William Snow v. Minister of National Revenue, [1984] CTC 2170, 84 DTC 1148

Rip, TCJ:—In this appeal from assessments for 1979 and 1980 the appellant claims a restrictive farm loss for each year in the amount of $5,000 in accordance with subsection 31(1) of the Income Tax Act.

The appellant was employed at all relevant times as a bus driver by the Toronto Transit Commission (“TTC”) in Toronto, Ontario. In December of 1977 the appellant purchased a farm property consisting of approximately 53 acres, 30 of which were arable and used as pasture land by the appellant, near Trenton, Ontario, for $48,000. A house in a good state of repair was on the property together with two barns which were in need of repair and which the appellant had been repairing since he purchased the property. He and his family moved on to the property in the spring of 1978. The appellant says his intention in purchasing the property was to have a mixed farm operation of beef, chicken and pork, from which he could earn a living and retire early from the TTC.

Prior to purchasing the property neither the appellant nor his wife had any farm experience or farm training nor did they take any courses on how to farm. The only equipment owned by the appellant which was used in the farming operation was a wheelbarrow; at one time he hired a custom operator to cultivate some land but the operator soon became bankrupt and left the locality.

As an employee of the TTC, the appellant would work five days and have two days off; he had a wide latitude as to the shifts he could work and was able to change shifts if required. He was able to work a shift, for example, in which he would have Thursday and Friday off, but work Saturday morning, be back home early Saturday afternoon, then return to Toronto for work from noon Sunday to the end of Wednesday morning and be home Wednesday afternoon, this would permit him to work on the farm Wednesday afternoon, all day Thursday, all day Friday, Saturday afternoon and Sunday morning. When at home he would work ten to twelve hours per day on the farm.

The appellant testified he was “trying to build his farm up slowly because it was hard to get money” and equipment was expensive.

In 1978, the appellant had about 150 chickens, which he sold, as well as some pigs; in 1979 he had another 150 chickens, some livestock and no pigs; the chickens were sold and three steers were purchased for fattening for eventual resale. The pigs were sold because the prices were “way down”.

At the end of 1980 the appellant had no livestock, although his intention when he bought the farm was to have a mixed farming operation. In 1981 he again bought some livestock, this time for breeding purposes, and today has a herd of 11 Herefords; he gave up his pig operation in 1979 and his chicken operation in 1982 because they were too costly.

The appellant estimated that for him to make a profit, he would require 30 head of cattle; at the time of trial he had 8 head of Hereford cattle.

The appellant’s farm expenses exceeded his farm income for the years in appeal. The appellant’s expenses for 1979 were: $9,414,49, of which $3,671.33 was for interest on the farm mortgage; $2,565.52 was for gasoline and oil for an automobile and $1,140.59 was for feed. In 1980 his expenses were $10,716.51, of which interest on the mortgage, gas and oil for the automobile and feed again represented more than 75 per cent of the total expenses. Income for 1979, was $1,488, being $678 from sale of swine, $680 for poultry and $130 from eggs. In 1980, the appellant had sales of only $630, all from the sale of poultry. In the two years his losses have increased rather than decreased.

In my view if the appellant was carrying on the business of farming, which has not been established, he was not carrying on the business for profit or with a reasonable expectation of profit. In Moldowan v the Queen, ([1977] CTC 310; 77 DTC 5213), Justice Dickson of the Supreme Court of Canada states that “whether a taxpayer has a reasonable expectation of profit is an objective determination to be made from all of the facts. The following criteria should be considered: the profit and loss experience in past years, the taxpayer’s training, the taxpayer’s intended course of action, the capability of the venture as capitalized to show a profit after charging capital cost allowance. The list is not intended to be exhaustive. The factors will differ with the nature and extent of the undertaking: The Queen v Matthews, [1974] CTC 230; 74 DTC 6193. One would not expect a farmer who purchased a productive going operation to suffer the same start-up losses as the man who begins a farm on raw land’’. The appellant has had no training in farming and his course of action appears to be one of experimentation in the years in appeal. He was, and apparently still is, looking for some type of farming operation that would not be too costly; it is my impression that the appellant does not foresee profit from his operation in the immediate future.

If the appellant had a course of action when he started farming it has deviated to something else, either because of poor economic conditions, as claimed by the appellant, or simply the inexperience of the appellant. While one would expect a taxpayer carrying on a business to incur “start-up” costs in the early years of the business, one would also expect to see more activity of a business nature than that in evidence in this appeal. The farming activity carried on by the appellant was not a business.

The appellant obviously enjoys farming and farm life and some day he may, through experience and experimentation find a farming activity which will be a business and susceptible of profit; but for the years in appeal the appellant did not look to farming, or to farming and some subordinate source of income for his livelihood. The appeal will be dismissed.

Appeal dismissed.