Case H29

Judges: JL Burke Ch

RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 16 July 1976.

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R.E. O'Neill (Member): During year ended 30 June 1971 the taxpayer sold shares and options in three mineral exploration companies for which (except as to one parcel of Arcadia options) she had subscribed in public issues which had been underwritten by the firm of sharebrokers where she worked. The results of such sales were in summary:

                                Cost      Proceeds     Profit      Loss

International Mining

   1,600 shares of 10c         $160      $3,210.19   $3,050.19

   2,000 options of 1c           20       4,562.90    4,542.90



Arcadia Minerals

      500 shares of 10c          50          97.80       47.80

    1,000 options of 1c         225         107.40                $117.60



Talga Exploration

    1,000 shares of 10c         100          77.80                  22.20

    1,000 options of 1c          10          37.90       27.90

                                                     ---------    -------

                                                     $7,668.79    $139.80

                                                     ---------    -------
    

The overall profit was $7,528.99. However, because the taxpayer supplied to the Commissioner the sale price per unit sold without taking account of commission and stamp duty charges and because of a misreading in the department of the transaction in Arcadia options as recorded in her account in the sharebroker's books (see para. 18) the Commissioner, in an amended assessment, brought to tax a sum of $7,986 which increased by $3,246 the tax originally assessed.

2. To her return for year ended 30 June 1971 (which she lodged in July 1971) taxpayer attached a note stating that shares she had acquired in International Mining Corporation N.L. ``were purchased as an investment in Australia's future and definitely not for capital gain'', but that she had sold them ``to obtain the deposit to purchase a home for myself''. By letter of 29 September 1971 the Commissioner requested particulars of taxpayer's acquisition and sale of shares. The letter concluded: ``If the shares, rights or options were not acquired for the purpose of profit-making by sale, please explain the purpose for which they were acquired and the reason for their sale.''

3. In her reply of 4 November 1971 taxpayer wrote:

``The shares and options abovementioned were all underwritten by the stockbroking

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firm by whom I was at that time employed. I was allocated the shares and options as non-cash bonuses and was at the time impressed with the companies involved as I felt they were genuinely searching for minerals. Accordingly I invested in them trusting they would be a worthwhile long term investment and would eventually produce reasonable dividends.

I was living in a flat at (suburb) with other people and because of the unsuitability of my accommodation and personal reasons, decided to move out and purchase a home for myself. International Mining Corporation shares had risen out of all proportion at that stage and I no longer felt that they were a sound investment. Through the sale of these shares I was able to afford a larger deposit on a home which I had decided would be a superior investment and would also return a small income by letting rooms.

I borrowed a further $8000.00 at 9 ½ % per annum in order to acquire my home and have let the extra bedrooms to help me pay my current obligations. The income from letting has been included in my return as assessable income.

I was forced to sell the remaining shares I had purchased in Arcadia Minerals and Talga Exploration to pay legal expenses and stamp duty on the purchase of my property.''

4. By letter of 13 March 1972 she was asked to explain the meaning of the expression ``non-cash bonus''. She replied on 6 April 1972 as follows:

• ``1. In each case my employers, X & Co. underwrote the issue of the shares.
• 2. Selected clients, only, were allocated shares on issue.
• 3. Limited parcels of shares were allocated to some staff members to be purchased by them if they so desired. I took up the shares allocated to me in these three instances as they were underwritten by the Firm and I had faith in the Firm's partners to underwrite sound issues which would be good long-term investments.
• Thus the term non-cash bonus referred to an intangible right to have shares allocated to myself, this right being treated by the firm as a form of bonus.''

5. On 8 September 1972 the amended assessment already mentioned was issued. Upon disallowance of her objection taxpayer required that the matter be referred to the Board. The question is were the shares sold during the year acquired by the taxpayer ``for the purpose of profit-making by sale'' in terms of the first limb of sec. 26(a).

