Strayer
J:—This
is
an
appeal
with
respect
to
the
disallowance
by
the
Minister
of
National
Revenue,
for
the
tax
years
1979
and
1980,
of
certain
operating
losses
incurred
by
the
plaintiff
with
respect
to
two
condominium
units
in
Florida.
An
appeal
to
the
Tax
Court
of
Canada
was
dismissed
and
the
taxpayer
then
appealed
to
this
Court.
After
the
hearing
of
this
appeal
I
found
some
ambiguities
in
the
materials
filed
by
agreement.
I
asked
counsel
for
further
clarification
which
has
now
been
provided.
The
plaintiff
has
abandoned
his
claim
to
deduct
certain
expenses
but,
given
the
disposition
which
I
am
making
of
this
matter
I
need
not
go
into
detail
with
respect
to
any
of
these
items.
The
condominium
units
in
question
are
numbers
1209
and
1210,
Baywood
Isles,
St.
Petersburg,
Florida.
They
are
in
one
of
six
large
buildings
in
a
condominium
complex.
•The
plaintiff
bought
unit
1210
in
July
1978
for
approximately
$42,000,
paying
for
it
by
cash
to
a
mortgage
of
about
$33,000.
This
unit
was
rented
out
for
four
months
in
each
of
1979
and
1980.
In
each
of
those
years
he
used
it
personally
for
about
three
weeks
and
made
no
use
of
it
otherwise.
Since
that
time,
and
since
his
retirement
he
has
been
spending
more
time
there,
on
the
average
about
three
months
per
year
in
periods
when
the
unit
can
not
be
rented
out.
In
August
1979
he
bought
unit
1209
for
about
$52,000,
paying
partly
in
cash
and
by
assuming
a
mortgage
of
about
$28,000.
It
was
rented
out
for
three
months
at
the
beginning
of
1980
but
was
never
otherwise
rented.
He
sold
it
in
November
1980
for
$61,500.
He
never
used
unit
1209
personally.
The
plaintiff
sought
to
deduct
his
losses
from
the
rental
of
unit
1210
during
1979
and
1980,
and
of
unit
1209
during
1980,
subtracting
an
appropriate
amount
from
total
expenses
for
that
portion
of
the
time
in
which
he
personally
occupied
unit
1210.
The
Minister
has
disallowed
these
deductions
rely
ing
on
paragraphs
18(1)(a)
and
18(1)(h),
and
section
248
of
the
Income
Tax
Act.
The
essential
question
appears
to
be
whether
these
losses
can
be
attributed
to
expenses
within
the
meaning
of
paragraph
18(1)(a)
of
the
Income
Tax
Act.
That
paragraph
provides,
to
the
general
rule
against
deductions
from
the
income
of
a
taxpayer
from
a
property,
an
exception
with
respect
to
an
outlay
or
expense
.
.
to
the
extent
that
it
was
made
or
incurred
by
the
taxpayer
for
the
purpose
of
gaining
or
producing
income
from
the
.
.
.
property;
This
has
been
taken
to
mean
that
for
an
expense
to
be
considered
to
have
been
made
for
the
purpose
of
gaining
income
from
a
property
there
must
be
some
reasonable
expectation
of
profit
from
that
property.
See,
e.g.,
Cecato
v.
M.N.R.,
[1984]
C.T.C.
2125;
84
D.T.C.
1110
(T.C.C.).
With
respect
to
the
meaning
of
reasonable
expectation
of
profit,
it
was
said
by
Dickson,
J.
in
Moldowan
v.
The
Queen,
[1977]
C.T.C.
310;
77
D.T.C.
5213
(S.C.C.)
at
313-14
(D.T.C.
485-86):
.
.
.
In
my
view,
whether
a
taxpayer
has
a
reasonable
expectation
of
profit
is
an
objective
determination
to
be
made
from
all
of
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
objective
nature
of
this
test
has
been
illustrated
in
many
cases
such
as
Lorentz
v.
M.N.R.,
[1985]
1
C.T.C.
2144;
85
D.T.C.
131
(T.C.C.);
Arbus
v.
M.N.R.,
[1980]
C.T.C.
2872;
80
D.T.C.
1744
(T.R.B.);
Paikin
v.
M.N.R.,
[1987]
1
C.T.C.
2041;
87
D.T.C.
6
(T.C.C.);
and
Saleem
v.
M.N.R.,
[1984]
C.T.C.
2660;
84
D.T.C.
1579
(T.C.C.).
The
onus
is
on
the
plaintiff
to
show
that
there
was
a
reasonable
expectation
of
profit
when
he
purchased
these
units.
In
my
view
he
has
failed
to
do
so.
To
the
extent
that
the
evidence
goes,
it
suggests
instead
that
he
could
not
normally
expect
to
rent
either
of
these
units
for
more
than
about
four
months
a
year.
With
respect
to
unit
1209,
his
experience
after
a
year
confirmed
to
him
that
there
was
no
reasonable
expectation
of
profit
and
he
sold
that
unit.
With
respect
to
unit
1210
his
experience
since
buying
it
has
also
indicated
that
it
was
not
a
profitable
investment.
As
noted
by
Dickson,
J.
in
the
Moldowan
case
quoted
above,
one
criterion
for
reasonable
expectation
of
profit
is
the
probability
of
"the
venture
as
capitalized
to
show
a
profit
after
charging
capital
cost
allowance”.
This
unit
has
never
shown
a
profit
as
so
defined,
and
so
far
in
only
two
years,
1982
and
1985,
has
there
even
been
sufficient
return
for
capital
cost
allowance
to
be
deducted.
Further,
while
the
taxpayer
in
testifying
expressed
his
opinion
that
there
had
been
an
unexpected
weakness
in
the
rental
market
due
to
recession,
the
weakening
of
the
Canadian
dollar,
and
gasoline
shortages
during
the
early
years
of
this
decade,
there
was
no
direct
evidence
as
to
sudden
changes
in
the
Florida
rental
market.
While
I
do
not
believe
a
taxpayer
has
to
prove
that
he
took
all
prudent
steps
to
satisfy
himself
that
a
profit
could
reasonably
be
expected
when
making
the
original
investment,
if
by
an
objective
test
such
an
expectation
would
have
been
reasonable,
such
evidence
would
strengthen
his
contention
that
he
had
good
reason
to
expect
a
profit
within
a
reasonable
time.
The
taxpayer
here
has
not
satisfied
me
that
he
took
such
steps.
The
expenses
in
question
therefore
do
not
qualify
as
having
been
made
for
gaining
or
producing
income
from
property.
This
is
true
in
respect
of
expenses
incurred
in
relation
to
both
units.
It
appears
to
me
that
nothing
turns
on
the
fact
that
the
plaintiff
made
no
personal
use
of
unit
1209,
although
the
fact
that
he
so
used
unit
1210
provides
additional
reasons
for
my
conclusion
based
on
paragraph
18(1)(h)
and
the
definition
of
“personal
or
living
expenses"
in
subsection
248(1)
of
the
Income
Tax
Act.
The
appeal
is
therefore
dismissed,
with
costs.
Appeal
dismissed.