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Decision Content

A-648-86
The Queen (Appellant)
v.
Raymond Morrissey (Respondent)
INDEXED AS: MORRISSEY V. CANADA (C.A.)
Court of Appeal, Mahoney, MacGuigan and Des- jardins JJ.—Toronto, November 16, 17; Ottawa, December 21, 1988.
Income tax — Income calculation — Farming — Taxpayer employed part-time as ship's engineer — Also running cattle farm, assisted by family — Deemed farming losses for three years restricted to $5,000 under Income Tax Act, s. 31(1), although losses much greater — Trial Judge holding farming "chief source of income" — Whether chief source of income farming or combination of farming and other occupation — Whether factors in Moldowan (time spent, capital committed, profitability both actual and potential) to be interpreted dis- junctively or conjunctively.
This was an appeal from a trial judgment holding that farming was a chief source of the respondent's income. The taxpayer was employed as chief engineer on a Great Lakes freighter six or seven months a year. He also ran a cattle farm, with extensive help from his family. In 1977, 1978 and 1979 his losses were restricted to $5,000 under subsection 31(1) of the Income Tax Act, although his actual losses were much higher. Subsection 31(1) applies where a chief source of income is not farming or a combination of farming and another occupation. The taxpayer argued that the criteria in Moldowan v. The Queen (time spent, capital committed, profitability both actual and potential) should be interpreted disjunctively, as did the Trial Judge who found that farming was a chief source of income as the taxpayer had shown a serious commitment to farming in relation to the first two factors. The Trial Judge held that profitability was but one of several factors to be considered. It was further argued that subsection 31(1) had become a burden upon real farmers although Parliament's original intention had been to grant limited relief to the gentle men farmer.
Held (Desjardins J. dissenting), the appeal should be allowed.
Per Mahoney J. (MacGuigan J. concurring): Moldowan did not suggest disjunctive consideration of factors in the way that they had been dealt with by the Trial Judge. It being admitted that the taxpayer had a reasonable expectation of profit, a question remained as to whether his farming operation was potentially a chief source of income alone or in combination
with another source. Although, in considering subsection 31(1), potentiality rather than actuality is the question, since the provision applies only when there is a loss, profitability in other years may be evidence of the potential :or profit. On the evidence, the taxpayer's farm had not been, and was unlikely to become, profitable. Absent actual or potential profitability, farming cannot be a chief source of income.
While it may be argued that remedial action is desirable in that Parliament's original intentions may not have been real ized, the Moldowan test was not so elastic as to permit it to be judicially provided.
Per Desjardins J. (dissenting): The statement in Moldowan, that the two distinguishing features of chief source of income were to be tested by considering, inter alia, time spent, capital committed and profitability, indicated that these tests were illustrative, not exhaustive. Profitability was only one of several factors that had to be weighed.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Income Tax Act, R.S.C. 1952, c. 248, s. 31(1) (as am. by S.C. 1970-71-72, c. 63, s. 1 [as am. by S.C. 1973-74, c. 14, s. 7]).
Income War Tax Act, 1917, S.C. 1917, c. 28, s. 3(1)(/) (as am. by S.C. 1919, c. 55, s. 2; S.C. 1919 (2d Sess.), c. 49, s. 2).
Income War Tax Act, R.S.C. 1927, c. 97, s. 10.
The Income Tax Act, S.C. 1948, c. 52, s. 13 (as am. by S.C. 1951, c. 51,s. 4). .
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Moldowan v. The Queen, [ 1978] 1 S.C.R. 480.
DISTINGUISHED:
P.E. Graham v. The Queen (1983), 83 DTC 5399; affd. [1985] 2 F.C. 107; 85 DTC 5256 (C.A.).
AUTHORS CITED
Canada. House of Commons Debates, Vol. V, 4th Sess., 21st Parl., June 13, 1951, at p. 4054.
Canada. House of Commons Debates, Vol. III, 6th Sess., 21st Parl., May 27, 1952, at pp. 2626 ff.
