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Intent to Profit Means Income - Not Capital Gain

Wed, 30 Jul 2008 16:32:54 +0000

Up until 1972, a sale was either a tax free capital gain or it was taxable at straight income tax rates as a venture in the nature of trade.

In 1969, Keele Dufferin Acres Ltd. had bought a 92 acre farm which they farmed for about four years. They then received an unsolicited offer to buy the farm, and made a profit in excess of $150,000 which they tried to claim as a tax free capital gain. The Tax Appeal Board ruled that the gain was taxable as a venture in trade at full tax rates, even though it was an isolated transaction.

In 1973, Anderson, Beckingham, McDonald and McDonald were all taxed as straight income on the purchase of a parcel of land outside of Edmonton. Even though it was an isolated transaction, they had obtained their advice from a noted real estate speculator, and the court ruled that though it is possible that a similar transaction `could' have been a tax free capital gain, it was unreasonable in this case to think that the investors bought with any idea other than resale at a profit.

It Can Take Time To Resolve Claims - Sometimes Many Years

Wed, 30 Jul 2008 16:29:20 +0000

The combination of differing treatments of stock trades and real estate trades can create situations which sound or read like Saturday morning cartoon shows, if it was not for the worry and heartache for the people involved. In the following case, which took over a year to solve, the taxpayer involved was driven to seek bankruptcy counseling, his marriage was "almost" destroyed, and another citizen wonders "why me??".

Read on...

What happened? My client bought a lot with acreage in a rural community. He bought the lot to build a house on for himself, his wife, and his children. However, a series of murders and other circumstances caused his wife to decide that she did not want to live in that area. It seemed fortuitous. He sold the lot and acreage at the top of the market and made a $50,000 profit. He took a small part of the money (a mistake as he should have paid cash) and put it down on another lot on which he promptly built at the top of the market... (i.e., although he had made a big profit in cash, he signed for a large amount of money at the peak)... and moved wife and family in. But now that he had some `real money' to work with he was going to make his fortune. An advisor told him to buy an Income Averaging Annuity Contract (IAAC) where he could borrow the money back out and have it to use, so he did.... (Now he has the money to spend, and doesn't owe all that tax `now').... He took his $40,000 to the stock market, made over 100 buys and sells, got up every morning to call his broker, and spent six months of his life losing the $40,000 plus another $10,000 he had borrowed... This, of course covers two fiscal years of tax which we will call `80 and '81. He now has a $50,000 capital loss in '81 which he can apply against the $50,000 capital gain in '80, and does not need his IAAC anymore. In trying to stop the taxing provisions of the IAAC, he triggers an audit.... The assessor taxes him 100% on the profits on the lot (an isolated instance bought for personal use and tax free if he had built right away) and only allows a $2,000 capital loss for the $50,000 stock market loss to which he has devoted six months of his life and has NOT EVEN MADE a Section 39 (4) ELECTION TO BE TREATED AS A TRADER.

THANKFULLY, although the local branch was unreasonable, and frustrating, a NOTICE OF OBJECTION ( T400A ) resulted in an appeals officer reversing this inequity without having to go to court. Our argument was that the lot was Capital Gains and that, if a change was to be made, it should be to allow the $50,000 stock loss as a business (i.e., trading) loss, which in the long run is what really did happen. My client and the Tax Office were happy to call it quits.

The IAAC was stupid legislation which has thankfully been removed. Most tax shelters are stupid with the exception of Rasp's and MURBs. When you see a B.C. Cabinet Minister resigning over his purchase of a Tax Shelter, and others losing homes, cars and reputation over purchasing Scientific Research Tax Credits which never took place, you have to realize that the inside of the deal is more important than what the paperwork looks like.

Sometimes, a deal can be a combination of capital gain and income.

In 1984, Dorothy May Hughes had her original loss in the Tax Review Board (in 1980) changed by the Federal Court - Trial Division. In January 26, 1973, Hughes bought an eighteen suite apartment block for $235,000. Various personal and financial problems caused Ms. Hughes to apply for strata conversion in July '73, and although North Vancouver City Council originally turned the request down, the conversion was finally approved on January 28, 1974. The strata value was appraised at $460,000 on January 15, 1974. When filing her 1974 tax return in 1975, Ms. Hughes claimed capital gains treatment for the change in value from $235,000 to $460,000 and reported straight income on the sale of the strata units over the $460,000. DNR tried to assess for straight income after the $235,000 cost, and the Tax Review Board agreed with DNR. However, the Federal Court agreed with Ms. Hughes, citing the following case, which took three court cases to settle in the taxpayer's favor. AND, as this case involved the 1967/68 tax years, capital gains treatment meant no tax.

