Kempo,
T.C.C.J.:—These
appeals
concern
the
appellant's
1980,
1981
and
1982
taxation
years
and
are
from
the
respondent's
application
of
subsection
31(1)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
"Act")
with
respect
to
its
farming
business
which
commenced
in
1980
and
which
is
still
ongoing.
Counsel
for
the
Minister
has
conceded
that
the
farming
venture
as
structured
during
the
subject
years
encompassed
a
reasonable
expectation
of
it
being
profitable
within
a
reasonable
period
of
time.
However,
the
test
before
me,
succinctly
put,
was
to
examine
the
reasonableness
of
the
farm's
capability
in
the
subject
years
to
produce
within
a
reasonable
time
a
profit
which
would
be
significant
in
relation
to
the
profitability
of
the
appellant's
then
established
and
ongoing
trucking
business.
If
such
is
found
not
to
be
significant
in
its
relative
sense,
then
the
farming
business
would
be
categorized
as
a
sideline
source
rather
than
as
the
appellant's
chief
source
of
income,
and
the
loss
restrictions
as
assessed
would
not
be
disturbed.
I
have
stated
the
issue
in
these
terms
as
being
expressive
of
the
core
position
taken
on
this
appeal
by
the
appellant
and
in
recognition
of
counsel's
urging
that
this
case
has
several
factors
which
ought
to
distinguish
it
from
other
taxpayers
who
have
been
unsuccessful
in
this
area.
The
following
matters
were
emphasized.
The
1980
to
1990
ten-year
period
examined
was
not
one
of
unbroken
and
continual
losses.
When
expressed
on
an
accrual
accounting
basis,
the
farm
had
produced
a
net
income
in
the
years
of
1983,
1984,
1986,
1987,
1988
and
1990
and
that
particularly
in
1983
the
farming
source
had
produced
a
net
profit
of
$5,814
while
the
trucking
source
showed
a
loss
of
$15,586.
The
cash/accrual
statement
extracted
from
Tab
8
of
the
appellant's
Book
of
Documents
was
illustrative
of
this
position.
I
have
included
thereon
the
net
profit
(loss)
experience
of
the
trucking
business
for
each
year
for
comparative
purposes.
It
appears
thusly:
Farming
on
a
cash
and
accrual
basis
($23,491.93)
($48,012.70)
($42,157.89)
($
2,760.20)
$14,479.57
($11,566.93)
($40,012.70)
($42,157.89)
($
5,814.80)
$14,479.57
|
1985
|
1986
|
1987
|
1988
|
1989
|
1990
|
($1,763.23)
($11,991.50)
$
2,341.84
$64,626.19
($87.50)
$11,044.43
($1,913.23)
$20,683.50
$13,195.14
$41,047.69
($87.50)
$11,044.43
|
Trucking
|
|
|
1980
|
1981
|
1982
|
1983
|
1984
|
$67,037.00
$97,156.00
$113,942.00
($15,586.00)
$61,047.00
|
1985
|
1986
|
1987
|
1988
|
1989
|
1990
|
$152,276.00
$183,047.00
$178,794.00
$13,098.00
$89,363.00
$75,917.00
The
evidence
for
the
appellant
was
that
the
1980
to
1982
period
was
the
beginning
or
start-up
time,
and
that
a
liveable
income,
or
at
least
a
break-even
point
was
expected
from
the
cow/calf
operation
within
three
to
four
years
with
a
45
to
50
breeding
herd
handled
properly.
The
trucking
business
was
then
perceived
as
becoming
more
uncertain,
competitive
and
problematical,
and
another
income
source
for
the
company
was
to
be
tested
out.
The
appellants
president
and
shareholder,
Mr.
Conrad
Desjardins,
having
a
significant
interest
and
experience
in
cow/calf
farming
was
to
run
the
farm
with
the
help
of
his
wife
and
children.
The
trucking
operation,
at
all
times,
was
to
be
the
funding
source
for
the
farm,
both
in
its
capital
and
operational
phases.
Mr.