COUNSEL:
Ian S. MacGregor and Susan L. Van Der
Hout for appellant.
William I. Innes for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Stikeman, Elliott, Toronto, for respondent.
The following are the reasons for judgment rendered in English by
MAHONEY J.: This appeal is concerned with the application of subsection 31(1) of the Income Tax Act [S.C. 1970-71-72, c. 63 (as am. by S.C. 1973-74, c. 14, s. 7)] to the respondent in respect of his 1977, 1978 and 1979 taxation years. The issue is whether in those years his "chief source of income" was a combination of farming and his employment as chief engineer on a Great Lakes freighter. The Act provides:
31. (1) Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income, for the purposes of sections 3 and I l 1 his loss, if any, for the year from all farming businesses carried on by him shall be deemed to be ....
There follows a formula which need not be recited. Suffice it to say, applied to his actual farming loss, the deemed farming loss for each year was $5,000.
I have not been persuaded that the learned Trial Judge [(1986), 6 F.T.R. 227 (F.C.T.D.)] erred in any of his findings of fact. All are supported by admissions or evidence.
The respondent was raised on a farm. His wife also had a farming background. The respondent sought other employment as he approached adult hood and has been employed on Great Lakes ships since 1948. In 1967, they traded their home in St. Catherines as down payment on a 178-acre farm at Wainfleet and have lived there ever since. They rented the land to another farmer in 1968. Since 1969 they have carried on their cow-calf operation, breeding cows, selling calves and using the land for grazing and growing feed. The respondent had attained the position of chief engineer by 1965. He normally works six to seven months a year on the ships and spends the rest of his time working the farm. Employment on the ships starts in early
April and goes on until December. However, the respondent is able to take time off, much of it without pay, when he has to work on the farm. Calving is scheduled to occur before the shipping season opens in the spring. His wife works hard, especially during his absences. The children, the oldest 13 in 1977, also help. The respondent has taken pertinent courses at the University of Guelph and, at the date of trial, had been a director of the Canadian Cattlemen's Association for about five years.
For the years in issue, the relevant figures are:
1977 1978 1979
Employment Income $39,169.20 $43,618.00 $46,889.06
Gross Farm Income 6,281.93 6,272.59 6,541.60
Farm Expenses 30,371.05 36,048.76 41,108.35
Farm Losses (22,726.66) (27,427.28) (32,108.27)
Prior to 1975, the respondent claimed and was allowed only the deduction of the restricted farm ing losses as permitted a taxpayer whose chief source of income was neither farming nor a combi nation of farming and some other source. For 1975 and 1976, he claimed and was allowed the deduc tion of his full farming losses from his employment income.
The appellant admitted that the farming opera tion was being carried on with a reasonable expec tation of profit. The learned Trial Judge found [at pages 230-231]:
It is hard to construe the plaintiff's farm losses during the years in question as transitory, accidental, or wholly unforesee able. It is true that he suffered misfortunes in having rabies in his herd in 1976 and scour in 1978. Yet his losses in those years do not appear to be significantly worse than several other years. He also says that meat prices were depressed toward the end of this period, but as counsel for the defendant pointed out, even if meat prices had quadrupled they would not have made his farm profitable.
For whatever reasons, the plaintiff has demonstrated that his farm has not been and is not likely to become profitable, at least if he operates it at the level of which he seems to be capable in terms of time and available capital. The Minister's
representative on examination for discovery, however, did not take the position that the operation could be profitable with more time or more capital and I need not go into that issue. The fact is that it was far from being profitable in the years in question and nothing that happened either before or since that time suggests that those years were on arberration. Further, it is hard to characterize many of the expenses incurred as "start-up costs", given the fact that they were incurred some 8 to 10 years after farming commenced.
The respondent made a serious policy-based argument. I shall try to do it justice. An apprecia tion of the legislative history is necessary to an understanding of the argument.