6. At the hearing of the reference taxpayer appeared on her own behalf. When the hearing began the Chairman, having established that she was an employee of the brokers who underwrote the International Mining issue, proceeded:

``And you said in your letter of 4 November 1971 that you were allocated shares and options as non-cash bonuses. Could you just elaborate on the circumstances under which you came to be told by (broker) or one of his staff that you were entitled to apply for shares in International Mining?... International Mining was going to be floated in January and normally around Christmas broking firms give a bonus to their employees. That particular year, since they were floating the issue, they thought it would be worth while. Certain members of the staff were allocated, not actually allocated but they were given an entitlement to take up the shares.

As to the case of bonuses, one particular person would get, say if it were a cash bonus, one would get, one particular person would get more money than another. In this instance, certain employees were told that they could have either 2000 or 3000, or whatever; you still had to pay for them.

Did this information come to you orally, or in the form of a staff circular?... Orally.

And you were told that you could apply for a certain number of shares with International Mining?... Yes, that is right.

And in fact you did apply?..... Yes, I did.

Could you tell the story in your own words

I cannot put words into your mouth, but if you just tell us why you applied for them, and then the subsequent history of your holding?... I thought the shares sounded a fairly sound investment.

What was the business of the company, to your recollection? Do you have a prospectus, Mr. (Commissioner's representative)?''

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7. The Chairman then read to her two extracts from the report of the company's Chairman in the prospectus stating that the company ``has been formed initially to carry out programmes of mineral exploration'' and concluding:

``Based on the geological reports and advice the Board has received, I am of the opinion that the immediate implementation of a vigorous exploration programme on the above areas is fully justified. While the Directors are naturally optimistic as to the potential of the areas, it should nevertheless be borne in mind that any mineral exploration programme carries a considerable element of risk.''

She responded to the questions then put to her:

``What do you say as to your reasons for taking up shares in this company?... I thought they would be a worthwhile company.

Worthwhile in what respect?... I thought they would go ahead with their exploration, and find minerals, and become a solid company.

Worthwhile can be worthwhile in two aspects; it can be worthwhile from the point of view of the premium price at which they came on the market, and therefore worthwhile as far as profit making from sale is concerned, or they could be worthwhile from the point of view of holding them for a long time, with a view to dividends received?... I bought them with the intention of holding them.''

8. Details of the selling prices of the shares and options from the day they were listed on 16 January 1970 (Exhibit 2) were shown to the taxpayer. In the first ten days or so of August 1970 the shares and options were selling around 25 ¢ and 15 ¢ respectively. On 12 August the prices jumped to 78 ¢ and 58 ¢ . On 14 August she sold 600 shares for net proceeds of $718.94 equal to $1.20 per share; on 17 August she sold 500 options for net proceeds of $1,074.70 equal to $2.15 each; on 20 August she sold 1,000 shares for net proceeds of $2,491.25 ($2.50 each) and 1,000 options for $2,256.69 ($2.25 each). With the details of price movements before her the Chairman proceeded:

``You came to sell these shares and options, commencing August 1970. You said you purchased these for holding for dividends. What was the circumstance that led you to change your mind, with regard to the shares?... Mainly, as is illustrated by this here, that the shares rose out of all proportion; that was one of the reasons, I felt that they were not really particularly safe, when that sort of thing would happen, as had happened to several mining companies in the past, they rose out of proportion, and quite a number of them were actually suspended. I did not want to be involved in something that was going to go like that, so I started selling off the shares. I was, at the time, trying to buy a house, as well. I had been considering selling up all the shares I did have, to put some money down on the house.''

She had been ``looking for quite a while at houses'' and her recollection was that in October 1970 she paid the deposit on the place she in fact bought. She then affirmed the correctness of what she had written in the second and fourth paragraphs of her letter of 4 November 1971 (see para. 3).

9. The foregoing evidence given in reply to the Chairman represents the whole substance of the preliminary questioning and her response thereto before the Commissioner's representative proceeded to cross-examine her.

