[8] Jens obtained professional advice to sell the timber rights at a lump sum so as to avoid being taxed on an income basis. The siblings' agreements with C.P.S. Investments Inc. were both signed on July 28, 1994. Tab 4's agreement sets out a lump sum of $350,000 for timber on a 10 inch basis and a schedule of payments. Tab 5's agreement sets out a price of $70 per cubic metre of timber and states that the $350,000 figure in the Tab 4 agreement is based upon 5,000 cubic metres at $70 each. Payment was made as the timber was removed from the land. [9] The agreement described in Tab 4 was first drafted on a lump sum basis of $350,000 premised on Jens' position that timber cut would be on a 12 inch basis. It was agreed that the timber was to be cut and removed during the period from July 12, 1994 to December 31, 1994. Cutting was completed by December 31, 1994 although the last load was not hauled out until January 18, 1995 which was approximately the date of the last payment. [10] Mr. Jeakins testified that selling by the cubic metre price is better and fairer than selling for a lump sum. In cross-examination he admitted that it is legal in British Columbia for all timber on private land to be sold on a lump sum basis and that those kinds of sales occur on private land. He testified that the logger usually does better on the lump sum sale because the logger is more capable than an owner at calculating a correct estimate of the amount of marketable timber on an owner's land. [11] Mr. Jeakins testified that the total variance of production, from an estimate by an experienced forester cruising the land, could be about 30 percent. He also testified that the likelihood is that the owner of the timber would be the loser in that estimate. The concept of fair market value indicates that the seller, for example Gertrude, wants to get the best price; the buyer, for example Jens, wants to pay a lower price. That is obviously what Jens intended when he unsuccessfully tried to restrict the butt size of timber to be cut to the 12 inch diameter. However Jens could not afford to purchase any of Gertrude's interest without recovering money from the timber himself. To that extent, it was also in Jens' interest to get the best price from the timber rights. [12] The Court finds that the four siblings, including Jens, formed a joint purpose to sell the timber rights in order that Gertrude could sell her interest in the land at the best price. In order to purchase, Jens had to pay that price and he did not have the money to pay it. Nor did the farm operation or his salaried income yield enough to warrant mortgaging the land. Gertrude knew the value of the timber growing on the land and wanted to realize that as part of her selling price. Whether from the buyer's or the seller's point of view, timber growing on the land represents part of the fair market value of that land. If Jens was going to retain his interest in the land and continue to ranch on the land, he had to buy Gertrude's interest. He wanted to retain his interest in the land and to continue ranching on the land. For these reasons, the Court finds that Jens' sole purpose in selling the timber rights in 1994 was to enable Gertrude's sale to Jens to occur. In Lemieux v. The Queen, 73 DTC 5428 (F..T.D.), a real estate agent purchased farmland on August 18, 1966 and sold the farmhouse on March 31, 1967. The taxpayer kept a large portion of the land. On July 22, 1968, the taxpayer sold a portion of the land adjoining the farmhouse to the original purchaser. The Minister assessed the profit on these sales as income. In finding for the taxpayer, Pratte J., for the Federal Court, Trial Division, stated at page 5429: Though the plaintiff sold the house and parcel of her land on March 31, 1967, this was solely in order to settle a family dispute. The plaintiff's husband, limited financial resources, could not accept his wife being the owner of a holiday cottage on which he himself could not pay the expenses. The sale timber rights was a one-time occurrence, to be exercised within a specified period of time, in a specified area. The quantity to be removed depended on the terrain on which the timber was situated and the size of the timber. The contracts of sale of the timber rights do not impose a minimum or maximum quantity of production on C.P.S. Investments Inc. There is merely a time limit in which it can exercise its profit a` prendre. PREVIOUS PAGE NEXT PAGE