Balanko v. MNR, 88 DTC 6228, [1988] 1 CTC 317 (FCTD)

Collier, J. [Orally]:—This is an appeal from a decision of Mr. M.J. Bonner, then a member of the Tax Review Board. The Board found in favour of the taxpayer, the defendant here. The Crown now appeals to this Court.

The Minister of National Revenue had added certain amounts into the defendant's income as follows: 1974, $2,485.35, 1975, $5,796.38, 1976, $15,741.19. Those are utlimate figures arrived at after net-worth audits and statements.

The defendant admitted before the Board, and in this Court, the amounts came from gambling, mostly card games.

The Minister contended the defendant was in the business of gambling and assessed accordingly. The issue here, as before the Board, was whether the taxpayer, in the years in question, carried on a business of gambling.

The taxpayer testified before the Board. In this Court, a transcript of his evidence was tendered as an exhibit. He agreed his evidence was the same now as then. He gave, as well, some additional explanatory viva voce testimony. He was cross-examined.

For the Minister, a former Staff Sergeant of the R.C.M.P., and an officer of Revenue Canada gave evidence in this Court. The record indicates they did not testify at the Tax Review Board. That evidence advanced the Minister’s contention very little. Mr. Chalmers, for the appellant, seemed, I thought, to feel some blame for that. I see no fault. Without going into detail, the difficulty was, to my mind, with the evidence itself. I suspect a good deal of it had to be based on hearsay.

The Board member found in favour of the taxpayer on the key issue. I am not bound by the member's finding. The proceeding here is in the nature of a new trial, not an appeal in the usual sense. Nevertheless, on the evidence before me, I have come to the same conclusion as Mr. Bonner.

There is no doubt the defendant was, and apparently still is an inveterate gambler. That does not mean he was in the business of gambling.

In 1974, he played cards mainly at the Army and Navy Club in Edmonton. He did this two or three times a week, but not necessarily every week. During that year and in 1975 and 1976, he also made bets on sports games and at the horse races.

In 1975, he played cards, mostly for money, at a social club called the Seroza Club. The club activities were carried out in the basement of an office building. The basement was rented by the Golden Nugget Pool Room. The defendant had a financial interest in the latter operation. The pool room and the Seroza Social Club each shared a part of the basement. There were other social activities at the club, besides cards.

Starting in August 1975, the defendant worked at the pool room operation for $150 per week. This carried on into 1976.

In 1976, the defendant played, as well, in unlimited stake games, in the evenings, in the office of a Mr. Ventress. This was not a club. A group of people, including the defendant, were invited, from time to time, to play. Once again he played an average of up to three or four times a week. But some weeks he did not play at all.

The defendant admitted he borrowed money at times to support his habit, but not after 1974. He paid any such loans back from his winnings.

The defendant testified he played for entertainment and because he liked gambling. He denied he was in the business of gambling.

I found the defendant's evidence to be acceptable and credible. He gambled a lot. In the years in question, he ended up with a gain, mostly from games played at the office of Ventress in 1976.

I adopt, as my own, the conclusions of Mr. Bonner. I quote from his reasons reported in Balanko v. M.N.R., [1981] C.T.C. 2977 at 2977-78; 81 D.T.C. 887 at 888:

On the evidence, I would characterize the appellant's card-playing activities both at the Seroza Club and at the Ventress office as having been undertaken in the character of a customer as opposed to that of a proprietor of a gambling establishment. The appellant played, he said, because he enjoyed it.

The appellant's trips to the horse races do not appear to have been either regular or particularly frequent during the years in question.

The appellant's evidence as to wagers on sporting events was that he did not enjoy watching sports unless he had made a wager on the outcome. The bets made by the appellant appear to have varied in amount, but they appear to have been very substantial, at least in some cases, and certainly on a cumulative basis.

The appellant from time to time borrowed money to finance his gambling activities. Save for gambling, he had no substantial source of income, and no significant occupation apart from the previously mentioned employment at the Seroza Club, which was during the latter part of the three-year period.

There can be no doubt that the appellant freely indulged his inordinate passion for gambling, but I cannot conclude that in doing so he carried on a business. Counsel for the Minister stressed that the appellant gambled with a view to profit. However, it must be observed that such intention is one shared by all who gamble, and the presence of the intention to win or make money in gambling, which is there in all who gamble, does not lead to a conclusion that all who gamble, or even all those who gamble frequently, are carrying on a business.

Counsel for the Minister stressed that the appellant took risks, and that he borrowed money in order to carry on his gambling activities. While risk-taking is necessary in a business, it is management or minimization of risk which is the characteristic of business activity. For example, in the case of an insurer, he would have regard to the statistical incidents of losses in deciding whether to insure or how much to charge for coverage. There is a total absence of any evidence here which indicates the presence of any organized system for the minimization or management of risk. This lack of system distinguishes the appellant, an intemperate gambler, from the professional gambler. In this regard, reference should be made to the decision of Mr. Justice Rowlatt in Graham v. Green, [1925] 2 K.B. 37.

I have read all the legal authorities given to me by counsel. As has frequently been said, this type of case must depend primarily on its own particular facts. I refer specifically, however, to M.N.R. v. Morden, [1961] C.T.C. 484; 61 D.T.C. 1266. I find here, as Mr. Justice Cameron did there, this taxpayer's gambling activities in 1974, 1975 and 1976, did not amount to a calling, or the carrying on of a business.

The appeal is therefore dismissed.

Thank you all for your assistance. But I invite submissions as to costs.

Appeal dismissed.