Martin,
J.:—This
is
an
appeal
from
the
June
18,
1984
decision
of
the
Tax
Court
of
Canada
affirming
the
assessments
of
the
Minister
of
National
Revenue
for
the
plaintiff's
taxation
years
from
1977
to
1981
inclusive.
The
plaintiff
has,
since
1972
to
the
hearing
of
this
matter,
carried
on
farming
operations
in
Saskatchewan.
During
the
period
from
1975
to
1981
he
was
a
licensed
real
estate
commercial
salesman
and
for
several
years
during
that
six-year
period
he
also
carried
on
the
business
of
buying
and
selling
real
estate
for
a
profit.
He
says
that
he
duly
reported
the
gains
made
on
sales
in
his
real
estate
business
as
income
and
was
assessed
at
full
income
tax
rates
on
them.
At
the
beginning
of
the
hearing
counsel
for
both
sides
agreed
that
I
would
only
have
to
consider
the
following
three
questions:
1.
Whether
the
August
30,
1977
sale
by
the
plaintiff
of
the
house
and
ten
acres
of
land
to
one
Gordon
Hiron
for
the
sum
of
$30,000
was
exempt
from
taxation
by
reason
of
paragraph
40(2)(b)
of
the
Income
Tax
Act
as
being
the
sale
of
his
principal
residence?
2.
Whether
the
sale
of
approximately
600
acres
of
land
by
the
plaintiff
to
one
Arlen
Avery
for
the
sum
of
$365,000
was
a
"disposition"
of
lands
which
occurred
in
1980
or
1981?
3.
Whether
the
plaintiff's
purchases
and
sales
of
farm
properties
between
1974
and
1981
were
of
such
a
nature
that
the
defendant
could
properly
conclude
the
plaintiff
was
in
the
business
of
trading
in
farm
properties
and
that
the
gains
made
on
the
sales
of
the
properties
were
profits
from
that
business?
Should
I
find
for
the
plaintiff
by
concluding,
with
respect
to
the
first
question,
that
the
sale
was
a
sale
of
his
principal
residence,
I
must
go
on
to
consider
whether
the
ten
acres
could
properly
be
included
as
a
part
of
the
land
forming
his
principal
residence.
This
land
and
its
buildings
were
purchased
by
the
plaintiff
in
March
of
1976.
The
land
is
about
six
miles
from
his
father's
farm
and
about
seven
miles
from
the
city
of
Moose
Jaw
and
forms
a
portion
of
two
quarter
sections
(320
acres)
described
as
the
"Duke"
land.
The
plaintiff
says
that
he
bought
the
land
with
the
intention
of
farming
it
and
living
in
the
rather
small
house
which
was
on
the
land.
He
moved
into
the
house
in
April
of
1976
and
from
that
base
he
carried
out
his
1976
farming
operations.
During
the
summer
of
1976,
while
living
in
the
house
on
the
Duke
land,
he
discussed,
with
the
woman
to
whom
he
became
engaged
in
December
of
1976
and
married
in
February
of
1977,
the
possibility
of
their
making
a
home
together
at
that
location.
His
bride
to
be
was
emphatically
not
interested.
She
had
a
good
job
with
the
Saskatchewan
Liquor
Board
and
did
not
relish
the
thought
of
having
to
commute
to
work
especially
in
the
winter
when
the
weather
conditions
could,
on
occasion,
make
it
difficult
or
impossible
for
her
to
get
from
the
farm
to
her
place
of
employment.
The
plaintiff
accepted
this
decision
and
at
the
end
of
the
1976
growing
season
he
moved
out
of
the
house
and
into
Moose
Jaw
having
lived
in
the
house
from
April
to
October
of
1976.
Because
his
wife
to
be
and
then
his
wife
was
not
interested
in
living
on
the
Duke
land
the
plaintiff
had
to
abandon
his
original
intention
to
live
there.
The
house
and
the
immediately
adjacent
land
became
excess
land
which
he
sold
in
the
summer
of
1977
for
$30,000.
Paragraph
54(g)
defines
the
principal
residence
of
a
taxpayer
as
a
housing
unit
ordinarily
inhabited
in
the
year
by
the
taxpayer.
In
this
respect
I
am
satisfied
that
the
plaintiff
“ordinarily
inhabited”
the
house
on
the
Duke
land
during
a
sufficiently
long
period
of
time
during
1976
that
he
could
properly
claim
it
as
his
principal
residence.
The
Department
of
National
Revenue
Interpretation
Bulletin
IT-120R,
issued
on
December
6,
1976,
recognizes
the
fact
that
“ordinarily
inhabited”
can
be
satisfied
by
a
short
period
of
actual
residence:
Where
the
taxpayer
claiming
the
principal
residence
status
has
occupied
the
residence
for
only
a
short
period
of
time
during
a
taxation
year
(such
as
a
seasonal
residence
occupied
during
a
taxpayer's
vacation
or
a
house
which
was
sold
early
or
bought
late
in
a
taxation
year),
it
is
the
Department's
view
that
the
taxpayer
“ordinarily
inhabited”
that
residence
in
the
year,
provided
that
the
principal
reason
for
owning
the
property
was
not
for
the
purpose
of
gaining
or
producing
income
therefrom.
[Emphasis
added.
I]
I
accept
the
plaintiff's
evidence
that
the
principal
reason
for
owning
the
property
was
for
carrying
out
a
farming
operation
and
was
not
for
the
purpose
of
gaining
or
producing
income
from
it.
The
original
intention
or
principal
intention
was,
with
respect
to
the
house,
frustrated
when
the
plaintiff’s
wife
refused
to
live
there.
This
is
not
a
case
of
a
brief
visit
or
series
of
visits
to
the
house
by
the
plaintiff
(Ennist
v.
