Words and Phrases - "stock in trade"

Thurlow CJ found that buildings (held in inventory) whose surrounding grounds were improved by landscaping were "used ... in the course of a business of constructing and selling them" when they were sold. This, however, did not mean that the landscaping costs could be deducted in the year prior to the buildings' sale during which they were not yet "used" in that business. S. 20(1)(aa) only provided for the deduction of landscaping costs that otherwise would be non-deductible by virtue of ss. 18(1)(a), (b) or (h). It thus did not authorize the deduction of landscaping costs that form part of the cost of land inventory and which, accordingly, would be deductible from income in the (subsequent) year of sale of the inventory. To depart from the normal rule that inventory costs are deductible only in the year of sale would distort the scheme of the Act.

Mahoney JA stated that he agreed with the above reasons, but went on to indicate that the buildings could be considered to be used in the taxpayer's business even in the year in which they were, as yet, unsold, and in which the landscaping costs were incurred. In this regard, he stated (at p. 6124):

[T]he stock in trade of a business is that which the business offers for sale in the ordinary course of is trade. ... [A]n item offered for sale by a business in the ordinary course of its trade is an item used by it in that business.

The concurring judgment of Hugessen JA also agreed that the taxpayer's appeal should be dismissed, but on the ground that the landscaping costs when incurred before the year of sale did not satisfy the "use" test in s. 20(1)(aa) because "use" in this context of a building "requires something more than the passive holding of it, waiting for it to be sold" (pp. 6125-6126).