Gillis v. The Queen, 78 DTC 6103, [1978] CTC 44 (FCTD)

Dubinsky, DJ:—This is an appeal from a decision of the Tax Review Board and from the order based thereon and dated July 27, 1976, whereby it dismissed the appeal of the plaintiff, Donald J Gillis, from reassessments made for the taxation years of 1969,. 1970, 1971, 1972 and 1973 by the Minister of National Revenue pursuant to the provisions of the Income Tax Act, RSC 1952, c 148, as amended by SC 1970-71-72, c 63.

Following is the decision appealed from:

This is an appeal by Donald J Gillis against reassessments made by the Minister of National Revenue for the 1969, 1970, 1971, 1972 and 1973 taxation years.

The disallowed amounts of the alleged farming losses are as follows:

1969	$4,154.47
1970	3,234.73
1971	3,103.57
1972	2,501.82
1973	2,901.64

In assessing the appellant, the respondent assumed that the expenses claimed as deductions by the appellant were not made or incurred by him for the purpose of gaining or producing income from a business: the expenses were personal or living expenses of the appellant, including expenses of properties maintained for the use or benefit of the appellant and his family and not maintained in connection with any business carried on for profit or with reasonable expectation of profit.

With respect to the 1972 and 1973 taxation years, the Minister relies on paragraphs 18(1)(a) and (h) and subsection 248(1) of the Income Tax Act, as amended by SC 1970-71-72, c 63, being respectively paragraphs 12(1)(a) and (h) and 139(1)(ae) of the Income Tax Act as it applied to the taxation years 1969, 1970 and 1971.

The appellant is a full-time professor of engineering at the University of Prince Edward Island and, as such, he had little time at his disposal to carry on a farming activity with a reasonable expectation of profit. Furthermore, the expenses incurred seem to be more of a personal nature than to produce income from farming activities. In addition, his plans for the future do not show that he will be able to carry on his farming activity with a reasonable expectation of profit.

Consequently, the appeal is dismissed.

Defendant’s counsel raised a preliminary objection to the jurisdiction of this Court to hear the plaintiff's appeal herein. The objection was to the following effect. The decision or judgment of the Tax Review Board had been sent by registered mail on August 12, 1976 to the Minister of National Revenue and to the plaintiff. The appeal from the judgment was filed in this Court on March 1, 1977.

Subsection 172(1) of the Income Tax Act states as follows:

172. (1) The Minister or the taxpayer may, within 120 days from the day on which the Registrar of the Tax Review Board mails the decision on an appeal under section 169 to the Minister and the taxpayer, appeal to the Federal Court of Canada.

According to counsel for the defendant, not only was the plaintiff’s appeal filed late but the plaintiff had not made any application for an extension of time to file his appeal. This extension is provided for by subsection 167(4) of the Act which reads as follows:

167. (4) Where no appeal to the Federal Court of Canada under section 172 has been instituted within the time limited by that section, an application may be made to the Federal Court of Canada by notice filed in the Court and served on the Deputy Attorney General of Canada at least 14 days before the application is returnable for an order extending the time within which such appeal may be instituted and the Court may, if in its opinion the circumstances of the case are such that it would be just and equitable to do so, make an order extending the time for appealing and may impose such terms as it deems just.

In short, defendant’s counsel objected to the appeal being proceeded with on the ground that it had been filed late in this Court and that no application to extend the time for filing an appeal had been made.

There was no dispute between the parties that the letter containing the judgment of the Tax Review Board and which had been sent to the plaintiff by the Registrar on August 12, 1976 by registered mail, had been returned to the sender with the notation that it was unclaimed. Subsequent letters to the plaintiff, also registered, containing the aforesaid judgment were similarly returned unclaimed. However, a letter sent to him by ordinary mail on November 4, 1976, and again setting forth the judgment of the Tax Review Board, was received by the plaintiff.

It was the contention of plaintiff’s counsel, therefore, that the time for filing the appeal from the Board’s decision began to run from November 4, 1976 and not from August 12, 1976. Hence, according to counsel for the plaintiff, the appeal filed in the Court on March 1, 1977 was made within the statutory period of 120 days.

