Words and Phrases - "replace"

The taxpayer and the estate of his mother co-owned (as tenants-in-common) a dairy farm and as well as the livestock, farming equipment, feed, milk quota and other farming assets. All the estate's interest and a portion of the taxpayer's interest in the farmland was sold to a third party housing developer (who leased the lands back to the taxpayer pending development), with the taxpayer using the sales proceeds received by him to purchase all of the Estate (non-realty) farming assets.

Lyons J affirmed the Minister's denial to the taxpayer of the s. 44(1) rollover on this farming-asset purchase. After reviewing the legislative history, she stated (at para 42):

...I interpret the words "to replace" in paragraph 44(5)(a) to mean that Parliament intended a direct substitution so that the same species of capital property would be required for the acquired property to constitute a replacement property for the former property. I find that it cannot reasonably be concluded that the Assets were to replace the farmland within the meaning of paragraph 44(5)(a) of the Act.

This purchase also did not satisfy the requirement in para. 44(5)(a.1) that the new property be acquired for a "similar" use. Notwithstanding that "similar" is potentially broad, the use of land for growing crops or pasturing cattle is not similar to the use to which the physical assets and milk quota were put and, in particular, the milk quota was used for the sale of milk (paras. 49, 50).