From its inception in 1917, Canada's federal income tax legislation contained a prohibition against the reduction of a taxpayer's income from his chief business, trade, profession or occupation by losses sustained in unconnected business trans actions. The Income War Tax Act, 1917, S.C. 1917, c. 28, paragraph 3(1)(f) as amended by S.C. 1919, c. 55, section 2 and S.C. 1919 (2nd Sess.) c. 49, section 2. A prohibition to the same general effect was carried forward in section 10 of the Income War Act, R.S.C. 1927, c. 97, and in 1948 was expressed in the following terms, S.C. 1948, c. 52 [The Income Tax Act]:
13. (1) The income of a person for a taxation year shall be deemed to be not less than his income for the year from his chief source of income.
(2) The Minister may determine which source of income or sources of income combined is a taxpayer's chief source of income for the purpose of this section.
By an amendment retroactively effective to 1949, S.C. 1951, c. 51, subsection 4(1), subsection (3) was added to section 13. It allowed the deduction of one-half a taxpayer's cash farming loss, to a maximum of $5,000, from his chief source income. Then, effective in 1952, the limitation of subsec tion 31(1) was enacted [Income Tax Act, R.S.C. 1952, c. 148] and the general prohibition against reducing chief source income by other business losses was repealed.
If one looks at the provisions of the taxing statute throughout the years, the situation has been as follows.
a. Prior to 1949, a taxpayer's chief source income could not be reduced by other business losses including farming losses.
b. For 1949, 1950 and 1951, a taxpayer's chief source income could not be reduced by other business losses except only by 50% of cash farm ing losses to a maximum of $5,000.
c. Since 1951, a taxpayer's chief source income can be reduced in unlimited amounts by other business losses but only by $5,000 farming losses.
In fact, unsanctioned by statute, the administrative policy of the Department of National Revenue prior to 1949 had been to permit the deduction of 50% of cash losses from farming from chief source income. That practice was described in the House of Commons by then Minister of Finance, the Hon. Douglas Abbott, in proposing the 1951 amendment.
[T]his section is intended to give some measure of relief to those who may be colloquially known as gentlemen farmers, whose principal occupation is not farming. Again this confirms what was a practice over a great many years, during which the income tax branch allowed 50 per cent of the cash losses incurred in this type of farming; secondary income; and by cash losses it meant without charging depreciation. It was a rule which as it developed, probably was not strictly justified under the act. We had a great many representations that the practice which had existed for many years, I believe going back to the early twenties, should be maintained. It was felt that it would not be appropriate to do so without any limit, because some might run very elaborate farms with very large losses in fancy horses and that sort of thing. Probably it would not be fair to allow such losses without limit, so the present section was inserted fixing a limit of $5,000. This means in effect that on the net cash basis, without allowance for depreciation, a man who has a cash loss of $10,000 will have to stand $5,000 of it himself and the other $5,000 can be deducted from his other income. I agree with my hon. friend that this type of farming has proved beneficial to a great many parts of the country, and we had representations from agricultural associations asking us
to maintain the practice which had been followed in previous years. That is the reason for this amendment.
House of Commons Debates, Vol. V, 4th Sess., 2I st Parl., June 13, 1951, at p. 4054.
Mr. Abbott was still Minister of Finance when the 1952 amendments were dealt with by Parliament.
Mr. Macdonnell (Greenwood): Will the minister explain to me these negatives, which I find it hard to understand.
Mr. Abbott: As the hon. member will recall, this was the section which referred to the principal source of income, and then section 13(1) was introduced last year as a loophole section to cover what, for want of a better term, I shall call the hobby farmers—
Mr. Fleming: Gentleman farmers.
Mr. Abbott: Well, gentleman farmers. The idea of the provi sion was to limit the deduction which a gentleman farmer may take for income tax purposes against other income as a result of farm losses. It was felt it was no longer necessary to have the definition of principal source of income as contained in the original section.