M.N.R.,
[1985]
2
C.T.C.
2398
at
2403;
85
D.T.C.
669
at
673).
In
this
case
there
was
continuity
of
occupation
or
habitation
over
a
substantial
period
of
the
year
so
as
to
permit
the
plaintiff
to
claim
the
house
as
his
principal
residence.
The
evidence
is
not
as
clear
with
respect
to
the
necessity
of
having
ten
acres
of
land
to
form
a
part
of
the
principal
residence.
The
plaintiff
says
he
understood
that
it
was
a
legal
requirement
that
there
be
a
minimum
of
ten
acres
associated
with
the
house
in
order
to
subdivide
the
land
or
sever
it
from
its
original
quarter
section.
There
was,
however,
no
evidence
of
any
municipal
by-law
or
provincial
regulation
to
that
effect
and
thus
the
question
cannot
be
resolved
in
accordance
with
the
decision
of
this
Court
in
The
Queen
v.
Yates,
[1983]
C.T.C.
105;
83
D.T.C.
5158.
The
plaintiff
also
described
an
area
of
uncultivable
land
containing
about
three
acres
immediately
surrounding
the
house
on
which
was
located
the
well,
some
outbuildings,
shade
trees
and
a
little
grass.
Bearing
in
mind
that
this
is
farm
land
and,
for
the
most
part,
sales
are
in
minimum
areas
of
160
acres
and
that,
because
there
are
no
municipal
water
and
services,
additional
land
is
essential
to
the
proper
enjoyment
of
the
residence,
I
have
concluded
that
the
plaintiff
has
discharged
the
obligation
on
him
under
subparagraph
54(g)(v)
and
has
established
three
acres
were
necessary
for
the
use
and
enjoyment
of
the
Duke
farmhouse
and
should
be
included
as
part
of
the
plaintiff's
principal
residence.
My
conclusion
leaves
outstanding
the
amount,
if
any,
of
the
capital
gain
on
the
farmhouse
and
three
acres
of
land
forming
the
plaintiff's
principal
residence
in
respect
of
the
period
between
October
1976,
when
he
vacated
it,
and
August
1977,
when
it
was
sold.
Also
outstanding
is
the
amount
of
the
capital
gain
to
be
attributed
to
the
seven-acre
portion
which
did
not
form
a
part
of
the
plaintiff's
principal
residence.
These
two
outstanding
items
are
relatively
minor
in
comparison
to
the
other
matters
which
must
be
addressed
in
this
appeal
and
should,
in
my
view,
be
able
to
be
settled
between
the
parties.
If
they
cannot
resolve
these
two
matters
by
agreement
then
the
parties'
counsel
will
have
leave
to
address
me
further.
The
second
question
is
with
respect
to
the
year
in
which
a
"disposition"
of
lands
occurred.
It
is
common
ground
that
if
the
disposition
of
these
lands
occurred
in
1981
rather
than
in
1980
then
the
defendant's
assessment
for
1980
will
have
to
be
vacated
and
no
tax
can
be
assessed
for
1981
because
the
defendant
has
issued
a
“nil”
assessment
for
that
year.
The
sales
and
cost
of
sales
of
the
nine
transactions
involved
in
this
portion
of
the
defendant's
assessment
of
the
plaintiff's
alleged
net
profits
from
his
1980
real
estate
operations
are
set
out
in
schedule
"D"
to
the
defendant's
amended
defence
in
the
following
form
to
which
I
have
added
the
numbers
from
1
to
9
for
ease
of
reference:
SCHEDULE
"D"
Calculation
of
Business
Income
for
the
year
1980
|
Sales
|
|
|
1.
|
Dec
23/80
|
SE16-16-27W2
|
$
95,000.00
|
|
|
2.
|
Dec
23/80
|
SW
16-16-27W2
|
95,000.00
|
|
|
3.
|
Dec
23/80
|
NW
11-16-27W2
|
100,000.00
|
|
|
LSD3,5
|
|
|
4.
|
Dec
23/80
|
6
of
Sec
11-16-27W2
|
75,000.00
|
|
|
LSD
|
|
|
5.
|
Dec
29/80
|
4
of
Sec
11-16-27W2
|
78,000.00
|
$443,000.00
|
|
Cost
of
Sales
|
|
|
6.
|
Jun
29/79
|
SE
16-16-27W2
|
$
62,500.00
|
|
|
7.
|
Jun
29/79
|
SW
16-16-27W2
|
62,500.00
|
|
|
8.
|
Mar
23/79
|
NW
11-16-27W2
|
85,000.00
|
|
|
9.
|
Mar
23/79
|
All
of
SW
|
85,000.00
|
$295,000.00
|
|
11-16-27W2
|
|
|
1980
Net
Profit
from
Real
Estate
Operations
|
$148,000.00
|
At
the
beginning
of
the
hearing
counsel
informed
me
they
had
reached
agreement
that
sale
#5,
being
a
40-acre
portion
of
the
southwest
quarter
of
lot
11
(cost
of
sales
#9)
for
$78,000
to
one
Rick
Tilson,
assessed
as
having
taken
place
on
December
29,
1980
had
in
fact
taken
place
in
1981
and
that
the
defendant
was
withdrawing
the
assessment
in
respect
of
that
transaction.
While
there
appears
to
remain
for
consideration
the
four
sales
numbered
1
to
4
and
cost
of
sales
numbered
6
to
9,
sale
#4
being
the
120
acre
remaining
portion
of
the
southwest
quarter
of
lot
11
(cost
of
sales
#9)
there
is
in
fact
only
one
transaction
and
that
is
the
sale
to
Avery
for
$365,000
of
those
lands
identified
as
sales
numbered
1
to
4
assumed
as
having
taken
place
on
December
23,
1980.
