Bonner,
TCJ
[ORALLY]:—The
appellants
Ruben
E
Kadatz
and
his
wife
Delaine
J
Kadatz
appeal
from
assessments
of
income
tax
for
the
1978
and
1979
taxation
years.
The
appellants
Rodney
M
Kadatz
and
Gail
Dreger,
who
at
all
relevant
times
was
the
spouse
of
Rodney
M
Kadatz,
appeal
from
assessments
of
income
tax
for
the
1978,
1979
and
1980
taxation
years.
In
making
each
of
the
assessments
in
issue
the
respondent
disallowed
the
deduction
of
the
entire
losses
incurred
by
the
appellants
in
farming.
He
did
so
on
the
basis
that
the
losses
were
personal
or
living
expenses
and
not
the
losses
of
a
business
activity
carried
on
for
profit
or
with
a
reasonable
expectation
of
profit.
The
appeals
were
heard
together
on
common
evidence.
Each
of
the
couples
carried
on
the
farming
operations
on
parcels
of
approximately
15.5
acres
in
area
located
near
the
city
of
Edmonton.
Each
couple
lived
in
a
house
on
their
parcel.
In
each
case
they
raised
cattle,
hogs
and
poultry.
As
well,
they
grew
hay
to
feed
the
animals
and
if
surplus
for
sale.
The
two
brothers
rented
land
from
nearby
landowners.
It
was
used
in
addition
to
the
acreage
which
they
owned
for
growing
hay
and
for
crop
rotation.
Each
of
the
four
appellants
at
all
relevant
times
held
a
full-time
job.
However,
each
spent
very
substantial
amounts
of
time
at
work
on
the
farms.
In
each
case
the
farming
operations
commenced
in
1974.
From
1974
to
1977
inclusive
the
farming
activities
generated
consistent
losses.
In
giving
his
evidence
Ruben
Kadatz
conceded
that
the
operations
in
the
1978
and
1979
years
were
too
small
to
turn
into
a
viable
business.
That
concession
was
entirely
warranted
having
regard
to
the
losses
during
the
1974
to
1977
years
and
as
well
to
the
absence
of
any
change
in
the
scale
or
nature
of
the
operations
during
1978
and
1979.
A
change,
however,
was
in
the
works.
The
brothers
had
an
interest
in
part
of
the
family
farm
on
the
outskirts
of
Edmonton.
It
was
their
plan
to
dispose
of
that
interest
and
invest
the
proceeds
in
a
farm
of
substantial
size.
They
deferred
action
on
that
plan,
however,
because
the
expected
annexation
of
the
family
farm
by
the
city
was
causing
its
value
to
rise
rapidly
and
they
wanted
to
realize
as
high
a
price
as
possible.
The
sale
was
ultimately
made
and
with
the
proceeds
a
quarter
section
of
land
was
purchased
at
Wetaskiwin.
It
was
first
farmed
in
1980.
Before
the
purchase
was
completed
the
marriage
between
Rodney
Kadatz
and
Gail
Dreger
broke
up.
As
a
result
those
two
appellants
did
not
proceed
with
the
Wetaskiwin
project.
Rodney’s
interest
was
taken
over
by
his
brother.
While
I
recognize
that
the
plan
throughout
1978
and
1979
was
to
increase
the
scale
of
farming,
the
decision
was
made
to
defer
that
step.
Given
that
decision,
the
farming
operations
which
in
fact
were
carried
on
in
those
two
years
could
only
be
expected
to
generate
losses.
The
same
is
true
of
the
1980
farming
operations
of
the
appellants
Rodney
Kadatz
and
Gail
Dreger
because
due
to
their
matrimonial
problems
they
did
not
proceed
with
the
plan
to
get
into
farming
on
a
larger
scale.
Small
scale
inherently
unprofitable
farming
operations
cannot
be
regarded
and
treated
as
large
scale
inherently
profitable
operations
simply
because
a
decision
has
been
made
to
increase
the
scale
at
such
time
as
capital
could
be
made
available.
The
losses
in
question
here
are
not,
as
I
see
it,
the
start-up
losses
of
a
business.
They
are
the
losses
from
farming
before
the
commencement
of
farming
as
a
business.
I
might
add
that
counsel
for
the
respondent
announced
during
his
closing
argument
that
he
had
received
instructions
to
consent
to
judgment
with
respect
to
the
first
of
the
taxation
years
in
question.
Those
instructions
were
given,
he
said,
as
a
result
of
his
client’s
policy.
1
indicated
at
the
time
and
I
repeat
now
that
I
am
not
at
all
interested
in
hearing
about
the
policy
of
the
Minister
of
National
Revenue.
This
Court
is
a
Court
of
law.
The
decisions
of
this
Court
are
based
on
and
can
properly
be
based
only
on
the
law
and
the
facts
as
established
by
the
evidence.
If
the
Minister
should
discover
that
an
assessment
which
he
has
made
is
inconsistent
with
some
policy
which
he
believes
he
should
follow
or
should
have
followed
then
it
is
open
to
him,
so
far
as
is
permitted
by
law,
to
reassess.
It
is
not
open
to
him
to
seek
the
assistance
of
this
Court
in
the
form
of
a
direction
to
reassess
in
a
manner
not
justified
by
the
application
of
the
law
to
the
proven
facts.
For
the
foregoing
reasons
all
the
appeals
will
be
dismissed.
Appeals
dismissed.
Email this Content