,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,adv5ture or ,3c]n 9 ! ,nature (
  ,trade
,numb]3 ,,it-#dei
,date3 ,septemb] #h1 #aihj
,ref];e3 ,subsec;n #bdh7#a7

#a4 ,x is a g5]al pr9ciple t :5 a p]son
  habitu,y does a ?+ t is capa# (
  produc+ a pr(it1 !n he is c>ry+ on a
  trade or busi;s not)/&+ t ^!
  activities may 2 q sep>ate & a"p f 8
  ord9>y o3up,n4 ,an example is t (a
  d5ti/ :o habitu,y buys & sells r1l
  e/ate4
#b4 ,": s* a ?+ is d"o only 9frequ5tly1
  or possibly only once1 r ?an habitu,y1
  x / is possi# 6hold t ! p]son has
  5gag$ 9 a busi;s transac;n if1 9
  a3ord.e )! def9i;n ( 8busi;s0 9     #a
               ,,it-#dei             a#a
  subsec;n #bdh7#a71 x c 2 %[n t he has
  5gag$ 9 8an adv5ture or 3c]n 9 !
  nature ( trade04 ,t phrase has be5
  9t]pret$ 9 num]\s deci.ns (! ,c\rts &
  "s ( ^? deci.ns1 ": ! transac;ns
  9volv$ r1l e/ate1 >e reflect$ 9
  ,,it-#bah 5titl$ 8,pr(it f ! ,sale (
  ,r1l ,e/ate04
#c4 ,al? an adv5ture or 3c]n 9 ! nature
  ( trade is 9clud$ 9 ! def9i;n (! t]m
  8busi;s0 9 sec;n #bdh1 x does n
  necess>ily m1n t a taxpay] :o is 5gag$
  9 an adv5ture or 3c]n 9 ! nature (
  trade is 8c>ry+ on0 a busi;s or has
  8c>ri$ on0 a busi;s4 ,": ^! phrases >e
  us$ 9 ! ,act1 a det]m9,n is made bas$
  on ! degree ( activ;y & ea* situ,n m/
  2 3sid]$ 9 ! li<t ( xs [n "picul>
  facts4
#d4 ,9 det]m9+ :e!r a "picul> transac;n
  is an adv5ture or 3c]n 9 ! nature (
  trade ! ,c\rts h emphasiz$ t all !
  circum/.es (! transac;n m/ 2 3sid]$ &
  t no s+le crit]ion c 2 =mulat$4     #b
               ,,it-#dei             b#a
  ,g5],y1 h["e1 ! pr9cipal te/s t h be5
  appli$ >e z foll[s3
  7a7 :e!r ! taxpay] d1lt )! prop]ty
    acquir$ 0hm 9 ! same way z a d1l] 9
    s* prop]ty ord9>ily wd d1l ) x2
  7b7 :e!r ! nature & quant;y (! prop]ty
    excludes ! possibil;y t xs sale 0 !
    r1liz,n ( an 9ve/;t or 0 o!rwise (a
    capital nature1 or t x cd h 4pos$ (
    o!r ?an 9 a transac;n (a trad+
    nature2 &
--------------------------------------#b
  7c7 :e!r ! taxpay]'s 9t5;n1 z e/abli%$
    or deduc$1 is 3si/5t ) o!r evid;e
    po9t+ 6a trad+ motiv,n4
  
  ,-;ts on ! signific.e (! abv te/s
  appe> 2l "u ! h1d+s 8,taxpay]'s
  ,3duct01 8,nature (! ,prop]ty0 &
  8,taxpay]'s ,9t5;n04



