Subsection 23(1) - Sale of inventory
Cases
Edmund Peachey Ltd. v. The Queen, 79 DTC 5064, [1979] CTC 51 (FCA)
S.85E(1) of the old Act did not apply to the factual situation of the appellant because it had not ceased carrying on a business by virtue of abandoning its intention to develop its lands as a housing subdivision. Since it continued to hold the land inventory of the original business, it was reasonable to assume that its business had not been brought to an end.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | no unequivocal act to convert land inventory to capital property | 100 |
Raby v. MNR, 65 DTC 5085, [1965] CTC 138 (Ex Ct)
S.85E(1) applied when the partner in a partnership holding 92 building lots became ill and sold his share of the lots at a profit to a corporation, which in turn sold these lots to his partner.
See Also
Henco Industries Limited v. The Queen, 2014 DTC 1161 [at 3528], 2014 TCC 192
A subdivision property of the taxpayer, a developer, was blockaded by Six Nations protesters. To diffuse the conflict, the Ontario government passed a by-law prohibiting any use of the property (rendering it valueless), and ultimately agreed to pay the taxpayer $15,800,000 in exchange for relinquishing its rights to the property and under a court order against the protesters, and for a release.
Before finding that as a factual matter the $15,800,000 receipt was not compensation for a "useless, worthless piece of land" (para. 167) but instead compensation for destruction of the taxpayer's business (i.e., goodwill), C. Miller J found (at para. 168) that s. 23 did not apply:
There was a conversion ... in which the DCE land completely lost its character as inventory. ... [T]he land did not lose its character as inventory because Henco went out of business and the land was sold while Henco was no longer carrying on a business (the very situation section 23 of the Act was put in place to address). The land lost its character as inventory by being made legally useless for development.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | parol evidence rule not applying to surrounding evidence/press releases admitted | 239 |
| Tax Topics - General Concepts - Fair Market Value - Land | deference to taxpayer's figure within appraiser's range of values | 111 |
| 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 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 |
Administrative Policy
8 January 1993 T.I. (Tax Window, No. 28, p. 22, ¶2365)
S.23(1) will apply to land inventory