Dubienski,
D.J.T.C.C.:—This
appeal
was
heard
under
the
informal
procedure
in
Winnipeg,
Manitoba,
on
January
12,
1993.
The
facts
in
this
case
are
fairly
simple,
and
are
as
follows.
The
appellant
is
appealing
the
disallowance
of
the
Minister
of
National
Revenue
for
the
deduction
of
farm
losses
for
1987,
1988
and
1989.
The
appellant
for
the
three-year
period
had
a
small
40-acre
farm
in
Ontario
as
a
hobby
farm,
and
for
the
last
18
years,
has
farmed
in
Manitoba,
the
subject
matter
of
this
appeal.
In
1975,
he
moved
to
Manitoba,
purchased
120
acres,
and
decided
to
take
up
farming.
In
1980,
he
decided
to
start
farming
full-time,
and
borrowed
a
considerable
amount
of
money
to
expand
it
for
the
purposes
of
producing
cattle
and
other
livestock.
He
indicated
to
the
Court
a
long-term
plan
that
he
embarked
upon
in
1980,
and
traced
the
history
of
this
farming
operation
from
that
date.
He
did
not
show
very
satisfactory
results
initially,
and
in
1982,
he
devised
a
beef
plan
and
a
cow/calf
operation.
In
1984,
he
encountered
banking
problems
and
arranged
to
develop
a
long-term
plan
to
run
10-12
years
that
he
presented
to
the
bank.
In
the
meantime,
he
had
become
unemployed
and
started
his
own
accounting
business.
During
most
of
this
period,
he
used
the
income
from
this
business
to
finance
the
farm
operation.
From
time
to
time,
he
reviewed
the
plan
and
made
amendments
where
necessary,
and
reviewed
his
progress
from
year
to
year.
In
1986,
he
made
some
plans
to
develop
the
production
of
hay,
pigs
and
chickens;
however,
in
1987,
the
weather
was
wet
and
he
had
no
hay.
In
1988,
it
was
hot
and
there
was
no
native
hay;
in
1989,
he
needed
more
land
and
larger
equipment,
and
entered
into
a
joint
venture
with
regard
to
chickens.
He
testified
that
he
personally
devotes
three
hours
a
day
to
his
farming
and
has
always
done
so,
and
works
on
Saturdays
and
Sundays,
holidays,
and
takes
his
vacation
on
the
farm.
He
said
that
the
reasons
for
the
losses
in
the
taxation
years
in
question
are
that
in
1987,
there
was
a
rain
which
created
a
disaster
and
there
was
no
hay;
in
1988,
there
was
no
rain,
low
production
of
tame
hay
and
no
native
hay;
in
1989,
there
was
low
temperatures
in
May,
the
chickens
were
lost,
and
there
was
rain
that
drowned
the
grain
and
he
was
not
able
to
have
any
weed
control.
He
said,
"they
at
all
times
felt
he
had
a
reasonable
expectation
of
profit",
and
"matters
would
be
in
good
shape
after
things
got
rolling”.
In
actual
fact,
historically,
the
business
shows,
commencing
in
1980,
the
losses
were
considerable
and
the
amount
of
$5,000
was
claimed
for
each
of
the
years
1980-86
inclusive.
In
1987,
the
losses
became
somewhat
less,
being
$4,984
in
1987;
$7,132
in
1988;
and
$5,712
in
1989.
The
result
was
the
taxpayer
claimed
the
following
for
each
of
the
years
in
question:
$3,742
in
1987;
$4,991
in
1988;
and
$4,106
in
1989.
The
appellant
argues
that
he
showed
that
he
had
spent
considerable
time
in
planning
and
had
been
conscientious
in
developing
his
business,
that
he
did
everything
that
was
possible
to
show
a
profit,
but
that
he
was
unable
in
the
three
years
in
question
to
achieve
his
goal
because
of
outside
forces.
He
attempted
to
operate
as
frugally
as
possible,
not
getting
into
high
finance,
and
he
made
a
long-term
plan
in
1980,
revised
it
in
1986,
and
followed
it
and
tried
to
implement
it.
He
claims
that
his
actions
show
that
his
plans
were
developed
properly
and
in
detail,
and
that
he
tried
to
manage
the
risk
and
to
control
and
implement
the
plan.
The
Crown
argues
that
the
history
of
this
operation
shows
that
at
no
time
was
there
a
reasonable
expectation
of
profit.
Aside
from
the
fact
that
the
appellant
does
not
have
a
great
deal
of
farming
experience,
he
tried
to
acquire
it
and
that
is
in
his
favour.
However,
in
spite
of
the
fact
that
he
shows
a
methodical
and
careful
plan,
it
obviously
went
off
the
rails
and
did
not
realize
its
objectives,
and
no
alternatives
were
able
to
correct
it.
It
is
clear
that
the
farm
was
never
a
business
and
was
never
in
a
position
to
possibly
be
a
business.
There
is
even
less
expectation
that
the
operation
will
be
a
viable
endeavour
in
the
foreseeable
future.
The
Court
is
impressed
with
the
decision
of
Blake
v.
M.N.R.,
[1984]
C.T.C.
2152,
84
D.T.C.
1162
(T.C.C.),
that
falls
almost
four-square
upon
the
facts
in
this
case.
In
the
cited
case,
the
taxpayer,
although
showing
a
great
deal
of
planning
endeavour
and
hard
work,
there
was
no
profit
shown
from
1986
until
the
taxation
year
in
question
of
1980.
Quoting
from
page
2153
(D.T.C.
1163)
in
the
judgment
of
Christie,
C.T.C.C.J.:
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
expecta
tion
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,
[1978]
1
S.C.R.
480,
[1977]
C.T.C.
310,
77
D.T.C.
5213.
I
must
say
that
in
my
opinion,
the
appellant
has
not
in
this
case
discharged
the
responsibility
of
complying
with
the
principles
as
above
stated,
and
therefore
the
appeal
is
dismissed.
Appeal
dismissed.
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