Couture,
C.J.T.C.:—These
appeals
were
heard
together
on
common
evidence.
They
involved
the
appellants’
1981
taxation
year
and
the
deductibility
of
farm
losses
incurred
during
the
said
taxation
year
from
their
respective
employment
income.
Both
appellants
were
full-time
civil
servants,
he
with
the
Department
of
Transport
and
she
with
the
Department
of
Supply
and
Services.
The
bulk
of
the
evidence
was
adduced
by
Ernest
Koteles
subsequently
concurred
in
by
Patricia
J.
Koteles.
While
this
fact
was
not
mentioned
by
the
witness,
the
appellants
were
involved
in
a
farming
venture
on
a
partnership
basis,
each
owning
a
50
per
cent
interest
as
reflected
in
their
income
tax
returns
and
assessments.
The
evidence
disclosed
that
the
appellants
lived
in
Chelsea,
Quebec
and
in
1974
they
purchased
a
parcel
of
land
of
one
hundred
acres
in
Campbell’s
Bay,
Quebec,
located
some
50
miles
from
their
residence.
According
to
Ernest
Koteles
at
the
time
of
this
purchase
they
did
not
intend
to
work
this
land
or
use
it
as
an
income-producing
asset,
but
in
1981
for
reasons
which
were
not
given
or
explained
to
the
Court
the
witness
said
that
they
decided
to
start
a
farming
operation
on
their
land
and
become
fully
fledged
farmers.
No
information
was
provided
as
to
what
prompted
this
sudden
interest
in
farming
or
as
to
the
extent
of
their
prior
involvement
or
exposure
and
experience
in
their
proposed
vocation.
In
1981
they
cleared
and
planted
18
acres
of
their
original
purchase
and
the
remainder
was
retained
as
forest
or
scrub
land
as
referred
to
by
the
appellant.
In
the
same
year
they
also
purchased
another
parcel
of
land
of
the
same
size,
which
was
mainly
forest,
but
no
farming
activities
were
carried
on
that
second
parcel
in
1981.
The
gross
income
derived
from
this
first
year
operation
was
$806
and
the
expenses
incurred
including
$12,935
of
capital
cost
allowance
amounted
to
$29,466
which
gave
rise
to
a
loss
of
some
$28,660,
each
partner
claiming
$14,330
of
losses
against
his/her
employment
income
of
$27,746
in
the
case
of
Ernest
Koteles
and
$24,098
for
Patricia
J.
Koteles.
In
1982
they
cleared
an
additional
ten
acres
off
the
second
parcel
purchased
in
1981
which
were
planted.
In
1983
they
purchased
another
parcel
of
land
of
200
acres
of
which
75
acres
were
cleared
and
125
were
forest.
From
a
chart
prepared
by
the
appellants
and
filed
as
an
exhibit
it
shows
that
for
the
taxation
years
including
the
taxation
year
under
appeal
the
farming
property
of
the
appellants
consisted
of:
1981
|
Forest
|
178
acres
|
|
Planted
|
18
acres
|
1982
|
Forest
|
160
acres
|
|
Planted
|
40
acres
|
1983
|
Forest
|
247
acres
|
|
Planted
|
123
acres
|
1984
|
Forest
|
272
acres
|
|
Planted
|
128
acres
|
These
numbers
indicate
that
during
the
taxation
years
after
1981
the
appellants
have
devoted
a
substantial
amount
of
time,
effort
and
energy
in
ringing
their
operations
to
the
level
reached
by
1984
and
at
the
same
time
to
have
been
able
to
cope
with
the
requirements
of
their
full-time
employment.
The
witness
explained
that
when
they
started
in
1981
there
was
nothing
on
the
property;
no
buildings,
no
equipment
and
the
land
itself
was
strictly
scrub
land.
they
built
two
Quonset
equipment
storage
buildings
and
one
shelter
for
the
harvesting
equipment.
On
the
financial
statement
attached
to
their
respective
income
tax
return
for
1981
it
indicates
the
following:
buildings
|
$
5,537
|
machinery
&
equipment
|
13,882
|
rolling
stock
|
32,941
|
|
$52,360
|
In
assessing
the
appellants
the
respondent
disallowed
the
losses
as
claimed
by
each
appellant
and
allowed
them
the
limited
farm
losses
under
the
provisions
of
subsection
31(1)
in
the
amount
of
$2,500
each.
The
appellants
filed
notices
of
objection
against
their
respective
assessments
which
were
confirmed
eventually
by
the
respondent.
Their
contention
was
that
their
farming
operations
in
1981
were
more
than
a
sideline
business
as
implied
by
the
respondent
in
his
assessment
and
that
they
constituted
in
fact
their
major
preoccupation
notwithstanding
their
full-time
employment.
The
question
that
I
have
to
resolve
with
regard
to
these
appeals
is
whether
during
the
taxation
year
1981,
the
only
taxation
year
under
appeal,
the
appellants
were
entitled
or
not
to
their
full
farming
losses
in
computing
their
respective
income.
