Robertson v. Canada
A-243-96
Desjardins J.A.
26/3/98
18 pp.
Appeal from T.C.C. judgment 1990 acquisition, disposition of stock option shares not "adventure in nature of trade"-Employment agreement including share option arrangement-On January 3, 1990 exercising remaining option rights-Purchase fully financed by bank loan-Appellant exercising rights at that time, rather than waiting until option expiration date, in part because of concern something might happen that could prevent him, as insider, from being able to exercise option later-In 1989 Corporation's long-term prospects appeared healthier than 1990, 1991 short-term prospects-Also exercised option rights in part to ensure eligibility for special dividend in common shares that, as insider, anticipated would be declared-At time exercised option rights, appellant preoccupied with possible cash flow deficiency to service debts on loans contracted-Market price of shares falling throughout 1990-On November 28, 1990 appellant selling option shares with concurrent intention of buying them back shortly thereafter-Appellant reporting resulting loss as capital transaction in 1990 return because unaware of possibility of reporting acquisition, subsequent disposition of common shares as part of "adventure in nature of trade"-Later sought to deduct loss as loss from business, as part of "adventure in nature of trade"-Appellant submitting T.C.C. not addressing motivation in acquiring shares i.e. to discharge indebtedness, subject to insider restrictions-Appeal dismissed-No question T.C.C. addressed whether resale for profit motivating factor in appellant's purchase-Applied proper test: whether appellant at time of purchase intended to resell shares as soon as possible for profit-Californian Copper Syndicate v. Harris (1904), 5 T.C. 159 (Scot. Ct. of Ex.) setting out general test to distinguish between capital, business income from adventure in nature of trade: is gain mere enhancement of value by realizing security, or gain made in operation of business in carrying out scheme for profit-making?-That isolated transaction (as herein) not preventing transaction bearing "badges of trade" from being adventure in nature of trade-From "badges of trade" inferences drawn as to whether taxpayer engaged in operation of trade or simply investing-Question whether operations constituting adventure of that kind, not whether constituting operator as person carrying on trade: Edwards (Inspector of Taxes) v. Bairstow, [1955] 3 All E.R. 48 (H.L.)-Whether securities purchased with purchaser's own funds, or with borrowed money, not significant factor in determining whether acquisition, subsequent sale not investment: Irrigation Industries Limited v. The Minister of National Revenue, [1962] S.C.R. 346-T.C.C. holding acquisition of securities not part of profit-making idea, but to take advantage of generosity of employers-Referring neither to appellant's concerns about cash flow nor to appellant's obligations as inside trader-Inference from finding no evidence appellant wished to sell as soon as possible that although appellant might not have been in position to sell earlier, no clear indication selling as soon as possible primary goal-Open to T.C.C. to infer from accountant's statements that share transactions motivated by someone driven by return on investment rather than by quick silver of profit-T.C.C. stating "profit was not ignored but not paramount"-Finding degree of motivation insufficient to characterize 1990 transaction as being on account of income-Open to T.C.C. to find operation not having sufficient of characteristics of adventure in nature of trade but investment not permitting in law appellant to change mind as time, conditions changed.