Bertrand v. Canada
T-565-88
McGillis J.
1/12/92
6 pp.
In 1977, 1978, 1979, plaintiff deducting from income farming losses of $20,650.39, $30,967, and $47,552 respectively -- Minister allowing restricted losses of $5,000 for each year on basis chief source of income neither farming nor combination of farming and some other source of income -- Tax Court upholding Minister's reassessment -- Plaintiff president of family-owned construction company generating yearly gross income of 6 or 7 million dollars -- Day-to-day operation of company, including supervision of managers and sales personnel, handled by general manager -- In 1974 plaintiff purchased horses and vacant land near his home as recreational activity for his children -- Built stable, including stalls for five horses, tack stalls, office and top floor for storage of hay -- In late 1975 or 1976 decided to start quarterhorse breeding, training and riding lesson business -- Hired trainer and doubled size of stables -- Attended horse shows, bought and sold horses and advertised services offered -- Built indoor practice arena and loafing barn -- Acquired stallion for breeding purposes -- Plaintiff claiming quarterhorse business likely to generate $20,000 profit in 1992, but no documents tendered to support claim -- Plaintiff spending two to three hours per day at construction firm and rest of time on quarterhorse business -- Weekends devoted to quarterhorse business -- Since 1976, farm generating net loss in all but three years when minor profits recorded -- Selective accounting practices (no claims for capital cost allowance, expenses in attending horse shows, trainer's salary, light, taxes or insurance) resulting in reporting of smaller farm losses during several taxation years -- Application of principles enunciated in Moldowan v. The Queen, [1978] 2 S.C.R. 480 -- Objective review of facts not disclosing reasonable expectation of profit from quarterhorse business -- Even if reasonable expectation of profit, income from quarterhorse business not chief source of income -- Plaintiff reasonably expects to receive income from construction company -- Fact bulk of time spent on quarterhorse business not detracting from fact plaintiff, as president, exercising control over construction company and derives money on which actually lives from it -- Farming sideline business -- Income Tax Act, S.C. 1970-71-72, c. 63, s. 31(1) (as am. by S.C. 1973-74, c. 14, s. 7).