Jean Gerard Monette v. Minister of National Revenue, [1988] 2 CTC 2089, 88 DTC 1467

Rip, T.C.J. [Translation]:—The appellant Jean-Gérard Monette is appealing from income tax assessments for the 1979 and 1980 taxation years in which the respondent Minister of National Revenue limited the losses for each year from a farming business to $5,000 within the meaning of subsection 31(1) of the Income Tax Act ("the Act”). The Minister said that the appellant's income for 1979 and 1980 does not come primarily from farming or from a combination of farming and some other source.

The two appeals were heard on common evidence.

Mr. Monette practices as a physician, specializing in psychiatry. He also operates a horticultural business under the name Tropinette Enr at Tingwick in the county of Arthabaska, Quebec.

In 1967 Mr. Monette received his BA at the College Ste-Marie and began his studies at the medical faculty of the University of Sherbrooke; he was at the same time enrolled in a master’s course in biochemistry at the same university. He never completed this course but in 1971 he received his medical degree. He interned at the Centre Hospitalier of the University of Sherbrooke and continued his studies in psychiatry at McMaster University in Hamilton. Mr. Monette testified that he wanted to get into a medical specialty that would allow him time for other activities, and psychiatry was an ideal specialty as emergencies are infrequent. In 1974 he began working as a psychiatrist under the supervision of the McMaster University Hospital. In 1976 he became a fellow and accepted a position with Homewood Sanitarium in Guelph, Ontario.

Homewood Sanitarium is a private profit-making hospital. The sanitarium has about 350 patients and 17 psychiatrists and nurses. Mr. Monette worked 70 hours for an annual salary of $45,000; he was also entitled to do outpatient work, from which he earned $10,000. He was the president of the Homewood Sanitarium medical council, working with the sanitarium medical director, and was a member of other medical committees. He explained that his duties in Guelph took up all his time.

Mr. Monette was not raised on a farm, but there were members of his family (his grandmother and an uncle) who had operated a farm and a garden in a vicinity of Ste-Thérése, Québec. He had visited these places quite often and expressed an interest in farming. While he was at Homewood Sanitarium the management of the St-Joseph Hospital in Hamilton offered him a position, but he declined. Mr. Monette testified that he also had employment opportunities in Montréal and Toronto. He found that it was better for a psychiatrist to work in a large centre because of the different types of patients and colleagues. He said that the income a psychiatrist could earn in Toronto in 1978 was greater than in Québec because at that time Ontario doctors could bill patients for an amount in excess of the government's medical insurance plan. He wanted to earn his living as a psychiatrist and as the owner of a horticultural business. The cost of land in the Niagara Peninsula or in Guelph was too high and he decided to return to Québec.

In January 1978 Mr. Monette took the first steps toward returning to Québec by contacting a former psychiatry professor at the University of Sherbrooke, Dr Gérard Perrault, who was attached to the Hôtel-Dieu d'Ar- thabaska. He obtained a position at that hospital as a psychiatrist and took up his duties on July 2, 1978. It was agreed he would work only 30 hours a week, in ten shifts of three hours each weekly. At the time the Québec government had set up a program designed to ensure a better distribution of psychiatrists throughout Québec. Psychiatrists were offered a premium to encourage them to settle in the Trois-Rivières region, where the Hôtel-Dieu d'Arthabaska was located, and this premium was $18,000. In order to qualify for this program, inter alia, a psychiatrist had to sign on for a period of two consecutive years in a hospital centre. Mr. Monette denied, first, that he had moved to the Hôtel-Dieu d'Arthabaska in response to the premium, and second, that he was aware of the government's program. He testified that he moved to the area because of his interest in operating a horticultural business.

