Sobier,
T.C.C.}.
(orally):—
The
Court
is
now
prepared
to
give
reasons
for
judgment
in
Rockliffe
v.
The
Queen,
92-1941(IT).
The
appellant
appeals
from
the
assessments
by
the
Minister
of
National
Revenue
(“the
Minister”)
for
her
1987
and
1988
taxation
years
whereby
the
Minister
disallowed
in
the
1987
taxation
year
rental
losses
of
$6,769.92
with
respect
to
the
property
known
as
46
First
Street
in
Oakville,
Ontario,
and
in
the
1988
taxation
year
losses
of
$36,416.18
with
respect
to
the
46
First
Street
property,
as
well
as
a
cottage
property
in
Muskoka,
Ontario.
With
respect
to
the
46
First
Street
property,
the
evidence
is
that
no
rental
income
was
generated
in
1987.
The
first
income
of
$1,550
per
month
was
earned
in
1988
and
lasted
at
that
rate
until
September
1989.
There
was
no
rental
income
to
set
off
against
expenses
in
the
1987
taxation
year.
The
problem
became
compounded
for
46
First
Street
because
of
legal
difficulties
arising
with
respect
to
the
use
to
which
the
property
was
being
put.
Therefore,
after
September
1989,
no
income
has
been
generated
from
the
First
Street
property
even
though
extensive
renovations
have
been
undertaken.
Although
there
has
been
some
evidence
of
other
viable
real
estate
investments,
the
evidence
before
me
leads
me
to
conclude
that
the
costs
of
operating
46
First
Street
would
exceed
any
reasonable
rental
income.
The
renovations
were
financed
with
borrowed
funds
the
cost
of
which
had
to
be
met
as
well
as
the
original
financing
costs
when
the
property
was
purchased.
This
is
in
addition
to
any
other
costs
such
as
taxes,
et
cetera.
There
is
insufficient
evidence
before
me
that
there
was
a
reasonable
expectation
of
profit,
even
if
gross
rental
income
was
more
than
$48,000
as
assumed
by
the
appellant.
With
respect
to
the
cottage
property,
the
evidence
shows
that
to
date
rents
have
been
unable
to
cover
expenses.
As
a
matter
of
fact,
except
for
the
real
rental
income
of
$7,000
in
1989,
no
income
has
been
earned.
Although
there
may
be
success
in
some
endeavours,
each
investment
must
be
looked
at
individually
since
we
are
not
dealing
with
a
business
but
with
rental
income
from
individual
properties.
In
addition,
the
fact
that
no
capital
cost
allowance
was
taken,
since
there
were
already
losses,
flies
against
the
reasons
for
judgment
of
Mr.
Justice
Dickson,
as
ne
then
was,
in
Moldowan
v.
The
Queen,
[1978]
1
S.C.R.
480,
[1977]
C.T.C.
310,
77
D.T.C.
5313,
a
decision
of
the
Supreme
Court
of
Canada,
whereby
he
stated
that
in
order
to
have
a
reasonable
expectation
of
profit,
one
of
the
criteria
to
be
considered
is
that
the
venture
must
be
such
that
as
capitalized
it
must
show
a
profit
after
charging
capital
cost
allowance.
Here
there
is
no
doubt
that
if
capital
cost
allowance
was
charged
the
losses
would
have
been
greater.
For
the
above
reasons,
the
appeals
are
dismissed.
Thank
you.
Appeals
dismissed.
Email this Content