The Assistant Chairman:—The appeal by Mr Viateur St-Pierre against an assessment for the taxation year 1968 was heard at Montreal, Quebec on October 31, 1972.
In 1968 appellant sold his grocery and purchased a hotel for which he paid $100,000, and which he subsequently sold for $105,000. The case at issue turns on three main points:
(a) Appellant considers the value of the hotel to be $87,517.21, while respondent contends that it is $45,000, in accordance with the valuation which he made of the property. Respondent’s appraiser fixed it at $48,849.50, according to the replacement cost method; appellant contends, however, that in the view of a reputable con- tractor the replacement cost would be $125,000, but he submitted no proof that this latter contention was well founded. In his testimony appellant stated that the hotel consisted mainly of a public bar. Very few meals were served and few rooms rented to customers. The building was of wood, and respondent’s valuation seems reasonable to me. During the hearing, however, respondent admitted that the hotel fell within Class 6 rather than Class 3 of Schedule B to the Income Tax Regulations, as stated in his reply to the notice of appeal, and that appellant would be entitled to a maximum depreciation of 10% per annum.
(b) Respondent allows depreciation of 50% on the automobile, while appellant contends that the automobile is used almost exclusively for purposes of his business. From the testimony at the hearing of the case, I conclude that depreciation of 75% on the cost of the automobile would be more in keeping with its use for commercial purposes.
(c) Appellant was taxed on the whole amount recovered on the capital cost allowance in connection with the sale of his grocery, whereas he claimed that this amount was applied against the cost of the hotel.
Subsection 1101(1) of the Income Tax Regulations applies to the Situation in this case, although from a construction standpoint the two properties may be regarded as falling within the same class, namely Class 6. The fact remains that these are two separate and quite distinct undertakings or businesses. Relying on MNR v Midwest Hotel Company Ltd, [1970] CTC 482; 70 DTC 6316 (in which the decision has just been affirmed by the Supreme Court of Canada, [1972] CTC 534; 72 DTC 6440) and Fernand Cameron v MNR, [1970] Tax ABC 470; 70 DTC 1297, I must hold that the assessment made by respondent with respect to the amount recovered on the capital cost allowance on the grocery is correct.
I therefore find that in the absence of evidence to the contrary, the valuation of the hotel by respondent at $45,000 is reasonable; that, in accordance with respondent’s admission, the hotel is taken as falling within Class 6 of Schedule B to the Income Tax Regulations, and appellant is entitled to depreciation of 10% per annum on this property; that depreciation of 75% rather than 50% should be allowed on the cost of the automobile for its use for commercial purposes, and that the total amount of the capital cost allowance can be recovered on the sale of appellant’s grocery.
For these reasons the appeal is allowed in part and the whole referred back to the respondent for reassessment to be made accordingly.
Appeal allowed in part.