Telly O Imus, Barbara I. Imus v. Minister of National Revenue, [1985] 2 CTC 2191, 85 DTC 528

Christie, CJTC:—These appeals were heard together by consent. They relate to the appellants’ 1977 to 1980 taxation years inclusive. They claim entitlement to deduct full farming losses incurred by them during the years just mentioned. Each appellant seeks to deduct one-half of these losses in his or her returns of income. In reassessing, the respondent allowed the restricted losses referred to in subsection 31(1) of the Income Tax Act ("the Act”). This fact has been pleaded by the respondent in his replies to notices of appeal dated June 1, 1984, and is admitted by the appellants. It follows that no question arises whether the appellants were in the business of farming during the years under review. They were. The only issue is whether the appellants were, during those years, within the first class of farmers which Mr Justice Dickson (as he then was) said, in delivering the judgment of the Supreme Court of Canada in Moldowan v The Queen, [1977] CTC 310; 77 DTC 5213, is envisaged by the Act. A person in this class is one whose major preoccupation is farming. He is 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 entitled to deduct the full amount of his expenses to the extent that, as provided by paragraph 18(1)(a) of the Act, they are incurred for the purpose of gaining or producing income from his farming business.

In the case at hand the appellants had income from both farming and other unrelated employment during the years under review. In such circumstances this question must be considered in deciding whether the appellants are in the first class: Is the unrelated employment, to use the language in Moldowan, "subsidiary" or "auxiliary" to farming? If the answer is in the negative, the appellants cannot succeed. In Kerr & Forbes v MNR, [1984] CTC 2071; 84 DTC 1094, this is said at 2078 (DTC 1100):

While it is not impossible for a person to fall within the first class even if he has other employment which is usually regarded as “full-time” it would, in my view, require a truly unusual set of facts of the kind described in Graham v The Queen, (supra), to arrive at that result.

The appellants are husband and wife. They both have background experience in ranching and farming. In 1964, while citizens of the United States and residing there, they acquired an option on 172 acres of land in the Burns Lake area of British Columbia. The property was purchased in 1965 and, on June 30, 1966, they emigrated to Canada and took up residence on the property. At that time they had some 20 head of cattle and 11 horses. In 1971, Mr Imus went to work on what is generally referred to as a "full-time basis” with Eurocan Pulp and Paper Co Ltd. It was made clear to him that his work for the company was not to be interfered with by his farming interests. That there was no such interference can be easily inferred from these promotions which Mr Imus testified were conferred upon him: to logging supervisor, to logging foreman, to general foreman and to general superintendent. The latter was the position occupied by him when he retired in July 1983.

In 1971 the appellants also secured an agricultural lease for an additional 320 acres. The lease contained an option to purchase, conditional upon stipulated improvements being made to the property by 1981. The condition was met and the land was bought. It stands registered in the name of both appellants.

By 1974 they had 100 head of cattle but, in that year, two-thirds were sold. A shortage of hay was mentioned in the testimony in respect of this sale. In the fall of 1975, Mr Imus said they "sold down” to six or seven head of cattle and in addition they were left with three horses and some chickens.

In 1975 Mrs Imus also went to work for Eurocan. She was employed on a full-time basis as an accountant and continued in that capacity until she retired in February 1983.

When Mr Imus began working for Eurocan the work site was at Andrew Bay which is 42 miles from his residence. In 1977 or 1978 Eurocan established another work site called East Ootsa Camp which is 73 miles from the appellants’ residence. Mr Imus worked at Andrew Bay in the summer and at East Ootsa during the rest of the year. Mrs Imus worked at Andrew Bay throughout. When both worked at the same site they commuted together and when working at Andrew Bay and East Ootsa they commuted separately. The estimated travelling time to Andrew Bay was given at 50 to 60 minutes each way. The same estimate in relation to East Ootsa was one hour and 45 minutes each way. For about two months in the winter the commuting distance to East Ootsa was reduced by about 20 miles by driving across a lake. In one year, 1978, the appellants had a trailer on a location 20 miles from Andrew Bay and 39 miles from East Ootsa. Mr Imus estimated the time away from home, including commuting time, when working at Andrew Bay to be about nine and one-half hours. The same estimate regarding East Ootsa was 12 hours.

In the course of cross-examination, Mr Imus said that, having regard to the inventory of stock on the farm during the years under review, it would have been "impossible” to make a living from the appellants’ farming activities alone. What follows is first a reproduction of paragraphs 3 and 4 of the reply to notice of appeal applicable to Mr Imus’s appeal and then a reproduction of the same paragraphs in the reply to notice of appeal applicable to Mrs Imus's appeal. What is said in them is not in dispute.

3. During the years under appeal the Appellant was employed as a general foreman with Eurocan Pulp and Paper Co Ltd and declared total earnings from the employment of $23,264.32 in 1977; $28,302.12 in 1978; $30,827.64 in 1979 and $35,635.38 in 1980.

4. In filing his 1977, 1978, 1979 and 1980 individual Income Tax Returns, the Appellant claimed farm losses as follows:

					Loss Claimed
	Total Farm	Total Farm	Total Farm		by Appellant
Year	Expenses	Income	Loss	Loss	per 50% Interest
1977	$24,443.29	674.03	23,759.26		11,879.63
1978	$38,937.18	6,000.00	32,937.18		16,468.55
1979	36,749.88	.00	36,749.88		18,374.94
1980	40,007.62	3,415.00	36,592.62		18,296.31

3. During the years under appeal the Appellant was employed as an accountant with Eurocan Pulp and Paper Co Ltd and declared total earnings from that employment of $17,541.15 in 1977; $18,516.60 in 1978; $20,198.74 in 1979 and $23,325.34 in 1980.

4. In filing her 1977, 1978, 1979 and 1980 individual Income Tax Returns, the Appellant claimed farm losses as follows:

					Loss Claimed
	Total Farm	Total Farm	Total Farm		by Appellant
Year	Expenses	Income	Loss	Loss	per 50% Interest
1977	$24,443.29	674.03	23,759.26		11,879.63
1978	$38,937.18	6,000.00	32,937.18		16,468.55
1979	36,749.88	.00	36,749.88		18,374.94
1980	40,007.62	3,415.00	36,592.62		18,296.31

The foregoing are the essential facts before the Court in these appeals. In my opinion they cannot, on any realistic basis, bring the appellants within the first class of farmers described in Moldowan and they necessarily lead to replying no to the question whether the employment of the appellants with Eurocan was subsidiary or auxiliary to their farming activities. It follows that the appeals cannot succeed.

The appeals are dismissed.

Appeals dismissed.