Defendant’s counsel submitted certain cases on this point. Among those cited was MNR v William S Walker; William S Walker v MNR, [1951] CTC 334; 52 DTC 1001. The Court, in this case, referred to subsection 55(1) of the Income Tax Act, SC 1948. Subsection 55(1) was substantially the same as the present subsection 172(1), ie, it provided for an appeal to be made within 120 days from the day on which the Registrar of the then Tax Appeal Board mailed the Boards decision. The Court also interpreted subsection 89(2) of the 1948 Act which at that time read in part as follows:

89. (2) A notice of appeal . . . may be served upon the taxpayer . . . by being sent to him at his last known address by registered mail.

Hyndman, DJ had the following to say at page 336 [1002]:

However, one must examine carefully the language of Section 89(2) above set out. The wording is, “may be served upon the taxpayer either personally or by being ‘sent’ to him at his last known address by registered mail.’’ My interpretation of this wording is that it is not the receipt of the notice by the taxpayer which is important, but its “being sent’’; and the date on which it was “sent” should be regarded as the date of service.

Defendant’s counsel argued that an analogy could be drawn between this point in issue and the so-called ‘‘mail-box doctrine’’ which had been approved in several cases and which regards a contract as being completed upon the mere posting of the acceptance by the offeree, irrespective of whether it reaches the offerer. He cited Byrne and Co v Leon Van Tienhoven and Co (1880), 42 LT 370, wherein Lindley J said at page 372:

It may be taken as now settled that where an offer is made and accepted by letters sent through the post the contract is completed the moment the letter accepting the offer is posted . . . even although it never reaches its destination. Household Fire Company v Grant, 41 LT 298; 4 Ex D 216 . . .

In Moscovitch’s Estate et al v South End Development Company Limited (1965-69), 4 NSR (2d) 182, speaking for the Appeal Division of the Supreme Court of Nova Scotia, I pointed out that Ritchie, J, in Imperial Life Assurance Company of Canada v Colmanares (1967), 62 DLR (2d) 138, had approved of the rule enunciated by Thesiger, LJ in Household Fire and Carriage Accident Insurance Co v Grant (1879), 41 LT 298: 4 Ex D 216, who said at page 300 [221] as follows:

But if the post-office be such common agent, then it seems to me to follow that as soon as the letter of acceptance is delivered to the postoffice, the contract is made as complete and final and absolutely binding as if the acceptor had put his letter into the hands of a messenger, sent by the offerer himself as his agent, to deliver the offer and receive the acceptance.

Quite apart from the clarity of the wording of subsection 172(1), it is my view that as with contracts it is within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, so too is it within the contemplation of all parties affected by the Income Tax Act that under the Act which provides for the communication of essential information by mailing same, a message is deemed to have been communicated when the letter containing it has been posted. But in any event, I am satisfied that the language of subsection 172(1) is clear and unambiguous. I share the view of Hyndman, DJ in the Walker case (supra). The section states: . from the day on which the Registrar . . . mails the decision . The important date, in my view, is the one on which the Registrar first mailed the decision whether by registered or ordinary mail and it is from that date that the 120 days began to run.

I must say, in passing, that it ill behooved the plaintiff to contend that November 4, 1976 was the material date if he meant to suggest that he became aware of the Board’s decision only after receiving that letter. The judgment of the Tax Review Board has this notation:

Appeal heard June 30, 1976 at the City of Charlottetown, Prince Edward Island and judgment pronounced the same day.

The plaintiff, Mr Gillis, was present in person and I have not the slightest doubt that he heard and understood the decision handed down by the Board Member.

The plaintiff's appeal has been filed herein late and I so ruled at the hearing before me. However, I had been advised earlier by counsel for the. defendant that if his preliminary objection were sustained by me nevertheless, if plaintiff’s counsel wish to move for an extension of the time for filing an appeal, the defence would waive the statutory requirement of 14 days’ notice to be given to the Deputy Attorney General of Canada. Counsel for the plaintiff thereupon made a motion for an extension of time.

The plaintiff had had ample time to file his appeal. He had known of the Tax Review Board’s decision since June 30, 1976 and in that connection he had not been frank with the Court. Moreover, he had had ample time to apply for an extension and to give the required notice thereof. Nonetheless, having glanced over the documents on file and being of the opinion that the plaintiff has some argument to present, I came to the conclusion that it would be just and equitable to extend the time for filing the appeal. Perhaps the quotation most often attributed to Lord Herschell is applicable herein:

Important as it was that people get justice, it was even more important that they should be made to feel and see that they were getting it.

