McGovern v. Canada
T-3088-90 / T-3089-90
Jerome A.C.J.
24/5/94
6 pp.
Appeal from Tax Court's decision dismissing plaintiffs' appeal from reassessment for 1984 taxation year -- Plaintiffs engaged in business of manufacturing and selling furniture; in effort to diversify business interests, acquisition of rental property, by purchasing condominium near lake and ski hills -- Plaintiffs did rent unit for 1981, 1982, 1983 where MNR accepted purpose of condominium investment as rental business and allowed to claim deductions for expenses and capital cost allowance in respect of unit -- In 1984, unit not rented and Minister disallowed rental loss claim -- Plaintiffs appealing on ground Tax Court erred in disallowing rental loss in so far as losses claimed in respect of condominium incurred for purpose of gaining or producing income from business or property -- Minister entitled to disallow losses with respect to business venture which have been accepted in previous taxation years -- However, fairness and consistency requiring that where there has been dramatic change in circumstances, reasonable period of time be granted before such losses disallowed -- Plaintiffs had reasonable expectation of profit from rental income -- Economic conditions of area and by-laws passed by condominium association restricting rental possibilities, were sudden dramatic changes in circumstances beyond plaintiffs' control which ultimately led to demise of businee venture -- Appeal allowed.