Bonner,
T.C.J.:—This
is
an
appeal
from
an
assessment
of
income
tax
for
the
appellant's
1987
taxation
year.
It
was
the
appellant's
position
that
his
chief
source
of
income
for
that
year
and
the
four
immediately
preceding
years
was
farming
and
that
he
was
therefore
entitled
under
the
provisions
of
section
119
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
to
average
his
income
over
the
five-year
period.
The
position
of
the
respondent
was
that
in
the
four
years
immediately
preceding
1987,
the
year
of
averaging,
the
appellant
had
no
source
of
income
and
thus
did
not
satisfy
the
conditions
laid
down
in
section
119.
The
respondent
took
this
position
because
the
appellant,
a
member
of
a
Hutterian
Brethren
Congregation,
was,
during
the
four-year
period,
less
than
18
years
of
age
and
therefore
not
an
adult
as
defined
in
paragraph
143(4)(a)
of
the
Act
and
in
consequence
not
a
person
to
whom
any
amount
could
be
allocated
pursuant
to
subsection
143(2)
of
the
Act.
It
is
not
necessary
to
an
understanding
of
this
case
to
set
forth
subsection
119(1)
of
the
Act
in
full.
It
is
sufficient
to
note
here
that
the
right
to
average,
that
is
to
say,
the
right
to
have
tax
payable
for
the
year
of
averaging
calculated
in
accordance
with
the
rules
laid
down
in
section
119
is
available
only
in
cases
[w]here
an
individual's
chief
source
of
income
has
been
farming
or
fishing
for
a
taxation
year.
.
.
and
the
four
immediately
preceding
years
.
.
.”.
Section
143
of
the
Act
creates
a
statutory
framework
for
the
taxation
of
organizations
such
as
the
congregation
to
which
the
appellant
belonged
and
of
individual
members
of
such
congregations.
That
provision
reads
in
part:
143.
(1)
Where
a
congregation
(a)
the
members
of
which
live
and
work
together,
(b)
that
does
not
permit
any
of
its
members
to
own
any
property
in
his
own
right,
and
(c)
that
requires
that
its
members
devote
their
working
lives
to
the
activities
of
the
congregation
carries
on
one
or
more
businesses
or
has
the
effective
management
or
control
of
one
or
more
corporations,
trusts
or
other
persons
(such
corporations,
trusts
and
other
persons
hereinafter
in
this
section
collectively
referred
to
as
"business
agencies”)
that
carry
on
one
or
more
businesses
for
purposes
that
include
supporting
or
sustaining
its
members
or
the
members
of
any
other
congregation,
an
inter
vivos
trust
shall
be
deemed
to
have
been
in
existence
on
December
31,
1976
and
continuously
thereafter
and
the
following
rules
apply:
(d)
the
property
of
the
congregation
and
the
property
of
all
business
agencies
of
the
congregation
shall
be
deemed
to
be
the
property
of
the
inter
vivos
trust;
(e)
where
the
congregation
is
a
corporation,
the
corporation
shall
be
deemed
to
be
the
trustee
having
control
of
the
trust
property;
(g)
the
congregation
and
all
business
agencies
of
the
congregation
shall
be
deemed
to
act
and
have
always
acted
as
agents
for
the
inter
vivos
trust
in
all
matters
relating
to
their
business
and
other
activities;
(h)
the
members
of
the
congregation
shall
be
deemed
to
be
the
beneficiaries
under
the
trust;
(i)
tax
under
this
Part
is
payable
by
the
trust
on
its
taxable
income
for
each
taxation
year;
and
(j)
in
computing
the
income
of
the
trust
for
any
taxation
year,
no
deduction
may
be
made
in
respect
of
salaries,
wages
or
benefits
of
any
kind
whatever,
paid
to
the
members
of
the
congregation.
