Robert D P Blake v. Minister of National Revenue, [1984] CTC 2152, 84 DTC 1162

Christie, CJTC:—This appeal relates to the appellant’s 1977 to 1980 taxation years inclusive. He describes himself as a teacher, politician, farmer and student. In each of the years mentioned, the appellant claimed farming losses which were disallowed in total by notices of reassessment. Notices of objection to the reassessments were served by the appellant and, by notification dated September 23, 1982, the respondent confirmed the reassessments. This appeal followed.

Paragraph 6 of the respondent’s reply to the notice of appeal dated August 8, 1983, reads:

6. In assessing tax as aforesaid, the Respondent relied, inter alia, upon the following findings or assumptions of fact:

(a) the Appellant during the period under appeal was employed as a teacher and

was also a municipal officer of the corporation of the Town of Dunnville;

(b) in 1964 the Appellant purchased 53 acres of land in Dunnville and in 1965 he purchased an adjoining 45 acres of land to give him a total of 98 acres of land (hereinafter) referred to as the “farm”);

(c) in 1969 the Appellant sold 30 acres of the farm land;

(d) the Appellant has never made a profit from the operation of the farm and has reported the following gross revenue, expenses and losses resulting from the operation of the farm:

Year	Gross Revenue	Expenses	Losses
1980	$1,332.75	$8,142.18	$6,809.43
1979	1,319.50	8,608.70	7,289.20
1978	1,098.50	8,598.50	7,500.00
1977	1,120.70	7,946.44	6,825.74
1976	(not available)	—	—
1975	635.72	3,489.59	2,853.87
1974	398.00	1,939.35	1,541.35
1973	350.00	1,325.57	1,024.43
1972	397.91	1,450.53	1,052.00
1971	nil	1,489.70	1,489.70
1970	nil	1,801.35	1,801.35
1969	nil	3,178.89	3,170.89 (sic)
1968	5,132.72	7,071.55	1,938.83
1967	2,036.65	6,801.37	4,764.72
1966	4,231.54	4,874.78	643.24;

(e) during the period under appeal the Appellant used approximately three acres of the farm land to grow vegetables for the personal consumption of the family, the remainder of the land was rented out to another farmer under a share-crop agreement; under the terms of the share-cropping agreement, the Appellant’s share was limited to a maximum of approximately $2,000,00, but has never exceeded $1,200.00;

(f) the Appellant was not during the period under appeal carrying on a farming operation with a reasonable expectation of profit;

(g) the expenses deducted by the appellant from farm revenue which caused the losses were not incurred for the purpose of gaining or producing income from a business or property but were the expenses of property maintained by the Appellant for the use of his family and not maintained in connection with a business carried on for profit or with a reasonable expectation of profit.

In order to succeed the appellant must establish by a preponderance of evidence that during the taxation years in question his farming undertaking was a business. This, in turn, raises the question whether during that time the appellant had a reasonable expectation of profit. The existence or absence of that expectation must be determined by objective testing. The leading case in this regard is the judgment of the Supreme Court of Canada in Moldowan v The Queen, [1977] CTC 310; 77 DTC 5213.

A considerable body of evidence was submitted by the appellant during the course of the hearing, but in very considerable measure it was irrelevant to a determination of the legal issue before the Court. Illustrative of this is the following: a letter dated January 25, 1984, from the appellant’s banker showing his credit and debit position with the bank as of the previous day. The letter includes reference to a guarantee issued by the bank on November 4, 1983, in favour of Revenue Canada and to a mortgage on a property at 165 Gardiner Avenue East, Dunnville, Ontario. Other evidence offered included two market stall permits issued to his daughter, Beth Blake, by the Town of Dunnville dated August 23, 1982 and July 7, 1983. Additional evidence submitted was a folder of newspaper clippings one-half inch thick concerning farming, Revenue Canada, government spending, criminal injuries compensation, RRSPs, the metric system, etc. At the commencement of the hearing the appellant presented seven letters addressed to the Registrar of the Tax Court of Canada. All are dated in January of this year and are commendable character references from sources such as a lawyer, a secondary school principal, his family physician, a member of Parliament and a retail paint merchant. Regardless of how laudatory these documents may be, they are of no probative value in the context of this appeal.

Some ten years ago the appellant was a litigant before the Tax Review Board on an appeal involving claims by him for farming losses. In a decision rendered February 18, 1974, in respect of the appellant’s 1971 taxation year, the Honourable Keith Flanigan, who was then chairman of the Tax Review Board, held that he was entitled to deduct the restricted farming losses prescribed by subsection 13(1) (now subsection 31(1)) of the Income Tax Act. The appellant placed considerable emphasis on that decision in these proceedings. In his notices of objection, he said:

On February 18, 1974 Mr K A Flanigan, Esq, QC ruled in my favour, that this farm was a viable farm operation with reasonable expectation of profit, at a hearing of the Ontario Tax Review Board. Why are government bureaucrats trying to place themselves and their interpretations above the rulings and interpretations or our judicial system?

Attached to the appellant’s notice of appeal dated November 19, 1982, was a copy of the Honourable Keith Flanigan’s “Summation and Decision” respecting the 1974 hearing. The formal judgment in that regard is dated February 22, 1974, and was entered as an exhibit in these proceedings, together with copy of the “Summation and Decision”. It is to rely on a non sequitur to contend that because a person was, in consequence of a decision rendered in 1974 by the Tax Review Board, found to be in 1971 in that class of farmers entitled to restricted farming losses, he is necessarily entitled to full or restricted farming losses in respect of his 1977 to 1980 taxation years. On January 17th last I delivered judgment in two losses from farming appeals arising in British Columbia — Kerr and Forbes v MNR — and in the course of giving my reasons for judgment I said:

Finally, by way of general observation, it is noted that, if a person who gets involved in farming cannot initially be regarded as being engaged in a business, that can mutate by reason of changed circumstances. A taxpayer could change from hobby farmer to businessman farmer and directly into a position of being able to lawfully claim deductions for the full amount of his farming losses. On the other hand, he might only move into a position of being able to claim restricted deductions and then, possibly later on, to full deductions. These shifts in the position of a taxpayer vis-a-vis farming losses will depend on changed relevant facts. The various movements in the direction of favouring deductions are, of course, reversible by reason of changed circumstances.

A considerable part of the appellant’s presentation at the hearing consisted of an acerbic attack on National Revenue as an institution and against some of its employees. This did not contribute in any way to the resolution of the legal issue. I presume it was this kind of thing that led the Honourable Keith Flanigan to conclude his 1974 “Summation and Decision” with these words:

I add gratuitously, from one who has heard many cases in the past few odd years, two years and a bit, from coast to coast, that to take a position that the government through its representatives with the Minister of National Revenue, District Office, are bent on destroying the willpower, good name or initiative of individual taxpayers throughout the country is one that should not be pursued, from my experience, and although one should be forceful and one should be prepared to stand up for one’s right, one should not assume that because an assessment is not accepted by the department, that there is a conspiracy to brow-beat the taxpayer.

There having been no evidence adduced from which it could be concluded that the appellant had a reasonable expectation of profit within the meaning attributed to that phrase by judicial authority binding on this Court, the appeal cannot succeed.

The appeal is dismissed.

Appeal dismissed.