That
sale
was
completed
by
a
Brock
R.
Graik,
a
solicitor
from
Moose
Jaw,
who
acted
for
both
the
plaintiff
as
vendor
and
one
Arlen
Avery
as
purchaser.
Graik
was
presented
with
an
"Offer
to
Purchase”
form
(Exhibit
P-5)
which
had
been
made
by
Avery
and
accepted
by
the
plaintiff
on
November
1,1980.
Under
the
terms
of
this
document
the
purchaser
had
paid
$1
by
way
of
deposit
at
the
time
of
making
the
offer
on
November
1,
1980
and
had
agreed
to
pay
the
balance
of
$364,999
on
or
before
the
2nd
day
of
January
1981.
Clause
4
of
the
agreement
provided
for
vacant
possession
in
the
following
terms:
4.
This
transaction
of
purchase
and
sale
shall
be
completed
and
closed
on
or
before
the
2nd
day
of
Jan
1987
(herein
referred
to
as
the
date
of
"completion"
or
"possession
date")
on
which
date
the
Purchaser
shall
have
POSSESSION,
vacant
or
subject
to
the
following
tenancy,
namely:
(if
none,
state
"NONE")
None
Avery
had
arranged
with
the
Royal
Bank
of
Canada
for
the
financing
to
purchase
the
property
but
in
order
to
satisfy
the
bank's
requirements
he
had
to
produce
title
in
his
name
prior
to
the
closing
date.
With
this
in
mind
Graik
had
the
plaintiff
execute
a
transfer
of
the
property
on
December
23
which
he
registered
in
the
Land
Titles
Office
at
Moose
Jaw
on
December
29,
1980
and
in
respect
of
which
certificates
of
title
showing
that
Avery
was
the
new
owner
of
the
lands
were
issued
on
the
same
date.
Armed
with
these
certificates
of
title
Graik
should
have
been
able
to
obtain
the
funds
necessary
to
close
the
sale
on
January
2,1981
in
accordance
with
the
agreement
made
by
the
parties.
It
appears
that
the
superiors
of
the
local
branch
manager
overruled
him
and
insisted
on
a
mortgage
of
the
property
from
Avery
before
they
would
authorize
the
release
of
funds.
Graik
attended
to
this
on
behalf
of
Avery.
The
mortgage
was
executed
by
Avery
on
January
15
and
registered
on
January
16.
On
January
19,
Graik
received
Avery's
funds
from
the
bank
and
applied
them
to
the
completion
of
the
purchase
of
the
plaintiff's
properties.
The
defendant
claims
that
the
December
23,
1980
transfer,
or
in
the
alternative
the
December
29,
1980
certificate
of
title
evidencing
the
transfer,
is
proof
sufficient
to
show
that
the
plaintiff
had
sold
or
disposed
of
the
property
in
1980.
I
do
not
agree
with
this
submission.
Although
the
Act
does
not
define
when
a
sale
of
a
property
occurs
section
54
does
define
“disposition”
and
the
"proceeds
of
disposition"
in
the
following
terms:
54
(c)
“disposition”
of
any
property,
except
as
otherwise
expressly
provided,
includes
(i)
any
transaction
or
event
entitling
a
taxpayer
to
proceeds
of
diposition
of
property,
.
.
.
but,
for
greater
certainty,
does
not
include
.
.
.
(v)
any
transfer
of
property
by
virtue
of
which
there
is
a
change
in
the
legal
ownership
of
the
property
without
any
change
in
the
beneficial
ownership
thereof,
.
.
.
54
(h)
"proceeds
of
disposition”
of
property
includes,
(i)
the
sale
price
of
property
that
has
been
sold,
.
.
.
In
this
matter
the
December
documentation
operated
to
transfer
legal
ownership
in
the
property
from
the
plaintiff
to
Avery
but
it
did
not
transfer
beneficial
ownership.
Between
the
December
transfer
and
the
January
2
closing
date
Avery
held
bare
legal
title.
He
held
the
property
as
trustee
only,
for
himself
if
he
paid
the
balance
of
the
purchase
price
on
January
2,
1981
and
for
the
plaintiff
if
he
did
not.
If
he
failed
to
pay
the
purchase
price
on
January
2,
1981,
as
required
by
the
terms
of
the
accepted
offer
to
purchase,
he
would
be
bound
to
reconvey
the
legal
title
to
the
plaintiff.
It
was
the
clear
intention
of
the
parties
to
the
sale
that
beneficial
ownership
was
to
pass
on
the
January
2,
1981
closing.
On
the
date
Avery
was
to
pay
the
purchase
price
and
until
then
he
would
have
no
right
to
the
possession
of
the
property
or
the
enjoyment
of
any
revenues
which
the
property
might
generate.
Until
that
date
it
was
intended
by
the
parties
the
plaintiff
would
not
be
entitled
to
the
sale
price
because
the
property
would
not
be
sold
until
the
price
had
been
paid.
There
would,
therefore,
be
nothing
by
way
of
the
proceeds
of
disposition
which
the
plaintiff
could
take
into
account
for
income
tax
purposes
until
at
least
January
2,
1981.
In
fact
Avery
was
not
in
a
position
to
close
the
sale
on
January
2,
1981
but,
due
to
difficulties
which
occurred
with
the
financing,
could
only
complete
the
sale
on
January
19,
1981.
I
do
not
have
to
consider
whether
the
delay,
to
which
the
plaintiff
consented,
had
the
effect
of
delaying
the
sale
or
disposition
of
the
property
even
beyond
January
2,
1981
because
I
am
satisfied
that
the
disposition
of
the
property
for
the
purposes
of
this
action
did
not
occur
prior
to
January
2,
1981.
That
being
the
case,
as
already
indicated,
the
defendant's
assessments
for
1980
will
have
to
be
vacated.
