Grant Dunstan v. Minister of National Revenue, [1985] 2 CTC 2275, 85 DTC 567

Taylor, TCJ:—This is an appeal heard in Toronto, Ontario, on May 15, 1985, against income tax assessments for the years 1979, 1980 and 1981 in which the Minister of National Revenue disallowed farm losses claimed. Originally the “full” farming loss had been claimed for the year 1981, but the agent for the appellant at the hearing noted for the Court that the appeal now only was to claim the “restricted” farm losses. Counsel for the Minister informed the Court that the instructions from his client (Revenue Canada) were not to contest the appeal for an amount of $2,473 with respect to the year 1979. Therefore, the question before the Court is whether the amounts of $2,473.45 and $5,000 (maximum) for the years 1980 and 1981 respectively could be claimed by Mr Dunstan as fulfilling the requirement that the farming operation was conducted with a "reasonable expectation of profit .

In 1970 the taxpayer purchased three acres of land with a house on it. He proceeded to renovate the existing barn, repair the fences and generally improve the property for several years. By his own account he was not "farming although he did grow certain crops. In 1975 he rented an additional 50 acres, purchased some cattle, and acquired some machinery. He continued to rent additional land and acquired more cattle up to and including the years under appeal. He presently has some 80 acres under cultivation and has an average of about 25 cattle. His objective is to grow as much as possible of the feed and hay he needs for the cattle by eventually cultivating about 100 acres, and to raise enough cattle to make the operation viable. During all the time relevant he had been separately fully employed, and he has not acquired any land of his own beyond the original three acres — preferring to lease the land on a year to year basis. Both the appellant and his wife had been raised on farms and they worked on their present farm at all possible opportunities and he contributed to the operation all his available resources, including those from the outside employment. The agent for the appellant presented an income and expense data sheet for the years 1978 through 1984 all of which had been "adjusted for such items as capital cost allowances, basic herd and livestock inventory provision etc, in an attempt to show that which Mr Elliott regarded as "cash profit or loss. There were certain facets of these data to which counsel for the respondent took minor exception, but in general the data represented the financial history and record of the operation, and is reproduced in summary form:

In addition, the agent for the appellant introduced a pro-forma statement of income and expenses for the year 1985, which showed projected gross income of $20,370, expenses of $17,720 (again representing "cash only) and a resultant "profit of $2,650. Counsel for the Minister rapidly showed some serious weaknesses in this 1985 pro-forma statement and it is not taken into account in making this decision.

I would refer to the recent case of Gorjup v MNR, [1985] 2 CTC 2194; 85 DTC 530 in which the "restricted farm loss deduction was allowed. The Court concluded in Gorjup (supra), that to be consistent with the case of The Queen v Paul E Graham, [1985] 1 CTC 380; 85 DTC 5256, a decision of the Federal Court of Appeal, this would be the result. The instant case, in my view, while differing from Graham (supra), and Gorjup (supra), in certain

facets, nevertheless remains within the general parameters and guidelines to be seen in Graham (supra), and should have equal claim to a favourable result from a taxpayer's viewpoint.

The appeal is allowed and the matter referred back to the respondent for reconsideration and reassessment. The appellant is entitled to party and party costs.

Appeal allowed.