Desjardins
had
suffered
a
continuing
physical
disability
from
an
accident
in
the
late
1970s
which
effectively
had
limited
his
physical
activities
in
the
trucking
operation.
During
1983
a
strike,
followed
by
industry
related
turmoil,
caused
a
significant
downturn
in
the
appellant's
trucking
income
for
that
year.
Another
crisis
having
a
similar
impact
on
the
company's
trucking
fortunes
happened
again
in
1988.
The
large
farming
profit
in
1988
was
not
explained
at
trial,
as
neither
Mr.
Desjardins
nor
the
appellant's
accountant
were
able
to
recall
what
had
actually
happened.
The
evidence
was
that
some
60
breeding
stock
were
on
hand
during
the
1985
to
1987
period.
A
compelling
inference
arises
that
a
significant
portion
of
the
breeding
stock
was
sold
that
year
which
would
obviously
negate
the
farm's
ability
to
generate
operational
profits
on
an
increasing
basis
for
the
immediately
ensuing
years.
The
Court
has
no
doubt
that
Mr.
Desjardins
spent
close
to
100
per
cent
of
his
time
running
the
farm
operations
and
that
his
son,
having
merely
his
incidental
assistance,
ran
the
trucking
business.
Of
the
appellant's
eight
employees,
two
(i.e.,
Mr.
and
Mrs.
Desjardins)
ran
the
farm,
with
the
son
and
five
other
truckers
being
totally
involved
with
the
trucks.
It
is
appropriate
to
note
and
emphasize
here
that
the
appellant's
shareholders
were
Mr.
and
Mrs.
Desjardins
and
their
son,
and
that
the
farm
as
a
source
of
income
must
be
viewed
in
context
of
the
entirety
of
the
corporation's
operations.
That
the
farm's
performance
may
have
met
and
satisfied
Mr.
Desjardins'
hopes
and
expectations
is
not
necessarily
representative
or
corroborative
of
the
appellant's
business
judgments
with
respect
to
its
performance
and
place
within
its
undertakings
as
a
whole.
There
is
little
doubt
of
Mr.
Desjardins'
interest
in
and
love
of
the
farm
and
of
his
competency
in
running
it
as
he
had,
and
that
he
was
perfectly
satisfied
with
how
those
matters
were
developing.
It
is
a
fair
observation
to
record
here
that
the
success
of
both
businesses
was
in
the
main
attributable
to
the
long
and
hard
lifetime
labours
of
Mr.
Desjardins.
His
business
acumen
had
been
derived
from
hard
experience.
He
said
that
as
a
farmer
he
saw
no
need
to
get
involved
in
any
written
financial
projections
for
the
farm.
Thus,
the
Court
heard
testimony
which
did
not
reflect
the
appellant's
view,
as
expressed
through
its
directors,
of
its
whole
business
undertakings
and
how
each
venture
should
fit
within
its
own
scheme
of
things.
Rather,
it
was
enlightened
almost
solely
by
the
views
and
opinions
of
Mr.
Desjardins
which
were
heavily
subjective
in
nature.
The
nearest
thing
the
Court
had
with
respect
to
any
corporate
expression
of
plans
or
intent
appeared
in
a
letter
to
Revenue
Canada,
signed
by
both
Mr.
Desjardins
and
his
son
back
in
1983,
wherein
a
profit
of
$17,600
was
said
to
be
projected
for
1986
along
with
a
plan
that
at
that
time
the
trucking
business
may
be
phased
out
to
the
son
via
a
new
company
with
the
farm
then
providing
the
bulk
of
the
appellant's
income.
Neither
happened.
Mr.
Desjardins
said
he
had
not
really
read
that
letter
and
that,
while
he
had
signed
it,
those
representations
were
not
correct.
The
Court
is
unable
to
form
the
opinion,
based
on
a
balance
of
probabilities,
that
the
appellant’s
main
preoccupation
was
with
respect
to
the
farming
business.
While
the
appellant
could,
and
did,
make
money
from
that
source,
it
has
not
carried
the
burden
of
establishing
that
farming
was
its
chief
source
of
income
as
that
expression
has
been
jurisprudentially
interpreted
in
recent
times
by
the
Federal
Court
of
Canada
at
both
the
trial
and
appellate
levels.
