Bowie T.C.J.:
1 This is an appeal from the reassessment of the Appellant for income tax for the 1980 taxation year. The Appellant claimed to be entitled to take a business loss of $20,005.00 into account in calculating his income for that year. By the reassessment under appeal the Minister of National Revenue has disallowed that loss to the extent of $18,005.46.
2 The dispute arises in this way. In August 1980 the Appellant purchased a licence to distribute a speed reading course, called the Advanced Reading Course, in a specific geographic area. The licence was for 20 years, and it covered a part of the city of London, Ontario, having a population of approximately 43,000 people. The licence was sold to him by a company called St. John International Ltd. (St. John) for the sum of $100.00. He was required as well to pay a royalty of $20.00 per course sold under the licence.
3 Concurrent with acquiring this licence the Appellant was required to pay to St. John an advance royalty of $18,000.00, calculated on the basis of $20.00 per course for the first 1,000 courses sold. This was said to be the number of courses that would be sold in the first year. At the same time he was required to enter into an agreement, called a standard operating agreement, whereby a company called Raesan Development and Management Corporation (Raesan) agreed to market the course for him in his assigned territory for a period of 10 years, paying him $35.00 for each course sold. Raesan also gave the Appellant a performance bond in the amount of $15,000.00 to guarantee the sale of 1,000 units of the course.
4 As is apparent from the foregoing, the Appellant put up $5,100.00 of his own money for the licence fee and advance royalty payment; the balance of $15,000.00 was immediately set off by the $15,000.00 performance bond that he received from Raesan. It was pointed out to the Appellant by the promoter of this arrangement that the deduction of the $20,000.00 advance royalty payment from his income would produce a tax saving in the 1980 taxation year which would substantially exceed his out-of-pocket expenditure.
5 In reassessing the Appellant to disallow his claimed business loss, the Minister of National Revenue took the position that the Appellant did not have a business, and so could not have a business loss. Among others, he made the following two assumptions of fact. First, that the Appellant in taking part in the arrangements herein before described did not at any relevant time, either by himself or through others acting for him or on his behalf, carry on business. Second, that Raesan did not have a viable marketing program in place, nor did it have sufficient employees to carry out a marketing and distribution business.
6 In the course of his evidence the Appellant said that he knew nothing of how Raesan would do the marketing when he entered into this arrangement. He had never seen the offices of Raesan and he made no inquiry about its financial affairs, or about the existence of an inventory of courses to sell. So far as he knew no sale had ever taken place in his territory, and to date he has received no money from Raesan under the marketing agreement. In his evidence he admitted quite candidly that his intention in buying into the arrangement was to achieve a deferral of some of his income tax liability until a later time. The Minister's assumptions referred to above have not been rebutted by the Appellant's evidence. I find that the Appellant did not, either by his own efforts or through the efforts of an agent, carry on any commercial activity in connection with the distribution of speed reading courses in London, Ontario. It is trite to say that where there is no commercial activity there is no business, and where there is no business there can be no business loss.[FN1: <p><em>Moloney v. R.</em>(1992), 92 D.T.C. 6570 (Fed. C.A.)and<em>Tonn v. R.</em>(1995), 96 D.T.C. 6001 (Fed. C.A.)</p>] This case is not significantly different in its facts from Moloney v. R., and the Minister was correct to disallow the business loss claimed by the Appellant.
7 The appeal is dismissed.
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