In 1963, Hiwako Investments Limited, which was controlled by an individual with a long history of real estate transactions, bought a number of apartment properties in Toronto. They were sold 9 months later for substantial profits which were claimed tax free. In 1973, Hiwako lost before the Tax Review Board. In 1974, Hiwako lost before the Federal Court. And in 1978, Hiwako Investments Limited won in the Federal Court of Appeal. In settling the Hughes case above, Judge Collier quoted Judge Jackett in the Hiwako case: "an intention at the time of acquisition of an investment to sell it in the event that it does not prove profitable does not make the subsequent sale of the investment the completion of an `adventure or concern in the nature of trade'".

Please note that it took from 1974 to 1984 to settle the Hughes case above. It took from 1964 to 1978 to settle the Hiwako case. Ten years and fourteen years are nothing in tax matters. As of the date of this writing, January 4, 1992, I have been waiting 15 months for the judge to rule on my 1979, 80, and 81 tax returns (which of course affects every return from 82 to 92). The case was 10 days long and would have cost a stranger $150,000 or more for representation.

Please remember the cost and time involved if and when you decide to challenge the system.

FAMILY HOME TAXABLE

Wed, 30 Jul 2008 16:27:23 +0000

In 1978, John Welton was taxed at full rates on a $66,000 profit from the sale of his fifth personal house in 13 years. His regular occupation was that of building contractor. The Tax Review Board ruled that his past conduct showed a clear intent to buy, build, live in and sell at a profit.

In December 1988, Harjit Atwal (I was his agent) was forced to pay full tax on a house which he built and lived in for a short while. He was a contractor at the time and built four similar houses for sale and one dissimilar house with a basement, etc. which he moved into. The judge ruled that he had not proven it was built for a personal residence.

Read on for more...

In December. 1991, in the Case of FALK vs the Minister of National Revenue , Mr. Falk won his case. He had had three houses in 8 years from 1980 to 1988. Revenue Canada Taxation tried to tax him on the second house he sold in 1985. The Tax Court of Canada ruled against Revenue Canada but Revenue Canada still tried to tax the house. Therefore, it should be obvious that you cannot "sell one a year", or Move back into the house for a month to make it tax free. In fact, Moving into the house to make it tax free, "triggers" a tax liability although it can be delayed.

You can see that one buy or sell could be a venture in trade and taxable at full rates, and that the supposedly "sacrosanct" family home is not always tax free either, but WHY THE BIG PROBLEM?

Well, as I implied before, the question of capital gain versus straight income was becoming quite clear by the start of the seventies. There were years of tax law to work with, and then the legendary monkey wrench got thrown into the works. In June of 1971, The Minister of Finance introduced Capital Gains tax at full rates on 50% of the gain beginning January 1, 1972.

The tax office became so engrossed in collecting the new tax that they ceased to pay as much attention to the difference between capital gains and straight income. As a consequence, for about eight years, profits which would have been taxed as straight income under the old act, snuck through as capital gains at half rates. Then in 1980/81 DNR started to crack down on straight income again. In fact, they went overboard and attacked every single sale that they could find, particularly in the west, where fantastic profits were being made by "flippers".

Unfortunately for DNR, by the time they did crack down, the losses were flowing like blood in a slaughterhouse, and the government ended up giving out as many or more dollars for the straight losses as they collected from the few people that they managed to tax at straight income.

Those losses have now been established and the real estate market in Canada is strong. In fact, collectively, Canadian Real Estate has increased in price 80 out of the last 86 years.

Concerning the Stock Market, Section 39 (4) contains an election which allows stock market investors (who might make 50 trades in a year) to elect to treat themselves as capital gains investors, rather than as traders. This election excludes professional stock traders and certain officers and directors, but it is there and makes the rules different between real estate/all other investments and the stock market.

The tax act defines "any buy/sell" as a venture in trade, and gives the election exemption for the stock market and for the family home. This means that by the very definition, any single buy/sell in real estate that you do not live in is taxable at straight tax rates. Lets face it. We would look pretty stupid in court telling the judge that we didn't buy the real estate or the stock to make a profit.

So what does this mean?

