Gold Bar Developments Ltd. v. Minister of National Revenue, (1987) 9 F.T.R. 303 (TD)

• Jurisdiction: Federal Jurisdiction (Canada)
• Court: Federal Court (Canada)
• Citation: (1987), 9 F.T.R. 303 (TD)
• Date: 29 October 1986

Gold Bar Dev. Ltd. v. MNR (1987), 9 F.T.R. 303 (TD)

MLB headnote and full text

Gold Bar Developments Ltd. (successor by amalgamation to Gold Bar Developments Ltd. and Campus Corner Building Ltd.) (plaintiff) v. Her Majesty The Queen (defendant)

(No. T-952-85)

Indexed As: Gold Bar Developments Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Jerome, A.C.J.

March 5, 1987.

Summary:

Gold Bar Developments was the owner of an apartment building constructed in 1966. In 1979, following an examination by engineers, extensive repairs were made to the building because of inferior work by the brick subcontractor. Gold Bar treated the expenditures as repairs and deducted them in calculating its income. The Minister of National Revenue disallowed the deduction, classifying them as capital expenditures. Gold Bar filed a notice of objection.

The Minister confirmed the assessments and Gold Bar appealed.

The Tax Court of Canada, dismissed the appeal. The court stated that the expenditure was of a capital nature and not an ordinary annual expenditure for repair. Gold Bar appealed.

The Federal Court of Canada, Trial Division, allowed the appeal and returned the matter to the Minister for the appropriate reassessment.

Income Tax - Topic 1212

Income from a business or property - Deductions - Land and buildings - Repairs - The Federal Court of Canada, Trial Division, stated that "an expenditure which is in the nature of repair will not be allowed as a deduction from income if it becomes so substantial as to constitute a replacement of the asset" - See paragraph 8.

Income Tax - Topic 1212

Income from a business or property - Deductions - Land and buildings - Repairs - The owner of an apartment building valued at $8,000,000.00 made repairs of $241,665.76 to the walls of the building, when bricks began falling from the walls - The owner deducted the cost of repairs from its income - The Minister of National Revenue rejected the deductions, alleging that the money was a capital expenditure - The Federal Court of Canada, Trial Division, held that the expenditure was properly classified as a repair and deducted from income - The court stated that what was done by the taxpayer was "neither more nor less than was required to replace the deteriorating and dangerous brick condition", nor was it a "voluntary expenditure with a view to bringing into existence a new capital asset for the purpose of producing income, or for the purpose of creating an improved building to produce greater income".

Cases Noticed:

Canada Steamship Lines Limited v. M.N.R., [1966] C.T.C. 125, refd to. [para. 8].

M.N.R. v. Haddon Hall Realty Inc., [1961] C.T.C. 509, refd to. [para. 8].

M.N.R. v. Vancouver Tugboat Company Limited, [1957] C.T.C. 178, refd to. [para. 8].

Shabro Investments Ltd. v. M.N.R., [1979] C.T.C. 125, refd to. [para. 9].

Sydney Harold Healey v. M.N.R., [1984] D.T.C. 1017, refd to. [para. 9].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 111 [para. 2]; sect. 172 [para. 1].

Counsel:

Ian H. Pitfield, for the plaintiff;

Norman A. Chalmers, Q.C., and Lydia Lytwyn, for the defendant.

Solicitors of Record:

Thorsteinsson, Mitchell, Little, O'Keefe and Davidson, Vancouver, British Columbia, for the plaintiff;

Frank Iacobucci, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard on October 29, 1986, at Edmonton, Alberta, before Jerome, A.C.J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on March 5, 1987: