Date: 20010820
Docket: 2000-4823-IT-I
BETWEEN:
DWAYNE LUCYSHYN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
AND
Docket: 2000-4824-IT-I
MARLENE LUCYSHYN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Beaubier, J.T.C.C.
[1] These appeals pursuant to the Informal Procedure were heard at Saskatoon, Saskatchewan on common evidence by consent of the parties on August 8, 2001. Both Appellants testified and called Tim Kolababa, a real estate agent in Saskatoon. The Respondent called Denise Hill, an auditor with Canada Customs and Revenue Agency ("CCRA").
[2] The Appellants are husband and wife. They have appealed assessments that they received income from the proceeds of the sale of 130 Woods Court, Saskatoon in 1996 and from the proceeds of the sale of 142 McFarland Place, Saskatoon in 1997 on the basis that both of these properties were their principal residences. In the event that they are found to be traders in these properties and liable as assessed, they claim additional expenses.
[3] The assumptions in the Replies to both Notices of Appeal are virtually identical. Those in Reply to Dwayne's in paragraph 16 read:
16. In so reassessing the Appellant, the Minister made the following assumptions of fact:
(a) The facts admitted supra;
(b) Woods Court and McFarland Place (the "Properties") were new, single family homes;
(c) The sale of the Properties offered a potential for profit;
(d) The homes on the Properties were built by the family in new areas of the City where lots were available for same;
(e) The Appellant was familiar with the market in the areas where the Properties were located;
(f) The Appellant sold both of the Properties within a year of the family moving into them;
(g) Both Properties had a private for sale sign on them shortly after construction was completed;
(h) The Appellant has sold 5 houses in thirteen years, and has built 4 houses since 1993;
(i) The first two of the five houses were considered a principal residence of the Appellant;
(j) The houses on the Properties were built by the Appellant with the assistance of his family and other trades people;
(k) The Properties were advertised for sale shortly after completion;
(l) The Appellant is experienced in house construction and approached it as a business;
(m) The Appellant assisted his brother in the construction of a house;
(n) The Appellant has written four of the eight exams to certify in the New Home Warranty Program with the Saskatchewan Home Builders;
(o) The Appellant incorporated Jade Developments Inc. to purchase and obtain wholesale discounts;
(p) The Appellant would not have sold the Properties if he could not realize a profit;
(q) The Appellant had the intention to sell the Properties from the time they were acquired.
[4] Assumptions 13(b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n) and (o) are correct. Assumption (q) is in dispute. Dwayne was ambivalent respecting assumption (p) in that he would not say that he would have sold 142 McFarland at a loss, but he would not have sold 130 Woods at a loss.
[5] The pertinent dates respecting the five houses that the Appellants have owned follow:
|
1534 Haslam Way |
1906 Kenderdine Road |
130 Woods Court |
142 McFarland Place |
106 McFarland Place |
||
|
1. |
Offer to purchase lot |
City name draw |
June, 1995 |
Aug. 30, 1996 Deposit July-August |
Dec. 16, 1997 |
|
|
2. |
Title of lot acquired |
Dec. 15, 1987 |
Sept. 15, 1993 |
Oct. 16, 1995 |
Oct. 25, 1996 |
Dec. 24, 1997 |
|
(Price) |
($22,819.77) |
($31,800.00) |
($36,900.00) |
($40,000.00) |
($49,500.00) |
|
|
3. |
Plan draughtsman's invoice |
Not known |
Not known |
July 26, 1995 |
July 11, 1996 |
|
|
(square feet) |
(1080) bungalow |
(1600) bungalow |
(2125) split level |
(Virtually identical to 130 Woods Court) |
(2300) 2 storey |
|
|
4. |
Construction began |
August, 1995 |
July-August, 1996 |
|||
|
5. |
Building permit |
Aug. 22, 1995 |
Aug. 14, 1996 |
|||
|
6. |
Moved in |
Nov. 1987 |
Oct. 1993 |
Dec. 1995 |
Dec. 1996 |
April, 1998 |
|
7. |
First considered selling |
Feb. 1996 |
Jan.-Feb. 1997 |
|||
|
8. |
Own sale sign up |
Unknown but first use |
Feb. 1996 |
Feb. 1997 |
||
|
9. |
Listed with real estate agent |
July, 1993 |
March, 1995 for 90 days (sold after listing expired) |
March, 1996 for 90 days (sold after listing expired) |
Aug. 25, 1997 for 90 days |
|
|
10. |
Offer to sell signed |
(Transfer) Aug. 23, 1993 |
(Transfer) July 15, 1995 |
June 27, 1996 (1st offer) |
Dec. 12, 1997 (lst offer) |
|
|
(Price) |
($113,500.00) |
($150,000.00) |
($178,000.00) |
($210,000.00) |
||
|
11. |
Possession given to buyer |
July 30, 1996 |
Jan. 23, 1998 |
|||
|
(moved into an apartment) |
(rented from purchaser, and then with Dwayne's parents |
(rented a 4-plex) |
(rented duplex) |
still live there |
Notes:
1. The Appellants acquired a standard sized (approximately 2' x 3') "For Sale" sign for display on their lawn showing their phone number when they sold 1906 Kenderdine Road. Dwayne testified that they kept this sign and used it on their lawn for their subsequent sales of both 130 Woods Court and 142 McFarland. (See Exhibits R-1 and R-2, photographs.)