What it means is that you are going to have a hard time getting that $100,000 or $500,000 lifetime exemption. The tax office has a policy of going after investors in the stock market and making them traders based on the volume or number of trades or the position of the purchaser/seller relative to the companies involved. In 1984, Louis Wolfin and Frobisher Securities Ltd. were denied the benefits of section 39 (4) and Capital Gains Tax treatment. The Tax Court of Canada ruled that the activities of Mr. Wolfin were such that he personally was responsible for the increased values of the shares he bought and sold in his own name and that of Frobisher Securities Ltd. Both Mr. Wolfin and Frobisher Securities have appealed the case to the Federal Court - Trial Division.

LAND IN EXCESS OF ONE ACRE

Wed, 30 Jul 2008 16:22:09 +0000

In 1984, Carl Rudeloff lost his claim for a tax free sale of his home and ten acres which he had lived on and in for ten years. The Tax Review Board ruled that although the excess 9 acres of land certainly `contributed' to the use and enjoyment of his home, it was not necessary. The facts that the Rudeloff family had a woodlot, raised horses and chickens, had a family garden and a play area, did not sway Judge Taylor of the Tax Court of Canada. He said, "I am not persuaded the relevant section of the Income Tax Act permits of the view espoused by this taxpayer - that merely because he resided in a housing unit on the property, and used the balance of the property in one way or another to enhance the utility and attractiveness of that domestic living style, he can expand the boundaries of his housing unit to the parameters of the natural domain desired in his appeal."

Read on for lots more on this and other cases...

This last decision has been partially turned over in the 1991 Federal Court decision where Judge Strayer decided that an extra lot was not essential but certainly contributed to the use and enjoyment of the property. However, I find this ruling unusual for a country like Canada. Certainly, this country was built on small holdings, self-sufficiency, the raising of chickens and the growing of food in a garden. However, it seems that unless you can show that it was necessary for the use and enjoyment of a housing unit, it will not fly. Perhaps if he could have shown that he did not have enough money to feed his family, it would have proved `necessary'. I think I can explain it in other equally ridiculous terms, though. You buy a car with no doors or roof. It has an engine (necessary to use), a transmission (necessary to use), four wheels (necessary to use), a steering mechanism, (necessary to use), and brakes (but brakes are not necessary to use). Brakes, roofs, and doors are an example of things which certainly `add' to the use and enjoyment of a vehicle but are not necessary if you drive in a vacant and level field where it does not rain. Of course, if you want to drive down a hill, brakes would be necessary, but since you don't `HAVE TO' drive down the hill, they are not necessary. However, if you want to drive on a highway, THE LAW SAYS THAT BRAKES ARE NECESSARY. If it rains, you may say that a roof and doors (and windows) are necessary, but all sorts of people ride motorcycles in the rain with no doors, roof or windows. (Okay, okay, a windshield is really nice, but not necessary... my motorcycle does not have one).

In fact, if any case should have been appealed to a higher court, the Rudeloff case should have been, and we at the CEN-TA GROUP had a similar case that was destined to "go to the top". We took our case to `the top' in 1988.

Unfortunately, the Tax Court ruled against five members of the Cillis Family and they have decided not to appeal. But I still feel they should have won. Four generations of one family lived on five acres in two houses. They used the acreage for a riding ring (one son is now a full-time professional equestrian), duck ponds, swimming pool, barns, sheds, and wood lot for themselves. However, as the two houses had been legally subdivided `out' of the five acres, it was ruled that the excess land was not `necessary' for the `Use and Enjoyment'.

And The Cillis family has decided not to appeal with good reason. DNR is treating this entire situation like parking meters. Either the violation flag is up or it is not. The courts have been interpreting the word "necessary" to mean "cannot be done without".

I still feel that the Cillis Family would have won their case on appeal. You have not really lost until the final judge has had his or her say. Marianne Fourt found that out when she did not take "NO" for an answer. Sort of a reverse of the popular T-shirt which says, "What part of No don't you understand".

In 1991, Marianne Fourt received a favorable ruling from the Federal Court Trial Division when the court ruled in favor of the tax free status of the second lot. The judge ruled that although not essential to the use and enjoyment of the family home, it clearly contributed to the use and enjoyment within the meaning of paragraph 54(g)(v) of the Act. She had lost in 1988 as stated below.

In 1988, Marianne Fourt paid tax on an adjoining lot she sold. She bought two lots and built her home on one and used the second lot for an incinerator, storage shed and parking. Judge Goetz of the Tax court ruled that she could have built everything on one lot and the other was not necessary, i.e., could not be done without.