Mr. Macdonnell (Greenwood): Yes, but will the minister explain to me these two words. The section reads in part:
Where a taxpayer's chief source of income for a taxation year is neither farming—
I think I can understand that. Then the next thing is "nor a combination of farming and some other source of income." Is that a single source? Because it goes on to say:
... his income for the year shall be deemed to be not less than his income from all sources other than farming ...
Mr. Abbott: Perhaps it is a little bit confusing, but almost invariably these gentlemen farmers never make money from their farms. They always lose money; and they write off that loss against income from other sources, such as salary or investment income. The section as introduced last year was of course to limit that write-off to the lesser of the two figures mentioned.
Mr. Graydon: They make money in the city and lose it in the country ...
Mr. Knowles: May I ask the minister to explain the real effect of this clause 4? The part that appears here in print is for the most part that portion of section 13 which is being retained.
Mr. Abbott: That is right.
Mr. Knowles: What we are actually doing by this is to eliminate the previous subsection 1 and subsection 2. Those subsections indicated that the income of a person for the taxation year shall be deemed to be not less than his income for the year from his chief source of income.
Mr. Abbott: It is no longer necessary. I thought I explained that a moment ago. If you are running a grocery business and a
drug business, you can offset the loss in the grocery business against the profit in the drug business. The only case in which we do not allow that is in the case of the gentleman farmer, who is limited as to the amount of loss. It therefore no longer became necessary to put in a provision that the income of a person for the fiscal year shall be deemed to be not less than his income from his chief source of income.
Mr. Knowles: Are there no gentleman grocers or gentleman druggists?
House of Commons Debates, Vol. III, 6th Sess., 21st Parl., May 27, 1952, at pp. 2626 ff.
The respondent is said not be the gentleman farmer Parliament had in mind when it enacted what is now subsection 31(1) and repealed the prohibition against reducing chief source income by other business losses. What was intended as a limited concession to gentleman farmers has been turned into a burden on real farmers, he argues. He asks, what is the policy basis for discriminating against him, who is admitted to be farming as a business, when he would not be subject to like discrimination had he chosen any other business? Why is farming the only entrepreneurial activity so treated even though it is undertaken as a busi ness, not a hobby, when the stated purpose of the legislation was to deal with hobbyists and only hobbyists?
The $5,000 limit has not changed since incep tion of the provision. We have no evidence on the relative purchasing power of the dollar over the years. One may speculate whether the limit would have had any real impact on a salaried marine engineer with a farm in 1951 and whether, had it been indexed, it would have had much, if any, impact on the respondent in the years in issue. It may be that the absence of periodic upward revi sions has, in a practical way, made the limitation applicable to taxpayers in relative income brackets not initially intended by Parliament to be affected.
The authoritative judicial decision is that of Dickson J., as he then was, for the Court in Moldowan v. The Queen, [1978] 1 S.C.R. 480. Relevant passages, at pp. 486 ff., follow:
Whether a source of income is a taxpayer's "chief source" of income is both a relative and objective test. It is decidedly not a pure quantum measurement. A man who has farmed all of his life does not cease to have his chief source of income from farming because he unexpectedly wins a lottery. The distin guishing features of "chief source" are the taxpayer's reason able expectation of income from his various revenue sources and his ordinary mode and habit of work. These may be tested by considering, inter alia in relation to a source of income, the time spent, the capital committed, the profitability both actual and potential. A change in the taxpayer's mode and habit of work or reasonable expectations may signify a change in the chief source, but that is a question of fact in the circumstances.
... the Income Taxt Act as a whole envisages three classes of farmers:
(1) a taxpayer, for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine. Such a taxpayer, who looks to farming for his livelihood, is free of the limitation of [s. 31(1)] in those years in which he sustains a farming loss.
(2) the taxpayer who does not look to farming, or to farming and some subordinate source of income, for his livelihood but carries on farming as a sideline business. Such a taxpayer is entitled to the deductions spelled out in [s. 31(1)] in respect of farming losses.
