William R Kellough v. Minister of National Revenue, [1972] CTC 2113, 72 DTC 1090

A J Frost:—These two appeals were heard together at Toronto, Ontario, on October 26, 1971 by the Tax Appeal Board as it was then constituted, the first being from a reassessment dated December 9, 1969 in respect of the appellant’s 1967 taxation year and the other from a reassessment of even date in respect of his 1968 taxation year.

The appellant is a land economist consultant and real estate appraiser who has written many technical articles on various aspects of land economics, has lectured extensively, and has played an active role in a number of professional societies and groups associated with his profession. In the introduction to an article written by the appellant for “Valuation”, the official journal of the American Society of Appraisers, which article won an international award, the appellant’s qualifications were enumerated for his readers as follows:

ABOUT THE AUTHOR: W. R. Kellough, A.S.A., S.R.A., is President of W. R. Kellough & Associates, Land Economists and Agricultural Consultants. He is a member of the International Fraternity of Lambda Alpha and president of its Simcoe Chapter, Governor of the American Society of Appraisers and a member of the Editorial Advisory Committee of the Society of Real Estate Appraisers. He is a member of the American Society of Farm Managers and Rural Appraisers; the International Federation of Housing and Town Planning; The Community Planning Association; The American Society of Planning Officials; The Canadian Agricultural Economics Society; The American Farm Economic Association; the International Conference of Agricultural Economists and owns and operates an experimental beef farm in Ontario.

In 1960 the appellant acquired a farm in Grey County (Ontario), not far from Owen Sound, and operated it as a business under the name of “Kellwood Experimental Farm”, (hereinafter referred to as Kell- wood”). Kellwood was mainly operated as a beef experimental farm, but was also used for the study of the adaptability of European farming systems, hay silage experimentation, appraisal methods, and other related farm problems.

The issue herein is not so much a question of the appellant being in the business of farming with a reasonable expectation of profit but whether or not the Kellwood farm was part of the larger operation, the net cost of which was an outlay for the purpose of producing other income of an agricultural nature.

The following figures are of some interest in assessing the appel- lant’s business known as W R Kellough & Associates:

In 1970, the gross income increased to $105,000 of which 25% was income of an agricultural nature.

The evidence adduced clearly indicates that the appellant has achieved a high degree of specialization in the field of land economics and appraisal work. He established an experimental farm to assist him in his work, not as a hobby, as men in different professions often do, but as a legitimate business venture related to his professional specialty.

In my opinion the losses sustained in the appellant’s 1967 and 1968 taxation years in respect of the Kellwood farm are operating losses incurred in producing other income, and are deductible items under the appropriate provisions of the Income Tax Act.

The appeals are allowed.

Appeal allowed.