Further,
it
has
been
authoritatively
established
that
one
does
not
simply
add
the
two
ventures
together
to
satisfy
the
combination
aspect
of
the
fiscal
provision.
On
my
analysis
and
in
my
opinion,
while
the
trucking
business
of
the
appellant
may
have
had
its
own
problems
and
difficulties,
no
factual
information
has
been
advanced
supportive
of
a
conclusion
that
it
was
being
run
and
managed
as
a
sideline
business,
or
that
it
was
being
maintained
and
enhanced
primarily
to
keep
the
farm
not
only
running,
but
also
expanding
according
to
a
plan
to
become
the
appellant's
chief
source
of
business.
Indeed,
except
for
1983,
it
had
funded
and
carried
the
farm's
operational
shortfall
whether
expressed
on
a
cash
or
on
an
accrual
basis.
As
for
the
1988
experience,
the
trucking
industry
was
in
a
slump
as
shown
by
the
appellant's
drop
in
net
income
to
some
$13,000
from
the
previous
year's
$178,000.
It
may
be
reasonably
inferred
that
the
farm's
cattle
inventory
had
been
sold
to
support
the
trucking
venture
at
that
time.
Thus
the
farm's
inventory
base
was
apparently
sacrificed
to
the
priority
or
precedence
of
need
and
importance
of
the
trucking
operations
over
that
of
the
farm.
Counsel
has
submitted
that
both
the
1983
and
1988
incidents
were
good
examples
of
mutuality
of
support
and
preoccupation,
and
that
each
venture
had
supported
the
other
in
time
of
need.
That
may
be
true;
but
it
was
only
the
farm
that
was
subjected
to
any
form
of
real
compromise
and
not
the
other
way
around.
I
return
to
my
opening
point
with
respect
to
the
reasonable
expectation
of
significant
profitability
from
the
farm
when
compared
with
the
trucking
source.
The
farm
had
not
experienced
or
been
subjected
to
any
unusual
or
unpredictable
negative
situations.
Its
operational
expenses
were
within
the
norm
and
had
continued
in
this
vein
for
the
1980
to
1990
period.
The
60-cow
breeding
inventory
on
hand
during
1985
to
1987
did
not
produce
large
sums
of
money
except
when
sold
off
in
1988.
The
financial
schedule
reproduced
above
is
illuminative
of
the
whole
situation
and
is
to
be
considered
as
a
part
of
the
determinative
factors
to
be
employed.
That
more
capital
had
been
committed
to
trucking
than
to
farming
is
also
a
factor.
The
comments
of
Strayer,
J.
in
Mohl
v.
Canada,
[1989]
1
C.T.C.
425,
89
D.T.C.
5236
(F.C.T.D.)
at
pages
427-28
(D.T.C.
5238-39)
are
a
judicial
recognition
of
the
requirements
within
the
"chief
source”
context
that
the
reasonably
anticipated
profitability
of
the
farm
must
not
only
be
significant
in
relation
to
other
income
sources
but
that
it
is
to
be
relatively
substantial
thereto.
It
is
my
analysis
and
opinion
that
the
farming
source
profitability,
whether
on
a
cash
or
accrual
basis,
does
not
rate
as
being
either
significant
or
substantial
in
relation
to
the
trucking
source
profitability.
This
is
so
as
expressed
in
both
of
its
actual
and
potential
aspects.
The
plan
as
envisaged
in
1980
to
1982
(i.e.,
the
start-up
phase)
was
what
had
actually
transpired
during
the
whole
of
the
ten-year
period.
Or,
to
express
it
another
way,
the
factual
events
of
1983
to
1990
have
objectively
corroborated
what
was
likely
the
1980
to
1982
start-up
plan
which,
in
reality,
was
to
be
a
supportive
but
nonetheless
sideline
venture.
In
conclusion
then,
the
appeals
are
to
be
dismissed.
Both
counsel
are
to
be
commended
on
their
very
able
presentation
of
the
case.
Appeals
dismissed.
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