In any event, I directed that the time for filing be extended and the hearing of the appeal was proceeded with.

The evidence of the plaintiff was to the following effect. He has been an instructor of engineering at the University of Prince Edward Island since 1968. Before that he worked as engineer for some three years. He arrived in Prince Edward Island from Montreal in January of that year and in June of the same year, with the assistance of the Farm Establishment Board, he purchased a farm of about 117 acres at Mermaid which is a small rural community of about 30-50 families and is located some 7 miles east of Charlottetown. His lot had about 80 cleared acres, an old house which was not habitable and some dilapidated old barns. The purchase price was $6,500 and he was able to advance $1,500 of his own money, the balance coming from his loan with the Board.

He said that it was his intention to farm in order to supplement his income. Farming is the main industry in Prince Edward Island and he was willing to put his money into farming. He was short on experience but he was in good health and although he was fully occupied with his university work during the winter months, his time was very much his own during the other months of the year. Between June and September. of the first year he constructed his home about 200 feet from the road and some 100 feet from the edge of the field where it is located. He did the construction work himself.

He did not plant crops or do any farming in 1968. Prior to that year, he had not done any farming but did work for his father-in-law on the latter’s 200-acre farm, helping with the haying, milking, etc. In 1969 he began active farming. Between July and August of that year he built a small barn the lumber for which he had cut himself with the help of a neighbour. He needed a good place to store grain. He had been in touch with the Department of Agriculture, had had his soil tested and had been advised to plant a high yield grain. He followed the custom of hiring a good seeder and put in 60 acres of grain having been assured that grain was saleable. He felt that 60 acres would be sufficient for his resources. He worked with a neighbour, Mr Proctor, doing the haying, cleaning the pens and generally making himself more acquainted with the work of a farm. He himself sprayed the grain crop to kill the weeds. He found that he was occupied all the time between building his barn and working for Mr Proctor.

He said that he was unable to harvest his whole crop due to a hurricane which struck his lot late in the season. He did not sell then the balance of his crop which he had salvaged but put it in the barn to be sold later. That year—which he said was not a good year for him—he also purchased a big combine machine. He had no income that year from the farm and the total amount of his expenditures which he claimed to have had in connection with his farm came to $4,154.47. Of this sum, $555 represented capital cost allowance and his out-of- pocket expenses therefore came to approximately $3,600.

During the year 1970 he purchased some more equipment such as a tractor, disc-harrow, a plough, chain saw etc. He took a loan for the purchase of the tractor in the amount of $1,900, but he paid for the other pieces of machinery himself. The disc-harrow cost $200; the plough, $275 and the chain saw, $170. This year he planted some 40 acres of grain and let the rest of his land lie fallow. During the summer months he continued to work with Mr Proctor on the latter’s farm and was kept busy all the time. He harvested the 40 acres and when he sold his crop he took in $415. He had as expenditures—including capital cost allowance of $904.50—the sum of $3,649.73, giving him a net loss for the year of $3,234.73. He was not discouraged even though he had hoped to make a profit in 1970 because he knew more about farming, production of better crops, etc. He expected the farm would pay off eventually—perhaps in about five years.

In October 1971 he purchased two standard bred horses both costing $1,200. He paid for them out of his own money. His intention was to have them bred and to sell their colts. This year he planted some 25-30 acres of grain and put in something less than 2 acres of potatoes. Again he worked for Mr Proctor and also for another farmer looking after potatoes, pigs, etc. He did not do so well with his potatoes but he harvested his crop in full and stored it in the barn and eventually sold it. He bought some machinery that year in the vicinity of $260. Including his capital cost allowance of about $1,050, his expenses came to approximately $3,775. His income from the farm for the year was $761.91 and his net loss for the year came to $3,013.57. His income from the university that year was around $12,000. His wife was not working and he had no other source of income. He said that he had not counted on making more money that year but he was gaining experience.

During the year 1972 he planted from 10-15 acres of grain and over one acre of potatoes. He acquired some more horses. He harvested the grain and most of the potatoes. His time had been taken up completely between looking after his own crops and his horses and doing much of the same work for his neighbours. The time spent on the horses was about 20% of his total time. His grain crop was favourable and he sold some of it. His income from the farm for the year came to $437. Including his capital cost allowance—the same as the previous year, viz, approximately $1,050—his total expenses came to $2,938.82. His university salary had gone up from $12,000 to $13,000. It did not seem to him as if four years had gone by since he first started at Mermaid. He felt that his land was improving. He still had his good health and he was still willing to invest money in the farm. He could not recall any capital expenditures that year. His net loss for the year came to $2,501.82.