2. In order to build 130 Woods Court and 142 McFarland Road the Appellants obtained a line of credit and a construction mortgage from the Bank of Nova Scotia. Marlene testified that the line of credit was used for construction and the construction mortgage paid off the line of credit as each phase of construction was reached. Once each house was finished and they moved in, the Appellants had an ordinary residential mortgage.
3. Dwayne incorporated Jade Developments Corporation ("Jade") on July 10, 1995 (A-1, Tab 31), before he had the plans for 130 Woods Court and kept Jade as its incorporator. From then on, the Appellants used Jade to obtain trade discounts for everything that they could except for the purchase of lots. However, it appears from the Appellants' testimony and from the cheques on exhibit that Dwayne and Marlene paid for these purchases personally from their lines of credit.
4. For their first four houses, including 130 Woods Court and 142 McFarland, Dwayne and Marlene did the baseboards, painting or wallpapering and the closet shelves. After their first house, their children helped clean up construction refuse on the remaining three of their first four houses.
5. 130 Woods Court, 142 McFarland Place and 106 McFarland Place are all within about 150 meters of each other on adjoining "courts" off of Kerr Road, Saskatoon. Each house was well within 100 meters of Kerr Road.
[6] From their very first house at 1534 Haslam Way, (where they were assisted and taught by Marlene's father) the Appellants acted as general contractors and had a draughtsman draw plans, sent the plans out to subcontractors, obtained and accepted or rejected bids on excavation, concrete, framing, plumbing, electrical, drywall, roofing, etc. and paid their subcontractors from their lines of credit.
[7] In 1996 Dwayne helped his brother build a house and in 1997 he helped his mother develop her basement. He used Jade to obtain trade discounts. In September and October 1997 Dwayne wrote four New Home Warranty Program exams with the object of qualifying so as to obtain discounts on lot purchases to build their "next principal residence" but he did not do additional exams once he found that there were four more exams and that their first two additional lots would require payments of the full retail price. After building 106 McFarland, Dwayne, as the general contractor, also built a 1500 square foot home in 1997 for the Lupul family in the same "Arbor Creek" district as the Woods and McFarland houses. In early 1998 the Revenue Canada audits began.
[8] During the years in question, Dwayne was a bus driver for the City of Saskatoon and Marlene was a secretary for Imperial Oil Limited. Both jobs were full time. Dwayne earned about $35,000.00 per year and Marlene about $30,000.00 per year. Dwayne had to get up to go to work at about 4:30 a.m. They testified that immediately after moving into 130 Woods Court they discovered that vibrations from the adjoining thoroughfare of Kerr Road kept Dwayne awake and so they decided to move. They blame the vibration on the concrete slab beneath the family room and their bedroom above the family room. They then built the same plan with a slab, at 142 McFarland (on the adjoining court) on a lot situated two lots from Kerr Road. They did not complain about vibrations there. However, in about January, 1997, about one month after moving into 142 McFarland rumours began to circulate that Imperial Oil Limited would close in Saskatoon. The Appellants testified that this was the reason for the move from 142 McFarland. They could not afford the monthly costs there. But Marlene did not look for a new job at any time in 1997. When she was laid off in early 1998, she relied on a consulting firm hired by Imperial Oil Limited through which she obtained a job in one month on the staff of the Saskatchewan City Police Force, where she remains. These reasons are not credible because:
1. They retained and kept using the same private "For Sale" sign for three houses in a row beginning before either of the subject properties was built.
2. They never moved very far from Kerr Road. Indeed their present house is closer to Kerr Road (albeit with a different plan) than 142 McFarland.
3. Despite their alleged motive respecting Marlene's job, she did not actively look for another job and they went ahead and built a larger, more expensive house at 106 McFarland Place where they now live.