It seems that unless, you have a "Yates" argument, i.e., could not have bought less because of zoning, you will not get anything more than one acre tax free. (to be fair, it is really 1.2 acres (1/2 hectare). Because of welfare, etc., the courts are determining that `eating off the land', i.e., garden, raising animals, etc., is not sufficient for necessity.

In 1989, Elmer Augart won an unusual case when you consider some of the other cases previously mentioned. (Elmo Baird for instance). He had bought 8.99 acres and he lived on it for FOURTEEN YEARS BEFORE the land was rezoned to require 80 ACRES FOR A SINGLE FAMILY HOUSE. Judge Mogan of the Tax Court of Canada ruled that because of the YATES case mentioned before in the text, the entire 8.99 acres was necessary under section 54(g) of the Act.

But also in 1989, the estate of Anna Lewis and the estate of John Lewis were taxed on the land in excess of one acre even though it was shown that the 2.11 acres could not be subdivided and sold as separate parcels. Judge Rip did not apply the Yates argument but he did change the values placed on the property by DNR resulting in a little less tax.

The following cases just add to the argument and are here for your information. You should also look at the Yates Case

In 1983, Donald Fraser lost his claim for an extra half an acre used as a garden and play area. D. E. Taylor, member of the Tax Review Board, found that the taxpayer had failed to demonstrate the "necessity" for the garden and play area.

In 1983, Elmo B. Baird, lost his bid for the tax-free sale of land in excess of one acre. Mr. Baird had bought 2.41 acres under the Veterans Land Act in 1951. He built outbuildings, raised farm animals, gardened, and used the size of the land for a septic field. Certainly "use", although an argument could be made by many "city dwellers" that tending a garden and cleaning stalls and septic fields is not "enjoyment", nor necessary. My understanding was that all VLA land was supposed to be in the 2 1/2 acres size `area'. If that is the case, Mr. Baird should have won his case because he could not have bought less land under VLA rules.

In 1991, Glen Windrim paid tax on the value of some 15 acres of land. He had a mobile home on 17.6 acres for three years and when he sold them, he tried to claim the total tax free. However, he had only lived there three years and showed no evidence of use and enjoyment or necessity. It is interesting that DNR voluntarily gave him 2 hectares (4.6 acres) tax free and Judge Muldoon of the Federal Court Trial Division went along with it even though the act only allows 1/2 hectare (about 1.22 acres) and originally allowed only 1 acre.

Interpretation bulletins IT 120 and IT 120R leave the impression that such matters as zoning will contribute to a favorable ruling when capital gains on land in excess of one acre are concerned.

In the case of Mr. Baird, he could not legally have bought less than 2 1/2 acres (VLA financing not zoning rules), which is relevant when the next case is mentioned.

The Famous Yates Case

Wed, 30 Jul 2008 16:19:42 +0000

In 1983, William and May Yates won their case in The Federal Court - Trial Division. The taxpayers could not legally have occupied their residence without ten acres because of local zoning laws. It was necessary to have more than one acre. Even though they had rented the excess out to a farmer, they only sold the excess 9.3 acres under threat of having the area expropriated. Judge Mahoney ruled "The defendants could not legally have occupied their housing unit as a residence on less than ten acres. It follows that the entire ten acres, subjacent and contiguous, not only `may reasonably' be regarded as contributing to their use and enjoyment of their housing unit as a residence; it `must' be so regarded. It also follows that the portion in excess of one acre was necessary to that use and enjoyment." This case was appealed to the Federal Court of Appeal. I am pleased to say that In 1986, William Yates and his wife May Yates won again. Judges Heald, Stone and Ryan found for the Yates.

But, there is a sense of futility here. When people need and use the land, they lose, but when they rent it out and don't use it, they win. Read on for more...

In 1986, the estate of Sarah Raper won the tax free ownership of an extra 4 acres for 9 out of 10 years. Until 1980, zoning laws prevented the subdivision of the land into less than 5 acre plots. Even though she did not subdivide the land in 1980, Judge Tremblay of the Tax Court of Canada ruled that her lifestyle was not sufficient to show `necessity for use and enjoyment' after 1980, and assessed tax on the capital gain after 1980. He said that `use and enjoyment' should be decided on a year to year basis, thus giving credence to my graph in the tax books from 1974 to '82 wherein I suggest that a taxpayer should be able to designate alternate years or different years as tax free, rather than the successive years suggested by DNR.