10. He first showed her a list of her share transactions during year ended 30 June 1970. They comprised purchases on the market of shares in five exploration companies beginning on 1 October 1969, all of which were resold by 5 January 1970, to show a net profit of $112. Asked why she had bought the shares in those five companies she quite frankly said ``I was trading''. But that answer, she said, did not extend to sales of 400 shares in International Mining in the week beginning 19 January 1970 for net proceeds of $273 nor to the sale in April 1970 of 500 shares in Arcadia Minerals for net proceeds of $98. As to those last mentioned sales they were made, she said, to cover her initial outlay. She had not objected to an amended 1970 assessment bringing the profits to tax including profits on those sales of shares in International Mining and Arcadia Minerals. ``I thought that I had better get that part of it over and then fight it out here. As far as International Mining, yes, I objected thoroughly but not to the Commissioner since these two particular shares in question were coming under review.''

11. She remembered that with the Poseidon nickel discovery announcement at

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the end of September 1969 ``the whole market rose''. Then she was asked:

``COMMISSIONER'S REP: Do you agree that anyone fortunate enough to obtain an original allotment of shares in a newly formed company, which was to engage in oil and mineral exploration, would have a good chance of making a profit by selling?... At that particular time?

At that particular time?... Not necessarily.

Not necessarily?... No.

CHAIRMAN: With regard to International Mining Corporation, was it anticipated by (her employer broker), and those associated with him, that those shares were expected to come on at premium?... I cannot answer for them.

You yourself have said that the shares were allocated to you as a non-cash bonus, but if they were coming on at par and less than par, there would be nothing in it for the recipient?... That is true, unless the shares were held for a long period of time.''

12. The Commissioner's representative then continued:

``Were you aware, when you signed the application form for the shares, that certain taxation deductions, under sec. 77D and 77C were available for applicants, if they so chose?... Yes.

Did you indicate on the application that you were interested in such taxation deductions?... No, I did not.

Is there any reason why you did not, if the shares were purchased for investment purposes?... I was under the impression, if you applied for concession, you were stating that you were intending to make a profit.

But was this not a government incentive to encourage investment in exploration for minerals?... I repeat what I just said. I do not know whether somebody told me the wrong thing, or what, but I considered if I claimed a concession in it, I was saying that I intended to make a profit.''

13. Her attention was again directed to the paragraph in the Directors' report in the Prospectus saying ``it should nevertheless be borne in mind that any mineral exploration programme carries a considerable element of risk'' and she was asked whether, when she applied for the shares, she had considered that she was ``putting her capital at considerable risk''. She replied ``No''.

14. The next line of questions merely confirmed that she had sold 400 International Mining in January 1970. She was reminded that she had said that she had been looking quite a while for a house and she said that that was so from ``approximately June 1970''. Then she was asked did she recall an announcement on 12 August 1970 by International Mining of a nickel discovery at Trough Wells in Western Australia. She thought that at that time she was ``down the snow''. She heard of the announcement when she returned to Sydney and ``as soon as I returned, I put in a selling order because I thought (the price) was out of proportion''. The announcement, she agreed, ``caused prices to rise a great deal, out of proportion'' (see para. 8 for details). She did not ``quite remember'' but thought that she had ``put in an order to sell most of the shares''. That answer is consistent with the fact that between 14 and 20 August the balance of 1,600 of her initial holding of 2,000 shares was sold along with 1,500 of her 2,000 options.

15. With reference to the remaining 500 options it was put to her:

``If you were of the opinion that the prices rose out of proportion, why did you not sell them all in one lot, why did you not instruct your brokers to sell all in one lot?... Because I was curious. It is a long time ago and I do not really remember. All I know is the shares rose out of proportion. I put orders on to sell. Over what time, I do not really remember. Whether I had forgotten I had 500 options. I do not really know.''

Of those then remaining 500 options she sold 300 on 16 September for net proceeds of $674. She was not specifically questioned about that sale.

16. But it was put to her that a further announcement was made on 29 September about the Trough Wells discovery. She could not recall hearing about it, but she agreed that she would have known of the ``enormous increase'' in the price of the options. Exhibit 2 shows that from mid-September the price of the options was above $2 and on Monday, 28 September they were $3.80 and after the announcement on 29 September the options closed at $5.40 and before the week was out they were $7 and for the next two weeks they

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were around $5. She sold her remaining 200 options on 21 October realising net proceeds of $557 ($2.79 each). She was questioned as to why she had not sold the 200 options earlier:

``... why did you continue to hold them during this period of high rise when the selling price was of the order of $6 and $7?... I do not quite remember. Possibly because...

