Ross Farrell v. Minister of National Revenue, [1985] 1 CTC 2072

Christie, CJTC:—The appellant appeals in relation to his 1977 to 1980 taxation years inclusive. At the commencement of the hearing I entertained an application to quash the appeal respecting 1977, 1978 and 1979 which was based on the ground that the appellant failed to comply with paragraph 169(a) of the Income Tax Act (“the Act”). This paragraph provides that where a taxpayer has served a notice of objection by sending it registered mail addressed to the Deputy Minister of National Revenue for Taxation at Ottawa, he may appeal to the Tax Court of Canada to have the assessment vacated or varied after the Minister has confirmed the assessment, but no such appeal may be instituted after the expiration of 90 days from the day notice has been mailed to the taxpayer by registered mail that the Minister of National Revenue has confirmed the assessment.

Maureen Hughes, a senior appeals clerk in the Appeals Section of the Department of National Revenue, Taxation, swore by affidavit that a notice of confirmation of the Minister’s assessments in respect of the appellant’s 1977, 1978 and 1979 taxation years was sent by registered mail to the appellant on July 22, 1983. This was not contradicted. Applying section 25 of the Interpretation Act, RSC 1970, c I-23, the appeal should have been instituted not later than October 20, 1983. The notice of appeal is dated Friday, October 21, 1983, and was sent from Langley, British Columbia to Ottawa. It was received there on Wednesday, October 26, 1983. If there was nothing more, the application to quash would have succeeded regardless of the closeness of the time factor: MacDonell et al v MNR, [1984] CTC 2279; 84 DTC 1258.

Counsel for the appellant argued however that there was a defect pertaining to the notice of confirmation by the Minister of sufficient significance to justify dismissing the application. The defect referred to is that the notice should have been sent to a different address. The material before me, including that forwarded to the Court pursuant to subsection 170(2) of the Act, and what was said at the hearing shows that three different addresses for the appellant were involved during the years under review. The address given on each of the three returns is RR #3, 3837 Brown Road, Langley, British Columbia, V3A 4P6. The address given on each notice of reassessment is 3837 — 240th Street, RR #12, Langley, British Columbia, V3A 4P6. The address given by the appellant on the notice of objection which, of course, is the document which relates directly to the notice of confirmation by the Minister is #202, 20559 Fraser Highway, Langley, British Columbia, V3A 4G3. In my opinion, the notice of confirmation should have been sent to the appellant at this last-mentioned address. It was the last address of the appellant of which the respondent had been given notice. No evidence was tendered to establish that, between the time that the notice of objection was sent to the Deputy Minister of National Revenue and the mailing of the notice of confirmation the appellant did anything which would lead officials of National Revenue to believe that the notice Of confirmation should be sent to an address other than that contained in the notice of objection. In fact the notice of objection was sent to the first-mentioned address, ie, RR #3, 3837 Brown Road, Langley, British Columbia, V3A 4P6. I concluded that this deficiency was a valid ground for refusing the application to quash and accordingly it was dismissed. The appeal then proceeded on its merits in respect of all of the years previously mentioned.

While material before the Court, eg, the notice of appeal and the motion to quash, referred to the appellant’s 1979 taxation year as being under appeal, it was established as the evidence unfolded that the appellant reported no farm income in that year nor did he claim farming losses. It follows that the appeal is dismissed in this respect.

The appellant claims entitlement to the restricted farm losses referred to in subsection 31(1) of the Act. The amounts claimed are: 1977, $2,078.57; 1978, $2,431.16 and 1980, $3,146.19. The issue is whether the appellant’s farming undertaking was a business during the years just mentioned within the meaning of the relevant legislation. This in turn raises the question whether the appellant has established by a preponderance of evidence the existence of profit or a reasonable expectation of profit. If the answer is in the negative, the appeal must be dismissed. The existence of a reasonable expectation of profit is not to be determined by the presence of subjective hopes or aspirations, no matter how genuine or deep felt they may be: Kerr and Forbes v MNR, [1984] CTC 2071; 84 DTC 1094.

In 1962 the appellant purchased 3.89 acres of land for $6,000 in the vicinity of Langley, British Columbia. He constructed a number of buildings on the property, including a home, a barn, two chicken houses and a greenhouse. He has suffered an uninterrupted string of farming losses since 1962. The appellant tendered a statement in evidence (Exhibit A-2) showing that from 1974 to 1983 inclusive he had annual income from employment unrelated to farming which varied between $9,835 and $23,855. In the years under review his income from this unrelated source was 1977, $14,225; 1978, $14,861.17 and 1980, $18,403.84. During the same years income from the farming operation averaged 54 per cent of the expenses incurred in relation thereto. Even with the application of an approach which is generous in favour of the appellant in relation to start-up time and costs he is still left with a formidable task in order to succeed. Consistent annual losses for over a decade prior to the first year under review, which losses persisted throughout those years and thereafter, must lead to the conclusion that the appellant’s farming operation did not constitute a business in the absence of evidence of exceptional circumstances which provide a foundation for an objective determination that there was a reasonable expectation of profit during the years under review. Evidence of this kind was not adduced at the hearing. Sequentially, the appellant cannot succeed.

The appeal is dismissed.

Appeal dismissed.