Leng v. The Queen

Leng v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2007-01-24
Neutral citation
2007 TCC 59
File numbers
2006-513(IT)I
Judges and Taxing Officers
Gerald J. Rip
Subjects
Income Tax Act
Decision Content
Docket: 2006-513(IT)I
BETWEEN:
ROGER LENG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on January 9, 2007, at Toronto, Ontario.
Before: The Honourable Gerald J. Rip, Associate Chief Justice
Appearances:
For the Appellant:
The Appellant himself
Counsel for the Respondent:
Josh Hunter
____________________________________________________________________
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 2001 and 2002 taxation years are dismissed.
Signed at Ottawa, Canada, this 24th day of January 2007.
"Gerald J. Rip"
Rip A.C.J.
Citation: 2007TCC59
Date: 20070124
Docket: 2006-513(IT)I
BETWEEN:
ROGER LENG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip A.C.J.
[1] Dr. Roger Leng appeals his income tax assessments for 2001 and 2002 in which the Minister of National Revenue considered his purchase and sale of shares in public companies, primarily in what are commonly referred to as "hi-tech" companies, to be on capital account and not on income account.
[2] Dr. Leng is currently an assistant professor of Pathology, specializing in cancer research, at the University of Albertain Edmonton. Dr. Leng's career track is interesting: he moved from China, where he had received a Ph.D. and Medical degrees, to the United States in 1992 and then to Scotlandin 1995 where he received a second Ph.D. degree. While in Scotlandhe took a course on buying and selling shares offered by a local brokerage. In April 1999 he immigrated to Toronto where, during the years in appeal, he did post-doctorate research at Princess Margaret Hospital where he had a fellowship. His hours of work at the hospital were flexible; he could come and go as he wished so long as he performed his work and writings; he worked mainly in the evenings.
[3] Dr. Leng does not consider himself a professional stock trader but believes he is a "good" trader. He bought and sold shares at a profit in Scotlandrealizing that one can make money by buying low and selling high. In Torontohe wished to make extra money to supplement his income and in 2000 began to purchase and sell shares on the internet on an account he shared with his wife at CIBC Investor Services. He would usually buy 200 to 300 shares of a corporation at any one time.
[4] If a share increased in value, say $1.00 or $2.00 on a share purchased for $10.00, he would sell, even if he purchased the share the same day. If the share decreased in value, he would hold on to it, hoping for a turnaround, until it dropped 50%, at which time he would sell.
[5] Dr. Leng made his purchases and sales usually in the morning. He watched stock market news during late afternoons and if the news was "interesting" he would buy shares the next day; otherwise he would not trade.
[6] In 2000 and 2001 Dr. Leng purchased and sold shares of U.S. corporations. In 2002 he purchased and sold shares of two Canadian corporations, Nortel Network Corp. and Q.L.T. Inc.
[7] In his statement of business activities for the relevant taxation years Dr. Leng describes himself as having a 50% interest in a partnership having a firm name of Roger's Bioinformation Consultation. At trial he stated his wife owned the other 50% interest in the partnership. The profits and losses from the dispositions of the shares were included in the partnership activities. The Confirmation Notices of purchases and sale are in the names of Dr. Leng and his wife. I note that the appellant's wife did not report any losses from the sales of shares.
[8] The purchases and sales of the shares in issue, as well as the prices and dates of the purchases and sales, are described in Schedule "A" to these reasons.
[9] For whatever reason, the Canada Revenue Agency included in Dr. Leng's losses in 2000 in the aggregate loss from sale of shares in 2001. The Crown counsel declared that the Crown is estopped from arguing that losses incurred in 2000 be deleted from calculations for 2001 and be added to 2000.
[10] The issue before me is whether, in the years in appeal, Dr. Leng's activities were on capital or income account. I find nothing in the evidence to suggest Dr. Leng was in the business of buying and selling shares. During 2000, 2001 and 2002 he had approximately 17 transactions. On four occasions he bought and sold shares of a corporation within days; on other occasions he purchased and sold shares within weeks or within several months.
[11] I do not doubt that Dr. Leng took courses in purchasing and selling shares, that he had time to study the market and considered himself knowledgeable. He was not an "insider" and had no specialized knowledge of the shares he was acquiring. He does not consider himself a professional.
[12] I have reviewed the cases submitted by Crown counsel at trial.[1] I could find no case that would support the appellant's submission that he was a trader in securities. Dr. Leng purchased shares - as did thousands of Canadians - to make a profit but he was not carrying on a business in pursuit of that profit. The fact that a person buys and sells shares at a short interval is not, by itself, conclusive that the person is a trader or that the venture was in the nature of trade. There were no indicia of business in Dr. Leng's investing activities.
[13] The appeals are dismissed.
Signed at Ottawa, Canada, this 24th day of January 2007.
"Gerald J. Rip"
Rip A.C.J.