It was about this time that you were involved in purchasing the property?... Yes, I would say I was involved. I was not particularly looking to make money. Does that sound silly?''

That simple answer seems to me to be in accord with her evidence that her purpose in acquiring the shares was not profit-making by sale.

17. The issue of shares by Arcadia Minerals Ltd. was underwritten by her employer. She was given the opportunity to subscribe but ``not necessarily as a bonus or anything like that''. ``You were just offered them if you wanted to take them up.'' She paid in full on application on 19 February 1970 for 1,000 shares at 10 ¢ each and 1,000 options at 1 ¢ each. She said that she ``intended to hold them on the same sort of thinking'', as that to which she had sworn in relation to her acquisition of shares in International Mining. Asked why she had not sold a sufficient parcel of Arcadia Mining directly after the shares were listed on 5 March 1970 as she had done with International Mining she replied - ``There was not any particular reason''. She did, however, sell 500 shares on 7 April 1970 for net proceeds of $98.

18. Her account with the broker showed that on 23 June she sold 1,000 options for net proceeds of $283 and that on 26 June she bought 1,000 options for $225. It was put to her that the 1,000 options were ``short sold'', that being the description given to the transaction in Exhibit 7 which was prepared by an unknown departmental officer. The taxpayer became confused and it was necessary to remind her that she had obtained 1,000 options along with the original allotment of 1,000 shares in February 1970. Thus the description in Exhibit 7 was wrong because she did have 1,000 options when the sale was recorded on 23 June. She could not recall the circumstances and, in the end, all she could say was that the sale on 23 June must have been a mistake on her part ``because I was not intending to sell out those shares (sic)''. The fact that she bought back 1,000 options gives at least some support to her answer.

19. On 10 December 1970 she sold out of Arcadia Minerals: 500 shares for $97.80 and 1,000 options for $107.40. Thus the shares showed a profit of $47.80 and treating the 1,000 options sold as being those she bought on 26 June she sustained a loss thereon of $117.60 ($225 less $107.40). Settlement of the purchase of her house took place in December and she needed money in that connexion.

20. The list for subscription to the issue of shares in Talga Exploration Ltd. opened on 25 September 1970 and she subscribed for 1,000 shares of 10 ¢ each and 1,000 options at 1 ¢ each. All of such shares and options were sold - the shares on 17 February 1971 at a loss of $22.20 and the options on 19 February at a profit of $27.90.

21. In the course of the Chairman's preliminary questioning she had said:

``Why do you say you took up shares in Talga? Was it for long term holding?... I will not say that about Talga, no, because at the time I took them up I was in the process of selling International Mining.

Yes, you purchased them in September 1970 and you had commenced selling International Mining in August. So why do you say you took up the shares in Talga?... My intention of taking up Talga is not terribly clear to me.

Did you have the purchase of a home in contemplation in September 1970 when you took them up?... Yes, I did.

Does that assist you at all in saying whether you intended to hold these shares or whether you intended to sell them to take a profit if it was available?... I think I may have been looking for a profit in that case.''

She responded as follows to the Commissioner's representative:

``You stated earlier also, getting now to the Talga Exploration, that at that time you applied for those shares you could have been looking more for a profit; is that right?... Yes.

Would you agree that the shares and options you purchased in this company were purchased with a view to resale at a profit?... I think I stated before, that my intention in buying Talga was not terribly

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clear to myself. I said before that I may have been looking for a profit, well I may have been.

Would you agree to the question I put to you, that you acquired these shares for resale at a profit?... Not necessarily, I would not say that.

You paid the deposit on the home, you stated earlier, in October 1970, is that right?... Yes.

And you took the Talga shares up in September 1970?... Yes.

Why did you take up the Talga shares, what did you intend to do with the shares and options?... I have stated in my correspondence previously to the taxation department, that all shares were taken up for investment. I said before that possibly I took up Talga for a profit, and seeing I am under oath, I probably was looking for profit, as I say, I was in the throes of buying a house myself, by that time.

