain lots included within the property at the same price that the Company paid to acquire those lots on December 22, 1998. The vendor of the property accepted an offer of the Company to purchase the property and on November 21, 1999 the Company sold to the two individual taxpayers two lots at a price that was substantially lower than what would have been their fair market value in the absence of the Options.

The fair market value of the lots when they were acquired by the taxpayers under the Options was equal to their relatively low cost to the Company given that the contractual obligation of the Company to sell the lots for this price was required to be taken into account in determining the lot's fair market value in light of the Beament case. Accordingly, no capital gain arose to the Company on disposing of the lots to the taxpayers.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefit conferred when shareholder receives unconditional right thereto, rather than when such right subsequently exercised 356
Tax Topics - Income Tax Act - Section 54 - Principal Residence basement apartment was separate from principal residence 63

Nauss v. The Queen, 2005 DTC 1370, 2005 TCC 488 (Informal Procedure)

In 1997 the taxpayer and his sister inherited from their grandmother a remainder interest in a house. with their 70-year old mother inheriting a life interest. In 2002 while the mother was still alive, the house was sold at a gain.

The 1997 valuation of the life interest of the taxpayer and his sister was determined as the present value of residential rental rates for the house over the life expectancy of the mother, and the 2002 valuation of the life interest was determined as its value in 1997 escalated in proportion to the increase in value of the whole property, and then proportionately reduced to reflect the decrease over the five years in the life expectancy of the mother from 10.02 years to 12.44 years. The remainder interest was valued in 1997 (for purposes of determining its adjusted cost base) and in 2002 (for purposes of determining the proceeds of disposition) by taking the residual values.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(5) 152

Morneau v. The Queen, 98 DTC 2199 (TCC)

The price received by the taxpayer for selling his principal residence to his corporation was found to not exceed the property's fair market value given that the corporation was a "special interest purchaser", i.e., it had a pressing need for office accommodation, the construction of a new building would have been extremely costly and the taxpayer's residence was situated strategically in relation to commercial structures already being used by the corporation in carrying on its business.

Administrative Policy

9 June 2011 Internal T.I. 2011-0395001I7 F - Co-propriété indivise d'un duplex

although each 50% co-owner of a duplex has an undivided interest in the whole dwelling, the FMV of her interest relates exclusively to the housing unit occupied by her

Mr. Y and Ms. X , who were the undivided co-owners of a duplex, with each occupying one of the two constituent housing units, disposed of the building and designated their housing unit as their principal residence for the three years they lived there. Before finding that each use could use the principal residence exemption to completely shelter their respective gains under s. 40(2)(b), CRA stated:

In the case where each of the co-owners has the exclusive right to live in his or her own unit, the value of their undivided share must take into account at the same time the exercise by each of them of the exclusive use and enjoyment of their unit, which necessarily includes the right to the use of the common parts of the building, and the prohibition on the use of the unit occupied by the other co-owner. Consequently, even if a person legally is selling his or her undivided interest in an immovable, the value of that share is attributable to the unit he or she lives in and is disposing of for the purposes of the Act.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (a) 2 equal co-owners of duplex could each claim the principal residence exemption for “their” unit 242
Tax Topics - General Concepts - Ownership co-ownership interest is in the whole but valuation of the part occupied should reflect rights of exclusive possession 317

GST/HST Policy Statement P-165R Fair Market Value for Purposes of Part IX of the Excise Tax Act (Revised) March 1998

3 methods for determing FMV of newly-constructed real estate on self-supply on 1st rental

Briefly, there are three general methods or approaches to market valuation that are used: the cost method; the direct comparison method; and the discounted cash flow method (also called the income method). There may be different approaches used for different components of the object being valued. The Department recognizes that no method should be excluded categorically.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(3) 66


After noting that s. 43.1 did not apply because the transfer of a remainder interest by parents to their children occurred before 20 December 1991, RC stated:

"The value of a life estate in real property at a particular time is the difference between the current value of the real property and the value of the remainder interest in the real property. The fair market value of the remainder interest in the real property is determined by what a typical purchaser would currently pay for a fee simple ownership in the property subject to a life estate of certain identifiable persons. This is the future value of the present worth of the real property calculated using the life expectancy of the life tenants and an appropriate discount rate."

24 March 1992 T.I. 920203 (March 1993 Access Letter, p. 76, ¶C109-126)

The fair market value of a restrictive covenant registered against land might reasonably be valued by determining the difference between the value of the land unencumbered by the covenant and the fair market value of the land subject to the covenant.