The Assistant Chairman:—The appeal by Napoléon St-Hilaire from assessments for the taxation years 1966, 1967 and 1969 was heard at Quebec City on December 7, 1972. The amounts of $45,987.76, $12,677.99 and $16,603.50 were added to appellant’s income for the taxation years 1966, 1967 and 1969, respectively, as being the net taxable profits on the sale of portions of appellant’s farm.
Appellant was alleged to have received from his father in 1925, as a gift, a farm consisting of Lots 549, 550, 557 and 460 in the register of the parish of St-Romuald, with the buildings and equipment thereon.
In 1960 appellant ceased to operate his farm. For calculation purposes counsel for the respondent admitted that profits from the sale of land on the farm before 1960 were of a Capital nature, and that the book value in 1960 of the land sold in 1966, 1967, 1968 and 1969 was $373,000.
In view of the circumstances surrounding the sale, dated August 15, 1966, of Lots 461, 460, 401-17, 401-21, 401-47, 549, 550, 557, 558, 561, 562, 565, 641, 639, 639-4 and 639-3 to the Irving refinery for the sum of $258,749.90, counsel for the respondent agreed that the transaction should be treated as of a capital nature, and that the profits realized by appellant on this sale were to be regarded as a capital gain and not taxable. However, counsel for the respondent maintains that all the other sales made by appellant during the years 1966, 1967 and 1969 of land included in his inheritance, were commercial in nature and taxable.
Appellant was the main shareholder in Napoléon St-Hilaire Inc (hereinafter referred to as “the company”), which carried out excavation work, digging of sewers and highway construction, operated a gravel pit and sold gravel. An extract from the company’s minutes dated December 31, 1962 shows that the company authorized Mr St- Hilaire, temporarily and on its behalf, to purchase the necessary land to establish a residential development for the company around appellant’s home. Subsequently, this land was repurchased from appellant by the company, at cost, and the development in question went ahead. It appears that the company thus continued to buy other land besides that in the property inherited by appellant to be used for development purposes, and streets and sewers were laid by the company.
In 1965 appellant incorporated Les Entreprises St-Hilaire Inc for the purpose of doing business as a real estate and construction company.
At December 31, 1969 Napoléon St-Hilaire Inc owed appellant the sum of $161,642, and Entreprises St-Hilaire Inc owed him an amount of $177,698.
Counsel for the appellant alleged that the latter had incorporated both the aforementioned companies for the sale of lots other than those included in the inherited property of appellant. However, counsel contended that Mr St-Hilaire was not operating a business for the sale of lands on his farm, since at the time the property vested in him he had no intention of reselling the land, and the subsequent sales were the result of chance, not of a secondary intent; he thus concluded that appellant was only realizing on his capital.
Between 1960 and 1969 appellant made at least 300 sales of land from his inheritance. For the years with which this appeal is concerned the gross sales amounted to: $43,464 in 1966, excluding the sale to the Irving refinery for $258,749.90; $33,467 in 1967; and $57,896 in 1969. It is very difficult to conceive of all these sales as being the result of chance. In fact, appellant’s companies purchased and improved land around his farm in such a way that the development which was under way was bound to include the farm. It should also be noted that Mr St-Hilaire in fact had legal control over both his companies, even after he had sold the shares. to his three sons.
During what might be called the “piecemeal” period the owner of the land nonetheless had to transfer to the city the land necessary for laying the streets and paying for their construction, which Mr St-Hilaire did in order to be able to sell his land. According to Mr St-Hilaire’s testimony, he hired and paid a surveyor to subdivide the lots and mark the boundaries of his land.
His actions taken as a whole and the number of sales concluded do not fall within my definition of “chance”. Whether deliberately or not, Mr St-Hilaire was carrying on a real estate business which was no different from the business operations of his two companies. Moreover, Mr St-Hilaire admitted that he made no distinction between the lots sold by himself and those sold by his companies. The fact that the appellant alleged he was realizing on his capital from his inheritance does not alter the nature of the transactions carried out by him to do this.
In my view the sales of land by appellant in 1966, 1967 and 1969, except for the sale to the Irving refinery, are commercial in nature and taxable.
For these reasons the appeal is allowed in part and the whole is referred back to the Minister for reassessment, taking into consideration that the sale of land to the Irving refinery in 1966 for the sum of $258,749.90 is not to be treated as commercial in nature, and must be deducted from appellant’s taxable income for the taxation year 1966. In all other respects the appeal is dismissed.
Appeal allowed in part.