(2)
Where
the
inter
vivos
trust
referred
to
in
subsection
(1)
in
respect
of
a
congregation
so
elects
in
respect
of
a
taxation
year,
the
amount
determined
under
paragraph
(a)
for
that
taxation
year
shall
be
deemed
to
have
been
payable
by
the
trust
in
the
year
to
the
beneficiaries
thereunder
in
accordance
with
the
following
rules:
(a)
determine
the
amount
that
would
be
the
taxable
income
of
the
trust
for
the
year
if
no
deductions
were
made
in
respect
of
expenses
incurred
for
the
support,
maintenance
and
satisfaction
of
the
personal
needs
of
its
members,
and
if
no
deductions
were
made
under
section
110.1,
and
110.2,
(b)
determine
the
amount
that
is
the
quotient
obtained
when
the
amount
so
determined
is
divided
by
1
1/4
times
the
number
of
adults
who
are
members
of
the
congregation
at
the
end
of
the
year,
(c)
allocate
to
each
family
in
the
congregation
at
the
end
of
the
year
the
amount
equal
to
the
product
obtained
when
the
amount
determined
under
paragraph
(b)
is
multiplied
by
the
number
of
adults
in
the
family
at
the
end
of
the
year,
and
(d)
allocate
among
the
families
in
the
congregation
at
the
end
of
the
year
in
such
manner
as
the
congregation
determines
the
amount
by
which
the
amount
determined
under
paragraph
(a)
exceeds
the
aggregate
or
amounts
allocated
under
paragraph
(c)
or,
if
such
an
allocation
is
not
made
and
specified
in
the
election
under
this
subsection
in
respect
of
the
year,
there
shall
be
allocated
to
each
of
the
families
in
the
congregation
at
the
end
of
the
year
the
amount
equal
to
the
proportion
of
the
excess
that
the
number
of
adults
in
the
family
at
that
time
is
of
the
number
of
adults
in
all
of
the
families
in
the
congregation
at
that
time,
and
the
aggregate
of
amounts
so
allocated
to
a
family
shall
be
deemed
to
be
payable
in
the
year
to,
and
to
be
received
in
the
year
by,
the
adult
member
of
the
family
who
is
specified
in
the
election
under
this
subsection
in
respect
of
the
year
and
that
member
of
the
family
shall
be
deemed
to
have
supported
each
of
the
other
members
of
the
family
during
that
taxation
year
and
the
other
members
of
the
family
shall
be
deemed
to
have
been
wholly
dependent
on
that
member
for
support
during
that
taxation
year.
It
will
be
noted
that
taxable
income
of
the
trust
which
has
been
allocated
to
a
family
is
deemed
to
be
payable
not
to
just
any
member
of
the
family
but
only
to
"the
adult
member
of
the
family
who
is
specified
in
the
election”.
The
appellant
attained
the
age
of
18
years
on
January
7,
1987.
He
was
not
married
prior
to
that
time.
Paragraphs
(a)
and
(e)
of
subsection
143(1)
define
the
words
"adult"
and
"family"
as
follows:
143.
(4)
For
the
purposes
of
this
section,
(a)
“adult”
means
an
individual
who,
before
the
time
at
which
the
term
is
applied,
has
attained
the
age
of
eighteen
years
or
is
married;
(c)
“family”
means,
(i)
in
the
case
of
an
unmarried
adult,
that
person
and
his
unmarried
children
who
are
not
adults,
and
(ii)
in
the
case
of
a
married
adult,
that
person
and
his
spouse
and
the
unmarried
children
of
either
or
both
of
them
who
are
not
adults
but
does
not
include
an
individual
who
is
included
in
any
other
family
or
who
is
not
a
member
of
the
congregation
in
which
the
family
is
included.
It
follows
that
before
the
1987
taxation
year
it
was
not
possible
to
allocate
to
the
appellant
any
part
of
the
taxable
income
of
his
congregation.
The
appellants
congregation
was
incorporated
under
the
name
New
Rockport
Hutterian
Brethren.
Throughout
the
relevant
period
the
congregation
owned
and
operated
a
substantial
mixed
farming
operation.
It
raised
and
sold
grain,
hay,
cattle,
hogs,
sheep,
poultry,
eggs
and
garden
produce.
The
members
of
the
congregation
lived
and
worked
on
the
farm.
Under
section
4
of
the
articles
of
association
of
the
congregation,
the
members
were
and
are
required
to
transfer
to
the
congregation
all
property
which
they
may
own
or
to
which
they
may
become
entitled.
The
articles
provide
as
well
that:
5.04
Each
member
shall
give
and
devote
all
of
his
time,
labour,
services,
earnings
and
energies
to
the
Company,
and
the
purposes
for
which
it
is
formed,
without
compensation
or
reward
of
any
kind
whatsoever
other
than
as
hereinafter
expressed.
5.05
Members,
and
persons
in
their
immediate
family
who
live
with
them
and
who
are
not
members,
shall
be
housed,
supported,
maintained,
instructed
and
educated
by
the
Company
according
to
its
rules,
.
.
.
persons
in
a
member's
immediate
family
who
live
with
him
and
who
are
not
members
shall
give
and
devote
all
of
their
time,
labour,
services,
earnings
and
energies
to
the
Company
and
the
purposes
for
which
it
is
formed
without
compensation
of
any
kind
whatsoever.
The
articles
also
purport
to
negate
the
existence
between
the
corporation
and
its
members
of
relationships
such
as
joint
ventures,
master
and
servant
and
partnerships.
The
children
of
parents
who
live
on
the
farm
are
taught
from
an
early
age
that
they
must
assist
their
parents
with
farm
and
domestic
chores.