(3) the taxpayer who does not look to farming, or to farming and some subordinate source of income, for his livelihood and who carries on some farming activities as a hobby. The losses sustained by such a taxpayer on his non-business farming are not deductible in any amount.
The reference in [s. 31(1)] to a taxpayer whose source of income is a combination of farming and some other source of income is a reference to class (1). It contemplates a man whose major preoccupation is farming. But it recognize [sic] that such a man may have other pecuniary interests as well, such as income from investments, or income from a sideline employ ment or business. The section provides that these subsidiary interests will not place the taxpayer in class (2) and thereby limit the deductibility of any loss which may be suffered to $5,000. While a quantum measurement of farming income is relevant, it is not alone decisive. The test is again both relative and objective, and one may employ the criteria indicative of "chief source" to distinguish whether or not the interest is auxiliary. A man who has farmed all of his life does not become disentitled to class (1) classification simply because he comes into an inheritance. On the other hand, a man who changes occupational direction and commits his energies and capital to farming as a main expectation of income is not disentitled to deduct the full impact of start-up costs.
It may appear that class 3 describes those whom the Minister of Finance described in 1952 in the following terms:
... almost invariably these gentlemen farmers never make money from their farms. They always lose money; and they write off that loss against income from other sources, such as salary or investment income. The section as introduced last year was of course to limit that write-off to the lesser of the two figures mentioned.
Those of whom the Minister said the provision was "to limit that write-off" appear to be those of whom the Supreme Court has said "the losses ... are not deductible in any amount". If that is correct, then it seems to me that the logical result of the respondent's argument is that Moldowan has read out of subsection 31(1) those whom it was intended to benefit in a limited way.
The respondent does not, of course, take his argument to that point. He cannot, because we are bound by Moldowan. Rather, he argues that Mol- dowan suggests an approach entirely consistent with the policy underlying subsection 31(1) which the Trial Judge has correctly adopted. That approach is to consider disjunctively the various criteria Dickson J., mentioned: time spent, capital committed and profitability. The Trial Judge expressed it thus [at pages 231-232]:
It will be noted that the learned judge says that the distinguish ing features of "chief source" are the taxpayer's "reasonable expectation of income from his various revenue sources" and his ordinary mode and habit of work". It appears to me that these are to be read disjunctively; that they are each factors to be taken into account but neither is an absolute requirement. This seems to be the tone of the judgment as a whole, and moreover on page 315 where Dickson, J., describes his first class of farmers, namely the kind within the exception in what is now s. 31(1), he says that they must be persons "for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine". (Emphasis added). Later on that page he describes such a farmer as one "whose major preoccupation is farming". Again, profitability is not set up as an essential requirement.
Focusing on the three factors mentioned by Dickson, J., in the quotation above, namely, time spent, capital committed, and profitability, it appears that the taxpayer here can show a substantial commitment to farming in relation to the first two factors.
The third criterion referred to by Dickson, J., in the passage quoted above is, of course, "profitability both actual and poten tial". As I have said, if this were the sole criterion or the most important one and if it were a sine qua non then I think the plaintiff could not succeed. But I understand it to be only one factor of several which may be relevant.
The Trial Judge concluded [at page 232]:
1 believe that I should not be guided solely by the improba bility of profit from the taxpayer's farming during the years in question or the foreseeable future. This is only one factor to be taken into account. Looking at all the circumstances, I am satisfied that the plaintiff here was a dedicated farmer trying to make a profit from his farm like so many full-time farmers do, unsuccessfully, year after year. The test of "chief source of income" is not one of economic wisdom. Nor do I think it particularly critical in the present case that the prospects for the taxpayer leaving his employment and devoting all of his time to farming were not very good. It must be kept in mind that s. 31(1) contemplates the possibility of a taxpayer's chief source of income being "a combination of farming and some other source of income". Whatever this may mean, and there remains room for clarification even after Moldowan, it does not require the taxpayer to abandon his employment in favour of farming. Moldowan merely requires that farming be the "major preoccupation" and I am satisfied from all the circum stances here that such is the case with this taxpayer.