The appellant is still a member of the Association des Psychiatres du Québec, the Fédération des Médecins Spécialistes du Québec and the Royal College of Physicians and Surgeons of Canada. He continues to practice his profession at the Hôtel-Dieu d'Arthabaska. The Hôtel-Dieu d'Arthabaska had two psychiatrists in 1978 but now has three. At the Hôtel- Dieu d'Arthabaska Mr. Monette was a member of only one committee, which met for one hour a week. From 1979 to 1986 he worked between 499 and 517 shifts at the hospital. In addition, he worked fifteen hours a week at an out-patient clinic. He read magazines and other medical publications at the hospital during his shifts. He accordingly estimated that he worked 45 to 50 hours a week as a psychiatrist during the years in question. In exceptional cases he saw patients at home. He said that apart from his weekly shifts, which were determined by his contract with the hospital, he was "master of his time and his activities". Mr. Monette was paid per shift by the Régie de I'Assurance-Maladie for shifts at the hospital; he was also paid for each time he attended the hospital's out-patient clinic. Mr. Monette said that he spent more time working at the Homewood Sanitarium than at the Hôtel-Dieu d'Arthabaska.

When he began his discussions with Dr Perrault, he mentioned to him that he wanted to work on a farm, to grow trees and develop a horticultural business. Dr Perrault referred him to people who could help him find suitable land for his project. On June 22, 1978 he bought a thirteen-acre farm at Tingwick, Québec for $72,000 and moved on June 30. He financed this purchase with a mortgage of $52,000 and a loan of $20,000 from the Bank of Nova Scotia.

At the time of the purchase this farm also had a house, a garage, a shed with a fully-equipped office and toilets and a small barn. The land itself was not being used: it had not been developed.

Mr. Monette was interested in operating a business selling shrubs. His efforts to operate his business began almost as soon as the land was bought. Mr. Monette corresponded with and met representatives of the Quebec Departments of Agriculture, Fisheries and Food to obtain information and advice on hydroponic cultivation. He also obtained documentation from the Montreal Botanical Garden on growing trees for use in his horticultural projects. He communicated by letter and telephone with the federal Department of Agriculture, the US Forestry Service of the US Department of Agriculture and the Rocky Mountain Forest and Range Station of the US Forestry Service. In 1978 Mr. Monette visited the nurseries at Rosemere, Joliette, Laval and Victoriaville in Québec and another near Edmundston in New Brunswick.

Mr. Monette obtained a lot of information and advice; he studied all the documentation, weighed the pros and cons and drew up a plan of action. At the hearing he entered in evidence a notebook which he used in 1979 to make sketches of the farm, outlines of the workplan and schedules, to calculate his fertilizer requirements and to draw up a timetable for certain operations. This allowed him to control his working hours and those of his employees who were hired to carry on his business. The notebook contained a plan for operating the farm.

In 1978 and 1979 Mr. Monette had a wooden structure built with skylights on the south side and a transparent material over the ends, for use as a greenhouse. Mr. Monette spent about $59,000 for the greenhouse and also spent $9,200 to renovate a storage shed and further amounts of $9,075 for equipment and $5,404 for rolling stock. To pay for the construction Mr. Monette borrowed $33,000 from the Bank of Nova Scotia on a demand note secured by a mortgage on the greenhouse. In his cross-examination counsel for the respondent suggested that no lender would have made him a loan secured on the greenhouse and it was only because of the profession he was engaged in that he could obtain the money needed for his operation.

In Fall 1978 Mr. Monette spent twenty to twenty-five hours a week on the farm, making plans, supervising the initial construction of the greenhouse and hiring workers.

The greenhouse was completed in March 1979 and Mr. Monette began using it at once. After studying and considering all the advice and information he had received, Mr. Monette decided to grow Colorado blue spruce. He began using his greenhouse by planting seed for a crop of 30,000 spruce and at the end of March for another crop of 20,000. Later, in 1979, he planted another 20,000 spruce in a room adjacent to the greenhouse which he called a growing room.

He operated his business under the trade name of "Tropinette Enr".