The
answer
to
the
third
and
final
question
relating
to
the
plaintiff's
extensive
dealings
in
farm
properties
requires,
as
counsel
for
the
plaintiff
submitted,
a
consideration,
not
of
the
overall
multitude
of
purchases
and
sales
but
of
each
transaction,
and
a
determination
of
the
intention
of
the
plaintiff
at
the
time
he
acquired
each
of
the
properties.
I
take
the
principle
applicable
to
the
facts
to
be
as
set
out
by
Jackett,
P.
in
Richthofen
v.
M.N.R.,
[1968]
C.T.C.
544
at
546-8;
68
D.T.C.
5346
at
5347-8.
In
that
case,
as
in
the
one
at
bar,
the
plaintiff
was
carrying
on
both
a
farming
business
and
a
real
estate
commission
and
trading
business.
In
1960
he
had
bought
some
land
for
$10,000
and
sold
it
in
1962
for
$30,000
the
difference
being
assessed
as
income.
The
evidence
was
that
the
plaintiff
had
been
in
the
practice
of
buying
and
selling
farm
land
for
a
profit
and
the
Tax
Appeal
Board,
which
confirmed
the
Minister’s
assessment,
concluded
that,
as
the
appellant
was
in
a
business
of
trading
in
farm
properties
and
as
the
profit
in
issue
was
the
result
of
turning
to
account
of
real
estate
acquired
it
followed
that
the
profit
was
a
profit
from
that
business.
Jackett,
P.
described
the
principles
applicable
to
the
case
in
the
following
terms:
.
.
if
the
property
in
question
was
acquired
by
the
appellant
with
a
view
to
resale
at
a
profit,
or
if
it
was
acquired
with
a
view
to
using
it
in
the
farming
business
or
re-sale
at
a
profit
as
circumstances
might
make
most
expedient,
then,
in
my
view,
when
it
was
re-sold
a
little
over
a
year
after
it
was
acquired,
the
sale
must
be
regarded
as
having
taken
place
in
the
course
of
the
appellant's
real
estate
activities
and
the
resultant
profit
must
be
regarded
as
a
profit
from
a
business.
If,
on
the
other
hand,
at
the
time
when
the
appellant
acquired
the
property,
the
only
purpose
he
had
in
mind
for
it
was
to
incorporate
it
in
his
farming
business,
and
if
he
did
make
it
a
part
of
the
property
on
which
he
carried
on
his
farming
business,
its
subsequent
sale
would
be
a
sale
of
a
capital
asset
of
that
business
even
though
it
occurred
within
a
very
short
time
after
acquisition.
Putting
the
matter
another
way,
where
a
person
carries
on
business
as
a
trader
in
real
estate
and
some
other
business
at
the
same
time,
if
he
buys
a
parcel
of
land
for
re-sale
at
a
profit
and
does
so
re-sell
it,
the
resulting
profit
is
a
profit
from
his
trading
business
even
though
he
found
a
use
for
the
land
in
his
other
business
during
the
period
that
he
owned
it;
but,
on
the
other
hand,
a
profit
that
he
makes
upon
the
sale
of
land
acquired
for
the
sole
purpose
of
being
used,
and
that
has
in
fact
been
used,
as
part
of
the
capital
assets
of
the
other
business
is
not,
as
such,
a
profit
from
his
business
as
a
trader
in
real
estate,
and
the
length
of
the
period
between
purchase
and
sale
of
a
parcel
of
land
by
such
a
person
is
not
relevant
except
in
so
far
as
it
is
some
indication
as
to
whether
the
land
was
inventory
of
the
trading
business
or
a
Capital
asset
of
the
other
business.
I
must,
therefore,
decide
whether
the
balance
of
probability
on
the
evidence
in
this
case
is
that
the
only
purpose
that
motivated
the
appellant
to
acquire
the
property
in
question
was
to
incorporate
it
in
his
farming
business
and
that
he
did
in
fact
make
it
a
part
of
the
property
on
which
he
carried
on
his
farming
business
before
he
sold
it.
and
went
on
to
conclude:
The
question
is
whether
he
did,
in
fact,
decide
that
it
would
make
a
good
addition
to
his
farming
business
at
a
price
of
$10,000
and
did,
in
fact,
acquire
it
for
that
purpose.
I
am
satisfied,
from
his
evidence,
that
that
is
the
sole
purpose
that
motivated
him
to
acquire
the
land
and
that,
for
over
a
year,
it
was
a
part
of
the
lands
that
he
used
in
his
farming
business.
I
am
also
satisfied
that
the
very
high
price
that
he
was
ultimately
offered
for
it
convinced
him
that
it
was
wise
to
dispose
of
it
and
carry
on
his
farming
business
without
it.
The
fact
that,
as
in
this
case,
there
have
been
many
turnovers
of
properties
which
have
been
held
for
short
periods
of
time
is
not
conclusive
that
the
taxpayer
has
been
carrying
on
the
business
of
a
real
estate
trader.
This
is
well
illustrated
in
Reich
Hotels
Ltd.
v.
M.N.R.,
[1982]
C.T.C.
2334;
82
D.T.C.
1297,
where
J.B.
Goetz,
then
a
member
of
the
Tax
Review
Board,
found
that
a
plaintiff
company,
which
had
bought
and
sold
five
hotels
over
a
period
of
seven
years,
was
not
engaged
in
an
adventure
or
concern
in
the
nature
of
trade.
Goetz's
findings
were,
in
part,
as
follows:
At
first
the
sequence
and
frequency
of
purchases
and
sales
of
hotels
would
seem
to
support
the
Crown's
proposition
that
the
acquisition
of
the
hotels
was
a
speculation
with
the
possibility
of
turning
them
to
account
for
profit
and
was
the
major
motivating
factor
and
that
the
appellant
was
really
engaged
in
an
adventure
or
concern
in
the
nature
of
trade.