In 1987, John Wallace Beaton lost his case for the sale of 2.1 acres tax free showing again how the judge's mind works in these situations. In 1979 he had bought a `remnant' 4 acres in an area that required 25 acres to build a house. He built a house and drilled two wells, one on each half of the property. Neither well was satisfactory. In 1984 he sold 2.1 acres and kept the balance as his residence. He claimed the 2.1 acres was tax free because he needed it for his well and because of the zoning in place at the time of purchase. Judge Brule of the Tax Court of Canada ruled that it could not be said that Beaton could not have built on less than 4 acres as the land in question was already a remnant, and he certainly didn't need the extra 2.1 acres for his water supply because the well was unsatisfactory. The taxpayer was able to "do without" the 2.1 acres (i.e., he didn't need brakes.)

In 1986, Jacob and Ruth Schellenberg won $221,000 out of a $375,000 sale as tax-free gains from the sale of their principal residence and an adjoining lot. DNR tried to reverse the figures to $154,000 for the principal residence, and $221,000 as taxable from the sale of the lot. Judge Christie of the Tax Court of Canada ruled that the Schellenberg's figures were correct.

ESTATES and CAPITAL GAINS and ROLLOVERS

Wed, 30 Jul 2008 16:16:04 +0000

Death can cause difficulties and hardships with regard to capital gains.

Income Tax is extremely time sensitive. In 1982, the estate of W. E. Hillis was caught in a time warp which our legislators would not have wanted to happen. When W. E. Hillis died in testate on February 21, 1977, his lack of a will (intestacy) delayed normal settlement of the estate, plus left (under Saskatchewan law) part of the estate to the sons, both of who disclaimed any interest in the estate in June and July 1979. His widow was granted the entire estate on December 14, 1979 under the Dependent's Relief Act of the Province of Saskatchewan. The act specifies that to escape capital gains tax on assets transferred to a trust or spouse upon the death of a taxpayer, the assets must vest in that trust or spouse within fifteen months of the death. If not, there is a deemed disposition at fair market value of any assets of the deceased as of the date of death.

In this case, it is obvious that this did not happen. And it is easy to say that the judge was correct in taxing the assets, but is this what parliament wanted, to tax widows because of time delays during moments of hardship? This case was appealed to the Supreme Court of Canada. The Court dismissed the application in 1985.

Read on for more...

And in 1989, the estate of Alexander Boger suffered the same indignity. Mr. Boger died in 1979 and left his estate to his wife and 4 daughters. Mrs. Boger contested the will and held up the settling of the estate for 3 years. Judge Rip of the Tax Court of Canada ruled that the property had not been transferred to the children within the required 15 month period. It is obvious that this law needs changing. Fifteen months is not enough time when there are large numbers of items and potential family claims that have to be settled. Legislators awake! The results are not what you expected when fifteen months was allowed in the first place.

But, in 1991, the Boger Estate fared better. There was a problem with the legal definition of "when the property transferred" because of a challenge to the will by the wife. To be tax free the property has to be vested or transferred within 15 months. Judge Jerome of the Federal Court ruled that it was necessary to look at concepts and terminology from real property law. As such, he ruled that the property was vested under the terms of the will under section 70(9) because there were no conditions precedent to stop the vesting. The Estate had lost in the Tax Court of Canada. The difference between this and the Hillis Estate, is that Hillis had no will, therefore, there was no immediate vesting which was challenged.

Two other cases dealt with slightly different matters but both dealt with Estates.

In 1989, the Estate of Stanley Earl Lewis won its case for tax free rollover. Lewis's final 1982 T1 return was filed showing the rollover of the farm to two grandsons within the 36 months required under section 70(9) of the act. However as the wife was to receive the rents and profits until their grandson's 20th birthday on June 17, 1989 when the two grandsons were to receive the farm, DNR tried to turn it over because the grandsons had not received possession. Judge Kempo ruled that there was an indefeasible vesting even though actual possession had not taken place.

Judge Kempo got another chance to make a wise decision as well.

In 1989, the Estate of Wilbert A. May received the same treatment. Because May died on May 18, 1982 with an ambiguous holographic (personally handwritten but not witnessed) will, it took four years of litigation to reach an agreement as to the disposition of the estate. Mrs. May the widow was finally given the property subject to some rights of first refusal on some of the land on April 9, 1986. Judge Kempo ruled that there was a rollover as defined by section 70(6) of the Act.

