Hugill (R.) v. Canada, [1995] 2 CTC 16, [1995] DTC 5311

Robertson J.A.:-The sole issue in this section 28 application is whether the Tax Court judge erred in holding that expenses incurred in relation to certain cottage properties purchased by the taxpayer for rental purposes were not deductable from income for the 1986, 1987 and 1988 taxation years. Applying the decision of the Supreme Court of Canada in Moldowan v. The Queen, [1978] 1 S.C.R. 480, [1977] C.T.C. 310, 77 D.T.C. 5213, the Tax Court judge concluded that there was no reasonable expectation of profit for the years in question.

In reaching this decision, the Tax Court judge had regard to: the constant losses suffered by the taxpayer since 1984; the lack of improvements required if the properties were to be rented during both the summer and winter seasons; and the fact that the venture "has been, and continues to be, under capitalized". It is true that the applicant had a "plan" which if realized might reasonably have resulted in a profit but unfortunately it was a plan which changed from year to year as his personal financial circumstances changed. In the circumstances, the reasoning of Mr. Justice Décary in Landry v. Canada, [1995] 2 C.T.C. 3, 94 D.T.C. 6624, at page 6 (D.T.C. 6625), is particularly apt: "There comes a time in the life of any business operating at a deficit when the Minister must be able to determine objectively...that a reasonable expectation of profit has turned into an impossible dream".

In our view, there is simply no basis on which it can be said that the Tax Court judge erred either in law or in fact. For these reasons, the application should be dismissed. Application dismissed.