Jean-Yves Leguillou v. Minister of National Revenue, [1984] CTC 2397, 84 DTC 1367

Cardin, TCJ:—Jean-Yves Leguillou is appealing from assessments with respect to the 1977, 1978, 1979 and 1980 taxation years. In his notice of appeal the appellant set out the issue succinctly:

1. The Minister disallowed deductions for agricultural property;

2. The Minister disallowed deductions for losses on appellant’s earnings as an author;

3. Both deductions are fully justified.

Summary of Facts

Prior to 1977 the appellant, a professor at the University of Montreal, operated a farm in Rawdon, Quebec. Its principal operations were with respect to horses. In 1977 the appellant’s Rawdon farm burnt down resulting in a considerable loss to the appellant.

In 1978 the appellant purchased a property in St Lazare Station measuring 300’ X 300’ for $55,000.

The appellant’s principal residence was situated on the land. A stable was erected on the site and part of the land was fenced to contain and train horses.

The appellant originally had three riding horses at the Rawdon farm which he transferred to the St Lazare property. The three horses had been acquired between 8 and 12 years previously. It is my understanding that the appellant boarded a fourth horse on the St Lazare farm. For lack of a better word to describe the appellant’s so-called farm operations I shall refer to the appellant’s horse activities.

In the years under review the appellant gave riding lessons to three or four persons. The appellant and his family enjoyed riding and did so regularly. That was the only use to which the farm was put. During the same period of time the appellant wrote three essays, “Le voyage au-delà des trois mers’’, “Le dit de la campagne” and “Grammaire des vieux Russes”, for which grants had been received from both the University of Montreal and the University of Quebec.

In his tax returns the appellant claimed deductions for the following amounts: The amounts of $9,344.75, $11,099.60, $12,622.50 and $15,765 are in issue for the respective taxation year under review.

The appellant’s income and expenses for farm operations (horses) were:

The evidence is that the appellant also incurred farm losses of $7,509 and $8,857 for the 1975 and 1976 taxation years respectively.

The appellant’s income and expenses as an author were:

On the basis of these figures, counsel for the respondent’s position is that the appellant cannot be said to have had a reasonable expectation of profit from his “horse operations” nor from his activities as an author. He concludes that the Minister properly disallowed all of the farming losses and the losses claimed by the appellant as an author.

At the hearing the appellant attempted to establish a direct relationship between the losses from the “horse” activity and those of the appellant’s activities as an author.

The appellant alleged that in the years under review he was writing a book on horses and in particular on the muscular movement of horses when in motion. The appellant claims to have come upon a photographic technique by which the various leg-movement motions of a horse in executing training steps can be studied on one photograph (Exhibit A-2). At the hearing the appellant contended that all the expenses and losses claimed stem from the same source, ie experimenting with horses for purposes of writing a book. The appellant is alleged to have been told by one publisher in Europe that such a book would be able to attract a price of $40 a copy. Mention was also made of an author who realized some $300,000 for a similar book on horses.

I am not at all convinced that the appellant seriously considered that his farming losses and his losses as an author were from the same activities.

The appellant’s tax returns and his notice of appeal indicate a clear distinction between his losses from farming and his losses from writing. The preponderance of the evidence supports that position.

As a professor of Slavic languages at the University of Montreal this appellant earned as salary the amounts of $28,889.36; $34,392.86; $34,628.77 and $40,522.75 for the 1977, 1978, 1979 and 1980 taxation years respectively.

The only income earned from the horses was for riding lessons for three to four persons over the period of three years. There was no evidence of any planning to develop a greater potential for the appellant’s horse activities. The appellant’s principal income from giving riding lessons in the years under review cannot objectively be considered as a business. Not only was there no reasonable expectation of profit from giving riding lessons, but there was no indication that the appellant intended to increase his income from that source or from any other possible farm activity.

The appellant’s accomplishment as an author was the writing of the three essays mentioned earlier. The essays had no bearing whatever on the appellant’s horse activities. The income derived from the appellant’s writing was $1,629.41 whereas the related expenses incurred were $20,301.16 for the 1977, 1978 and 1979 taxation years. The evidence is that the appellant had written 700 pages of his book on horses. Since the appellant claimed that the farming losses and the losses of an author came from the same source, it follows that his activity with respect to his book on horses covered a period of three years and represents but a very small portion of the appellant’s time per year in writing the book on horses.

The appellant’s son confirmed that all the members of his family enjoyed riding and did so regularly. With respect to photographic sessions with the horses the witness stated that approximately 20 sessions of two to five hours’ duration were held over the period of three years.

The appellant has not, in my opinion, met any of the criteria established by the Courts in determining whether or not a taxpayer is in the business of farming.

A review of the evidence will clearly indicate that the appellant invested very little capital with respect to his farming activities — building a stable for three riding horses and a riding path both of which are personal expenditures in the circumstances of the appeal.

The appellant had no plans for developing his horse activities into a business which could have had a reasonable expectation of profit.

The appellant spent very little time in giving riding lessons over the period of three years. One hundred hours spent in photographing the horses hardly warrants considering that activity as a business either with respect to his horses, to the appellant’s writing activity or even a combination of the two.

The appellant did not keep separate records for his so-called farming activities or for his activity as an author.

The appellant did not, in the years under appeal, look to riding lessons and/or to his activity as writer for his livelihood.

If giving riding lessons can be considered as farming (I have serious doubts that it can) it cannot, in my opinion, be considered as a sideline business, because it did not have an objective and reasonable expectation of profit.

Indeed for the whole period from 1974 to 1980 the appellant had consistently shown farm losses and the Court has been given no reason for expecting a profit in the future from the appellant’s limited use of the horses.

The appellant’s activities as an author do not easily fall into the concept of what constitutes a business. The appellant’s accomplishments as an author: three essays (and even the 700 pages of a book) over a period of three years, do not convince me that the appellant was in the business of writing. Here again the appellant’s time and effort with respect to writing and the very modest income it generated precludes the appellant from being considered as having been in the business of writing in the pertinent taxation years.

The appellant was optimistic that his book on horses would be successfully published and would be a source of considerable income. Indeed the appellant may be right and the book could be a financial success. The appellant some day might become greatly involved in the business of writing. However based on the facts and figures with respect to the appellant’s accomplishments he was not in the business of writing in the years under appeal. He was enjoying and sharing with his family a style of life and a longstanding hobby and interest in horses. The fact that a taxpayer enjoys certain activities does not of course preclude him from being in business with respect to those activities. However, whether a taxpayer enjoys his activities or not, all the criteria and earmarks of a business which are questions of fact must be clearly seen before a taxpayer can be said to be in business. In this appeal the appellant did not meet the criteria of a business.

I conclude that the appellant had no reasonable expectation of profit and was not in the business of farming; nor was he in the pertinent taxation years in the business of writing as an author.

The respondent in his assessment did not err in disallowing all the farming losses claimed by the appellant in 1977, 1978, 1979 and 1980, nor did he err in disallowing losses as an author in the 1977, 1978 and 1979 taxation years.

The appeal is dismissed.

Appeal dismissed.