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The saga of Sam's: records to real estate

The doors are locked, and the famous spinningrecord billboards have been turned off, but that didn't stop the faithful from coming to Sam the Record Man this week - a steady stream arrived at the now-defunct Yonge Street store to pay tribute, like mourners at the casket of a fallen king.

"People don't realize what it meant to us," says 75-year-old Jim Smith, who had shopped at Sam's since it opened in 1961.

Grief has been the prevailing theme since the iconic store closed for good last week. But behind the scenes is another story, one that combines money, politics, a tax strategy and the special brand of family intrigue that comes with a failing empire and a $20-million piece of real estate owned by a handful of relatives.

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"All I can say is that we're a family," says Bobby Sniderman, one of five kin with an interest in the landmark property at Yonge and Gould. "A family is like the tide. Sometimes it's high, sometimes it's low. And there have definitely been some lows lately."

At the heart of the family's struggles is the fate of the store site, purchased in the 1960s for $140,000 and now worth an estimated $20-million.

This week, the city announced that the store site will be expropriated by Ryerson University, a move that has divided the Sniderman family - founder Sam Sniderman has endorsed the move, while his son Bobby decries it as "disgusting" and "hostile."

"I don't know why they decided to do this," Bobby says. "It was insensitive, and it showed a tremendous lack of respect."

The expropriation, which is expected to proceed shortly, will put the property in the hands of the university. And it will also allow the Sniderman family to defer at least $4.6-million in taxes, thanks to a little-known clause in the Ontario Expropriations Act.

Under the act, an expropriated owner can avoid capital-gains tax on his or her property by investing the money from the forced sale in another piece of real estate. "Very few people are aware of this," says Bob Aaron, a veteran Toronto real-estate lawyer.

In the case of the Sam the Record Man site, the tax implications of the expropriation are significant. If the property had been sold for its estimated value of $19-million to $21-million, the Snidermans would have been on the hook for at least $4.6-million in capital-gains tax. The expropriation means they will pay nothing, as long as they invest the proceeds of the store in another property of equal value within 24 months. (They would be liable for capital gains if they sold the new property.)

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Some insiders believe that this consideration shaped the Sniderman family's agenda. Despite the public protest, insiders say, the family might have welcomed the expropriation as a tax-deferred way of extracting the real-estate value of their failing record store. "It's a major, major benefit," city councillor Kyle Rae says.

The Snidermans deny that the capital-gains aspect of the deal motivated any of their actions. "I wasn't even aware of it," Bobby says. "We'll have to run it by our accountant."

Bobby says the financial and emotional pressures of running the troubled business left no time or energy for considering tactics like promoting the expropriation as a tax strategy.

"This business has been our life," Bobby says. "I started working in the store when I was 10 years old."

Sam the Record Man fell on hard times in recent years, crippled by the rise of deep-pocketed rival such as HMV and a music business reshaped by downloading. The store went into bankruptcy in 2001 and was reopened the next year by Bobby and his brother Jason, who hoped that the famous brand could be resurrected. Such was not the case.

Earlier this year, the Snidermans announced that the store would close on June 30 and held a massive auction to clear out the remaining merchandise and fixtures. Bobby says the decision was anything but easy. "It just broke my heart to close it. My son said it was like Old Yeller. We all loved the store, but it had to go, and I had to be the one to do it. It killed me. If I had my choice, I'd have kept the store. I wish it was 1967 again."

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Ryerson University spent more than a year trying to buy the property from the Snidermans, but failed to reach a deal. Late last month, Ryerson president Sheldon Levy said the university would pursue expropriation. "We have had discussions over the past 18 months, but given the closing of the business and our need to move quickly to accommodate growing numbers of students, last week we informed the Sniderman family of our intent to pursue expropriation," he said.

The expropriation does not necessarily mean an end to the fight. Under the Expropriations Act, Ryerson can take over the store site immediately, and determine its true value later - a process that can be the stuff of legal nightmares.

The battle over some of the properties expropriated for the creation of nearby Dundas Square, for example, went on for nine years after the city took possession in 1996, and involved some heated debate; one couple showed up at City Hall and screamed that they would set their business on fire and die in the flames rather than turn it over to the city.

One of the most complicated parts of determining the final price paid to the expropriated owner is determining the value of the business they operate on the property. In the case of the Sam's site, there is clear potential for dispute. In the city's view, there is little or no value to the business, since it was closed before the expropriation. "This does not involve a viable business," Mr. Rae says. "They proved that when they shut it down."

The Sniderman family sees things differently. Even though they elected to shut down the flagship store, they consider Sam the Record Man a vibrant brand, and say the closing was just a single move in a larger plan. "Everyone knows the name," Bobby says. "It's a valuable property. Now, we'll just see how it all sorts out."

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About the Author
National driving columnist

Peter Cheney launched his driving column after 25 years as an award-winning feature writer, investigative reporter and news correspondent. His writing steers clear of industry jargon to focus on human experience and the passion of driving. More


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