Mr.
Reich
has
now
developed
over
the
years,
an
expertise
in
the
management
of
hotels,
and
now
is
the
owner
and
manager
of
a
hotel
worth
at
least
$2,000,000.
This
certainly
is
a
progression
upwards
in
the
improving
of
his
total
business
operations
of
operating
hotels
to
produce
income.
To
me,
the
appellant's
whole
course
of
conduct
is
consistent
with
its
desire
to
acquire
properties
to
improve
and
move
its
business
upwards
and
to
acquire
a
larger
total
investment
in
the
hotel
business.
See
The
Queen
v.
Grant
Kyllo,
[1976]
C.T.C.
409;
76
D.T.C.
6235.
[.
J
I
do
not
consider
these
purchases
and
sale
of
the
various
hotels,
albeit
in
a
relatively
short
period
of
time,
as
being
motivated
with
the
view
of
speculation
and
turning
the
acquisition
of
the
hotels
to
account
for
profit.
[.
.
.]
The
appellant's
whole
course
of
conduct
is
more
consistent
with
that
which
is
maintained
by
the
appellant,
namely,
to
acquire
capital
assets
to
produce
income
in
the
ordinary
course
of
the
operation
of
its
hotel
business.
In
both
cases
the
credibility
of
the
plaintiff
was
a
determining
factor.
In
the
Richthofen
case
Jackett,
P.
observed
that
the
plaintiff
was
thoroughly
tested
on
cross-examination,
that
no
effort
was
spared
in
putting
him
to
the
defence
of
his
story
but
that
at
the
end
of
the
day
its
main
outlines
were
not
shaken.
In
the
latter
case
Goetz
observed
that
Mr.
Reich,
the
plaintiff's
witness,
was
not
shaken
in
any
way
in
cross-examination
and
that
he
accepted
his
evidence
as
the
reasons
for
the
purchases
and
sales
of
the
different
hotels.
In
this
matter,
after
observing
the
plaintiff
both
in
direct
and
cross-
examination,
I
found
him
to
be
a
very
credible
witness.
The
explanations
which
he
gave
for
purchasing
the
several
properties
were
reasonable
as
were
his
explanations
for
their
sale.
His
use
of
the
properties
as
farm
lands
while
he
held
them
was
entirely
consistent
with
his
occupation
as
a
bona
fide
full-
time
grain
farmer
who
purchases
the
properties
with
the
intention
of
farming
them.
His
subsequent
disposition
of
the
farm
properties
was
likewise
consistent
with
his
original
and
continued
long-term
plan
to
acquire
two
to
three
sections
of
land
for
the
purposes
of
conducting
a
farming
operation.
In
short
I
found
the
plaintiff
to
be
a
credible
witness
and
I
have
accepted
the
overall
truth
of
his
evidence.
Both
the
plaintiff's
father
and
grandfather
were
prairie
grain
farmers
in
Saskatchewan.
As
a
boy
the
plaintiff,
like
most
farm
children,
was
pressed
into
service
as
he
was
growing
up.
By
the
time
he
was
20
years
of
age
in
1972
he
had
quit
his
first
year
of
university
and
returned
home
to
go
farming
with
his
father.
That
was
the
first
year
that
the
plaintiff
had
his
own
permit
book
and
was
thus
able
to
sell
grain
to
the
Wheat
Board
on
his
own
account.
He
had
second
thoughts
about
leaving
university
and
went
back
for
two
more
years,
until
the
spring
of
1974,
when
he
decided
against
continuing
and
decided
to
become
a
full-time
farmer.
Being
a
full-time
grain
farmer
in
Saskatchewan
involves
full-time
work
of
10-12
hours
per
day
during
the
season
from
April
to
October.
It
is
not
unusual
therefore
to
find
farmers
with
secondary
jobs
during
the
five-month
winter
season
from
November
to
April.
Having
made
his
decision
to
become
a
full-time
grain
farmer
the
plaintiff
purchased
his
first
piece
of
land,
a
quarter
section
adjacent
to
his
father’s
property.
He
bought
this
land
in
July
of
1974
from
his
grandmother
for
$24,000.
He
also
leased
from
his
grandmother
a
second
quarter
diagonally
opposite
the
purchase
land
so
that,
between
them,
he
and
his
father
had
five
quarter
sections
contiguous
to
each
other
(Exhibit
P-1).
He
bought
the
land
with
the
intention
of
farming
it
and
in
fact
did
farm
it
until
1979
when
he
transferred
the
land
and
paid
$45,000
to
his
father
in
exchange
for
two
quarters
of
land.
At
the
time
he
purchased
and
leased
the
two
quarter
sections
from
his
grandmother
in
1974
those
sections
combined
with
his
father’s
sections
made
a
compact
farming
unit
ideally
suited
to
the
plaintiff's
farming
capacity.
He
had
no
equipment
while
his
father
had
equipment
enough
to
farm
more
land
than
he
held.
The
plaintiff
and
his
father
had
an
agreement
that
if
the
son
would
contribute
his
labour
to
assist
his
father
in
his
farming
operation,
the
plaintiff
could
use
his
father’s
equipment
in
his
operation
and
would
likewise
be
assisted
by
the
father.
In
effect
father
and
son
jointly
farmed
their
properties.
There
was
nothing
in
the
evidence
to
indicate
to
me
that
the
plaintiff
had
any
intention
other
than
to
farm
the
land
when
he
acquired
it
from
his
grandmother.
The
following
year,
in
March
of
1975,
the
plaintiff
acquired
two
additional
quarter
sections
about
six
miles
south
of
the
land
purchased
from
his
grandmother.
These
properties
were
purchased
for
$70,000
and
are
described
as
the
Duke
land.
The
purchase
of
this
property
was
in
furtherance
of
the
plaintiff's
overall
plan
to
eventually
farm
a
larger
total
area.
At
the
time
his
father
was
farming
a
total
of
about
two
and
a
half
sections
and
the
plaintiff's
plan
was
eventually
to
farm
an
area
of
about
the
same
size.
I
accept
the
plaintiff's
evidence
that
it
was
his
intention,
when
he
acquired
the
Duke
land,
to
farm
it
and
live
in
the
farmhouse.
For
the
reasons
already
given
he
sold
the
farmhouse
and
ten
acres
of
the
land
in
1977
but
he
kept
the
remainder
of
the
property
and
farmed
it
until
1981
when
he
sold
it
to
his
brothers
for
$200,000,
which
amount
was
put
towards
the
purchase
of
five
adjoining
quarter
sections
of
land
about
nine
miles
to
the
east.
I
can
find
no
evidence
of
any
interest
on
the
part
of
the
plaintiff
at
the
time
he
acquired
the
Duke
land
to
do
anything
other
than
to
operate
it
as
a
farm.
Not
only
is
this
borne
out
by
the
fact
that
he
did
farm
it
every
year
that
he
had
it
until
he
sold
it
to
his
brothers
in
1981
but
the
$5,000
cost
of
draining
a
portion
of
the
property
in
1976
to
improve
its
productivity
is
consistent
with
the
intention
of
keeping
and
farming
it.
The
next
acquisition
marked
a
change
in
the
plaintiff's
pattern
of
farming
operations.
This
occurred
in
March
of
1978.
At
the
time,
five
adjacent
quarter
sections
of
prime
farming
land,
three
of
which
are
called
the
Eves
land
and
two
of
which
are
called
the
Gamble
land,
came
up
for
sale.
The
asking
price
of
the
property
was
$70,000
for
each
quarter
section
of
the
Eves
land
and
$75,000
for
each
quarter
section
for
the
Gamble
land.
The
plaintiff
decided
to
go
in
partnership
with
Arlen
Avery
to
purchase
the
property.
All
five
quarter
sections
were
acquired
by
the
plaintiff
and
Avery
in
March
of
1978.
The
plaintiff
said,
and
I
accept
his
evidence,
that
these
lands
were
acquired
with
the
intention
that
they
would
be
used
for
farming
operations
and
were
not
acquired
with
a
view
to
selling
them
for
a
profit.
In
fact
the
plaintiff
farmed
the
properties
during
the
1978
season
in
the
usual
way,
i.e.
by
using
his
father's
equipment
and
contributing
his
labour
to
his
father's
farming
operations.
Avery,
however,
although
he
took
no
active
part
in
the
farming
operations,
took
his
share
of
the
proceeds
of
the
operations.
After
the
1978
season
the
plaintiff's
father
became
dissatisfied
with
the
sharing
arrangement
he
had
had
with
his
son
for
the
previous
five
seasons.
Apparently
what
had
been
a
satisfactory
arrangement
between
father
and
son
in
this
respect,
and
one
which
was
probably
very
much
weighted
in
favour
of
the
plaintiff,
was
not
to
be
extended
to
a
stranger
and
particularly
to
a
stranger
who
did
not
contribute
anything
in
regard
to
the
operations.
The
plaintiff's
father
let
his
son
know
that
their
long-standing
equipmentsharing
arrangement
would
not
be
continued
to
the
partnership.
The
plaintiff
says,
and
I
accept
his
evidence,
that
it
was
this
change
which
made
him
decide
to
sell
the
Eves
and
Gamble
properties
which
he
and
Avery
had
acquired
the
previous
year.
Thus
it
was
that
in
the
spring
of
1979
the
plaintiff's
five
quarter
sections
comprising
the
Eves
and
Gamble
lands
were
sold
to
one
Dutchak
for
$300,000
and
the
plaintiff
transferred
to
his
father
the
land
he
had
purchased
from
his
grandmother
in
1975.
In
return
for
the
land
purchased
from
his
grandmother
the
plaintiff's
father
sold
his
son
two
quarter
sections
about
a
mile
from
the
"home"
farm.
He
allowed
his
son
$80,000
for
the
grandmother's
quarter
section
and
charged
his
$125,000
for
the
two
quarter
sections,
making
a
net
payment
of
$45,000
due
from
the
son
to
the
father
on
the
exchange.
In
addition
to
these
two
quarter
sections
acquired
from
his
father,
the
son
applied
the
proceeds
of
the
sale
of
the
partnership
property
to
acquire
two
quarter
sections
of
land
south
of
and
adjacent
to
the
home
farm.
This
land
is
called
the
Mews
land
and
was
acquired
in
March
of
1979
in
time
for
that
year’s
farming
season.
At
that
point
the
plaintiff
owned
three
pieces
of
land
comprising
two
quarter
sections
each,
the
Duke
land
purchased
in
1976,
the
land
purchased
from
his
father
in
1979
and
the
Mews
land
also
purchased
in
1979.
The
latter
two
parcels
of
land,
although
close
to
the
home
farm,
were
separated
from
each
other
by
a
mile
and
from
the
Duke
land
by
about
six
miles
(Exhibit
P-1).
As
a
result
of
these
1979
land
transactions
the
plaintiff
had
gotten
himself
out
of
the
partnership
with
Avery,
had
moved
his
farming
operation
closer
to
the
home
farm,
and
was
in
a
position
to
return
to
the
favourable
equipment-sharing
arrangement
he
had
with
his
father.
He
farmed
this
land,
950
acres
in
all,
for
the
1979
and
1980
seasons.
