Bosa Bros. Construction Ltd. v. Canada
T-3403-90 / T-3404-90 / T-3405-90
Nadon J.
22/12/95
41 pp.
Appeals from Minister's reassessments regarding: (1) gains realized on properties A and B; (2) entitlement to Act, s. 85(5.1) non-capital loss with respect to liquidation of property A; (3) entitlement to bad debt claim with respect to certain money advances; (4) deduction of repurchase costs with respect to units in properties B, C, and D-Preliminary ruling holding appeal from nil assessment may be dealt with in other taxation years where matter relevant in determination of taxes for other years-Property characterized as capital or inventory according to six factors: (1) taxpayer's primary intention; (2) taxpayer's normal course of business; (3) number and repetition of similar transactions; (4) nature of and length of time property held; (5) reason for sale of asset; and (6) taxpayer's secondary intention-Plaintiff arguing no intention to sell property A at profit as purchase prompted by legal action for specific performance; however, judge finding such intention due to short period of time property held-Gains from sale of property A constituting income-Title to units of property B stratified to facilitate financing; stratification not indicative of intention to sell-Gains from sale of property B constituting capital gain in light of plaintiff's clear intention to retain property as rental income producer-Liquidation of property A entitling plaintiff to s. 85(5.1) non-capital loss as evidence showing property A treated as depreciable property by Crown-Had evidence as to whether property A depreciable been unclear, burden of proof shifting to Crown as such information within Crown's power to obtain-Plaintiff's ordinary business construction and development of properties rather than lending of money; thus money advanced to wholly- owned subsidiary not constituting loans within meaning of s. 20(1)(p)(ii) and plaintiff not entitled to bad debt claim with respect to advances-Money advanced for purpose of covering losses and protecting guarantors rather than for purpose of acquiring product or ensuring source of supply; advances neither deductible expense nor capital loss-As cash flow guarantee, plaintiff's contractual obligation to repurchase units of property B constituting s. 42 capital loss-Plaintiff failing to meet onus of proving repurchase of units of property C and D inventory rather than capital; Minister correctly characterizing same as expenditures on capital account for purpose of s. 42-Income Tax Act, S.C. 1970-71-72, c. 63 ss. 20 (1)(p)(ii) (as am. by S.C. 1988, c. 55, s. 12(6)), 42 (as am. by S.C. 1985, c. 45, s. 16(1); 1988, c. 55, s. 23(1)), 85(5.1) (as enacted by S.C. 1980-81-82-83, c. 140, s. 48(6)).