With respect, I do not agree that Moldowan suggests disjunctive consideration of pertinent fac tors in quite the way the learned Trial Judge has dealt with them. The discussion in Moldowan begins as follows [at page 486]:
Whether a source of income is a taxpayer's "chief source" of income is both a relative and objective test. It is decidedly not a pure quantum measurement.
Moldowan also says, dealing with the difference between classes 1 and 2, "While a quantum meas urement of farming income is relevant, it is not alone decisive". While the determination that farming is a chief source of income is not a pure quantum measurement, it is equally not a determi nation in which quantum can be ignored.
The appellant has admitted that the respondent was farming with a reasonable expectation of profit. That means he was farming as a business and is conclusive that he was not a class 3 farmer. It also implies that farming was a potential source of income and calls for an enquiry whether it was potentially a chief source of income either alone or in combination with another source. In considering subsection 31(1), it seems to me that potentiality, rather than actuality, is the question in all cases since the provision applies only where there is a loss in a taxation year. That is not, of course, to say that actual profitability in other years may not be evidence of the potential for profit in years of losses.
Moldowan suggests that there may be a number of factors to be considered but we are here con cerned only with three: time spent, capital commit ted and profitability. In defining the test as rela tive and not one of pure quantum measurement, Moldowan teaches that all three factors are to be weighed. It does not, with respect, merely require that farming be the taxpayer's major preoccupa tion in terms of available time and capital.
In my opinion, this case is clearly distinguish able from P.E. Graham v. The Queen (1983), 83 DTC 5399; affd. [1985] 2 F.C. 107; 85 DTC 5256 (C.A.). There, the Trial Judge, at page 5406, had found:
In the circumstances of these appeals I do not accept the premise predicated upon the evidence that the plaintiff might not reasonably expect his farming operations to "provide the bulk of income" and it most certainly is "the centre of work routine".
While expressed in a double negative, that was understood by this Court to be a finding, support ed by the evidence, that farming was both the centre of the taxpayer's work routine and could be reasonably expected to provide the bulk of his income. That finding, in the opinion of a majority of this Court, placed that taxpayer clearly within class 1.
On a proper application of the test propounded in Moldowan, when, as here, it is found that profitability is improbable notwithstanding all the time and capital the taxpayer is able and willing to devote to farming, the conclusion based on the civil burden of proof must be that farming is not a chief source of that taxpayer's income. To be income in the context of the Income Tax Act that which is received must be money or money's worth. Absent actual or potential profitability, farming cannot be a chief source of his income even though the admission that he was farming with a reasonable expectation of profit is tantamount to an admission which itself may not be borne out by the evidence, namely that it is at least a source of income.
I have set out, fairly I hope and certainly at some length, the basis for the respondent's policy- based argument that the test of Moldowan ought to be applied as it was by the Trial Judge to achieve Parliament's desired result. I should not have done so had I not been persuaded that the government's intentions as told to Parliament in 1951 and 1952 may indeed not have been realized. Parliament chose to draw the line between gentle man farmers and real farmers in terms of source of income. It may not have intended to treat taxpay ers like the respondent as it intended to treat gentleman farmers, not to deny gentleman farmers any relief at all. There may be a serious argument for remedial action, however I have not been per suaded that the Moldowan test is so elastic as to permit it to be judicially provided. The judiciary must interpret what Parliament has said, which is not necessarily what it may have intended to say.
I would allow the appeal with costs and set aside the judgment of the Trial Division and dismiss the respondent's action with costs.
MACGUIGAN J.: I agree.
The following are the reasons for judgment rendered in English by
DESJARDINS J. (dissenting): I have no difficulty with the Trial Judge's reasons for judgment, par ticularly with the fact that he read disjunctively the distinguishing features of "chief source of income" of subsection 31(1) of the Income Tax Act as mentioned by Dickson J. for the Court in Moldowan v. The Queen, [1978] 1 S.C.R. 480.
