Happy Valley Farms Ltd. v. Minister of National Revenue, (1986) 7 F.T.R. 3 (TD)

JudgeRouleau, J.
CourtFederal Court (Canada)
Case DateApril 15, 1986
JurisdictionCanada (Federal)
Citations(1986), 7 F.T.R. 3 (TD)

Happy Valley Farms Ltd. v. MNR (1986), 7 F.T.R. 3 (TD)

MLB headnote and full text

Happy Valley Farms Ltd. v. Minister of National Revenue

(No. T-6632-82)

Indexed As: Happy Valley Farms Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Rouleau, J.

July 16, 1986.

Summary:

In 1968, a lawyer purchased a company that owned 150 acres of farmland. In 1969, the company purchased 450 acres of farmland. Between 1968 and 1976, the company sold 17 various size lots. In 1976, the company sold 400 of the 450 acres. The company treated the profit realized as a capital gain, rather than income. The Minister of National Revenue assessed the profit as business income. The company's appeal to the Tax Review Board was dismissed. The company appealed.

The Federal Court of Canada, Trial Division, dismissed the appeal. The court affirmed that the profit was income derived from an adventure in the nature of trade, and not a capital gain from disposition of an asset acquired as an investment.

Income Tax - Topic 1054

Income from business - Secondary intention to trade - The Federal Court of Canada, Trial Division, stated that "even where it could be established that a taxpayer's main intention was investment, a gain on the sale of the asset would be held taxable as income if the court believed that, at the time of acquisition, the taxpayer had in mind the possibility of selling the asset if his investment project did not, for whatever reason, materialize" - See paragraph 16.

Income Tax - Topic 1055

Income from business - "Adventure or concern in the nature of trade" - The Federal Court of Canada, Trial Division, stated that in determining whether the profit from the sale of an asset was income from an adventure in the nature of trade or a capital gain the court was to consider the (1) nature of the asset, (2) length of ownership, (3) frequency or number of similar transactions, (4) work expended on the asset realized, (5) circumstances leading to the sale of the asset and (6) motive in acquiring the asset - See paragraph 14.

Income Tax - Topic 1055

Income from business - "Adventure or concern in the nature of trade" - In 1968, a company purchased 150 acres of farmland - In 1969, the company purchased a further 450 acres - Between 1968 and 1976, the company sold off 17 lots - In 1976 the company accepted an offer to purchase 400 of the 450 acres - The Federal Court of Canada, Trial Division, affirmed that the profit realized was income from an adventure in the nature of trade and not a capital gain, because the land was purchased with the primary intention (or at least secondary intention) of selling the property at a profit - The court held that the evidence was inconsistent with a finding that the property was acquired for investment purposes only.

Cases Noticed:

Minister of National Revenue v. Taylor, [1956] C.T.C. 189 (Ex. Ct.), appld. [para. 13].

Racine, Demers and Nolin v. Minister of National Revenue, 65 D.T.C. 5098 (Ex. Ct.), consd. [para. 16].

Armstrong v. Minister of National Revenue, [1985] 2 C.T.C. 179 (F.C. T.D.), refd to. [para. 17].

Hiwako Investments Limited v. Minister of National Revenue (1978), 21 N.R. 220; 78 D.T.C. 6281 (F.C.A.), refd to. [para. 17].

Rutledge v. Commissioner of Inland Revenue v. Fraser, 14 T.C. 490, refd to. [para. 19].

Commissioner of Inland Revenue v. Fraser, 24 T.C. 598, refd to. [para. 19].

McDonald v. Minister of National Revenue (1975), 6 N.R. 298; 74 D.T.C. 6644 (F.C.A.), refd to. [para. 19].

Pierce Investment Corp. v. Minister of National Revenue, 74 D.T.C. 6608, refd to. [para. 22].

Marsted Holdings Ltd. v. Minister of National Revenue (1986), 1 F.T.R. 68 (F.C.C.), appld. [para. 23].

Statutes Noticed:

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 248(1) [para. 13].

Counsel:

L.M. Little, Q.C., and D. Thompson, for the plaintiff;

Ingeborg Lloyd, for the defendant.

Solicitors of Record:

Thorsteinsson, Mitchell, Little, O'Keefe and Davidson, Vancouver, B.C., for the plaintiff;

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

This appeal was heard on April 15, 1986, at Vancouver, B.C., before Rouleau, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on July 16, 1986.

