A-689-83
The Queen (Appellant)
v.
Geoffrey Stirling (Respondent)
Court of Appeal, Pratte, Hugessen and Mac-
Guigan JJ.—Montreal, March 19, 1985.
Income tax — Income calculation — Deductions — Trial
Judge erred in allowing deduction for interest on unpaid
portion of price of bullion and safe-keeping charges in com
puting capital gain — Ss. 40(1 ) (c)(i) and 54 governing compu
tation — Interest and safe-keeping charges deductible only if
part of cost of bullion — "Cost" meaning price taxpayer
paying for asset, but not including expense incurred to enable
him to pay price or keep property afterwards — Appeal
allowed — Income Tax Act, S.C. 1970-71-72, c. 63, ss.
40(1)(c)(i), 54.
CASES JUDICIALLY CONSIDERED
REFERRED TO:
R. v. Canadian Pacific Ltd., [1978] 2 F.C. 439; 77 DTC
5383 (C.A.); Birmingham Corporation v. Barnes, [1935]
A.C. 292 (H.L.); R. v. Consumers' Gas Company Ltd.,
[ 1984] I F.C. 779; 84 DTC 6058 (C.A.).
COUNSEL:
J. Côté and E. Atkinson for appellant.
Bruce Verchère and G. Du Pont for
respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Verchère, Noël & Eddy, Montreal, for
respondent.
The following are the reasons for judgment of
the Court delivered orally in English by
PRATTE J.: The only issue on this appeal is
whether the Trial Division [[1984] 2 F.C. 3011*
was right in holding that, in computing his capital
gain from the disposition of gold bullion, the
respondent could deduct, as part of his cost, inter
est on the unpaid portion of the price of the bullion
* Editor's Note: The style of cause was amended by order dated
April 29, 1983. The spelling of the respondent's surname was
changed from Sterling to Stirling.
and safe-keeping charges that he had incurred in
respect of the period during which he had held the
bullion.
In deciding that those interest and charges could
be deducted, the learned Trial Judge did not rely
on any provision of the Income Tax Act (S.C.
1970-71-72, c. 63] but, rather, on what, in his
view, would have been the intention of Parliament
had it given consideration to that question. We
cannot agree with that approach.
In trying to support that judgment, counsel for
the respondent argued in substance that capital
gain should be computed according to the same
rules as income from a business or property. That
argument, while attractive, does not find any sup
port in the Income Tax Act which provides special
rules for the computation of capital gain. Under
those rules, as they are found in subparagraph
40(1)(c)(i) and section 54, the interest and safe
keeping charges here in question could be deduct
ible only if they were part of the cost of the
bullion. In our opinion, they were not. As we
understand it, the word "cost" in those sections
means the price that the taxpayer gave up in order
to get the asset; it does not include any expense
that he may have incurred in order to put himself
in a position to pay that price or to keep the
property afterwards.'
The appeal will therefore be allowed with costs,
the judgment of the Trial Division will be set
aside, the respondent's action will be dismissed
with costs.
1 See: R. v. Canadian Pacific Ltd., [1978] 2 F.C. 439; 77
DTC 5383 (C.A.); Birmingham Corporation v. Barnes, [1935]
A.C. 292 (H.L.); R. v. Consumers' Gas Company Ltd.,
[ 1984] 1 F.C. 779; 84 DTC 6058 (C.A.).
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.