Discussion of the distinction between a business and an adventure in the nature of trade.
particularly relevant extracts set out below (and with some corrections to the translation noted in brackets):
The Department has not developed any specific criteria to distinguish property in a company's inventory which is not an adventure or concern in the nature of trade from property in inventory held as part of an adventure or concern in the nature of trade. Each is a question of fact … .
… Paragraph 3 of IT-459 mentions that although an adventure or concern in the nature of trade is included in the definition of the term "business" in section 248 of the Act, it does not necessarily mean that a taxpayer who is engaged in an adventure or concern in the nature of trade is "carrying on" a business or has "carried on" a business. It further notes that when these expressions are used in the Act, a determination is made based on the degree of activity and each situation must be considered in the light of its own particular facts.
According to paragraph 1 of IT-459, a person who habitually does a thing that is capable of producing a profit is carrying on a trade or business.
Paragraph 2 of IT-459 states that where such a thing is done only infrequently, or possibly only once, rather than habitually, it is still possible to hold that the person has engaged in a business transaction if it can be shown that he has engaged in an "adventure or concern in the nature of trade".Determining whether property belongs in the inventory of a business other than an adventure or concern in the nature of trade or is held as part of a concern in the nature of trade, could essentially be resolved by analyzing the organizational structure of an operation, the extent and variety of the activities of this operation and its continuity over time, in other words by determining whether a business is carried on by the taxpayer.
The Department then discussed the decision of the Supreme Court in the Friesen case ([1995] 3 S.C.R. 103) which quoted with approval a statement in an earlier case that, in contrasting the carrying on of a business with the holding of property as an adventure in the nature of trade, stated:
When this expression "carry on" is used in the Act, Parliament describes a continuity of time or operations with respect to the factual situation contemplated by the particular provision.
As noted by the Department, the Court went on to state:
[B]y definition an adventurer in the nature of trade is neither a stock-in-trader nor does he "carry on" a business.
Respecting the holding of land parcels, the Department stated:
The number of land parcels held by a taxpayer is one of the factors to consider in determining whether or not he is carrying on a business. On the other hand, owning several such parcels is not of itself decisive because, following an analysis of the specific facts and circumstances of a situation, the Department could consider that a business is not being carried on in the situation because it deems [considers], for example, that each parcel of land has been acquired separately as a concern [adventure] in the nature of trade or that each of the parcels of land is held as part of a series of isolated transactions, or that the acquisition of all such land parcels is [each] an isolated event.
Likewise, a taxpayer who owns a very large number of land parcels could hold an inventory of land parcels of a business which is not an adventure or concern in the nature of trade if, for example, he carries out other activities with respect to these land parcels on an ongoing or constant basis.