During 1973 he had no capital expenditures. He planted about 10 to 15 acres of grain and a small acreage (about /4 to /2 acre) of potatoes. He continued to devote time to his horses but did not have much success that year. Once again his time—apart from the months when he was teaching—was taken up with looking after his own crops and working for his neighbours. He experienced some difficulty with his potatoes but stored his grain and sold it the following year. His farm income for the year came to $316. His expenditures, including capital cost allowance which again was approximately $1,050, amounted to $3,217.64. His out-of-pocket expenses were approximately $2,200 and his net loss for the year came to $2,901.64.

In 1974 the plaintiff planted a couple of acres of potatoes and some grain. He termed the year not a profitable one. In 1975 he planted two acres of potatoes which he marketed to stores. He also sold some 10 acres of hay that year. However, his 10-15 acres of grain did not, according to him, yield a good crop.

Between the years 1973 and 1976, he continued to work with his neighbours and they with him. He had never offered to sell his farm but offers to buy it had been made to him. Over the years, he said that he endeavoured to keep himself up-to-date on all farm literature, pamphlets, etc. In 1976 a farmers’ market was organized and he was invited to participate in it. It is a non-profit organization designed to help the farmers sell their produce. He became the assistant manager of it but he is not paid for his work. Both he and his wife are active in the 4H movement and they serve as gardening instructors. He did not take any holidays between 1968 and 1973. His four children help with duties around the farm. He considers that he qualifies for some provincial government assistance. Although he had been interested politically, he did not consider that his politics had any bearing on what went on at his farm.

There is no dispute as to the hereinbefore enumerated facts in any material respect and the defence offered no evidence. The case therefore turns, as Addy, J put it in D P McLaws v The Queen, [1976] CTC 15 at 16: 76 DTC 6005 at 6006, “. . . entirely on the interpretation to be given to those facts and on the conclusions of fact to be drawn therefrom . .

The relevant sections in so far as the taxation years 1969, 1970 and 1971 are concerned are the Income Tax Act, RSC 1952, c 148, sections 12, 13 and 139 as amended by SC 1958, c 32, subsection 5(1). For the purposes of this decision, the following subsections or paragraphs should be set forth:

Deductions Not Allowed in Computing Income

12. (1) In computing income, no deduction shall be made in respect of

(a) an outlay of expenses except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from property or a business of the taxpayer,

(h) personal or living expenses of the taxpayer except travelling expenses (including the entire amount expended for meals and lodging) incurred by the taxpayer while away from home in the course of carrying on his business,

Miscellaneous Rules for Computing Income

13. (1) Chief source of income.—Where a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income, his income for the year shall be deemed to be not less than his income from all sources other than farming minus the lesser of

(a) his farming loss for the year, or

(b) $2,500 plus the lesser of

(i) one-half of the amount by which his farming loss for the year exceeds $2,500, or

(ii) $2,500.

(3) For the purpose of this section, “farming loss’’ means a loss from farming computed by applying the provisions of this Act respecting the computation of income from a business mutatis mutandis.

Definitions

139. (1) In this Act,

(p) “farming” includes the tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, . . .

(ae) “personal or living expenses” include

(i) the expenses of properties maintained by any person for the use or benefit of the taxpayer or any person connected with the taxpayer by blood relationship, marriage or adoption, and not maintained in connection with a business carried on for profit or with a reasonable expectation of profit.

The relevant sections in so far as the taxation years 1972 and 1973 are concerned are SC 1970-71-72, c 63, sections 18, 31 and 248. Paragraph 18(1)(a) of the. present Act is identical with paragraph 12(1)(a) of the 1952 statute; subsection 31(1) of the present Act is analogous to subsection 13(1) of the 1952’statute and the definitions of “personal or living expenses’’ and “farming” in section 248 of the present Act are identical with the definitions of these terms in the 1952 statute as amended.

I said above that subsection 31(1) now is analogous to what subsection 13(1) was previously. Actually that is not correct for there is a significant change between the two subsections. I feel that subsection 31(1) now helps to clear away the difficulties encountered in understanding subsection 13(1) which Dickson, J in Moldowan v Her Majesty the Queen, [1977] CTC 310; 77 DTC 5213, described as “an awkwardly worded and intractable section and the source of much debate”.

