Reasonable Expectation of Profit

Cases

The Queen v. Gulf Canada Resources Ltd., 96 DTC 6065, [1996] 2 CTC 55 (FCA)

Pratte J.A. noted (at p. 6067) (and Linden J.A. concurred at p. 6069) that the reasonable expectation of profit doctrine had no application where...

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Walls v. The Queen, 2000 D.TC 6025 (F.C.A.)

A limited partnership purchased a mini-warehouse for a purchase price ($2.2 million) that was approximately twice the cost to the...

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Kuhlmann v. Canada, 98 DTC 6652, [1999] 1 CTC 38 (FCA)

The Court reversed a finding of the trial judge that a husband and wife team of practising physicians were not engaged in operating an "English...

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Mohammad v. R., 97 DTC 5503, [1997] 3 C.T.C. 321 (FCA)

The taxpayer had acquired a co-ownership interest in a residential property by assuming his share of a first mortgage and borrowing money for the...

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The Queen v. Donnelly, 97 DTC 5499, [1998] 1 CTC 23 (FCA)

Before going on to find that the deduction of farming losses by the taxpayer was restricted by s. 31(1) f the Act, Robertson J.A. stated (at p....

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Watt Estate v. The Queen, 97 DTC 5459 (FCA)

In finding that the taxpayer could not deduct the costs incurred by her in seeking to develop her daughter (who was in the taxation years in issue...

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Mastri v. R., 97 DTC 5420, [1997] 3 C.T.C. 234 (FCA)

The Court reversed a finding of the Tax Court judge that the taxpayers were entitled to deduct their net loss from a rental property...

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Hickman Motors Ltd. v. Canada, 97 DTC 5363, [1997] 2 S.C.R. 336, [1998] 1 CTC 213

Before finding that equipment that the taxpayer received on the winding-up of one subsidiary and held for five days before transferring it to...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence failure to report revenue did not evidence its non-receipt 42
Tax Topics - General Concepts - Onus taxpayer demolished Minister's assumptions with uncontradicted testimony 52
Tax Topics - General Concepts - Payment & Receipt unrecorded revenues 148
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) brief earning of rental income 130
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit reasonable expectation of profit test directed only at existence of business source 85
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) integrated farming equipment and auto leasing 95
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) generation of revenue for a short time was sufficient 352
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) deemed property to be acquired for an income-producing purpose 37
Tax Topics - Statutory Interpretation - Drafting Style absence of specific-hold period was telling 85
Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius 69
Tax Topics - Statutory Interpretation - Interpretation Act - Section 16 26

Walls v. The Queen, 96 DTC 6142, [1996] 2 CTC 14 (FCTD)

A limited partnership purchased a mini-warehouse for a purchase price ($2.2 million) that was approximately twice the cost to the...

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Tonn v. The Queen, [1996] 1 CTC 205 (FCA)

In 1989 the taxpayer purchased a vacant residential property in Scarborough, containing two residential rental units, with the expectation that...

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Yaki v. The Queen, 94 DTC 6637, [1994] 2 CTC 361 (FCTD)

In finding that the taxpayer operated his farm in his 1986, 1987 and 1988 taxation years with a reasonable expectation of profit Jerome A.C.J....

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Landry v. The Queen, 94 DTC 6624 (FCA)

Before finding that the taxpayer - who returned to the practice of law in 1979 at the age of 71, organized his practice in a similar manner to...

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McGovern v. The Queen, 94 DTC 6527, [1994] 2 CTC 231 (FCTD)

A condominium rental unit located at Paul Lake, near Kamloops, was found to have been purchased in December of 1980 with a reasonable expectation...

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Engler v. The Queen, 94 DTC 6280, [1994] 2 CTC 64 (FCTD)

A venture of buying and selling various gift items, was marginally profitable while it was conducted by the taxpayer on a part-time basis or...

