Facts
The case concerns a taxpayer who purchased two properties in 1925 and used them for his dairy business. In 1952, he created a general partnership with his two sons and included the properties in the company's accounting. In 1961, he sold the properties to third parties and realized a capital gain. The tax administration considered this gain taxable under Article 21, paragraph 1, letter d of the Law on Tax for National Defense (LDN).
The taxpayer contested this decision, arguing that the properties were his private property and not a business asset. He also claimed that the capital gain was not taxable because the properties had not been used exclusively for business purposes.
Considerations
The Federal Court examined the question of whether the properties were part of the company's commercial assets or the taxpayer's private assets. It considered that the properties had been included in the company's accounting and had served the needs of the business, in particular for the accommodation of the owners and for dairy activities.
The Court also examined the company agreement which provided that the properties would be recorded in the company's accounting for tax purposes, but that the taxpayer would remain the owner. It considered that this agreement did not change the fact that the properties were part of the company's commercial assets.
The Court rejected the taxpayer's argument that the…