Bonner,
T.C.J.:
—[Orally]
The
appellant
appeals
from
assessments
of
income
tax
for
the
1977,
1978,
1979
and
1980
taxation
years.
The
respondent
made
the
assessments
in
question
on
the
basis
that
section
31
of
the
Income
Tax
Act
applied
to
limit
the
deduction
of
the
appellant's
losses
from
a
farming
business.
During
the
years
in
issue
the
appellant
carried
on
a
fuel
oil
delivery
business.
It
made
the
greatest
demands
on
the
appellant's
time
from
December
to
March.
The
farming
business,
which
consisted
primarily
of
raising
purebred
Arabian
horses
and
goats,
required
the
appellant's
attention
mainly
during
the
remaining
months
of
the
year.
It
was
the
appellant's
position
that
his
chief
source
of
income
during
the
taxation
years
in
question
was
either
farming
or
a
combination
of
farming
and
the
fuel
oil
delivery
business.
This
conclusion,
so
the
appellant's
counsel
argued,
was
supported
by
evidence
regarding:
(a)
time
spent;
(b)
capital
committed
(although,
as
counsel
noted,
this
test
pointed
to
a
combined
chief
source
of
farming
and
rental
of
real
property);
and
(c)
profitability,
both
actual
and
potential.
The
evidence
on
profitability
pointed,
according
to
the
appellant's
counsel,
either
to
a
conclusion
that
the
fuel
delivery
and
farm
businesses
formed
the
appellant's
combined
chief
source
or
to
a
conclusion
based
on
potential
profitability
that
farming
was
the
appellant's
chief
source.
The
farm
land
used
by
the
appellant
was
in
part
owned
and
in
part
rented
as
set
forth
on
Exhibit
A-3.
The
centre
of
operations
on
Lincoln
Avenue
is
depicted
in
photographs
taken
earlier
this
week
and
entered
as
Exhibit
A-2.
Some
of
the
buildings
shown
on
the
photographs
have
been
erected
since
1980.
They
can
be
identified
by
reference
to
Exhibit
A-1.
For
the
most
part
the
farm
buildings
were
either
moved
to
the
property
by
the
appellant
or
were
erected
using
materials
taken
from
demolished
buildings.
There
was
no
evidence
as
to
the
cost
or
value
of
the
buildings
which
were
in
place
during
the
years
in
question.
There
was
no
clear
evidence
as
to
what
buildings
and
equipment
were
in
fact
required
in
order
to
successfully
conduct
the
farm
operation
carried
on
during
the
years
in
question
or
contemplated
during
the
years
in
question.
There
was,
however,
evidence
summarized
on
Exhibit
A-3
as
to
the
approximate
cost
of
the
equipment
which
the
appellant
did
in
fact
possess.
I
have
no
doubt
on
the
evidence
that
the
appellant
spent
more
time
on
the
farm
than
he
did
on
the
fuel
delivery
business.
However,
the
appellant
did
live
on
the
farm
and
it
was
not
at
all
clear
how
much
of
the
time
spent
on
the
farm
was
required
for
purposes
of
revenue-generating
activities.
In
cases
such
as
this
care
should
be
taken
to
distinguish
between
time
necessarily
spent
conducting
farming
operations
and
mere
presence
on
the
farm
property
on
which
the
home
is
also
located.
The
appellant
testified
that
he
started
to
sell
off
his
Arabian
horses
in
1979
when
he
observed
that
prices
had
started
to
fall
as
a
result
of
a
drop
in
demand
resulting
from
a
recession.
The
evidence
was
vague
with
respect
to
what
the
financial
potential
of
the
Arabian
horse
operation
would
have
been
had
the
operation
reached
the
full
scale
planned.
I
recognize
that
revenues
depend
on
market
forces
and
on
the
quality
of
the
horses
produced
and
that
quality
depends
on
conformation,
bloodlines
and
other
factors
considered
important
in
the
market
place.
However,
the
use
in
the
evidence
of
totally
unsupported
average
figures
such
as
$2,000
an
animal
for
anticipated
horse
prices,
figures
which
appeared
to
have
been
pulled
out
of
the
air,
coupled
with
the
absence
of
projected
cost
of
production
figures,
makes
it
impossible
to
form
any
sort
of
conclusion
as
to
the
probable
financial
viability
of
the
farm
operation
had
it
expanded
to
the
size
planned.
The
principles
laid
down
in
the
Moldowan
case,
[1977]
C.T.C.
310;
77
D.T.C.
5213,
are
well-known.
Nothing
in
the
description
of
a
class
one
farmer
supports
a
conclusion
that
a
taxpayer
who
spends
most
of
his
time
working
on
a
farm
must,
for
that
reason
alone,
be
regarded
as
a
class
one
farmer.
Even
if
it
could
be
said
that
the
centre
of
the
appellant's
work
routine
was
on
the
farm,
it
cannot
be
said
that
he
looked
to
farming
during
the
years
in
question
either
for
his
livelihood
or
any
part
of
it.
Farming
had
at
no
time
prior
to
the
taxation
years
in
question
produced
a
profit.
There
was
no
basis
on
the
evidence
for
a
conclusion
that
the
operation
then
carried
on,
if
developed
to
the
full
scale
then
planned
by
the
appellant,
was
likely
to
generate
a
profit,
much
less
a
profit
of
any
significant
size.
In
my
view
the
evidence,
which
as
I
have
already
indicated
was
vague
and
therefore
unpersuasive,
falls
far
short
of
establishing
that
farming,
as
carried
on
during
the
years
in
issue
and
as
then
planned,
was
more
than
a
subordinate
income
source.
In
relation
to
the
decision
of
this
Court
in
Sidon
v.
M.N.R.,
[1987]
1
C.T.C.
2302;
87
D.T.C.
235,
and
to
the
decisions
of
the
Federal
Court
in
Morrissey
v.
The
Queen,
[1986]
2
C.T.C.
389;
86
D.T.C.
6509,
and
Timpson
v.
The
Queen,
[1987]
1
C.T.C.
389;
87
D.T.C.
5266,
it
should
be
noted
that
the
presence
of
a
reasonable
expectation
of
profit
from
a
farming
operation
will
not,
standing
alone,
lead
inevitably
to
a
conclusion
that
the
farmer
falls
into
the
Moldowan
class
one.
In
the
present
case,
as
in
Moldowan,
it
was
common
ground
that
the
appellant
was
farming
and
that
his
farming
constituted
a
source
of
income.
Here
also,
as
in
Moldowan,
those
facts
standing
alone
do
not
prevent
the
application
of
section
31
to
limit
the
deductibility
of
the
losses.
For
the
foregoing
reasons
the
appeals
will
be
dismissed.
Appeals
dismissed.
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