T Gordon Wright v. Minister of National Revenue, [1985] 2 CTC 2083

St-Onge, TCJ [ORALLY]:—The appeal of Mr T Gordon Wright was heard on January 16, 1985, in the City of Vancouver, British Columbia, and the issue is whether the appellant is entitled to deduct a betting loss from his commercial fisherman business in his 1981 taxation year.

The contentions of the parties are stated in paragraph 6 of the reply to the notice of appeal which reads as follows:

6. In so reassessing the Appellant the Respondent relies, inter alia, upon the following assumptions:

(a) The Appellant was at all relevant times resident in Vancouver, BC.

(b) The Appellant had been interested in betting on horse races for approximately ten years as a pastime or hobby.

(c) The Appellant spent two months in 1981 at the Santa Anita Race Track in Arcadia, California betting on horse races.

(d) The Appellant does not own or breed horses.

(e) Although the Appellant has been carrying on his betting activities for a number of years and is well organized, he does not have any special knowledge or inside information which would minimize his risks and reduce the element of chance in his betting activities.

(f) The Appellant did not carry on the business of betting on horse races in his 1981 taxation year.

(g) The expenses claimed by the Appellant with regard to his betting activities were not outlays or expenses made or incurred by the Appellant for the purpose of gaining or producing income from a business but were personal or living expenses of the Appellant.

The appellant was the only witness to testify. He is a fisherman by trade and in 1971 he started to be interested in the horses. He read numerous books and received numerous newsletters and quarterly periodicals to become a professional gambler.

From 1973 to 1978, although he did some gambling as a hobby, there is no record available for these years and the evidence shows that in 1980, he won a net gain of some $12,000 and in 1981 incurred a loss of $41,892 in betting in horseraces at Santa Anita racetrack in Arcadia, California.

In 1981, the appellant decided to be in the business of betting on horses. He opened a bank account at the Bank of America at Acadia and deposited therein most of his savings. He even borrowed some $18,000 in American money.

His day-to-day activities in Arcadia during his eight weeks consisted of four to six hours of handicapping in his hotel room. Once at the racetrack he would make a visual inspection of the horses and the final choice would also depend upon the betting odds.

He also retained horse race experts for advice at a total cost of $500. He explained that he was not like the people who go to the racetrack to have fun, to relax, and to bet on hot tips or to choose a horse by the name of a child or a friend.

On the contrary, every day he did a lot of study of the horses, a lot of computation with respect to their records and was at the racetrack from 9:30 to 4:15.

The appellant had a more scientific method of choosing his horses because he was using basic information which came from documents and his knowledge that he had absorbed during the years. However, he could not give a logical explanation for his substantial loss of 1981.

Exhibit A-1 was filed to show his earnings as a commercial fisherman from 1976 to 1983, and Exhibit A-2 to show his earnings from roe herring fishery. The said Exhibits read as follows:

It may be seen, with respect to roe herring fishing, there was a strike in 1980, no income in 1981, and a small income in 1982.

Upon cross-examination, amongst other things, he explained that with respect to his big loss, he went to see his bank manager who advised him to see an accountant. The latter told him that he could claim it as a business loss.

Counsel for the appellant argued that this case should be decided on the facts and that the appellant did everything he could to be in the business of betting.

The month of March was his best month to fish, but the appellant went to gamble in Arcadia because it was his livelihood and not his pleasure. Then, he referred the Court to a substantial jurisprudence and commented on the main principles which help to find a solution.

In most of these decisions, the appellants were reassessed following a net worth assessment which means that for a certain number of years, they had reported no income or not enough compared to the assets they had. After investigation it was discovered that for all those years the appellants’ main or sole occupation was gambling, so they were in the business.

In the case at bar, such is not the case. It is obvious that Mr Wright’s occupation from 1971 was the fishing business and some gambling as a hobby. The figures are there to prove it, but there is no record to indicate the importance of his gambling activities in those years. The year before his substantial loss, he made a net gain of $12,000 that he did not report as income.

In 1981 when he incurred a substantial loss he did not know what to do, so he went to see his bank manager who told him to see an accountant. It is only then that he learned about the possibility of being in the gambling business.

According to this evidence, it is obvious that the appellant never had the intention of reporting his gambling gains as income which would have qualified him as being in the gambling business.

It is only when he incurred a substantial loss that he wanted to be qualified as such. Furthermore, his scientific method of betting has been used by many others who never wanted or tried to be qualified as being in the gambling business, even if they were not more lucky than the appellant.

According to the appellant’s background, the fact that he went for eight weeks to gamble in Arcadia cannot constitute his livelihood for this short period of time in his life, especially when in March, 1980, there was a strike and in March 1981 an income of only $4,000. In that period of time, it appears that the strike did affect the roe herring fishing.

Gambling is a risky business and it is difficult to have a reasonable expectation of profit even if a taxpayer is a sophisticated gambler who uses scientific methods of gambling. The case at bar is a perfect example.

For these reasons, the appeal is dismissed.

Appeal dismissed.