Cheryl L a Cassista v. Minister of National Revenue, [1983] CTC 2755

St-Onge, TCJ [ORALLY]:—The appeal of Cheryl L A Cassista came before me on July 21, 1983, at the City of Halifax, Nova Scotia, and it involves farming losses for the appellant’s 1977, 1978 and 1979 taxation years.

The facts are set forth in the reply to the notice of appeal at paragraphs 2, 3 arrd 4 which read as follows:

2. By Notices of Reassessment dated January 14, 1982, the Respondent reassessed the Appellant’s income tax liability for her 1977, 1978 and 1979 taxation years by disallowing losses claimed as business losses from a horse operation in the following amounts:

1977	—	$ 6,359.69
1978	—	$11,101.51
1979	—	$13,295.21

3. The Appellant has not served the Respondent with a Notice of Objection with respect to the assessment or reassessment of her 1980 taxation year.

4. In so reassessing the Appellant’s income tax liability for her 1977, 1978 and 1979 taxation years the Respondent made, inter alia, the following assumptions of fact:

(a) At all material times the Appellant was employed by the Halifax Board of School Commissioners and her total annual earnings from that source during the 1977, 1978, and 1979 taxation years were in the following amounts:

1977	—	$18,604.49
1978	—	20,485.27
1979	-	22,850.88

(b) In 1977, 1978 and 1979 the Appellant provided horse riding lessons; and in 1979 she also provided horse schooling on five acres (more or less) of the 117 acres of land she owns in Enfield, Nova Scotia;

(c) The purpose of the Appellant’s activities was to show Canadian bred horses;

(d) In 1977, 1978 and 1979 the Appellant reported gross income, expenses and net loss from her activities with horses in the following amounts:

	Gross Income	Expenses	Net Loss
1977	$151.00	$ 6,424.69	$ 6,273.69
1978	120.00	11,221.51	11,101.51
1979	772.76	14,067.97	13,295.21

(e) The Appellant has not established any steady customers;

(f) The Appellant has not been able to obtain financing for her activity;

(g) The Appellant had no reasonable expectation of earning a profit from her activity with horses;

(h) The Appellant’s activity with horses was not a business, but a hobby of the

Appellant and the expenses incurred by her were personal or living expenses,

(i) At no time was the Appellant’s chief source of income farming, or farming and some other source of income.

(The italics above, subparagraph 4(b) as supplied by the undersigned.)

At the hearing, the appellant has admitted paragraphs 2, 3 and subparagraphs 4(a) and (d).

The respondent has proven his subparagraphs 4(b), (e) and (f).

At the hearing the appellant testified that she had been interested in horses since the age of 11 years old. She worked for various organizations under the supervision of trainers and she volunteered her services for training. She had the public relations to start this kind of operation. In 1977, she owned 17 acres of land that she sold in 1978 to acquire a more appropriate piece of land of 117 acres for $31,000. A downpayment of $11,000 was given out of the proceeds of the sale of 17 acres.

In the years under appeal, she worked two hours a day as a teacher, and sold products for Amway Canada Limited. She resided in Halifax, Nova Scotia, and took 45 and 35 minutes each time she had to go to the first and second parcel of land, respectively. On her 117 acre parcel of land, she had a mobile trailer and a barn with four box stalls. In 1978, she had two nonregistered horses.

Upon cross-examination, counsel for the respondent, questioned the appellant on her Exhibit A-3 which is a market analysis prepared in 1978 in order to obtain some financing.

Counsel for the respondent obtained, therefrom, the two following examples of other riding schools in the vicinity of Halifax.

FIRST EXAMPLE

The appellant’s income relating to horses is as follows:

As may be seen the income from her intended farming business is so minimal that no one, by any stretch of the imagination, could conceive that there was a reasonable expectation of profit. In addition to this very poor result, the appellant has incurred more losses in her 1980 and 1981 taxation years.

In all these years, she did not hire any employees except some students who did work during the summer.

According to this evidence and in the light of the two examples taken from Exhibit A-3, it is obvious that the appellant did not carry on her horse riding school activity with a reasonable expectation of profit in her 1977, 1978 and 1979 taxation years. Even if she had the knowledge, she did not have the assets nor the financial backing to realize her goals.

For these reasons, the appeal is dismissed.

Appeal dismissed.