In the replies to the notices of appeal, the Minister stated that in reassessing the appellant for 1979 and 1980 he relied on the following facts:

5. In reassessing the appellant for his 1979 taxation year, the Minister of National Revenue relied inter alia on the following facts:

(o) in 1979 the appellant bought small tropical plants which he tried to keep and grow for resale;

(p) in November 1979 the appellant undertook a promotion at the Zellers store, making sales of some $745;

(q) the appellant then found that his greenhouse, of a new type, was not particularly well suited for growing tropical plants and re-directed his activities towards the production of Colorado blue spruce . . .

Mr. Monette denied that he had re-directed his business activities towards spruce. He explained there were two reasons why he had cultivated tropical plants: he wanted to make his business profitable sooner and to promote his name. He ceased growing tropical plants after the Zellers sale because these plants took up too much space and were not the type of plants he wanted to grow. He testified that this was a means of making himself known.

In 1979 Mr. Monette got his first crop of 50,000 trees, 95% of which were marketable. These trees were potted and then placed in containers. They were eventually sold. The tropical plants were part of his second crop in 1979.

He built his greenhouse using a commercial greenhouse assembly plan with modifications which he felt were beneficial for his operations. In 1980 a problem arose. He had built five levels in the greenhouse and sown plants on each of these levels. Because of a defect in the ventilation he lost approximately 50,000 trees in 1980. This defect was the cause of a disease known as damping-off, which originates in three families of parasitic mushrooms and contamination. The modification made to the ventilation created another problem which caused [s/c] 10,000 other trees. These problems were corrected with the result that since 1980 his business has encountered no further problems.

Aside from his work as a psychiatrist, Mr. Monette devoted all of his time to the farm; holidays from the hospital were spent on farm-related work. Mr. Monette is a member of l'Union des Producteurs Agricoles, l'Association Paysage Québec, l'Association Forestière des Cantons de l'Est et de l'Association des Producteurs en Serre du Québec.

Mr. Monette established a daily routine for his personal attention to the farm. He would verify ventilation and temperature in the greenhouses, check for pests and make chemical tests of the plants. He also did manual labour in 1979, when he had hired help, and 1980, when he did not. This work continued in later years when more labour had to be employed to take care of the farm. An excerpt from his work diary (Exhibit A-8) reflects what he personally did at the farm during the period October 20, 1980, to October 30, 1980; on October 26, for example: “routine et plantation, toiture, monter néons"; on October 27: "routine de plantation, aller chercher peat mix à Drummondville, extincteur chimique poser, interruption haut/bas pour hiver, porte, toiture préparer pour l'hiver".

An excerpt from the schedule of work for August 1982 shows the labour to be performed for the day by employees and for some functions, the time the function should take. Each of four employees was assigned eight hours of work. Mr. Monette testified that on the preceding evening he would prepare a schedule of work to be performed for the next day.

In 1981 Mr. Monette gave a training course in industrial horticulture to an employee referred to him by the Canada Manpower Centre; Mr. Monette was supervised by a local school board. In 1982 he continued the course, being subsidized by the Department of Employment and Immigration, for one employee; however he encouraged his other employees to attend the courses as well. Mr. Monette personally attended a business course at the École des Hautes Études Commerciales in Montréal.

In the meantime Mr. Monette's inventory of trees was increasing. His farm was divided into nine parks, each park growing trees of different maturity. In 1986, for example, seven of the parks were being used to grow 68,540 potted Colorado blue spruce in various stages of development, depending on the park in which they were located. Trees from two other parks had been sold. In addition 22,000 Douglas pines and Santa Isabella pines had left the greenhouse and were in transition in pots. To each of these plants Mr. Monette gave a minimum and maximum value, as published in various catalogues. Mr. Monette determined the wholesale value of these plants was $273,605 in 1986; the market value was approximately $755,031. In addition Mr. Monette had 15,000 pines in the ground with a wholesale value of $240,000 and a small tree plantation of 2,000 plants at a wholesale value of $30,000. In all, the wholesale value of his inventory was $543,605.

