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In connection with the primary argument counsel referred to a number of cases including the decision of the Exchequer Court in Trans-Prairie Pipelines, Ltd v MNR, [1970] CTC 537; 70 DTC 6351, as authority for the proposition that an expense may be regarded as incurred for the purpose of gaining or producing income from a business or property even though it is not possible to trace the expenditure directly to a precise dollar of income earned. ...

In connection with the scheme the appellant entered into an agreement with the Crown in Right of Canada represented by the Minister of State for Urban Affairs. ...

In assessing tax as aforesaid, the Respondent relied, inter alia, upon the following findings or assumptions of fact: (a) the Appellant during the period under appeal was employed as a teacher and was also a municipal officer of the corporation of the Town of Dunnville; (b) in 1964 the Appellant purchased 53 acres of land in Dunnville and in 1965 he purchased an adjoining 45 acres of land to give him a total of 98 acres of land (hereinafter) referred to as the “farm”); (c) in 1969 the Appellant sold 30 acres of the farm land; (d) the Appellant has never made a profit from the operation of the farm and has reported the following gross revenue, expenses and losses resulting from the operation of the farm: Year Gross Revenue Expenses Losses 1980 $1,332.75 $8,142.18 $6,809.43 1979 1,319.50 8,608.70 7,289.20 1978 1,098.50 8,598.50 7,500.00 1977 1,120.70 7,946.44 6,825.74 1976 (not available) — — 1975 635.72 3,489.59 2,853.87 1974 398.00 1,939.35 1,541.35 1973 350.00 1,325.57 1,024.43 1972 397.91 1,450.53 1,052.00 1971 nil 1,489.70 1,489.70 1970 nil 1,801.35 1,801.35 1969 nil 3,178.89 3,170.89 (sic) 1968 5,132.72 7,071.55 1,938.83 1967 2,036.65 6,801.37 4,764.72 1966 4,231.54 4,874.78 643.24; (e) during the period under appeal the Appellant used approximately three acres of the farm land to grow vegetables for the personal consumption of the family, the remainder of the land was rented out to another farmer under a share-crop agreement; under the terms of the share-cropping agreement, the Appellant’s share was limited to a maximum of approximately $2,000,00, but has never exceeded $1,200.00; (f) the Appellant was not during the period under appeal carrying on a farming operation with a reasonable expectation of profit; (g) the expenses deducted by the appellant from farm revenue which caused the losses were not incurred for the purpose of gaining or producing income from a business or property but were the expenses of property maintained by the Appellant for the use of his family and not maintained in connection with a business carried on for profit or with a reasonable expectation of profit. ...

Attached and marked Exhibit “A” is a photocopy of my solicitors reporting letter in connection with the said purchase. ...

—where the taxpayer was employed in the year in connection with selling of property or negotiating of contracts for his employer, and (iii) was remunerated in whole or part by commissions or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated. ...

The appellant had no other connection with the farming business until the Spring of 1976 when he purchased the farm in question as a going concern. ...

In assessing tax as aforesaid, he relied inter alia, upon the following findings or assumptions of fact: — the Appellant purchased 50 acres of land at RR #1, Canfield, Ontario, in 1974 for $30,000.00 cash and gave a $38,000.00 mortgage on the property in order to finance the building of a house and barn; — the Appellant commenced his farming activities in 1976: — from the time the Appellant commenced his farming activities, no profit has been earned by the Appellant from the operation of the farm; — farm losses claimed by the Appellant in computing his income for the 1976 to 1981 taxation years totalled $849.93; $6,999.79; $7,994.39; $9,760.99, $7,941.03 and $6,934.62 respectively; — the farm was maintained by the Appellant for his own use or benefit, and for the benefit of persons connected with the Appellant by blood relationship or marriage and was not maintained in connection with a business carried on for profit or with a reasonable expectation of profit; — the expenses incurred by the Appellant with respect to the farm were personal or living expenses of the Appellant and not outlays or expenses incurred to earn income from a business or property; — In the alternative, the Respondent submits that the Appellant’s chief source of income was neither farming nor a combination of farming and some other source of income, thereby limiting the Appellant to a restricted farm loss within the meaning of subsection 31(1). ...

Paragraph 66(15)(c) provides: 66 (15) In this section and sections 66.1 and 66.2, (c) “Canadian resource property” of a taxpayer means any property acquired by him after 1971 that is, (i) any right, licence or privilege to explore for, drill for, or take petroleum, natural gas or other related hydrocarbons in Canada, (ii) any right, licence or privilege to prospect, explore, drill, or mine for, minerals in a mineral resource in Canada, (iii) any oil or gas well situated in Canada, (iv) any rental or royalty computed by reference to the amount or value of production from an oil or gas well, or a mineral resource, situated in Canada, (v) any real property situated in Canada the principal value of which depends upon its mineral resource content (but not including any depreciable property situated on the surface of the property or used or to be used in connection with the extraction or removal of minerals therefrom), or (vi) any right to or interest in any property (other than property of a trust) described in any of subparagraphs (i) to (v) (including a right to receive proceeds of disposition in respect of a disposition thereof); Subsection 83A(Sa) referred to in subsection 59(1.1) relates to exploration and drilling rights; payments deductible. ...

See also s 139(1)(ae) of the Income Tax Act which includes as “personal and living expenses” and therefore not deductible for tax purposes, the expenses of properties maintained by the taxpayer for his own use and benefit, and not maintained in connection with a business carried on for profit or with a reasonable expectation of profit. ...

There was uncontroverted evidence that no money passed from Sunnydene to Arames in payment of the debts and that, thus, no money or property passed from Arames to the appellant by way of loan in connection with the transactions. ...