Subsection 31(1) now reads as follows:

31. (1) Where a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income, for the purposes of sections 3 and 111 his loss, if any, for the year from all farming businesses carried on by him shall be deemed to be the lesser of

(a) the amount by which the aggregate of his losses for the year otherwise determined from all farming businesses carried on by him exceeds the aggregate of his incomes for the year from all such businesses, and

(b) $2,500 plus the lesser of

(i) /2 of the amount by which the amount determined under paragraph (a) exceeds $2,500, and

(ii) $2,500;

and for the purposes of this Act the amount, if any, by which the amount determined under paragraph (a) exceeds the amount determined under paragraph (b) is the taxpayer’s “restricted farm loss’’ for the year.

The significant word introduced in the section, in my opinion, is '‘businesses”. When we talk about a profit or a reasonable expectation of profit, we are talking about a business. As Dickson, J said in the Moldowan case (supra) at page 313 [5215]: ‘‘Although originally disputed, it is now accepted that in order to have a ‘source of income’ the taxpayer must have a profit or a reasonable expectation of profit. Source of income, thus, is an equivalent term to business.” This, I trust, will explain my reasoning below. There are a couple of relevant decisions that must be mentioned.

Firstly, I want to refer to Holley v MNR, [1973] CTC 539; 73 DTC 5417. I am in complete accord with Sweet, DJ, who said at page 542 [5419] as follows:

I think that section 13 and subparagraph 139(1)(ae)(i) can and must be read together and in doing so regard is to be had to the definition of “farming loss” in subsection (3) of section 13, a subsection which was not specifically mentioned in the reasons in Matthews. [Matthews v MNR, [1972] CTC 2643; 72 DTC 1526.] It seems to me that that definition with its association of “farming loss” with “business” is a clear indication that to obtain the benefit of any farming loss pursuant to subsection 13(1) the farming done must be in the nature of a business and not a hobby which is not carried on for profit or which is without a reasonable expectation of profit.

When section 13 is taken as a whole, including all its subsections, it is my opinion that it is clear that when Parliament enacted the section its intention was to deal with situations where the farming had commercial characteristics. In any event, as I see it, that is the result of the wording and “farming loss” has a commercial connotation and a loss from hobby farming which is not carried on for. profit or which is without a reasonable expectation of profit is not included.

An undertaking must be carried on for profit or with a reasonable expectation of profit for it to come within the generally held concept of the commercial. Profit, or the reasonable expectation of it is inseparable from the basics of business. This, I think, is recognized by the wording of Subparagraph 139(1 )(ae)(i).

Furthermore, and in any event, because of the obvious purpose and concept of the Income Tax Act in its entirety it would require clear and unequivocal language for an interpretation which would permit a deduction of losses. occasioned by farming, not as a business, but merely as a pleasurable activity per se and without a reasonable expectation of profit. In my view section 13 certainly does not contain such language.

Secondly, I share the views—as other judges have done—of Cattanach, J in CBA Engineering Limited v MNR, [1971] CTC 504: 71 DTC 5282, when he said at page 510 [5286] the following:

Section 13 contemplates three possibilities:

(1) the farming losses of a full-time farmer where farming is the chief source of income (or a combination of farming and something else) in which event all losses are deductible,

(2) farming losses incurred in a farming operation with the expectation of profit or the eventual expectation of profit but where farming is not the taxpayer’s chief source of income, nor part of it, in which event the deductibility of losses is limited by Section 13, and

(3) an operation which is in the nature of a hobby, pastime or way of life, the losses from which are not deductible being personal or living expenses.

Dickson, J in Moldowan v The Queen (supra) at page 315 [5216] puts it this way:

In my opinion, the Income Tax Act as a whole envisages three classes of farmers:

(1) A taxpayer for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine. Such a taxpayer, who looks to farming for his livelihood, is free of the limitation of subsection 13(1) in those years in which he sustains a farming loss.