In 1982 Mr. Monette started to decorate trees for sale at Christmas. He has continued selling decorated trees and for this purpose he orders tree decorations from Taiwan.

Mr. Monette in 1982 sold decorated Christmas trees to the Quebec City district branch of Coca Cola Limited and 51 Provigo stores in the Québec City region to promote soft drinks. The promotion proved a success and will be continued for the 1987 Christmas season; Coca Cola anticipates ordering between 6,000 and 10,000 trees.

Also for 1987 sales, Mr. Monette contacted other potential purchasers of trees and arranged to sell approximately 15,000 trees to Access Marketing, which represents retailers such as Métro-Richelieu, Provigo, Steinberg, Zellers, Jean Coutu and Supercarnaval. He also sells trees to hotels and restaurants.

Mr. Monette has purchased additional land and entered into a lease for land which will permit him to expand his operations. He has investigated the possibility of entering the Boston market. He has visited Boston, has been in touch with the Canadian Consulate in Boston for advice and assistance and discussed with a broker, Carry Mallary Corporation, the latter representing him in the United States.

Mr. Monette has not invested all of his assets in the farm. At the time of trial, his investments, other than his home and car, included shares in public companies, a Registered Retirement Savings Plan and term deposits. In 1979 he had no such investments; in 1980 he invested $4,475 in a Registered Retirement Savings Plan and $2,300 in caisse d'entraide. In 1985 the value of his Registered Retirement Savings Plan and other investments totalled $139,511.

During the years 1984, 1985 and 1986, Mr. Monette sold trees totalling $4,196, $13,671 and $82,262 respectively. For 1987 he projects sales of $153,040; the projection does not include possible additional sales of $100,000 from promotions with Coca Cola and Aligro, arrangements for which had not been concluded at the time of trial.

Mr. Monette's income from psychiatry and agriculture from 1979 to 1985 is set out in Schedule A of these reasons. The major expenses incurred by Mr. Monette in his farm business were for salary, interest and depreciation:

In 1986 he earned a net income of $12,230 from farming; his gross farm income was $82,262 and expenses were $57,446. Sales cost was $12,586. For 1987 he projects net farm income of $28,105, after deducting sales cost of $42,583 and expenses of $82,105 from a gross income of $153,040.

The question is whether Mr. Monette's farming business, either alone or in combination with his medical practice, was his chief source of income in 1979 and 1980. If farming by itself or in combination with medicine was not his chief source of income the assessments will not be disturbed. If, however, I find that farming alone, or in combination with the practice of medicine, was Mr. Monette's chief source of income he will be permitted to deduct all of the expenses incurred in the farming business during 1979 and 1980.

In Taillefer v. M.N.R, [1987] 2 C.T.C. 2137; 87 D.T.C. 418, I commented on subsection 31(1) of the Act (pages 2139-40 (D.T.C. 419-20):

Law

Section 31 of the Income Tax Act (“Act”) limits the amount of losses from farming which a farmer whose chief source of income is neither farming nor a combination of farming and some other source of income may apply to reduce his income from other sources.

Section 31 reads as follows:

31. (1) Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income, for the purposes of sections 3 and 111 his loss, if any, for the year from all farming businesses carried on by him shall be deemed to be the aggregate of

(a) the lesser of

(i) the amount by which the aggregate of his losses for the year, determined without reference to this section and before making any deduction under section 37 or 37.1 from all farming businesses carried on by him exceeds the aggregate of his incomes for the year, so determined from all such businesses, and

(ii) $2,500 plus the lesser of

(A) '/2 of the amount by which the amount determined under subparagraph (i) exceeds $2,500, and

(B) $2,500, and

(b) the amount, if any, by which

(i) the amount that would be determined under subparagraph (a)(i) if it were read as though the words 'and before making any deduction under section 37 or 37.1’ were deleted,

exceeds

(ii) the amount determined under subparagraph (a)(i);

and for the purposes of this Act the amount, if any, by which the amount determined under subparagraph (a)(i) exceeds the amount determined under subparagraph (a) (ii) is the taxpayer's ‘restricted farm loss' for the year.

