Kettle River Sawmills Ltd. v. Minister of National Revenue, (1992) 56 F.T.R. 191 (TD)

• Judge: Strayer, J.
• Court: Federal Court (Canada)
• Case Date: April 07, 1992
• Jurisdiction: Canada (Federal)
• Citations: (1992), 56 F.T.R. 191 (TD)

Kettle River Sawmills Ltd. v. MNR (1992), 56 F.T.R. 191 (TD)

MLB headnote and full text

Kettle River Sawmills Ltd. (plaintiff) v. Her Majesty the Queen (defendant)

(T-35-87)

Elk Bay Logging Ltd. (plaintiff) v. Her Majesty the Queen (defendant)

(T-36-87)

Indexed As: Kettle River Sawmills Ltd. v. Minister of National Revenue

Federal Court of Canada

Trial Division

Strayer, J.

September 4, 1992.

Summary:

Two timber operators sold their timber sales licences and treated the proceeds of sale as a capital gain. The Minister of Na­tional Revenue reassessed and included the proceeds as income from timber resource property under s. 13(21)(d.1) of the Income Tax Act. The companies appealed the reassessments. Both cases were heard together.

The Federal Court of Canada, Trial Divi­sion, held that the proceeds were income, but the capital cost of the interests should be deducted.

Income Tax - Topic 1039

Income from a business or property - Income from property - Timber resource property - Section 13(21)(d.1) provided that proceeds of sale of a timber resource property acquired after May 6, 1974 should be included in income - A timber operator acquired its timber sale licences and quotas before 1974 - The licences were renewed or substituted until 1980 when they were sold - The Federal Court of Canada, Trial Division, held that the licences, whether renewals, extensions or substitutions for the earlier licences were timber resource properties - The proceeds of sale less capital cost (i.e., cost of the first acquisition after May 6, 1974) were to be included in income.

Cases Noticed:

Universal Timber Products Ltd v. Minister of National Revenue (1974), 5 N.R. 69; 74 D.T.C. 6413, refd to. [para. 11].

Kirsch Construction Ltd. v. Minister of National Revenue, [1988] 2 C.T.C. 338; 23 F.T.R. 67 (T.D.), refd to. [para. 18].

D'Auteuil Lumber Co. Ltd. v. Minister of National Revenue (1970), 70 D.T.C. 6096 (Ex. Ct.), refd to. [para. 24].

Statutes Noticed:

Income Tax Act, R.S.C. 1952, c. 148, sect. 13(1) [para. 25]; sect. 13(21)(b) [para. 20]; sect. 13(21)(d.1) [para. 8]; sect. 13(21)(d.1)(i), sect. 13 (21)(d.1)(ii) [para. 14]; sect. 13(21)(d.1)(i)(A) [para. 15]; sect. 13(21)(d.1)(i)(B) [para. 19]; sect. 13(21)(d.1)(ii)(A), sect. 13(21)(d.1)(ii)(B) [para. 15]; sect. 13(21)(f) [para. 21]; sect. 20(1)(a) [para. 20]; sect. 39(1)(a)(iv) [para. 21].

Income Tax Act Amendment Act, S.C. 1974-75-76, c. 26, sect. 6(7), sect. 6(9) [para. 8].

Income Tax Act Regulations (Can.), Schedule II, Class 33 [para. 20].

Counsel:

I. Pitfield and K. Hauser, for the plaintiffs;

I. Lloyd and T. Clarke, for the defendant.

Solicitors of Record:

Thorsteinssons, Vancouver, British Co­lumbia, for the plaintiffs;

John C. Tait, Q.C., Deputy Attorney Gen­eral of Canada, Ottawa, Ontario, for the defendant.

These appeals were heard on April 7, 1992, at Vancouver, British Columbia, before Strayer, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on September 4, 1992.