(2) The taxpayer who does not look to farming, or to farming and some subordinate source of income, for his livelihood but carried on farming as a sideline business. Such a taxpayer is entitled to the deductions spelled out in subsection 13(1) in respect of farming losses.*

(3) The taxpayer who does not look to farming, or to farming and some Subordinate source of income, for his livelihood and who carried on some farming activities as a hobby. The losses sustained by such a taxpayer on his non-business farming are not deductible in any amount.* [1]

Finally, l adopt for the purposes of this case another excerpt from the aforementioned decision by Dickson, J. At page 313 [5215] of Moldowan v The Queen (supra) he had the following to say:

In my view, whether a taxpayer has a reasonable expectation of profit is an objective determination to be made from all the facts. The following criteria should be considered: the profit and loss experience in past years, the taxpayer’s training, the taxpayer’s intended course of action, the capability of the venture as capitalized to show a profit after charging capital cost allowance. The list is not intended to be exhaustive. The factors will differ with the nature and extent of the undertaking.

With the aforesaid authorities before me and keeping in mind the criteria set forth by Dickson, J, I proceed to determine whether the plaintiff herein has proper grounds for appeal. It goes without saying that the work he performed during the five taxation years in question— apart from his duties at the university—did constitute farming according to the Act. Moreover, it also is undoubted that his situation does not fit into the first of the three farming categories set forth by Cattanach, J in the CBA Engineering case (supra) and by Dickson, J in the Moldowan case (supra). Did his farming activities fit into the second or third of these categories?

In order for this taxpayer to obtain the benefit of any farming losses which he sustained, that is to say, for him to fall into the second of the categories envisaged by subsection 13(1), he must needs have carried on his farming venture as a business. To put it differently, in order for his farming to have constituted a “source of income” against which (in accordance with the spirit of the Income Tax Act) he would be entitled to offset legitimate expenditures incurred in producing the income, he must have had—if not a profit—at least the reasonable expectation of profit.

I have carefully perused the evidence given by the plaintiff and have minutely examined the several exhibits filed on the plaintiff’s behalf. Try as I might, I could not find in the evidence or in the documents or in the duties which he performed on his land and on the land of his neighbours or in his expressions of faith for the future anything which would lead me to conclude that the plaintiff carried on a business on his farm. Assuredly, he made no profit. Unlike, for example, the situation in the McLaws case (supra) where Addy, J found that “having regard to the total income and expenditure of the partnership, the losses were not unreasonable”, in the case at bar, the income in 1969 was nil and very little in each of the four subsequent taxation years and the loss each year was heavy. Looking at all the. figures presented by the plaintiff himself as he fully described each of the five taxation years in question, and viewing everything objectively, I could not find any reasonable expectation of profit. It is true that the plaintiff’s enthusiasm was never dimmed and undoubtedly he felt that his efforts would some day in the future cause his expectation of profit to be realized. A realistic appraisal of all the evidence and exhibits did not enable me to share his optimism in the slightest.

I should make it clear that in using the terms “income”, “loss” and “profit”, I am merely quoting the plaintiff. As indicated earlier, I am not satisfied that Mr Gillis was carrying on any business relative to his farm or that his activities therein over the five years in question were commercial in nature. That he made some isolated sales of potatoes and grain and some hay did not turn what I find as a fact to be a hobby undertaking into a business one. Accordingly, his farming falls into the third of the aforesaid categories.

I hold that this taxpayer, in so far as the taxation years 1969, 1970 and 1971 were concerned, was not entitled to make any deductions in regard to his farming by virtue of subsection 13(1) of the Income Tax Act as it was previously enacted. I also hold that in so far as the taxation years 1972 and 1973 were concerned, he was not entitled to make any deductions in regard to his farming by virtue of subsection 31(1) of the Act as presently enacted. I am satisfied and find as a fact that the alleged farm losses for the five years in question as claimed by him and as set forth at the commencement of these reasons were expenses which were not made or incurred by him for the purpose of producing income from a business. I find that they were his own personal and living expenses including those of the property maintained for his use and that of his wife and children.

I may add that I had ample opportunity to observe the demeanour of the plaintiff during the course of his lengthy examination and cross- examination. I was left with the distinct impression that Mr Gillis did not really consider his farming venture as a business during these five years. It is not without some significance that neither he nor his wife who assisted him saw fit to maintain a separate set of books for the undertaking and which surely would have been done had the venture been treated as a side business to his university duties. He may very well have considered himself entitled to the deductions because of what Dickson, J called the “awkwardly worded and intractable” section 13. That the farming in question had to constitute a business was not as clear under subsection 13(1) as it now is, in my view, under subsection 31(1).

The appeal is dismissed with costs.