Classes of Farmers

The Supreme Court of Canada considered this “awkwardly worded and intractable" provision (then subsection 13(1)) together with the whole of the Income Tax Act in William Moldowan v. The Queen, [1977] C.T.C. 310; 77 D.T.C. 5213. Mr. Justice Dickson, as he then was, described, at page 315 (D.T.C. 5216), three classes of farmers envisaged by the Act:

(1) a taxpayer, for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine. Such a taxpayer, who looks to farming for his livelihood, is free of the limitation of s. 13(1) in those years in which he sustains a farming loss.

(2) the taxpayer who does not look to farming or to farming and some subordinate source of income, for his livelihood but carried on farming as a sideline business. Such a taxpayer is entitled to the deductions spelled out in s. 13(1) in respect of farming losses.

(3) the taxpayer who does not look to farming, or to farming and some subordinate source of income, for his livelihood and who carried on some farming activities as a hobby. The losses sustained by such a taxpayer on his non-business farming are not deductible in any amount.

Mr. Monette is a Class 1 or 2 farmer. In Taillefer, supra, I said, at pages 2142-43 (D.T.C. 421-22):

. . . The Court may then be asked to find whether the taxpayer is a class (1) or class

(2) farmer, that is, whether or not farming, or a combination of farming and some other source of income, is the taxpayer's chief source of income. If so, the taxpayer is a class (1) farmer. In describing the three classes of farmers envisaged by the Act Mr. Justice Dixon stated that a class (1) farmer looks to farming for his livelihood. One may apply quantitative tests, among others, to determine [sic]whether farming may reasonably be expected to provide the bulk of income to a taxpayer. To determine whether farming may reasonably be the centre of the taxpayer's work routine requires subjective tests bearing in mind the work routine must be directed to earning one's livelihood. Keeping oneself busy is not the work routine of a clams (1) farmer unless he may reasonably be expected to earn his livelihood from that work.

In his reasons for judgment, in Moldowan v. The Queen, [1975] C.T.C. 323; 75 D.T.C. 5216 Mr. Justice Ryan of the Federal Court of Appeal considered the possibility that a source may be a source of income in a particular year although it did not yield a profit in that year and therefore to determine the chief source for a year it appears pertinent:

. . . to look at each of the taxpayer's sources from the point of view of capacity for present or future profit or for both when one is seeking to determine his chief source of income in that year. The relative importance of sources as sources of income would seem to me to be in most part a function of their capacity to produce gain. In my opinion an appropriate path to a resolution of this difficult problem is to give significant attention to the taxpayer’s ongoing income-earning activities in a practical and businesslike way and in this way to determine which of the taxpayer's sources of income, in the ordinary run of his affairs, but taking account of his plans and his activities in implementation of his plans,* [1] is the chief source of his income in the sense of its usual or its the sense of its usual or its foreseeable profitability or of both. In seeking an answer, gross income, net income, capital investment, cash flow, personal involvement, and other factors may be relevant considerations (page 5219).

Mr. Justice Dickson stated in Moldowan, op cit, at page 314 (D.T.C. 5215-16), that:

Whether a source of income is a taxpayer's "chief source" of income is both a relative and objective test. It is decidedly not a pure quantum measurement. A man who has farmed all of his life does not cease to have his chief source of income from farming because he unexpectedly wins a lottery. The distinguishing features of “chief source” are the taxpayer's reasonable expectation of income from his various revenue sources and his ordinary mode and habit of work. These may be tested by considering, inter alia, in relation to a source of income, the time spent, the capital committed, the profitability both actual and potential. A change in the taxpayer's mode and habit of work or reasonable expectations may signify a change in the chief source, but that is a question of fact in the circumstances.