When you acquired those Talga shares?... I was buying a house.

You were looking for a home yourself?... Yes.''

22. Asked whether she had paid the legal costs in connexion with the house purchase after 17 February 1971 she said:

``They may have been paid before; if you have cash on hand, you pay something, and then you might need cash for something else, but basically this is what the shares were sold for, for the expenses.''

23. As Mahoney J. stressed in
Piper v. F.C. of T. 74 ATC 4127 at 4128-4129 , one must guard oneself against discounting the sworn testimony of a taxpayer as to his purpose in acquiring shares, over heavily against, as in this case, such objective facts as the inherent risk there is in putting money into mineral exploration companies and the volatility of stock exchange prices of shares. For it is one thing to keep in mind the possibility that the testimony of a taxpayer may be of a self-serving kind, but it is altogether another thing to cast aside (unless it is shown in cross-examination or otherwise that the taxpayer is untrustworthy), or to unduly discount as being not recollection but reconstruction, the taxpayer's statements as to his purpose when, as here, that is the only evidence the taxpayer can bring forward to support his case.

24. On a fair reading of her evidence which I have tried to detail with accuracy, I think that the taxpayer's credibility was not put in doubt. As I have said she appeared on her own account and, despite her obvious and understandable nervousness, she adhered under oath to the substance of what she had written in her replies, particularly that of 4 November 1971, to the Commissioner's queries. Accordingly, to my mind there is no basis for asserting that the testimony she gave more than four years later is self-serving reconstruction. She had said and she repeated under oath that she had sold International Mining because the price had jumped ``out of all proportion'' and because she was looking to buy a house for herself, and that she had sold the Areadia and Talga shares and options to pay legal and other expenses when the purchase was finalised. That evidence was not in any part broken down or shown to be wrong. True she was hesitant about saying what was her purpose in September 1970 in acquiring the shares in Talga Exploration, but it seems to me that that unwillingness to commit herself in answering the questions about that acquisition (see para. 21) underlines the conscientious honesty with which she gave her evidence. Her confusion about, and inability to recall, the circumstances of the sale and buying back in June 1970 of Arcadia options seemed to me to be occasioned by it having been incorrectly described to her as a ``short sale'' and I think it would be wrong and unjust to discount any of her evidence because of the incident.

25. Stress was put for the Commissioner on the fact that the opportunity she took of subscribing to the issue by International Mining came to her as an employee of the underwriter by way of a ``non-cash bonus''. From her evidence the proper inference is that she subscribed for them not in January 1970 when they were listed but before Christmas in December 1969 when the subscription list opened. No doubt some of the staff who took the like opportunity did so for no other purpose than to convert the ``bonus'' into cash by promptly selling their shares. Throughout the first five or six weeks after listing the price of the shares did not drop below 50 ¢ and it was often above 60 ¢ and 70 ¢ . During the same period the options did not go below 30 ¢ and for the first two weeks they were well in excess

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of 40 ¢ . If her purpose in acquiring the shares and options was profit-making by sale then commonsense says that, particularly as she worked for the underwriter, she would have sold, not merely 400 shares as she did, but all when she knew that she could convert the ``bonus'' to cash equal to more than 500% profit on her shares and at least 3,000% and more profit on the options.

26. In this reference the question of the taxability or otherwise of the profit she made in the year ended 30 June 1970 from sales of International Mining or Arcadia shares is not in issue and whatever was her intention with regard to those parcels is not necessarily to be regarded as applying to the whole of her acquisitions see per Hogarth A.C.J. in
G. Williams v. F.C. of T. 74 ATC 4237 at 4248; (1974) 9 S.A.S.R. 129 . That case also shows (see para. 31) that the fact that she had bought and sold for profit-making shares in five other exploration companies does not warrant casting aside her testimony as to what was her purpose in acquiring the shares sold in year ended 30 June 1971.