In
the
beginning,
their
tasks
involve
light
work
such
as
gardening.
As
they
grow
older
more
arduous
tasks
are
assigned.
When
the
children
are
about
six
years
old
they
enter
public
school.
It
is
held
on
the
farm.
The
daily
public
school
classes
are
preceded
by
a
period
of
instruction
in
German
and
in
religion.
During
the
period
between
classes
and
the
dinner
hour,
the
children
are
expected
to
perform
farm
and
domestic
chores.
The
appellant
left
school
at
age
fifteen
and
turned
to
full-time
farm
work.
He
then
commenced
field
work
involving
learning
about
the
operation
and
repair
of
all
farm
implements
used
in
cultivation,
seeding,
fertilization,
spraying
and
harvesting.
In
addition,
he
worked
at
other
aspects
of
the
farming
operation
including
cattle,
hog,
sheep
and
poultry
production.
The
appellant
filed
a
return
of
income
for
the
1987
taxation
year.
In
that
return
he
included
amounts
allocated
to
him
under
subsection
143(2)
of
the
Act.
In
addition,
returns
of
income
for
the
four
preceding
taxation
years
were
filed
each
reporting
nil
income.
They
were
accompanied
by
a
form
of
election
to
average.
Counsel
for
the
appellant
submitted
that
each
child
in
the
colony
is,
by
virtue
of
paragraph
143(1
)(h),
a
beneficiary
of
the
trust
deemed
to
exist
by
subsection
143(1)
notwithstanding
that
no
income
was
allocable
to
such
child
under
subsection
(2).
Farming,
it
was
said,
was
the
chief
source
and
in
fact
the
only
source
of
income
of
such
children.
No
competing
source
existed.Counsel
referred
to
dictionary
definitions
of
the
word
"source"
and
to
decisions
in
which
the
meaning
of
the
term
“source
of
income"
was
considered.
He
pointed
out
that
a
source
of
income
may
exist
in
a
year
despite
the
fact
that
such
source
generates
no
income
during
the
year.
In
this
regard,
he
referred
to
Dorfmann
v.
M.N.R.,
[1972]
C.T.C.
151;
72
D.T.C.
6131.
He
referred
as
well
to
Stringham
v.
M.N.R.
(1954),
9
Tax
A.B.C.
407;
54
D.T.C.
45
at
411
(D.T.C.
48)
and
in
particular
to
the
following
statement:
"By
looking
at
the
whole
period
of
averaging
one
obtains
a
truer
perspective
and
a
clearer
picture
of
what
a
taxpayer's
chief
source
of
income
was
in
that
particular
period."
He
pointed
out
that
in
each
of
the
four
years
prior
to
1987
the
only
source
of
income
was
farming
and
in
this
regard
he
relied
on
the
evidence
that
the
appellant,
from
his
fifteenth
birthday
onward,
spent
his
full
time
at
farming.
He
pointed
as
well
to
evidence
that
a
good
portion
of
the
appellant's
time
during
his
fourteenth
year
was
devoted
to
farming
operations.
Counsel
referred
to
the
decision
of
the
Supreme
Court
of
Canada
in
Moldowan
v.
M.N.R.,
[1978]
1
S.C.R.
480;
[1977]
C.T.C.
310;
77
D.T.C.
5213
and
in
particular
the
comments
of
Dickson,
J.
as
to
the
significance
of
the
taxpayer's
"ordinary
mode
and
habit
of
work".
Finally,
counsel
submitted
that
the
source
of
income
of
the
appellant
was
not
a
provision
of
the
Income
Tax
Act
but
rather
was
the
farming
operation
conducted
by
the
congregation
of
which
the
appellant
was
an
integral
part.
Counsel
referred
as
well
to
the
decision
of
the
Federal
Court
of
Canada
in
The
Queen
v.
Kuhl,
[1973]
C.T.C.
846;
74
D.T.C.
6024.
In
light
of
the
submission
that
section
143
cannot
be
regarded
as
a
source
of
income
it
may
be
helpful
to
explore
the
position
as
it
would
have
been
had
section
143
not
been
enacted.
In
my
view,
in
such
a
case,
the
farming
business
carried
on
by
the
corporation
could
properly
be
regarded
as
a
source
of
income
of
and
only
of
that
corporation.
The
applicable
principle
was
stated
by
Jackett,
P.
in
Lagacé
v.
M.N.R.,
[1968]
C.T.C.
98;
68
D.T.C.
5143
at
108
(D.T.C.
5149)
as
follows:
.
.
.
for
purposes
of
Part
I
of
the
Income
Tax
Act,
profits
from
a
business
are
income
of
the
person
who
carries
on
the
business
and
are
not,
as
such,
income
of
a
third
person
into
whose
hands
they
may
come.