The
answer
to
this
question
is
dependent
upon
the
facts
as
they
existed
in
1981
considered
in
the
light
of
the
principles
laid
out
by
Mr.
Justice
Dickson
of
the
Supreme
Court
of
Canada,
as
he
then
was,
in
William
Moldowan
v.
The
Queen,
[1977]
C.T.C.
310;
77
D.T.C.
5213.
The
learned
Justice
who
wrote
the
unanimous
decision
of
the
Court
states
at
315
(D.T.C.
5216)
that
the
Act
envisages
three
classes
of
farmers
and
I
quote:
(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
subsection
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
subsection
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
but
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.
In
which
of
the
classes
described
by
His
Lordship
were
the
appellants
in
1981?
They
had
been
civil
servants
for
a
number
of
years
and
their
main
source
of
income
for
1981
shown
on
their
respective
tax
return
was
their
salary.
In
addition
to
their
salaries
the
reported
amounts
received
from
a
registered
retirement
savings
plan
which
they
apparently
cancelled
that
year.
They
had
owned
a
non-productive
parcel
of
land
for
seven
years
in
1981,
and
the
fact
that
they
exerted
efforts,
energy
and
spent
money
in
converting
a
portion
of
it,
18
acres
out
of
200,
into
productive
land
does
not
by
itself,
in
my
Opinion,
support
their
claim
that
their
farming
activities
were
of
sufficient
magnitude
to
reduce
their
full-time
employment
to
a
subsidiary
occupation.
The
Court
has
to
consider
the
facts
as
they
were
presented
in
evidence
and,
therefore,
as
they
allegedly
existed
in
1981.
Admittedly
it
is
permissible
to
the
Court
to
consider
events
which
took
place
either
prior
or
after
the
taxation
year
under
appeal,
as
what
happened
in
those
years
often
provides
informative
data
as
to
the
true
nature
of
an
appellant's
farming
operations
in
a
year
under
appeal.
However,
in
the
present
appeal
no
evidence
was
adduced
by
the
appellants
to
demonstrate
to
the
Court
whether
the
prospect
of
future
acquisitions
of
additional
land
formed
part
of
a
total
long-
range
planning
at
the
time
of
their
initial
decision
of
becoming
farmers
in
1981
or
was
merely
the
result
of
an
expansion
of
their
original
venture
which
was
carried
on
over
the
years
as
land
became
available
for
purchase.
For
this
reason
the
acquisitions
of
land
in
subsequent
years
with
the
increase
in
acreage
under
culture
are
not
of
real
assistance
to
the
Court
in
determining
the
chief
source
of
income
of
the
appellants
in
1981.
In
their
evidence
they
explained
that
when
they
started
their
farming
operations
in
1981
they
were
hoping
that
farming
would
become
their
chief
source
of
income
within
a
few
years,
in
fact
he
mentioned
five
years
but
added:
“as
long
as
we
were
entitled
to
deduct
our
full
losses
against
our
salaries/'
However,
as
mentioned
before,
no
evidence
was
led
with
regard
to
their
financial
resources,
their
respective
previous
experience
in
farming
and
the
extent
of
their
knowledge
of
the
industry
including
forestry
operations
so
that
the
Court
could
appreciate
whether
their
alleged
expectations
were
capable
of
realization
within
a
reasonable
period
of
time
or
should
be
regarded
as
the
formulation
at
that
time
of
aspirations
which
in
reality
were
completely
beyond
their
reach.
Eighteen
acres
of
land
under
culture
and
some
178
acres
of
forest,
none
of
the
timber
having
attained
the
required
maturity
for
cutting
and
not
expected
to
reach
this
maturity
for
at
least
five
to
ten
years,
according
to
the
evidence,
did
not
represent
in
1981,
in
my
estimation,
an
economic
operation
which
could
generate
by
itself
at
any
time
or
could
be
looked
upon
to
yield
within
a
reasonable
time
sufficient
income
to
meet
the
test
enunciated
by
Mr.
Justice
Dickson
in
Moldowan
with
respect
to
the
first
class
of
farmers,
that
is
whereby
the
appellants
could
reasonably
expect
that
their
farming
operations
could
provide
the
bulk
of
their
income
or
the
centre
of
their
work
routine.
Admittedly
in
the
years
following
the
taxation
year
under
appeal
they
did
expand
their
operations
substantially
and
it
is
quite
possible
that
at
some
point
after
1981
they
could
have
relied
on
farming
as
their
centre
of
work
routine
and
claim
with
justification
that
their
chief
source
of
income
was
a
combination
of
farming
and
some
other
source
of
income,
but
this
is
not
what
I
have
to
decide
in
dealing
with
these
appeals.
On
the
basis
of
the
evidence
presented
in
these
appeals,
I
am
unable
to
accept
that
for
the
taxation
year
1981
the
chief
source
of
income
of
the
appellants
was
a
combination
of
farming
and
some
other
source.
For
all
these
reasons
the
appeals
are
dismissed.
Appeal
dismissed.