27. In Williams' case the taxpayer developed from 1962 an association with an Adelaide sharebroking firm where a friend, Boys, worked. From time to time he conducted share transactions through and on the advice of Boys. In 1969 he transferred his industrial investments to a family company but retained the shares he owned in companies other than industrial stock. On 12 January 1968 Boys told him he could have a $500 share in a syndicate consisting of clients of the firm and friends for a project - arising out of investigation by Mr. Shirlaw, a partner in the sharebroking firm - for mineral exploration related to a place called Bindi Bindi in Western Australia. That same day he gave his cheque for $500 to Boys. The court found that by 22 January the taxpayer knew that he would not be a member of a syndicate, but instead would be allotted shares in an old inactive but listed mining company, Poseidon N.L. He raised no objection and on 2 March 1968 he received a bought note for 3,750 shares of 20 ¢ each paid to 12 ¢ . The price of the shares was $450 plus $10 duty and commission. On 8 March he signed a ``Transferee's Acceptance'' for the shares.

28. He sold shares as follows:

Year ended 30 June 1968

20 March 1968                   200 at $1.50)

 2 April                        200 at $1.46)             proceeds  $579

29 May                          900 at $1.80)

31 May                          100 at $1.90)             proceeds $1,770



Year ended 30 June 1969

February 1969                  1,000 at $0.60             proceeds $586



Year ended 30 June 1970

December 1969                  150 at about $86           proceeds $12,823

May 1970                       500 at about $61           proceeds $30,844
      

29. The first two sales in 1968 were made ``to recoup his outlay''. It was found that the May 1968 sales were made to provide funds towards paying off a mortgage. The February 1969 sale followed a drop in prices after an announcement by Poseidon that it had abandoned its interest in the Bindi Bindi project. In late September 1969 Poseidon announced its Windarra nickel strike. The court found that the December 1969 sale was made because the taxpayer considered that a suitable time had come to take the opportunity of paying the whole of his overdraft ($7,420 at the time) and of creating a credit. After January 1970 the shares stayed at prices of over $200 until mid March and from then until the sale in May there was a fairly steady decline in value. The court found ``that the taxpayer felt some alarm at the future prospects of the company, and that for that reason he decided to turn some of his Poseidon shares into money before the value declined further''.

30. The appeal, which was heard more than six years after the events of early 1968, concerned only the profit made from the sales in the year ended 30 June 1970. The appeal was allowed. Throughout the taxpayer claimed

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that his investment in the syndicate was intended to be a long-term investment. The Commissioner contended - (1) that an investment in a prospecting syndicate which had insufficient funds to exploit any minerals which it might find must of its very nature be speculative and must therefore fall within sec. 26(a); and (2) that in any event the proper inference to be drawn from the surrounding circumstances including the taxpayer's dealings in shares not only in Poseidon but also in other mineral exploration companies was that the case fell within sec. 26(a); or at least, that he had not established that it did not.

31. At ATC 4249 Hogarth A.C.J. said:

``The mere fact of acquisition of shares in a syndicate engaged in searching for minerals is equivocal. The search may fail. But if it succeeds the interest of the syndicate members is not likely to have any great value unless suitable arrangements can be made to exploit the discovery. Money is often found in such circumstances, which still leaves the original syndicate holders in a favourable position, perhaps as the holders of shares in an operating company. I feel unable to say that, as a matter of necessity, anybody who invests money in such a syndicate must for that reason alone bring the proceeds of the sale of his interest in the syndicate, or any part of it, to tax as part of his taxable income. I imagine that many investors who put their money into such ventures do so in the hope that one day they will strike it lucky; but unless there is something more specific I do not regard this as being a sufficiently formulated purpose to bring the investor within the first limb of sec. 26(a); and unless there is some continuity or reasonably frequent repetition of such activities, I do not think that they can be brought within the second limb. On my view of the evidence, this was the taxpayer's purpose when he invested his $500 on 12 January 1968. He hoped that he was on to a `good thing' and that, if so, in some undefined way, he would benefit financially; and I so find.