This
to
me
is
the
obvious
import
of
sections
3
and
4
of
the
Income
Tax
Act
and
is
in
accord
with
my
understanding
of
the
relevant
judicial
decisions.
Wipf
v.
The
Queen,
[1975]
C.T.C.
79;
75
D.T.C.
5034;
affd
[1976]
C.T.C.
57;
76
D.T.C.
6059,
was
a
case
dealing
with
the
taxability
of
individual
members
of
Hutterian
congregations
on
profits
earned
from
farming
businesses
carried
on
both
by
incorporated
and
unincorporated
congregations.
The
case
arose
prior
to
the
enactment
of
section
143
in
its
present
form.
At
pages
80-81
(D.T.C.
5035)
of
the
report
Thurlow,
J.
stated:
In
my
opinion
neither
the
farming
operations
nor
the
profits
therefrom
are,
in
any
relevant
sense,
those
of
the
individual
members
of
the
communities.
The
operations
in
each
community
are
those
of
the
trustees
or
the
corporation,
as
the
case
may
be,
and
for
their
account.
The
profits,
as
well,
of
such
operations
are
theirs
for
the
purposes
for
which
they
have
been
established.
The
individual
members
are
not
entitled
to
such
profits
at
any
stage
either
in
individual
shares
or
collectively.
When
becoming
members
they
engage
to
devote
their
time
and
effort
to
the
operation
without
wages
or
reward
and
without
entitlement
to
any
form
of
return
save
the
subsistence
to
be
provided
by
the
trustees
or
corporation
for
them
and
their
families.
Such
subsistence,
as
I
see
it,
is
all
that
the
individual
members
are
ever
entitled
to
under
the
arrangements
and,
in
my
opinion,
its
value
represents
the
full
extent
of
the
individual
member's
income
for
the
purposes
of
the
Income
Tax
Act.
[Emphasis
added.]
Nothing
said
in
The
Queen
v.
Kuhl,
supra,
can
detract
from
the
authority
of
this
statement.
For
the
foregoing
reasons
it
is
clear
that
farming
cannot
be
regarded
as
the
chief
source
of
income
of
the
appellant
during
the
four
years
prior
to
1987
unless
such
a
conclusion
is
warranted
by
section
143
of
the
Act.
The
deeming
provisions
of
section
143
and
of
subsection
119(7)
alter
reality.
The
corporate
congregation
is
deemed
to
be
a
trustee
acting
as
agent
for
the
trust
in
all
matters
relating
to
its
business.
The
members
of
the
congregation
are
deemed
to
be
the
beneficiaries
of
the
trust.
Subsection
119(7)
provides
in
part:
119.
(7)
For
the
purposes
of
subsection
(1
),
(b)
income
from
a
trust
or
estate
to
the
extent
that
it
can
reasonably
be
regarded
as
having
been
derived
from
farming
or
fishing,
shall
be
deemed
to
be
income
from
farming
or
fishing.
It
was
admitted
that
farming
was
the
chief
source
of
income
of
the
congregation.
It
follows
that
the
business
income
of
the
beneficiaries
of
the
deemed
trust
must
be
regarded
as
having
been
derived
from
farming.
Paragraph
104(13)(b)
of
the
Act
provides:
104.
(13)
Such
part
of
the
amount
that
would
be
the
income
of
a
trust
for
a
taxation
year
if
no
deduction
were
made
under
subsection
(6),
(12)
or
20(16)
or
under
regulations
made
under
paragraph
20(1)(a)
(b)
as
was
payable
in
the
year
to
a
beneficiary
shall
.
.
.
be
included
in
computing
the
income
of
the
person
to
whom
it
so
became
payable
whether
or
not
it
was
paid
to
him
in
that
year
and
shall
not
be
included
in
computing
his
income
for
a
subsequent
year
in
which
it
was
paid.
Since
nothing
is
deemed
to
be
payable
under
subsection
143(2)
except
to
adult
members
of
the
congregation,
and
since
throughout
the
1983
to
1986
taxation
years
the
appellant
was
an
infant,
no
part
of
the
income
of
the
congregation
could
be
allocated
to
and
deemed
to
be
part
of
the
appellant's
income.
In
summary,
during
the
taxation
years
prior
to
1987
farming
was
not
a
source
of
income
of
the
appellant
either
in
reality
under
the
arrangements
governing
relationships
between
the
congregation
and
its
members
or
in
the
surreal
world
created
by
the
deeming
provisions
of
the
Income
Tax
Act.
It
follows
that
the
claim
to
average
under
section
119
must
be
rejected.
For
the
foregoing
reasons
the
appeal
will
be
dismissed.
Appeal
dismissed.
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