He
says,
and
I
accept
his
evidence,
that
the
lands
were
bought
with
the
intention
of
farming
them
and
not
with
the
intention
of
re-selling
them
at
a
profit.
In
support
of
this
intention
the
plaintiff
points
to
a
drainage
project
he
undertook
on
the
lands
acquired
from
his
father.
In
the
fall
of
1979
he
spent
almost
$20,000
on
a
deep
tile
drainage
project
the
full
benefits
from
which
would
not
be
realized
for
five
years.
Even
though
his
intention
was
to
farm
the
acreage
he
had
accumulated
by
1979,
and
he
did
so
for
the
1979
and
1980
seasons,
that
plan
came
to
an
end
in
the
fall
of
1980.
At
the
time
Dutchak
called
the
plaintiff
to
tell
him
that
he
was
moving
to
Alberta
and
that
he
would
have
to
sell
the
Eves
and
Gamble
lands
which
he
had
purchased
from
the
plaintiff
and
Avery
two
years
previously.
Dutchak's
holdings
comprised
four
of
the
five
quarter
sections
of
those
lands
originally
purchased
by
the
plaintiff
and
Avery.
At
the
time
the
fifth
quarter
section
of
the
original
five
was
owned
by
one
Nikolic
who
had
built
a
house
on
the
property
and
who
had
also
decided
to
sell.
The
plaintiff,
who
had
already
farmed
the
land
for
one
season,
knew
that
this
area
was
one
of
the
most
productive
in
the
region.
The
five
quarter
sections
were
adjacent
to
each
other
and
would
make
for
more
economical
use
of
equipment
and
the
Nikolic
house
was
far
more
suitable
to
his
family
needs
than
the
house
in
which
they
were
currently
living.
He
saw
the
acquisition
of
that
property
as
a
major
step
in
realizing
his
objective
of
a
compact
2-
to
3-section
farm
and
decided,
if
at
all
possible,
he
would
acquire
it.
He
arranged
to
purchase
Dutchak's
four
quarter
sections
for
$433,000
and
Nikolic’s
quarter
section
for
$175,000.
Although
the
agreement
to
purchase
these
properties
was
made
in
mid-October
of
1980
the
sales
were
not
due
to
be
completed
until
mid
or
late
January
of
1981.
The
delay
was
to
give
the
plaintiff
time
to
complete
the
disposition
of
his
own
lands
so
as
to
enable
him
to
raise
the
funds
to
purchase
the
Eves
and
Gamble
lands
now
owned
by
Dutchak
and
Nikolic.
As
already
detailed
in
my
consideration
of
the
second
question
he
then
arranged
the
sale
to
Avery,
effective
January
2,
1981
for
$365,000,
of
the
two
quarter
sections
he
had
purchased
from
his
father
and
the
two
quarter
sections
comprising
the
Mews
land,
except
40
acres
and
a
building
from
one
of
the
Mews'
quarter
sections.
He
arranged
to
sell
this
building
and
40
acres
to
one
Tilson
for
$78,000
effective
January
15,1981.
Finally
he
made
arrangements
to
sell
the
Duke
land,
acquired
back
in
1976,
to
his
brothers
for
$200,000
effective
April
1981.
The
net
result
of
these
transactions
was
that
his
overall
land
holdings
had
been
reduced
by
about
a
quarter
section
but
that
the
five
sections
which
he
now
owned
and
intended
to
farm
would
be
more
productive
than
the
six
quarter
sections
he
had
sold.
Not
only
would
the
new
land
be
more
productive
but,
because
of
its
configuration,
it
would
be
more
economical
to
farm.
Finally
he
had
also
provided
a
suitable
house
for
himself,
his
wife
and
children
at
the
farm
site
itself.
At
the
trial
I
had
no
reason
to
doubt
the
plaintiff's
evidence
that
his
intention
in
acquiring
that
property
was
to
farm
it
and
that
he
had
no
intention
of
acquiring
it
to
speculate
on
its
future
value
and
to
realize
a
profit
on
it.
I
have
no
hesitation
in
concluding
now
that
his
expressed
intention
was
in
fact
his
intention.
That
the
plaintiff
expected
to
be
farming
the
land
he
had
just
acquired
in
the
1981
season
is
borne
out
as
well
by
the
fact
that
almost
immediately
after
he
took
possession
of
it
in
January
of
1981,
at
a
cost
of
some
$4,000,
he
spread
17.5
metric
tonnes
of
nitrogen
fertilizer
on
the
land.
The
plaintiff
continued
with
his
plan
to
expand
his
farming
property
in
March
of
1981
by
negotiating
for
the
purchase
of
three
quarter
sections
adjacent
to
his
newly
acquired
property.
Agreement
was
reached
on
a
price
of
$425,000
but
before
the
plaintiff
had
the
opportunity
to
obtain
the
necessary
financing
the
proposed
vendor
sold
the
property
to
a
Mr.
Kerr
Chow
who
immediately
re-sold
it
to
Brian
Farms
Limited
for
about
$1,050
per
acre
or
about
$500,000.
The
final
chapter
in
this
lengthy
tale
is
that
a
short
while
after
Chow
had
sold
his
land
to
Brian
Farms
Limited,
the
plaintiff
was
contacted
and
asked
if
he
would
sell.
He
said
he
would
sell
at
the
same
price,
i.e.
$1,050
an
acre
or
$800,000
which
did
not
include
the
house
on
one
of
the
Eves'
quarter
sections.
In
May
of
1981
he
sold
the
five
quarter
sections,
less
the
house,
for
$800,000
to
Brian
Farms
Limited
with
the
intention
that
he
would
re-establish
himself
on
new
lands.