In determining if a taxpayer's chief source of income is from farming the Court must consider whether it follows from the facts that notwithstanding the taxpayer's other income sources farming can reasonably be expected to be a major force in the taxpayer's income-earning process or to have priority over other incomeearning activities that require his energies. The taxpayer's commitment of capital or personal energy to the farm must be such that a knowledgeable person would reasonably expect the farm to provide a livelihood. In short, to find farming to be the chief source of a taxpayer's income the Court must determine the relevant importance of farming to the taxpayer's other sources of income: The Queen v. Graham, op cit, at page 388 (D.T.C. 5263) (F.C.A.).

Combination of Farming and

Some Other Source

In many cases under section 31 the taxpayer usually acknowledges farming alone is not his chief source of income but claims his chief source of income is from a combination of farming and some other source of income. It is usually, but not always, from this other source of income that he is seeking to deduct his farming losses.

There need not be any connection between farming and the 'other source of income’ for a taxpayer's chief source of income to be a combination of the two sources, however, the meaning of ‘combination’ in section 31 does not mean the simple addition of any two sources of income for any taxpayer (Moldowan, op cit, page 314; D.T.C.5216).

In the Federal Court of Appeal Mr. Justice Ryan was of the view that:

Just as in the case of determining whether farming alone is the chief source, so in the case of determine [sic] whether farming combined with another source is the chief source, a practical judgment must be made, and in my opinion the judgment is to be made by way of analogy to the process appropriate to determining whether farming alone is the chief source. In making this assessment, the comparative importance of the combination must be assessed as if the decision were being taken by a reasonable and informed observer. The question to be decided is one of fact: Was the combination the taxpayer's chief source? The answer is to be sought in a context which, depending on the facts of the particular case, may embrace the past and predictions about the future as well as the present (pages 334; 5219-20 D.T.C.).

Mr. Justice Dickson described what section 31 contemplates and what one must consider in determining whether a combination of farming and some other source of income is a taxpayer's chief source of income. On page 315 (D.T.C. 5216) he wrote that section 31:

. . . contemplates a man whose major preoccupation is farming, but it recognizes that such a man may have other pecuniary interests as well, such as income from investments, or income from a sideline employment or business. The section provides that these subsidiary interests will not place the taxpayer in class (2) and thereby limit the deductibility of any loss which may be suffered to $5,000. While a quantum measurement of farming income is relevant, it is not alone decisive. The test is again both relative and objective, and one may employ the criteria indicative of ‘chief source’ to distinguish whether or not the interest is auxiliary. A man who has farmed all of his life does not become disentitled to class (1) classification simply because he comes into an inheritance. On the other hand, a man who changes occupational direction and commits his energies and capital to farming as a main expectation of income is not disentitled to deduct the full impact of start-up costs.

Counsel for the appellant submitted that a taxpayer's full-time employment or occupation as a psychiatrist does not necessarily preclude him from being a full-time, or Class 1 farmer: Graham, op cit. Mr. Monette, he says, devoted much time, approximately 40 hours a week, to his horticultural activities in the years on appeal.

When Mr. Monette moved back to Québec City, said counsel, he immediately undertook to start his horticulture business. He did so methodically and meticulously as can be seen from records in his diary.

The move was a change of Mr. Monette's occupational direction. His primary motive in moving to Québec City was to begin a horticulture business.

Mr. Monette invested in his enterprise, notwithstanding the farm was acquired with borrowed funds. He used his occupation as a physician to borrow funds to start and carry on the business of farming. The losses incurred by the business prior to 1986 were borne by the appellant who had sufficient capital to maintain the business in its formative years. It was not until 1984, when the farm's production goals were in sight, that Mr. Monette started to diversify his investments.