4. The incorporation of Jade in July, 1995 and its continuing use by them for trade discount purchases is indicative of a business-like conduct of their construction activities. Their financing arrangements during the construction of the last three houses were also normal for the construction business.
[9] In Happy Valley Farms Ltd. v. The Queen, 86 DTC 6421 Rouleau, J. described the following tests to be used in determining whether the proceeds of the sales of real property were income. Using them, the Court finds:
1. The nature of property sold
The two houses in question were single family residences located in a residential area.
2. The length of period of ownership
130 Woods Court's land was owned for about 13 months; the house existed for about seven months. 142 McFarland Place's land was owned for about 18 or 19 months; the house existed for about 13 months.
3. The frequency of other similar transactions by the taxpayers
1906 Kenderdine was a somewhat similar transaction.
4. Work expended on the property realized
The painting, wallpapering, wallboards and cleaning was physically done by the Appellants for each subject property. However more important was the general contracting manner in which they managed and did the financing, obtaining of plans, submissions for tender and supervision of construction. (Dwayne checked the construction each day or evening.) All of this was completely business-like. In addition the initial "For Sale" sign placement of the Appellants' own sign within about two months of completion in each subject case was business-like.
5. The circumstances responsible for the sale of the property
Dwayne's allegations about vibrations at 130 Woods Court are not accepted when the subsequent two moves were not very far from the alleged source - Kerr Road. Marlene's excuse of a possible loss of her job as the reason for the sale of 142 McFarland is similarly rejected in view of the evidence that she did not actively look for a job while they proceeded to build an even more expensive house at 106 McFarland Place.
6. Motive
The fact that the Appellants kept and used the same "For Sale" sign for each of (in order) 1906 Kenderdine, and then 130 Woods Court, and then 142 McFarland Place is highly indicative of a primary intent from the beginning of the lot purchase of each of 130 Woods Court and 142 McFarland Place to sell at a profit. The incorporation of Jade before the purchase of the 130 Woods Court lot also indicates a business intent.
[10] In the foregoing circumstances, the Court finds that the Appellants both had the intention to sell both the subject properties from the time that they were acquired, that they were sold with the intention to gain a profit, that the proceeds therefrom were taxable as income and that they were correctly included in the calculations of the income of both Appellants.
[11] The Appellants argued that certain additional expenses should be allowed for deduction if it was found that the proceeds of the sales were income. In the Court's view the Respondent allowed the proper expenses to each Appellant including the vehicle expenses allowed and the deduction of interest and similar expenditures in the course of construction. The Respondent did not allow the deduction of mortgage interest, property taxes or utility expenditures while the Appellants resided in the two subject properties and the Court finds that to be correct since the Appellants benefited from the shelter the properties provided at those times.
[12] For these reasons, both appeals are dismissed.
Signed at Prince Rupert, British Columbia, this 20th day of August, 2001.
"D. W. Beaubier"
J.T.C.C.
COURT FILE NO.: 2000-4823(IT)I and 2000-4824(IT)I
STYLE OF CAUSE: Dwayne Lucyshyn and Marlene Lucyshyn
PLACE OF HEARING: Saskatoon, Saskatchewan
DATE OF HEARING: August 8, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge D. W. Beaubier
DATE OF JUDGMENT: August 20, 2001
APPEARANCES:
Counsel for the Appellant: Kurt G. Wintemute
Counsel for the Respondent: Karen Janke
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-4823(IT)I
BETWEEN:
DWAYNE LUCYSHYN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeal of
Marlene Lucyshyn (2000-4824(IT)I)
on August 8, 2001, at Saskatoon, Saskatchewan
by the Honourable Judge D. W. Beaubier
Appearances
Counsel for the Appellant: Kurt G. Wintemute
Counsel for the Respondent: Karen Janke
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1996 and 1997 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Prince Rupert, British Columbia, this 20th day of August, 2001.
|
"D. W. Beaubier" |
J.T.C.C.
2000-4824(IT)I
BETWEEN:
MARLENE LUCYSHYN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on common evidence with the appeal of
Dwayne Lucyshyn (2000-4823(IT)I)
on August 8, 2001 at Saskatoon, Saskatchewan
by the Honourable Judge D. W. Beaubier
Appearances
Counsel for the Appellant: Kurt G. Wintemute
Counsel for the Respondent: Karen Janke
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1996 and 1997 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Prince Rupert, British Columbia, this 20th day of August, 2001.
|
"D. W. Beaubier" |
J.T.C.C.