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6 practice notes
  • Cardella v. Minister of National Revenue, (2001) 268 N.R. 168 (FCA)
    • Canada
    • Canada (Federal) Federal Court of Appeal (Canada)
    • February 26, 2001
    ...Minister of National Revenue, 65 D.T.C. 5098 (Ex. Ct.), refd to. [para. 25]. Happy Valley Farms Ltd. v. Minister of National Revenue (1986), 7 F.T.R. 3; 86 D.T.C. 6421 (T.D.), refd to. [para. Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103 ; 186 N.R. 243 , refd to. [para.......
  • de Chantal v. Ministre du Revenu national, (2000) 193 F.T.R. 212 (TD)
    • Canada
    • Canada (Federal) Federal Court (Canada)
    • June 13, 2000
    ...which she made were actually business income. Cases Noticed: Happy Valley Farms Ltd. v. Minister of National Revenue, [1986] 2 C.T.C. 259; 7 F.T.R. 3 (T.D.), refd to. [para. Racine v. Minister of National Revenue (1965), 65 D.T.C. 5098 (Ex. Ct.), refd to. [para. 4]. Counsel: Diane de Chanta......
  • Bygrave v. The Queen, 2019 TCC 138
    • Canada
    • Tax Court (Canada)
    • June 25, 2019
    ...103, Canada Safeway Limited v. Her Majesty the Queen, 2008 FCA 24, 2008 DTC 6074, and Happy Valley Farms Ltd v. Her Majesty the Queen (1986), 7 FTR 3, are often cited for the factors to be considered. [8] The Supreme Court of Canada took the list of factors in the Minister of National Reven......
  • Paletta v. The Queen, 2019 TCC 205
    • Canada
    • Tax Court (Canada)
    • April 5, 2022
    ...Written Argument, page 82 at para. 53(a). [96] [1995] 3 S.C.R. 103 [Friesen]. [97] 2008 FCA 24 [Canada Safeway]. [98] 86 DTC 6421, (1986), 7 F.T.R. 3 (F.C.T.D.). [99] [1967] 1 Ex. C.R. 245. [100] Friesen, at para. 16 S.C.R. [101] Jinyan Li, Joanne Magee & J. Scott Wilkie, Principles of ......
  • Request a trial to view additional results
5 cases
  • Cardella v. Minister of National Revenue, (2001) 268 N.R. 168 (FCA)
    • Canada
    • Canada (Federal) Federal Court of Appeal (Canada)
    • February 26, 2001
    ...Minister of National Revenue, 65 D.T.C. 5098 (Ex. Ct.), refd to. [para. 25]. Happy Valley Farms Ltd. v. Minister of National Revenue (1986), 7 F.T.R. 3; 86 D.T.C. 6421 (T.D.), refd to. [para. Friesen v. Minister of National Revenue, [1995] 3 S.C.R. 103 ; 186 N.R. 243 , refd to. [para.......
  • de Chantal v. Ministre du Revenu national, (2000) 193 F.T.R. 212 (TD)
    • Canada
    • Canada (Federal) Federal Court (Canada)
    • June 13, 2000
    ...which she made were actually business income. Cases Noticed: Happy Valley Farms Ltd. v. Minister of National Revenue, [1986] 2 C.T.C. 259; 7 F.T.R. 3 (T.D.), refd to. [para. Racine v. Minister of National Revenue (1965), 65 D.T.C. 5098 (Ex. Ct.), refd to. [para. 4]. Counsel: Diane de Chanta......
  • Paletta v. The Queen, 2019 TCC 205
    • Canada
    • Tax Court (Canada)
    • April 5, 2022
    ...Written Argument, page 82 at para. 53(a). [96] [1995] 3 S.C.R. 103 [Friesen]. [97] 2008 FCA 24 [Canada Safeway]. [98] 86 DTC 6421, (1986), 7 F.T.R. 3 (F.C.T.D.). [99] [1967] 1 Ex. C.R. 245. [100] Friesen, at para. 16 S.C.R. [101] Jinyan Li, Joanne Magee & J. Scott Wilkie, Principles of ......
  • Bygrave v. The Queen, 2019 TCC 138
    • Canada
    • Tax Court (Canada)
    • June 25, 2019
    ...103, Canada Safeway Limited v. Her Majesty the Queen, 2008 FCA 24, 2008 DTC 6074, and Happy Valley Farms Ltd v. Her Majesty the Queen (1986), 7 FTR 3, are often cited for the factors to be considered. [8] The Supreme Court of Canada took the list of factors in the Minister of National Reven......
  • Request a trial to view additional results
1 firm's commentaries
  • Adventure Or Concern In The Nature Of Trade ' A Canadian Tax Lawyer's Guide
    • Canada
    • Mondaq Canada
    • October 8, 2020
    ...legitimate intention to earn profit from the transaction. In the leading case Happy Valley Farms Ltd. V. Her Majesty The Queen, (1986) 7 F.T.R. 3, the Federal Court Canada, Trial Division, laid out six factors used by courts to differentiate between business and capital income. In that case......

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