                                      #c
           ,taxpay]'s ,3duct         a#b
            7p>agraphs #e-h7
    
#e4 ,! prim>y 3sid],n is :e!r !
  taxpay]'s ac;ns 9 reg>d 6! prop]ty 9
  "q 7 ess5ti,y :at wd 2 expect$ (a d1l]
  9 s* a prop]ty4 ,:at is requir$1 "!=e1
  is 6-p>e :at d1l]s 9 ! same k9d (
  prop]ty ord9>ily d ) :at ! taxpay] did
  :5 he pur*as$ ! prop]ty1 :5 he sold x
  & dur+ ! "t :5 x 0 9 8 posses.n4 ,": !
  prop]ty is r1l e/ate1 "s relevant
  factors >e set \ 9 ,,it-#bah4
#f4 ,evid;e t ef=ts 7 soon made 6f9d or
  attract pur*as]s or t a sale took
  place )9 a %ort p]iod ( "t af !
  acquisi;n (! prop]ty 0! taxpay] po9ts
  6a trad+ 9t5;n4
#g4 ,dur+ ! "t ! taxpay] [n$ ! prop]ty x
  is significant :e!r /eps 7 tak5 )!
  9t5d$ result ( improv+ xs m>ketabil;y4
  ,": ! prop]ty 3si/$ ( an op]at+
  busi;s1 s* /eps mi<t 9volve v>i\s
  *anges 9 ! way ! busi;s 0 op]at$ s z
  6improve ! pr(it pot5tial4 ,!       #d
               ,,it-#dei             b#b
  li/+ (! busi;s = sale :5 ! improv$
  m>ketabil;y 0 a*iev$ wd su7e/ t !
  busi;s _h n be5 acquir$ z an 9ve/;t b
  _h be5 acquir$1 improv$ & (f]$ = sale
  9 a mann] simil> 6proc$ures foll[$ 0a
  d1l] 9 busi;ses4
#h4 ,! fact t ! taxpay] has a -m]cial
  backgr.d 9 simil> >1s or has _h
  previ\s exp]i;e (a simil> -m]cial
  nature has be5 held 6be a p]t95t
  3sid],n 9 "s circum/.es4

          ,nature (! ,prop]ty
           7p>agraphs #i-aa7
    
#i4 ,": prop]ty acquir$ 0a taxpay] is (
  s* a nature or ( s* a magnitude t x cd
  n produce 9come or p]sonal 5joy;t 6xs
  [n] 0virtue ( xs [n]%ip &! only
  purpose (! acquisi;n 0 a subsequ5t
  sale (! prop]ty1 ! presump;n is t !
  pur*ase & sale 0 an adv5ture or 3c]n 9
  ! nature ( trade4 ,? 0 a f9d+ (!
  c\rts1 = 9/.e1 ": ! prop]ty         #e
                ,,x-#dei             c#b
  acquir$ 0 a l>ge quant;y ( "o k9d (
  gds4
#aj4 ,! prop]ty acquir$ may 2 capa# (
  produc+ 9come b only if ! taxpay] is 9
  a posi;n 6op]ate or l1se x1 z =
  example1 a c>go %ip4 ,if ! taxpay] is
  n 9 a posi;n 6op]ate x & cd make use (
  x only 0sell+ x1 ! presump;n ag wd 2 t
  ! pur*ase & subsequ5t sale 0 an
  adv5ture or 3c]n 9 ! nature ( trade4
#aa4 ,"s k9ds ( prop]ty 7e4g4 a busi;s1
  a secur;y7 >e prima facie ( an 9ve/;t
  nature 9 t !y >e norm,y us$ 6produce
  9come "? _! op],n or m]e posses.n4 ,":
  prop]ty is ( ? k9d &! taxpay] 0 9 a
  posi;n1 if he s wi%$1 6h op]at$ or
  held x b he *ose 6sell x1 !n ! mann] 9
  : he d1lt ) x &! 9t5;n :5 he acquir$ x
  m/ 2 ! gov]n+ factors 9 decid+ :e!r !
  transac;n 0 an adv5ture or 3c]n 9 !
  nature ( trade4