CITATION: 2007TCC59
COURT FILE NO.: 2006-513(IT)I
STYLE OF CAUSE: ROGER LENG AND HER MAJESTY THE QUEEN
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: January 9, 2007
REASONS FOR JUDGMENT BY: The Honourable Gerald J. Rip, Associate Chief Justice
DATE OF JUDGMENT: January 24, 2007
APPEARANCES:
For the Appellant:
The Appellant himself
Counsel for the Respondent:
Josh Hunter
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada
Schedule A
Roger Leng
2000-2002 Stock Sales
2000 and 2001 Stock Sales
Stock
Quantity Bought
Cost (US$)
US$/CDN$
Cost (CDN$) Sold
Proceeds (US$) US$/CDN$ Proceeds (CDN$) T1ne Held Gain (Loss)
Alpha Industries Inc.
200 07-Nov-00
8,078.00
1.5316
12,372.26 6-Dec-00
9,971.66
1.5321
15,277.58
29
2,905.32
Alpha Industries Inc.
300 18-Jan-01
9,590.50
1.5160
14,539.20 24-Jul-01
10, 771.64
1.5381
16,567.86
187
2,028.66
Alpha Industries Inc.
300 29-Aug-01
9,835.00
1.5460
15,204.91 Dec-01
5,012.00
1.5774
7,905.93
94
-7,298.98
Atmel Corp.
600 20-Oct-00
8,953.00
1.5129
13,544.99 20-Oct-00
9,422.00
1.5129
14,254.54
0
709.55
Atmel Corp.
600 31-Oct-00
8,990.50
1.5271
13,729.39 8-Dec-00
7,172.00
1.5193
10,896.42
38
-2,832.97
Broadvision Inc.
200 26-Oct-00
5,090.50
1.5185
7,729.92 27-Oct-00
5,371.82
1.5272
8,203.84
1
473.92
Cypress Semiconductor Corp.
200 17-Oct-00
7,378.00
1.5188
11, 205.71 19-Oct-00
7,971.73
1.5109
12,044.49
2
838.78
Elantec Semiconductor Inc.
300 24-Jul-01
9,328.00
1.5381
14,347.40 24-Aug-01
11, 974.60
1.5410
18,452.86
31
4,105.46
Exodus Communications Inc.
300 20-Oct-00
10,518.63
1.5129
15,913.64 31-Oct-00
8,971.70
1.5271
13,700 68
11
-2,212.95
Inktomi Corp.
100 18-Oct-00
7,328.00
1.5200
11,138.56 8-Dec-00
4,171.86
1.5193
6,338.31
51
-4,800.25
Inktorni Corp.
100 08-Dec-00
4,028.00
1.5193
6,119.74 Dec-01
420.00
1.5774
662.51
358
-5,457.23
Lattice Semicondutor Corp.
300 17-Oct-00
7,153.00
1.5188
10,863.98 19-Oct-00
7,509.24
1.5109
11, 345.71
2
481.73
Micrel Inc.
300 11-Dec-00
12,928.00
1.5222
19,679.00 17-Jan-01
14,071.52
1.5121
21,277.55
37
1,598.54
Rambus Inc.
100 23-Oct-00
6,315.50
1.5083
9,525.67 6-Nov-00
7,071.76
1.5298
10,818.38
14
1,292.71
Sun Microsystems Inc.
200 12-Dec-00
6,621.75
1.5247
10,096.18 Dec-01
1,800.50
1.5774
2,840.11
354
-7,256.07
Total
122,136.38
186,010.55
111,684.03
170,586.76
-15,423.79
Taxpayer's Share (50%)
-7,711.89
Amount Claimed
-16,533.67
Taxpayer's Share (50%)
-8,266.84
Notes.
No receipts were provided for the December 2001 sales
CRA accepted Leng's reporting of 2000 sales on his 2001 return as the 2000 TY was statute-barred by the time of the at' All exchange rates are closing rates from the Bank of Canada website (www.bankofcanada.ca)
2002 Stock Sales
Stock Quantity Bought
Cost (CDN$) Sold
Proceeds (CDN$) Gain (Loss'
Nortel Networks Corp. 160 22-Feb-02
1,349.80
20-Dec-02
403.80
-946.0'
QLT Inc. 100 22-Feb-02
2,875.00
20-Dec-02
1,253.00
-1,622.'
Total
4,224.80
1,656.80
-2,56F
Taxpayer's Share (50%)
-1,2 £
Amount Claimed (only claimed taxpayer's 50% share)
-1,307.10
[1] Irrigation Industries Ltd. v. M.N.R., [1962] S.C.R. 346, Vancouver Art Metal Works Ltd. v. R., [1993] 2 F.C. 179 (F.C.A.), Rajchgot v. R., 2004 T.C.C. 548, Corvalan v. R., 2006 T.C.C. 200, Woods (L.E.) v. Canada, [1995] 2 C.T.C. 2084, McNeil v. R., 2005 T.C.C. 124, Funk v. M.N.R. 1965 CarswellNat 90.