The farm was capable of making a profit. A profit was earned in 1986 and an even larger profit is projected for 1987; the projections for 1987 are based on actual orders to be filled for 1987, and are not mere hopes. Sales are steadily increasing and most costs are fixed, unaffected by the number of plants sold.

Counsel for the respondent questioned whether a career as a medical practitioner could take a back seat to that of a farmer. He doubted the time devoted to farming by the appellant in view of the steady rise in income from his psychiatric practice. He disputed whether, in these circumstances, psychiatry could be a sideline activity.

Respondent's counsel argued that in 1978,1979 and 1980 Mr. Monette was not a productive farmer and did not have the skills to be productive: the loss of his plants was due to this inexperience. Counsel suggested that it was only in later years, perhaps, that Mr. Monette achieved a level of expertise to farm profitably. For example, in 1982 he experimented in the sale of decorated trees for sale during the Christmas season.

Counsel also argued that Mr. Monette did not change occupational direction in 1978. His background was non-agricultural; all of his studies were for the purposes of carrying on the profession of medicine.

In my view Mr. Monette's chief source of income in the years under appeal was from a combination of farming and medicine.

The farm business is now yielding a profit, a profit the evidence indicates will increase. The income from Mr. Monette's medical practice and the perception people, including lenders, have of a medical practitioner's potential income gave him the luxury — usually not available to other taxpayers

— of borrowing funds to subsidize the farm business during its early years; his personal assets were put at risk for the long-term benefit of the farm. The evidence also establishes the physical efforts put into the farm by Mr. Monette.

Whether Mr. Monette devoted forty hours a week to the farm as he testified — and I have no reason to doubt his testimony — or less, as suggested by counsel for the respondent, is not the only basis for my decision. Mr. Monette's evidence established that he was carrying on a business a person can reasonably look to for a livelihood, notwithstanding he was earning substantially greater income from another source. If a business, whether a farm business or a retail, service or industrial business, can generate sufficient income to produce a livelihood for its owner, the number of hours the owner devotes to that business is not of the utmost importance. It does not follow that if an owner is capable of carrying on a successful business, its success may detract from the potential success of another business. The steady increase in income over the years from Mr. Monette's medical practice ought not to derogate from the potential of the farm to become his chief source of income. One ought not to be excluded from being a Class 1 farmer for the sole reason his income from a source other than farming is relatively substantial if the farm itself is capable, or potentially capable, of supporting a taxpayer.

My impression of Mr. Monette both from observing him during the trial and his evidence is that he is a hard worker who must be gainfully occupied, whether working over 70 hours a week at Homewood Sanitarium or combining and devoting his hours to his businesses of medicine and farming.

The business of Tropinette Enrg. is being carried on efficiently in a businesslike manner. The genesis of this commercial operation was in 1978 when Mr. Monette moved to Québec and was due to the efforts of Mr. Monette. Mr. Monette has worked constantly and consistently since 1978, striving to produce a viable business; he is now selling his produce commercially to a varied market and appears to have succeeded in building a good business.

In my view during the years on appeal the farm and the profession of medicine had equal call on Mr. Monette; one was not secondary to the other. Undoubtedly medicine was providing Mr. Monette with a livelihood and he did not require the farm business; but once the farm was started it soon became obvious that it too was capable of providing him with a livelihood. In 1979 and 1980 the farm was in the initial stages of production and could not by itself be expected to be Mr. Monette's chief source of income in those years; however farming in combination with his medical practice was his chief source of income in those years. Mr. Monette was practising medicine in a particular region due to the location of the farm and the income generated by his medical practice permitted Mr. Monette to borrow capital for the farm; the farm, as Mr. Monette's chief source of income, combined with medicine to provide him with a livelihood.

The appeals will be allowed, with costs, and the reassessments will be referred back to the respondent for reconsideration and reassessment in accordance with these reasons.

Appeals allowed.