                                      #f
           ,taxpay]'s ,9t5;n         d#b
           7p>agraphs #ab-ac7
    
#ab4 ,a taxpay]'s 9t5;n 6sell at a pr(it
  is n su6ici5t1 0xf1 6e/abli% t he 0
  9volv$ 9 an adv5ture or 3c]n 9 !
  nature ( trade4 ,t 9t5;n is alm
  9v>iably pres5t ev5 :5 a true 9ve/;t
  has be5 acquir$1 if circum/.es %d >ise
  t wd make x f9anci,y m b5eficial 6sell
  ! 9ve/;t ?an 63t9ue 6hold x4 ,":1
  h["e1 "o or o!r (! abv te/s cle>ly
  su7e/s an adv5ture or 3c]n 9 ! nature
  ( trade1 &1 9 a4i;n1 x c 2 e/abli%$ or
  9f]r$ t ! taxpay]'s 9t5;n 0 6sell !
  prop]ty at ! f/ suita# opportun;y1
  9t5;n w 2 view$ z corroborative
  evid;e4 ,on ! o!r h&1 9abil;y 6e/abli%
  an 9t5;n 6sell does n preclude a
  transac;n f 2+ reg>d$ z an adv5ture or
  3c]n 9 ! nature ( trade if x c o!rwise
  2 s reg>d$ pursuant 6"o (! abv te/s4
#ac4 ,x m/ 2 recogniz$ t a taxpay] may h
  m ?an "o 9t5;n :5 a prop]ty is
  acquir$4 ,if ! prim>y 9t5;n is sd   #g
                ,,x-#dei             e#b
  6be ! hold+ (! prop]ty z an 9ve/;t1
  reg>d m/ 2 _h 6:e!r1 at ! "t (!
  acquisi;n1 "! 0 a second>y 9t5;n 6sell
  ! prop]ty if ! prim>y 9t5;n cd n 2
  fulfill$4 ,second>y 9t5;n is "picul>ly
  significant :5 ! circum/.es su7e/ t "!
  0 ll likelihood (! prop]ty 2+ reta9$
  0! taxpay] 2c (a lack ( f9ancial
  res\rces or = "s o!r r1son4 ,fur!r1 a
  taxpay]'s 9t5;ns >e n limit$ 6!
  purposes = acquir+ ! prop]ty b ext5d
  6! "t at : ! 4posi;n 0 made4 ,a
  taxpay]'s 9t5;n1 if any1 at ! "t (
  acquisi;n (! prop]ty may *ange at any
  "t dur+ [n]%ip & up 64posi;n 2c !
  taxpay] may =m an 9t5;n or o!rwise
  *ange or ab&on ! prim>y1 dom9ant or
  second>y 9t5;n ) respect 6! prop]ty4





                                      #h
          ,isolat$ ,transac;ns        #d
             7p>agraph #ad7
    
#ad4 ,! foll[+ factors1 9 &( !mvs1 >e n
  su6ici5t 6prev5t a f9d+ t a transac;n
  0 an adv5ture or 3c]n 9 ! nature (
  trade3
  7a7 ! transac;n 0 a s+le or isolat$
    "o2
  7b7 ! taxpay] did n cr1te any
    organiz,n 6c>ry \ ! transac;n2
  7c7 ! transac;n is tot,y di6]5t f any
    (! o!r activities (! taxpay] & he
    n"e 5t]$ 96s* a transac;n ei 2f or
    s9ce4
  
         ,losses 7p>agraph #ae7
    
#ae4 ,a taxpay] :o emb>ks on :at is
  e/abli%$ z an adv5ture or 3c]n 9 !
  nature ( trade may su6] a loss r ?an !
  anticipat$ ga94 ,s* a loss 3/itutes a
  loss f busi;s & 5t]s 96! calcul,n (!
  taxpay]'s non-capital loss =! ye>4
                                      #i
        ,sec;n #ad ,n ,applica#      a#d
             7p>agraph #af7
    
#af4 ,! ,de"p;t 3sid]s t a transac;n 9
  "rs or ?+s : wd ord9>ily -e )9 !
  provi.ns ( sec;n #ad cd 2 an adv5ture
  9 ! nature ( trade ": ! 9t5;n 0 n 6e>n
  9come f a busi;s b 6buy & sell a
  prop]ty )9 a %ort p]iod ( "t at a
  pr(it4 ,9 s* circum/.es1 ! ga9 is
  busi;s 9come & sec;n #ad does n apply4













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