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Johnson v. The Queen, 93 DTC 5462 (FCTD)

An employee of M.L.W. Bombardier who only visited his farm once a week except on summer vacations, and whose farming operation suffered consistent...

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DesChênes v. The Queen, 93 DTC 5234, [1993] 2 CTC 107 (FCTD)

The taxpayers, who were full-time employees of the federal government, were found not to have engaged in the leasing of a yacht with a reasonable...

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Edwardes v. The Queen, 91 DTC 5635, [1991] 2 CTC 269 (FCTD)

A full-time teacher was prohibited from deducting losses incurred in automobile performance rallying in the absence of any record of achieving...

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Blake v. The Queen, 91 DTC 5574 (FCTD)

A teacher who earned approximately $1,000 per year in farm revenues in the taxation years in question was unsuccessful in deducting farm losses...

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Bigelow v. The Queen, 90 DTC 6262, [1990] 1 CTC 351 (FCTD)

The taxpayer, who in his 1978 and 1979 taxation years was a full-time employee in a potash mine, was found not to be carrying on a thoroughbred...

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The Queen v. Demers, 90 DTC 6216, [1990] 1 CTC 317 (FCTD)

A husband and wife, who were full-time employees, and who in 1981 purchased farmland which required considerable work before it would become...

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McNeill v. The Queen, 89 DTC 5516, [1989] 2 CTC 310 (FCTD)

The taxpayer was found to have held his condominium with a reasonable expectation of profit after the time that he abandoned his intention to hold...

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Posno v. The Queen, 89 DTC 5423, [1989] 2 CTC 234 (FCTD)

The taxpayer, who worked full time as a co-ordinator of special education but had a passion for flying, purchased a high performance aircraft and...

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Madronich v. The Queen, 89 DTC 5093, [1989] 1 CTC 247 (FCTD)

The taxpayer's tree farm was found to have a reasonable expectation of profit in light of the reforestation operation being undertaken in a...

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Coupland v. The Queen, [1988] 1 CTC 414, 88 DTC 6252 (FCTD)

A campground operation on land in the Calabogie area of Lanark which an Ottawa resident with a full-time job had originally purchased as a holiday...

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Chequer v. The Queen, 88 DTC 6169, [1988] 1 CTC 257 (FCTD)

Although the taxpayer purchased a 48-foot diesel cruiser with a sincere belief that he eventually would make a financial success of an operation...

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The Queen v. Gorjup, 87 DTC 5348, [1987] 2 CTC 129 (FCTD)

The taxpayer, who at all relevant times had a full-time job, purchased 1/2 of his father-in-law's run-down 200-acre farm in 1975 with the...

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London Life Insurance Co. v. The Queen, 87 DTC 5312, [1987] 2 CTC 90 (FCTD), aff'd 90 DTC 6001 (FCA)

London Life provided excess computer capacity to its subsidiary ("LDS") and charged LDS a fee that was calculated so as to avoid any profit or...

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Magee v. The Queen, 87 DTC 5282, [1987] 2 CTC 17 (FCTD)

Two spouses, who carried on a truck repair service and an accounting service for truckers, were held not to be carrying on a small operation of...

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Meech v. The Queen, 87 DTC 5251, [1987] 1 CTC 421 (FCTD)

The taxpayer failed to establish that he acquired two Florida condominium units with a reasonable expectation of profit. One unit showed losses...

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Firestone v. The Queen, 87 DTC 5237, [1987] 2 CTC 1 (FCA), rev'g 86 DTC 6405, [1986] 2 CTC 251 (FCTD)

A taxpayer's expenses may be deductible even if "there is neither immediate income nor an immediate source of income in his business." In the...

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Croutch v. The Queen, 86 DTC 6453, [1986] 2 CTC 246 (FCTD)

A part-time farmer who realized farming losses for his 1977-1980 taxation years which were approximately twice his revenues was prohibited from...

