Words and Phrases - "adventure in the nature of trade"
Edwards v. Bairstow & Harrison, (1955), 36 TC 207, [1955] UKHL TC (HL)
The taxpayers who were a director of a leather manufacturing company and an employee of a spinning firm, purchased a complete cotton spinning plant with a view to selling it as quickly as possible at a profit but, in the event, disposed of the plant piecemeal over the following two years at a gain.
In finding that the transaction was on income account as an adventure in the nature of trade, Lord Radcliffe noted that they had no intention of using the machinery as an income-producing asset, or of buying it to consume it or for the pleasure of enjoyment. It was not relevant that the plant was not advertised for sale (why should they do so if the sale of the plant could be achieved without advertising); even if no "work had been done on the maturing the asset to be sold", there was "no reason why a dealer should do more work in making his plant saleable than the purposes of sale required"; and even if the taxpayers did not have any special skill which placed them in an advantageous position for the purposes of the transaction, "the members of a commercial community do not need much instruction in the principles and possibility of dealing and ... given the opportunity, the existence or non-existence of special skill is of no significance whatever" (p. 230). Accordingly, this was "a commercial deal in second-hand plant" (p. 230).
MNR v. Taylor, 56 DTC 1125, [1956] CTC 189 (Ex Ct)
Because the parent corporation of the taxpayer's employer ("Canada Metal") prohibited Canada Metal from dealing in futures or purchasing lead substantially in advance of its delivery, the taxpayer, who was Canada Metal's general manager and who perceived a substantial business advantage to Canada Metal in securing a substantial purchase of lead from overseas, entered into a contract for the purchase of lead from overseas with a view to selling the lead to Canada Metal at the time of delivery. The gain which he realized from doing so was held to have arisen from an adventure in the nature of trade, and therefore was fully taxable. The transaction was highly speculative, "he dealt with the lead in exactly the same manner as any dealer in imported lead would have done", and the fact that the subject matter of the adventure was a commodity "excluded any possibility that it was of an investment nature involving the realization of a security or resulted in a fortuitous accretion of capital" (p. 1139).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | purchase of large quantity of lead for resale was an adventure | 127 |
Minister of National Revenue v. Freud, 68 DTC 5279, [1968] CTC 438, [1969] S.C.R. 75
Before finding that the taxpayer has sustained a fully deductible loss on advances which he had made to a business venture, Pigeon J. stated (pp. 5281-5282):
"It must also be noted that the Income Tax Act defines business so as to include 'an adventure or concern in the nature of trade' (section 139(1)(e)). By virtue of this definition, a single operation is to be considered as a business although it is an isolated venture entirely unconnected with the taxpayer's profession or occupation ... Due to the definition of business as including an adventure in the nature of trade, it is unnecessary for an acquisition of shares to be a trading operation rather than an investment that there should be a pattern of regular trading operations".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | loan loss sustained on speculative start-up venture | 156 |
Wisdom v. Chamberlain (1968), 45 TC 92 (C.A.)
In finding that a gain resulting from the purchase of silver by the U.K. taxpayer in order to hedge against a devaluation of the pound was taxable, Harman L.J. stated:
"In the first place, it seems to me that, supposing it was a hedge against devaluation, it was nevertheless a transaction entered into on a short-term basis for the purpose of making a profit out of the purchase and sale of a commodity, and if that is not an adventure in the nature of trade I do not really know what it is. The whole object of the transaction was to make a profit."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives | purpose for silver purchase was to profit from devaluation | 192 |
Happy Valley Farms Ltd. v. The Queen, 86 DTC 6421, [1986] 2 CTC 259 (FCTD)
In determining "when a transaction, which is not itself a trade or business, can be held to be 'an adventure or concern in the nature of trade' ... the question to be answered, ... was the asset acquired by the taxpayer as an investment or was it not."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate | farmland gain of real estate developer | 73 |
MNR v. Taylor, 56 DTC 1125, [1956] CTC 189 (Ex Ct)
A transaction whereby the taxpayer purchased lead and resold it to his employer at a gain was an adventure in the nature of trade - notwithstanding that he engaged in the transaction in order to assist the business of his employer (of which he is a general manager) rather than to make a profit, and notwithstanding that this was the only transaction of that type which he had engaged in personally - in light of the fact that "he dealt with the lead in exactly the same manner as any dealer in imported lead would have done" (p. 1139), in light of the speculative nature of the transaction, and in light of the fact that lead is a commodity rather than property of an investment nature.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives | executive's substantial lead purchase with view to resale to employer/meaning of adventure | 169 |
R. v. Fogazzi, 92 DTC 6421, [1992] 2 CTC 321 (Ont. C.J. (G.D.)), rev'd 93 DTC 5183 (Ont. CA)
Before going on to find that the misappropriation by the accused of money received from Italian relatives did not give rise to income from an adventure in the nature of trade, Sheppard J. stated (p. 6427):
"'Adventure or concern' means the isolated nature of the transaction. 'In the nature of trade' means this person has conducted himself in the same manner as a person who would have who is in the business of trading in land."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 239 - Subsection 239(1) - Paragraph 239(1)(d) | 97 | |
| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) | 109 | |
| Tax Topics - Income Tax Act - Section 9 - Timing | 42 |
MNR v. Mandelbaum, 62 DTC 1093 (Ex Ct)
In finding that the purchase by individual shareholders of a company of mortgage receivables and conditional sales contracts owing to that company was an adventure in the nature of trade in addition to being a transaction in the course of their business of managing the company, Thorson P. stated (at p. 1098) that "if a person deals with the commodity purchased by him in the same way as a dealer in it would ordinarily do such a dealing is a trading adventure" and that "when the respondents purchased [the company's] mortgages and agreements their transaction was similar to the kind of transactions that dealers in mortgages and agreements engaged in".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) | no-application where mortgage receivables on income account | 162 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Debt/ receivables | 243 |
Quirinus C. Van Dongen v. Her Majesty The Queen, 90 DTC 6633, [1991] 1 CTC 86 (FCTD)
In finding that the taxpayer did not acquire two real estate properties in connection with an adventure in the nature of trade, Cullen J. stated (p. 6635):
"An adventure in the nature of trade involves an isolated transaction only ... However, the isolated nature of the transaction by itself is not enough to conclude that it is an adventure in the nature of trade."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) | 87 |