McKinley v. Minister of National Revenue, (1974) 1 N.R. 403 (FCA)

• Judge: Jackett, C.J., Pratte, J.
• Court: Federal Court of Appeal (Canada)
• Case Date: January 24, 1974
• Jurisdiction: Canada (Federal)
• Citations: (1974), 1 N.R. 403 (FCA)

McKinley v. MNR (1974), 1 N.R. 403 (FCA)

MLB headnote and full text

McKinley v. Minister of National Revenue

Indexed As: McKinley v. Minister of National Revenue

Federal Court of Appeal

Jackett, C.J., Pratte, J.

and Hyde, D.J.

January 24, 1974.

Summary:

This case arose out of a reassessment for income tax by the Minister of National Revenue issued to the taxpayer for the 1965 taxation year. The taxpayer in 1958 purchased for $167.00 1/6 of the common shares of a company which bought and sold oil and gas rights. In 1965, the taxpayer sold all of his shares for $200,000.00. The Minister assessed the taxpayer tax on a gain of $200,000.00 less $167.00. The Trial Division of the Federal Court of Canada allowed the taxpayer's appeal and held that the taxpayer's taxable gain was the difference between the book value of 1/6 of the company's net assets in 1965 and the selling price of $200,000.00. On appeal to the Federal Court of Appeal the Minister's appeal was allowed and the judgment of the Trial Division was set aside.

The Federal Court of Appeal stated that the taxpayer purchased the shares for profit or gain and that the sale of shares of a company cannot be regarded for income tax purposes as equivalent to the sale of assets of the company - see paragraphs 11 and 12. The Federal Court of Appeal stated that the Trial Division improperly calculated the taxpayer's gain when it regarded the sale of shares as if the taxpayer was selling the assets which were owned by the company. The Federal Court of Appeal stated that for income tax purposes the existence of a company as a separate entity cannot be disregarded - see paragraph 12.

Income Tax - Topic 1013

Income from the sale of shares of a company - The taxpayer in 1958 purchased 1/6 of the common shares of a company for $167.00 - The company bought and sold oil and gas rights - In 1965 the taxpayer sold his shares for $200,000.00 - The trial court held that the taxpayer's taxable gain was the difference between the book value of 1/6 of the company's net assets in 1965 and the selling price of $200,000.00 - The Federal Court of Appeal held that the taxpayer acquired the shares for profit or gain and that he was properly assessed tax on a gain of $200,000.00 less $167.00.

Cases Noticed:

Fraser v. M.N.R., [1964] S.C.R. 657, dist. [para. 12].

M.N.R. v. Freud, [1969] S.C.R. 75, folld. [para. 12].

Counsel:

Howard Stikeman, Q.C. and Claude Desaulniers, for the appellant;

N.A. Chalmers, Q.C. and B.J. Wallace, for the respondent.

JACKETT, C.J., concurred with PRATTE, J. and HYDE, D.J.