The
same
year,
out
of
the
proceeds
of
the
sale
to
Brian
Farms
Limited,
he
purchased,
in
partnership
with
Avery,
1,280
acres
of
land
in
Montana
and,
in
his
own
name,
320
acres
of
land
in
the
Moose
Jaw
area.
Revenue
Canada
was
duly
notified
in
the
plaintiff's
1981
tax
return
that
the
farm
land
sold
had
been
replaced
by
the
land
purchased
in
the
United
States
and
by
two
quarter
sections
in
the
Moose
Jaw
area.
Counsel
for
the
Crown
took
the
view
that
the
notification
with
respect
to
the
Moose
Jaw
land
was
somehow
inoperative
because
it
did
not
accompany
the
plaintiff's
1981
return
at
the
time
of
filing
it.
This
was
explained
as
an
oversight
on
the
part
of
the
accountant
who
prepared
the
return.
The
plaintiff
noticed
the
omission
to
include
the
Moose
Jaw
replacement
purchase
when
he
received
a
copy
of
the
tax
return
from
the
accountant.
He
immediately
notified
the
accountant
of
the
omission.
This
was
acknowledged
by
the
accountant
who
filed
an
amended
schedule
showing
the
correction.
In
this
respect
I
am
satisfied
that
the
amended
schedule
filed
under
cover
of
the
accountant's
letter
dated
May
31,
1981
is
sufficient
notification
to
Revenue
Canada
of
the
facts
contained
in
it
(Exhibit
P-13).
Although
I
need
not
concern
myself
with
it,
it
is
interesting
to
note
that
in
furtherance
of
his
stated
intentions
with
respect
to
his
farming
operations
the
plaintiff
is
still
a
full-time
bona
fide
farmer.
He
now
owns
two
sections
of
land
and
rents
another
1,500
acres
which
he
farms
himself.
As
I
said
at
the
beginning
of
this
narrative
relating
to
the
acquisition
and
disposition
of
farm
lands
by
the
plaintiff
from
1974
to
1981
the
plaintiff
was
a
credible
witness.
Even
though
there
were
many
different
acquisitions
of
property
he
has
satisfied
me
that
in
each
case
his
sole
motivation
in
acquiring
it
was
to
add
to
his
farming
lands.
In
each
case
the
lands
acquired
were
in
fact
farmed,
some
of
them
for
years.
That
being
the
case
I
am
equally
satisfied
that
the
sales
of
the
farm
lands
which
took
place
were
sales
of
capital
assets
of
his
farming
business.
Exhibit
P-24,
showing
as
it
does
a
consistent
increase
in
the
size
of
the
plaintiff's
farm
holdings
from
1974
to
1981,
tends
to
confirm
his
evidence
to
the
effect
that
his
overall
intention
in
purchasing
and
selling
farm
lands
was
to
increase
the
size
of
his
holdings.
The
plaintiff
has
admitted
that
he
was
a
real
estate
salesman
and
that
he
purchased
some
lands
for
speculation.
In
my
view
his
occupation
as
a
real
estate
salesman
which
lasted
for
the
winter
seasons
from
1976
to
1980
was
a
part-time
winter
occupation
which
did
not
diminish
in
any
way
the
full-time
and
bona
fide
character
of
his
occupation
as
a
farmer.
His
evidence
was
that
grain
farmers
have
little
to
do
during
the
winter
season
and
that
by
obtaining
a
real
estate
broker's
license
and
selling
real
estate
he
would
supplement
his
income
selling
real
estate
during
the
winter
seasons.
I
fail
to
see
how
that
in
any
way
could
cause
him
to
be
less
than
a
full-time
farmer.
One
has
only
to
glance
at
the
plaintiff's
income
tax
returns
to
compare
the
income
from
farming
and
the
real
estate
commissions
to
confirm
that
by
far
the
plaintiff's
major
operation
was
farming
(Exhibit
P-14).
As
well
I
can
see
no
reason
why
the
plaintiff
could
not
be
a
speculator
or
trader
in
real
estate
and
also
be
a
farmer
who
acquires
real
estate
with
the
sole
intention
of
employing
it
in
his
farming
operations.
It
is
true
that
he
runs
the
risk
of
an
up-hill
fight
in
having
to
convince
a
court
that
the
two
operations
are
separate
and
that
his
intention
in
acquiring
farm
land
is
completely
different
from
his
intention
in
acquiring
land
for
re-sale
particularly
where
the
farm
lands
are
acquired
and
re-sold
several
time.
Although
that
is
quite
a
risk
to
take,
the
plaintiff
has
satisfied
me
that
he
did
keep
his
farming
operations
separate
and
apart
from
his
real
estate
trading.
Like
Mr.
Richthofen
he
has
satisfied
me
that
he
acquired
the
several
farm
lands
which
he
did
to
be
used
in
his
farming
business
and
that
the
last
sale
was
made
because
of
the
very
high
price
that
he
was
offered
for
the
lands
which
convinced
him
that
it
was
wise
to
sell
them
and
to
use
the
proceeds
to
replace
them
with
other
farm
lands.
And,
like
Mr.
Reich
and
his
hotel
properties,
the
plaintiff
has
satisfied
me
that
his
whole
course
of
conduct
in
the
acquisition
and
disposition
of
the
farm
lands
has
been
consistent
with
his
expressed
intention
to
acquire
farm
properties
to
improve
and
move
his
farming
business
upwards
and
to
acquire
a
larger
total
investment
in
the
farming
business.
The
plaintiff's
appeal
will
be
allowed
to
the
extent
indicated
in
these
reasons.
Counsel
for
the
plaintiff
will
prepare
a
draft
judgment,
which
he
will
submit
to
counsel
for
the
defendant
for
approval
as
to
form,
and
will
then
submit
the
same
to
me
for
my
consideration.
The
plaintiff
will
have
his
costs
throughout.
Appeal
allowed.
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