James Rh H Kirkpatrick v. Minister of National Revenue, [1972] CTC 2143, 72 DTC 1120

J O Weldon:—This appeal with respect to the 1968 taxation year was heard at Kitchener, Ontario on March 25, 1971 under the Tax Appeal Board as it was then constituted. The appellant acted for himself in the matter and D J A Rutherford, Esq, acted as counsel on behalf of the Minister.

The matter in dispute herein arose out of the disallowance by the Minister of an alleged farming loss of $1,098.03 claimed by the appellant as a deduction from his income in his 1968 taxation year. it is the Minister’s contention herein that the taxpayer’s total expenditures of $1,098.03 in the said taxation year — they were treated by him as constituting his above-mentioned farming loss — were, in fact, personal or living expenses within the meaning of paragraph 12(1)(h) of the Income Tax Act, RSC 1952, c 148, as amended, and that the taxpayer did not carry on farming operations within the meaning of that term contained in paragraph 139(1)(p) of the Act in his 1968 taxation year.

The term “personal or living expenses” is defined in paragraph 139(1)(ae) of the Act. The relevant portion thereof reads as follows:

139. (1) In this Act,

(ae) “personal or living expenses’’ include

(i) the expenses of properties maintained by any person for the use or benefit of the taxpayer or any person connected with the taxpayer by blood relationship, marriage or adoption, and not maintained in connection with a business carried on for profit or with a reasonable expectation

of profit.

The taxpayer and his wife acquired their home in the country — containing some six acres of land — about 1949. He testified at the hearing of the appeal, in effect, as follows: that his home was in a real rural area; that —

there were deer in the fields opposite me and then there was a den of foxes there, etc;

that the property is presently located about a mile and a half from highway 401 and about two and a half miles from the Town Hall in Preston; that, back in 1949, the property was located about five miles from the centre of Kitchener and about four miles from its limits but is now only a mile from the said limits which extend to the Grand River; that his country home property has an exclusive land subdivision right on one of its borders and the general area is now very popular; that he owns two [1] /2-acre lots in the said subdivision and regularly enters his property through the subdivision; that he acquired further adjoining acreages to his original 6-acre property bringing his total holding of land to 25 acres as follows:

that of the total number of trees planted, as stated above, only about 20% or somewhat more are still living.

The expenditures of $1,098.03, mentioned earlier herein, which were made by the taxpayer in his 1968 taxation year are as follows:

It should be noted that, in his Notice of Objection herein dated March 12, 1970, the taxpayer stated — “I contest this disallowance of farm- ing loss — details to follow”. The details followed in a letter to the District Taxation Office at Kitchener dated May 7, 1970. Contained therein is an indication by the taxpayer that he would be content to reduce his total claim fairly substantially but no such adjustment was, in fact, made in his Notice of Appeal.

According to the Minister’s Reply to Notice of Appeal, he acted on seven specific assumptions (a), (b), (c), (d), (e), (f) and (g) in refusing to permit the taxpayer to deduct the above expenditures totalling $1,098.03 from his income in his 1968 taxation year. At the hearing of the appeal, the appellant conceded the correctness of the first five assumptions (a), (b), (c), (d) and (e), and disputed the remaining assumptions (f) and (g). The above assumptions will now be quoted because they appear to sum up the situation very concisely:

(a) The Appellant acquired about 25 acres of land near the town of Preston, Ontario, in or about the year 1949, and has since that time made his home and permanent residence there.

(b) Since the acquisition of the said land as aforesaid the Appellant alleges he has incurred from year to year, certain expenses related to the planting and growing of trees on less than 15 acres of the said land.

(c) At no time has the Appellant made any profit or received any income as a result of the planting of the said trees.

(d) The Appellant’s chief source of income is his remuneration as a Judge of the Ontario Provincial Court, and has deducted from his taxable income, expenses related to the said planting and growing of trees as follows:

Year	Farm Income	Farm Loss	Other^ Income
1961	Nil	$1,647.93
			Items in this column have been
1962		1,128.52
			deleted since they do not form
1963		1,074.67
			an essential part of the Board’s
1964		755.97	reasons.
			reasons.
1965		1,209.50
1966		1,358.80
1967		1,266.05
1968		1,098.03

(e) The Appellant carries on no farming other than the planting of trees as alleged.

(f) The area of land on which the Appellant planted the said trees is insufficient to produce a profitable crop even if they ultimately matured successfully and were harvested.

(g) The methods and equipment used by the Appellant are insufficient to support a farm operation or a business, but are consistent with the Appellant’s maintaining and improving his capital asset in a hobby sense.

The appellant’s Notice of Appeal contains the following enlightening submission:

It is submitted that the expenditures claimed as deductible are in principle identical to those of forestry management ie planting of seedlings and keeping down of inhibiting undergrowth which must surely be acknowledged as deductible expenses in the timber industry. The applicant is at an extreme disadvantage not knowing into what category growing trees for the timber market is placed viz farming, mining, or industry.

Early in the hearing of this appeal, the appellant stated quite dogmatically that his main purpose in planting all the trees referred to earlier was for timber, ie on the basis of his own evidence, to provide a wood lot resource for lumbering operations 25 to 40 years in the future. From my standpoint, it should be observed that the above estimate could be far too optimistic; that, speaking generally, the planting and growing of trees for timber is not farming within the meaning of paragraph 139(1)(p) of the Act but constitutes reforestation; that, while a forward-looking farmer would be well advised and should be encouraged to protect and build up any natural wood lot on his farm by removing deadwood therefrom and planting trees to provide “some revenue in 20 or 25 years from the sale of fence posts, fuel-wood or pulp-wood” (that is a quotation from a booklet entitled “Planning For Tree Planting” issued by the Department of Lands and Forests of the Province of Ontario), that limited type of activity can only be regarded as purely incidental to such farmer’s main farming operations, and should not, by itself, be considered as a primary farming operation within the definition of “farming” contained in paragraph 139(1)(p) of the Act, and that reforestation is ordinarily a responsibility of government, or for large lumber and pulp-wood companies which are bound by the nature of their industry to have regard for their future timber requirements.

On the basis of the evidence and other material before me in this matter, it should be concluded that the expenditures in question herein were not made by the taxpayer pursuant to paragraph 12(1)(a) of the Act for the purpose of gaining or producing income from property of the taxpayer (there was, of course, no income in the 1968 taxation year or in any previous year from 1961 to 1967) or from a business of the taxpayer because there was not a tittle of evidence herein of the existence of any type of business whatsoever.

In the result, the appeal with respect to the 1968 taxation year should be dismissed and the relevant assessment confirmed.

Appeal dismissed.