Gilles Morisset v. Minister of National Revenue, [1984] CTC 2202

St-Onge, TCJ [TRANSLATION]:—The appeal of Mr Gilles Morisset came before me on November 28, 1983 in Rouyn, Quebec.

The case involves farm losses which the appellant is attempting to deduct for his 1977, 1978, 1979 and 1980 taxation years.

The facts of this appeal are set out in paragraphs 2, 4 and 8 of the reply to the notice of appeal, which read as follows:

2. In computing his income for his 1977, 1978, 1979 and 1980 taxation years, the appellant reported the following amounts as farm losses:

Year	(Loss reported)
1977	($5,000.00)
1978	($4,658.00)
1979	($4,314.00)
1980	($4,008.00)

4. In making these reassessments, the respondent disallowed the amounts claimed by the appellant as farm losses, thereby adding the following amounts to the income already reported by the appellant:

Year	Income added
1977	$5,000.00
1978	$4,658.00
1979	$4,314.00
1980	$4,008.00

8. In assessing the appellant for his 1977, 1978, 1979 and 1980 taxation years, the respondent relied on the following facts, inter alia’.

(a) During the period in question, the appellant was a full-time travel agent;

(b) In July 1973 the appellant purchased a 99-acre property for $12,500.00, for the purpose of setting up a cattle farming business;

(c) From 1973 to 1980 the appellant never owned a proper herd of animals, being content to keep a few animals including 1 cow, 1 calf, 3 horses and a few hens, preferably during the summer months;

(d) During the years in question the income generated by the appellant’s farming activities was minimal, being only in the order of $1,295.00 in 1977, $1,735.00 in 1978, $392.00 in 1979 and $264.00 in 1980;

(e) The said income was made up partly of the proceeds of the sale of a few animals, as well as government subsidiaries .. . .

(f) During the said taxation years the expenses incurred by the appellant to generate the said income were in the order of $10,314.00 in 1977, $8,591.00 in 1978, $6,522.00 in 1979 and $5,787.00 in 1980;

(g) The said expenses incurred by the appellant were occasioned principally by the renovation of various buildings and of the residence located on the appellant’s farm and by the appellant’s use of the said residence;

(h) During the years in question the appellant did not operate a business with a reasonable expectation of profit;

(i) The appellant never carried out his intentions, which according to him were to operate a cattle farming business;

The appellant admitted paragraphs 2 and 4 and subparagraphs 8(d) and (f) of the reply to the notice of appeal.

The Court is of the view that the respondent proved his subparagraphs 8(a), (b), (c), (e), (g), (h) and (i) of the reply to the notice of appeal.

The following paragraph in Exhibit I-2, at pages 3 and 4, reads as follows:

The “objector” took several theoretical and practical courses in farming and has been a member of the farm producers’ union for several years. His inexperience led him to acquire various types of livestock that were unprofitable owing to the economic situation and government policies. Having acquired a certain amount of experience over the years, the “objector” now wishes to raise cattle. He would buy the calves in the spring, fatten them and then sell them in the fall. To do this he will buy a few cows for milk and his land would provide him with the necessary fodder and grain for this type of herd.

The evidence showed that the appellant had neither the time nor the basic herd to operate a farming business with a reasonable expectation of making a profit. He testified that certain farm implements, such as a tractor, bailer, rake, harvester, plough, creamer, manure spreader, truck and trailer, had been purchased between 1977 and 1980, but he changed his evidence under cross- examination and admitted that many of these implements had been acquired before 1975.

The evidence showed that the appellant’s income from the travel agency was rather substantial compared with the gross income from the farming operations:

1977 $5,800 1978 — $8,000 1979 $8,400 1980 — $16,800 1981 — $15,800 1982 — $7,200

Whereas the gross income from the farm was:

1977 — $1,295 1978 — $1,200 1979 $392 1980 — $264 1981 — $3,649 1982 — $3,440

These figures show clearly that there was never a reasonable expectation of making a profit, especially when one considers the nature of the expenses incurred.

The evidence showed that when the appellant bought 23 cows, he did not become the owner of them but kept them for a livestock dealer, and in fact derived no profit from this transaction. He said that his intention was to “stay on the land’’ with his family. The evidence showed that the farm was not operated with the intention of making a profit and that the expenses incurred were much more personal expenses than expenses to make a profit.

What struck me most was the fact that the appellant did not succeed in proving to the Court the existence of a specific plan, between 1977 and 1980, that would have enabled him to operate his farm with a reasonable expectation of making a profit.

The appellant had the onus of proving that the Minister of National Revenue’s assessment was unfounded in fact and in law, but did not succeed in doing so.

For these reasons the appeal is dismissed.

Appeal dismissed.