Meritt Realty Co. Ltd. v. Brown

The profits were realized as part of a scheme for profit‑making carried on by the company and the properties were acquired with the purpose of turning them to account by sale if necessary; therefore the gains are taxable as income under the provincial Income Tax Act.

Citation: [1932] SCR 187
Parties: Appellant (defendant): Merritt Realty Company Limited; Respondent (plaintiff): Charles R. Brown (Provincial Assessor)
Court: Supreme Court of Canada
Jurisdiction: Canada
Judgment Date: 9 February 1932
Procedural Posture: Taxation Appeal / On Appeal to the Supreme Court of Canada From the Court of Appeal for British Columbia
Outcome: Appeal dismissed with costs.
Legal Topics: Income Tax, Profit Versus Capital, Real Estate Transactions, Shareholder Control
Source Language: English

Taxation Property Corporate Law Income Tax Profit Versus Capital Real Estate Transactions Shareholder Control

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Full judgment text Legal principles 2 Authorities cited 7 Party arguments 2 Amounts and remedies 1

Parties

Merritt Realty Company Limited

Appellant (defendant)

Charles R. Brown (Provincial Assessor)

Respondent (plaintiff)

Procedural Posture

Taxation Appeal / On Appeal to the Supreme Court of Canada From the Court of Appeal for British Columbia

Legal Issues

1 Whether profits from sale of real estate held by a closely held company are accretions to capital or taxable income
2 Whether the company was carrying on a scheme for profit‑making such that gains are income under the provincial Income Tax Act
3 Whether transfer of property to a company controlled by one shareholder alters character of subsequent gains

Ratio Decidendi

Court Disposition

Appeal dismissed with costs.

Orders

Appeal dismissed with costs.
Assessment of $15,242.18 confirmed as income tax for the years 1926, 1927 and 1929.