Donald Wallace Hart v. Her Majesty the Queen, [1981] CTC 91, 81 DTC 5070

Mahoney, J:—This is an appeal from the reassessment of the plaintiff’s 1977 income tax return. The trial was heard together and on common evidence with an appeal by the plaintiff’s wife from the reassessment of her 1977 return. Both plaintiffs are shareholders, directors, officers and employees of Hartholm Farm Limited (hereafter “Hartholm”), an Ontario Corporation engaged in the business of farming. The issue is their liability to pay income tax on a portion of the sum paid by Hartholm for a tour to New Zealand and Australia taken by the plaintiffs in 1977. In his initial reassessment of the plaintiff’s return, the Minister of National Revenue assessed 75% of the total payment of $5,236.75, or $3,927.56, to the plaintiff as a personal benefit conferred on him as an employee. Subsequent reassessments of both plaintiffs, subject of the present appeals, resulted in $1,963.78 being assessed to each. The $5,236.75 was the total price of the tour package. In addition, the plaintiffs spent some $1,300 of their own money on the trip.

Hartholm operates a 1,333 acre farm in Oxford County, Ontario. 1,080 acres are under cultivation. Since it stopped feeding cattle in early 1977, it has been engaged primarily, if not exclusively, in raising wheat, corn, soya and white beans as cash crops. In addition to the plaintiffs, it employs their son and another man full time as well as casual labour as required.

Mr Hart is clearly Hartholm’s directing mind. He graduated from the Ontario Agriculture College at Guelph with a BSc in agriculture having majored in farm economics. He is a knowledgable, competent and innovative businessman. His business is farming. Mrs Hart is Hartholm’s bookkeeper. She runs errands, such as picking up spare parts, whether the other employees are busy and is a sounding board for her husband’s ideas.

The tour was organized for the Oxford County Soil and Crop Improvement Association. Except for the provincial government’s district agriculturalist and his wife, all participants were active farm couples. The tour seems to have been as loaded with agriculturally oriented activities as was reasonably possible. Aside from a 24 hour stopover in Honolulu each way, every day not spent in long distance travel entailed a tour through agricultural areas of New Zealand or Australia, visits to farms or agricultural institutions, meetings with government agricultural officials, farmers or ranchers or a combination of such activities. A good deal of this activity related to matters of no immediate interest to Hartholm, notably sheep. On the other hand, Mr Hart did pick up two ideas that he has since incorporated in Hartholm’s operation that, on the evidence, have more than paid for the cost of the trip. I think it fair to infer that while Hartholm did not send Mr Hart to the antipodes with the specific mission of bringing back something, tangible or otherwise, that it could turn to profit, it had good reason to be confident that if something potentially profitable were there, he would not overlook it. Inclusive of dates of departure and return, the tour consumed 23 days. Hart estimates, and the program supports his estimate, that about 45% of their waking hours were spent in actual travel, 20 to 25% in social activities and 30 to 35% on “business”.

I do not find it necessary to review the expert evidence of Dr Terry Day- nard. Insofar as it was competent and relevant, it merely corroborated Mr Hart who was, himself, entirely credible. Mrs Hart did not testify.

Hartholm’s deduction of the $5,236.76 as a business expense was not questioned by the Minister. The sole issue is whether and, if so, to what extent the payment for the tour constituted a personal benefit to each of the Harts as employees of Hartholm.

The Minister has recognized the tour as a combined business and holiday trip. The questions to be answered, as framed by Thurlow, J, as he then was, in CA Philp et al v MNR, [1970] Ex CR 496; [1970] CTC 330; 70 DTC 6237 are firstly,

. . . Whether the right or occasion for the appellant and his wife to make such a trip was something of value having regard to what it was, that is to say, a combined business and holiday trip taken in the circumstances as I have endeavoured to describe them.

and, secondly,

. . . not “what was the value of the holiday portion of the trip?” but rather “what was the value as a holiday trip of such a combined business and holiday trip regarded as a whole?”

In that case, employees of a grocery chain, with their wives, won the right to participate in combined business and holiday trip to Bermuda on the basis of points accumulated during a nine month promotional campaign. Those who did not accumulate sufficient points had to pay a portion of the cost personally.

As to the first question, the tour was of personal value to the Harts entirely apart from its business value. There may well be an incidental personal value inherent in many purely business trips but the personal benefit to the Harts in this case was not a mere incident of a business trip. A holiday oriented toward one’s business or professional interests remains a holiday; it is not, per se, a business trip.

In answering the second question, I must, I think, ignore the $1,300. In this instance, as in most other disputes with the tax collector, the onus is one the taxpayer to prove the facts upon which he premises his position. While it appears that some of the $1,300 was spent on necessities not included in the package tour price, it is likewise apparent that there were personal outlays. I have no basis upon which to allocate the $1,300 as among, for example, meals not included with the package and souvenirs.

The Minister has been generous with Mrs Hart. The value of the combined business and holiday trip to her was, on the evidence, almost entirely as a holiday. Her appeal will be dismissed.

As to Mr Hart, I am of the opinion that, as nearly as it can be estimated on the evidence, the holiday value of the trip was half the $2,618.38 paid for him by Hartholm. His appeal succeeds to that extent.

There will be no order as to costs in either action. A copy of these reasons will be filed in and form part of the record in Mrs Hart’s appeal. Mr Hart’s assessment will be referred back to the Minister for reassessment in accordance with these reasons.

In conclusion, I must point out that my finding that this tour was a combined business and holiday trip for both plaintiffs reflects admissions on behalf of the defendant in both actions. It was not an issue. I should not wish this judgment to be construed as authority for the proposition that a “busman’s holiday” is necessarily a combined business and holiday trip.