At page 486 of Moldowan, Dickson J. [as he then was], stated:
Whether a source of income is a taxpayer's "chief source" of income is both a relative and objective test. It is decidedly not a pure quantum measurement. A man who has farmed all of his life does not cease to have his chief source of income from farming because he unexpectedly wins a lottery. The distin guishing features of "chief source" are the taxpayer's reason able expectation of income from his various revenue sources and his ordinary mode and habit of work. These may be tested by considering, inter alia in relation to a source of income, the time spent, the capital committed, the profitability both actual and potential. A change in the taxpayer's mode and habit of work or reasonable expectations may signify a change in the chief source, but that is a question of fact in the circumstances. [Emphasis added.]
After quoting this passage, the Trial Judge said [at page 231]:
It will be noted that the learned judge says that the distinguish ing features of "chief source" are the taxpayer's "reasonable expectation of income from his various revenue sources" and "his ordinary mode and habit of work". It appears to me that these are to be read disjunctively; that they are each factors to be taken into account but neither is an absolute requirement. This seems to be the tone of the judgement as a whole, and moreover on page 315 where Dickson, J., describes his first class of farmers, namely the kind within the exception in what is now s. 31(1), he says that they must be persons "for whom farming may reasonably be expected to provide the bulk of income or the centre of work routine". (Emphasis added). Later on that page he describes such a farmer as one "whose major preoccupation is farming". Again, profitability is not set up as an essential requirement.
I understand, like the Trial Judge, that what Dickson J. is saying is that the two distinguishing features of "chief source of income" may be tested by considering inter alia (emphasis added) the time spent, the capital committed, the profitability
both actual and potential. These tests are illustra tive, not exhaustive. They are to be weighed in the light of all the circumstances. Not one is absolute. Profitability is only one factor out of several. Pure quantum measurement is not a deciding consider ation.
With regard to the first two factors mentioned by Dickson J. namely, time spent, capital commit ted and profitability, the Trial Judge found as a fact (appeal book at 1132) that the taxpayer was spending considerable time on the farm taking off from his other employment, much of it without pay and that he was investing a relatively impor tant amount of capital in it. He said [at pages 231-232] :
... it appears that the taxpayer here can show a substantial commitment to farming in relation to the first two factors. I am satisfied that the taxpayer spends virtually as much time farming as he does on the boats. The fact that he lives on the farm when not on the boats, that his family lives there and contributes substantially to the management of the farm in his absence, together with his obvious personal commitment to farming, satisfy me that his major preoccupation is farming. In this connection it should also be noted that he has not in any way altered his status or responsibilities on the boats since he commenced farming which suggests that he has made no effort to develop further his employment career. As for capital it appears likely that he has committed as much as he had available. His counsel estimated that he had invested in the order of $200,000 and 1 do not disagree with that estimate. In terms of commitment this is as important as the investment of millions by a millionaire.
With regard to profitability, both actual and potential, the Trial Judge said [at page 232]:
I should not be guided solely by the improbability of profit from the taxpayer's farming during the years in question or the foreseeable future. [Emphasis added.]
He added [at page 232]:
The test of "chief source of income" is not one of economic wisdom.
The taxpayer testified:
... if I can feed my family, educate my family, and 1 am happy—which 1 am happy doing farming—if I can meet those obligations, that is all I am satisfied with. That is what I feel is a profitable farm. If I can meet my obligations, that is it. (Transcript, September 16, 1986)
I am satisfied by the finding of facts made by the Trial Judge, that the taxpayer here in question has chosen neither the hobby farming nor farming as "a sideline business" so as to put him in the second and third class of farmers referred to by Dickson J. at pages 487-488 of Moldowan. His main preoccupation is farming although he is not at present in a situation of leaving his employment to devote all of his time to farming. Subsection 31(1) contemplates the possibility of a taxpayer's chief source of income being "a combination of farming and some other source of income". I understand the present case to be of such a nature.
I would therefore have dismissed the appeal with costs.
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