When later in the month he was told that he would be receiving Poseidon shares instead of his interest in the syndicate, I think it reasonable to infer that his initial state of mind continued and that he still hoped that the venture in its new form would prosper with financial benefits to himself. But he was now to become the owner of shares which were negotiable in parcels on the stock exchange, as contrasted with a single non-negotiable share in a syndicate. His previous actions in the case of the ventures which I have mentioned,* and his actions in the present case, suggest that he may have had the intention at that time of recouping himself for his initial outlay at the first opportunity. He said that he first made up his mind to sell some shares in Poseidon when the market was around $1.50 and he saw that he had the chance to retain over 3000 shares after recouping himself the whole of the outlay. He may well have thought it prudent to sell the second parcel in view of what then appeared to him an unexpectedly sudden rise in the value of the shares. It may be that the profits made on the shares sold in March and April 1968 should be brought to tax; but as this is not a topic which is formally before me on this appeal, I do not think it desirable to express my opinion any more definitely. I have already dealt with the circumstances of the sale in February 1969.''

* His Honour was here referring to evidence concerning the taxpayer's dealings in shares in exploration companies such as Vam Ltd., Nickel Mineral Search N.L., and Surveys and Mining Ltd. Thus he acquired 500 Nickel Mineral in September 1967 for $100 and sold them in November 1967 for $1,075 because they were ``grossly overpriced''. In September 1968 he bought 600 Surveys and Mining for $429 and sold 200 in December 1968 for $617 to cover his initial outlay.

32. At ATC 4249-4250 the learned Judge stated his conclusion:

``So far as the law is concerned, it is well established that the onus is upon the taxpayer to prove to my satisfaction, on the balance of probabilities, that when he acquired the shares in Poseidon which he sold in the year of income under review, his main or dominant purpose in acquiring them was not to resell them at a profit; and furthermore that the profit he made on their resale did not form part of a profit-making undertaking or scheme. So far as the first limb is concerned, although the onus is upon the taxpayer to establish on the balance of probabilities that it was not his main or dominant purpose in acquiring the shares to sell them at a profit, it does not

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necessarily follow that he must establish what in fact his main or dominant purpose was. If he can establish that it was some other specific purpose, so much the better for him. That is one way of proving that it was not the purpose of resale at a profit. But he may be able to prove the absence of that purpose by evidence which establishes that he had no particular purpose, but merely a vague general hope that the shares would be a good investment. In this case I am satisfied that that was the taxpayer's main or dominant purpose. He hoped to better his financial position in some vague and undefined way. This was his intention when he signified his intention to invest in the syndicate, and I think it should be accepted as remaining his intention when instead of receiving a share in the syndicate he received shares in Poseidon. I am satisfied that he had no defined purpose of selling the shares which he sold in the year under review either when he signified his intention of investing in the syndicate; or when by implication he assented to receiving the shares in Poseidon in lieu of his share in the syndicate; or when he was actually allotted the shares in Poseidon. I would emphasize that I am referring to the shares sold during the year under review, and I am deliberately refraining from making any comments with regard to shares sold in other years, in particular those sold during the financial year in which the shares were acquired. So far as the shares under review were concerned, therefore, I find that the taxpayer did not have the specific purpose of selling them at a profit when he acquired them. The net proceeds of their sale are therefore not brought to tax under the first limb of sec. 26(a).''

33. The cases establish that a taxpayer may bona fide acquire property for a purpose (other than the making of profit by sale) even though the chances of it being fulfilled may appear uncertain or even remote; and it is consistent with that proposition that the same taxpayer may, without coming within the scope of sec. 26(a), contemporaneously have it in mind that if, for some reason, he cannot proceed as originally intended, he will resell the property in question and believe - even hope - that he will do so at a profit (see per Walsh J. in
Eisner v. F.C. of T. 71 ATC 4022 at 4032; (1971) 45 A.L.J.R. 110 , and per Wells J. in Adelaide
Olive Co. Pty. Ltd. v. F.C. of T. 74 ATC 4048 at 4055 ; (1974) 7 S.A.S.R. 442 .

34. In my opinion the taxpayer has on the balance of probabilities established that she did not acquire the shares and options in either International Mining or Arcadia ``for the purpose of profit-making by sale'' but that she has failed so to do in relation to the shares and options in Talga. I would therefore allow her claims as regards International Mining and Arcadia but disallow it as regards Talga.