And in another estate situation, in 1987, The Estate of Jeannette Bell Kelley lost its bid for tax free capital gains under the US/Canada Tax Treaty. JBK died in 1970, and the land in Alberta was sold in 1980. The two heirs both lived in the United States. Article VIII of the US/Canada Tax Treaty of the time, exempted Capital Gains earned in one country by a resident of another country. The estate tried to claim this treaty exemption. Judge Rip of the Tax Court of Canada ruled that the estate realized the gains and that therefore gains were only indirect for the residents of the U.S. Furthermore, an intervening life estate could have nullified the inheritance if the beneficiary of the life estate had had children, etc.

SELLING YOUR OWN ART HISTORY

Wed, 30 Jul 2008 16:15:02 +0000

In 1981, Murray Schafer, (one of Canada's foremost musicians and composers) sold a large number of his original manuscripts, his diary, and other effects to the National Library of Canada. The tax office taxed him on these items as straight income. Guy Tremblay of the Tax Review Board ruled that the items were unique and not for resale and were not a commodity, and were of a personal property capital nature. The problem of valuation day then came up because if there was no increase in value from January 1, 1972 there would be no tax on the sale price of $25,000. However, eight of the documents were written after 1971 and could not have had any value before 1972. In an unusual move, the court in this case decided on a value and recommended that both sides accept that value. Guy Tremblay C.G.A. decided that the value of pre-1972 documents on valuation day was $15,000 and that they had sold for $20,000 and that they were more valuable because of their age and relevance than the post 1972 documents, which he assessed as sold for $5,000. This resulted in a capital gain of $10,000.

MULTIPLE APARTMENTS

Wed, 30 Jul 2008 16:13:17 +0000

In 1980, Greenbranch Investments Limited received a favorable ruling from the Federal Court - Trial Division. Greenbranch had built 152 maisonette units for rental purposes. These units were sold. In 1971 the taxpayer foreclosed on the property and ran the units as a rental project for another year and a bit, but the failing health of one of the principals and serious structural defects caused it to be sold again in 1973. Judge D. J. Grant ruled that the property had been foreclosed on, in an attempt to keep it, rather than by using an `order for sale' to recover the monies. Given that the company had built the units once and sold them twice, you can see that it IS possible to have capital gains tax treatment, even if outwardly the deal looks like a venture in the nature of trade.

And 10 years later...

in 1990, Frank Grouchy, an auto parts dealer did better in his Real Estate Venture than the Dands did in their Horse Breeding business (see Expectation of profit section). Grouchy had bought 14 townhouses in partnership with an experienced real estate investor. When the partnership received an unsolicited offer soon after the purchase, they sold at a substantial profit. Judge Martin of the Federal Court ruled that the taxpayer was an open, frank, and credible witness and allowed him capital gains treatment even though the partner was taxed at full rates.

And in 1990, corporations do not always lose either. In 1990, W. Hanley & Company were allowed capital gains treatment on their 7% share of an apartment condominium project. They had taken the 7% in lieu of a smaller commission on a project originally built for resale. However, when the developers decided to keep it and rent it, Hanley got the 7% ownership. When the project was subsequently sold because of rent controls, the 7% was $146,000 instead of the $20,500 they had given up in favor of the 7%. Judge Collier of the Federal Court ruled that because the developer had control of the project and made the decision to sell, Hanley's profit was a capital gain. Most of the time, these cases end up in court because there is something different and the next one is no exception to that rule.

BUILDINGS

Wed, 30 Jul 2008 16:12:14 +0000

In 1985, Charles A. Beghin had his capital gains and possible personal use claim changed to straight income and penalties were added for the unreported income on the sale and the interest on the mortgage resulting from the sale.

In 1985, Robert Blais, who had bought 59 buildings and sold 29, was assessed straight tax. His purpose in buying the buildings was to improve his financial position.

TRAILER PARKS

Wed, 30 Jul 2008 16:09:44 +0000

In 1985, Leonard Reeves Incorporated was assessed straight tax on trailer courts sold in Florida. The mobile home parks were owned with two others but the taxpayer made no attempt to hold on when the others wished to sell.

In 1985, Paul Zen, whose regular occupation was that of land developer, had his 1977 return changed by the Federal Court - Trial Division. Judge Muldoon ruled that the building had been built in the ordinary course of business and was properly taxable at straight income rates rather than capital gains. In this case, only a couple of years were involved and the taxpayer was a builder.