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Gillis v. The Queen, 78 DTC 6103, [1978] CTC 44 (FCTD)

A full-time professor at the University of Prince Edward Island who purchased an 117 acre farm 7 miles away in dilapidated condition, built his...

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Moldowan v. The Queen, 77 DTC 5213, [1977] CTC 310, [1978] 1 S.C.R. 480

Dickson, J. stated that "if the taxpayer in operating his farm is merely indulging in a hobby with no reasonable expectation of profit, he is...

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McLaws v. The Queen, 76 DTC 6005, [1976] CTC 15 (FCTD)

An operation of breeding and keeping horses for racing purposes was held to be carried on as a commercial venture and with a reasonable...

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See Also

Allen v. The Queen, 99 DTC 968, [1999] 4 CTC 2371 (TCC)

The Minister's position, as revealed in the examinations for discovery, was that the taxpayers, who invested in what quickly became a profitable...

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Witkin v. The Queen, 98 DTC 1933, [1998] 3 CTC 2869 (TCC)

The taxpayers and other Canadians purchased a 99% interest in a partnership ("CL 1") which, in turn, owned a 99% interest in a Texas general...

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Hawkes v. The Queen, 97 DTC 1258, [1998] 1 CTC 2333 (TCC)

Before finding that the taxpayers were able to deduct amounts paid by them to a third party to help fund legal expenses to be incurred by the...

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Heier v. The Queen, 97 DTC 739, [1997] 1 CTC 2471 (TCC)

The taxpayer was not entitled to deduct her losses from operating a bookstore and selling religious artifacts. Her initial purpose in starting the...

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Griffin v. The Queen, 96 DTC 1731 (TCC)

The taxpayer, who had a successful medical practice, was unable to deduct any of his losses incurred in respect of an import/export business given...

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Heenan v. The Queen, 96 DTC 1344 (TCC)

A partnership in which the taxpayer allegedly invested as a general partner was found not to have a reasonable expectation of profit and,...

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Roopchan v. The Queen, 96 DTC 1338, [1995] 2 CTC 2415 (TCC)

It was not appropriate for the Minister to aggregate the small operating profit realized by the taxpayer in renting out a basement apartment in...

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Mattison v. The Queen, 95 DTC 489 (TCC)

In finding that the Minister had been "premature" in disallowing initial losses sustained by the taxpayer in his operation of selling Amway...

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Administrative Policy

Income Tax Technical News, No. 16

"The Department recognizes that a start-up period often involves incurring extra costs in order to get a business up and running but taxpayers...

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11 December 1998 Internal T.I. 9828647 - PARAGRAPH 18(1)(A)

Discussion on whether certain swap transactions were entered into for the purpose of producing income in a situation where the swap contracts were...

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28 May 1990 T.I. (October 1990 Access Letter, ¶1446)

Where as a result of a temporary move to another city, an employee rents out his house at a rent which is less than the expenses of maintaining...

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October 1989 Revenue Canada Round Table - Q. 2 (Jan. 90 Access Letter, ¶1075)

The test of reasonable expectation of profit is applied at the level of the partnership, not at that of the partners. Therefore, in the case of a...

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87 C.R. - Q.35

In determining whether an activity has a reasonable expectation of profit, discretionary deductions should be considered if they are relevant in...

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84 C.R. - Q.75

List of criteria that are applied in assessing whether an enterprise has a reasonable expectation of profit.

Articles

Joel A. Nitikman, "Reasonable Expectation of Profit - Where Are We Now?", Canadian Current Tax, Vol 8, No. 8, May 1998, p. 81.

John R. Owen, "The Reasonable Expectation of Profit Test: Is There a Better Approach?", 1996 Canadian Tax Journal, Vol. 44, No. 4, p. 979. [cited in the Hickman Motors case, supra, at p. 5373].

Silver, "Great Expectations: Are They Reasonable?", 1995 Corporate Management Tax Conference Report, c. 6.