Tax Court of Canada Judgments

Date: 20001121

Docket: 1999-2024-IT-I

BETWEEN:

DOUGLAS DERWORES,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

McArthur J.T.C.C.

[1]            The parties have agreed that the sole issue is whether the Appellant's chief source of income is "either farming or a combination of farming and some other source of income" pursuant to subsection 31(1) of the Income Tax Act. Each of these cases involving subsection 31(1) of the Act turns on its own facts.

[2]            Janice Derwores, the Appellant's spouse was the first to testify. She is 44 years of age and was raised on a farm. The land they presently farm belonged to the Appellant's grandparents and as a youth he spent his summers on it. His love for farming was developed from this early experience. She and the Appellant were married in the 1970s and now have two sons, ages 18 and 21 and a 20-year old daughter. Through most of her married years, she worked outside the home primarily as a bank teller. The Appellant has worked for IPSCO, a Regina steel plant, since 1973 and is presently a locomotive operator earning $55,000 annually.

[3]            The Appellant purchased 16.5 acres of land from his father for $2,000 in 1991. The land is situate near Kamsack, approximately 300 kilometres northeast of Regina, close to the Manitoba border. In 1992, he acquired 157 acres from his uncle adjacent to the 16.5 acres, for the cost of legal fees.

[4]            Janice and her husband Douglas made the difficult decision in 1992 to give up their Regina lifestyle and commenced farming. They sold their upscale 1,800 sq. ft. home in Regina for $117,000. It was decided by the family unit that the Appellant would continue to work at IPSCO because they needed the money to become full-time farmers. He purchased a $36,000 bungalow in Regina and commenced the arduous adventure of separating his time between IPSCO and the farm. Janice is an intelligent, articulate, energetic lady who described the months and years that followed with passion and emotion. Douglas works four days, 12-hour rotation, with four days off. During the relevant years, he had five weeks holidays and now has six. He spends all his free time working on the farm. After the three hours travelling to and from the farm, he is left with two clear days to devote to the farm wedged between his four-day shifts at the steel plant.

[5]            In 1992, the buildings and equipment used in the farm were old and rundown. The family moved into an old unheated 800 sq. ft. home and froze the first winter. Douglas is a talented handyman and has worked tirelessly since 1992 to upgrade their home, a machine shed, four granaries and one steel bin, all of which were in poor condition. Equipment they took over included a skidster, press drill, Dozer Blade and 76 IHC 4WD tractor.

[6]            The Appellant reported farming losses for the 1992 to 1997 years as follows:

TAXATION          GROSS                                                                                    NET        

YEAR	INCOME	EXPENSES	INCOME(LOSS)
1992			($17,757)
1993	350	$20,158	($19,808)
1994	$15,548	$44,631	($29,083)
1995	$8,256	$45,681	($37,424)
1996	$4,362	$33,211	($28,849)
1997	$10,362	$38,681	($28,416)

[7]            In 1992, the Appellant's uncle had seeded the acreage and benefited from the harvest to the exclusion of the Appellant. In 1993, they planted barley. The uncle had not been up front with them, to their surprise he expected them to do the farming and he would reap any rewards. They had no farming income in 1993.

[8]            In 1994, after informing themselves from experienced farmers and grain dealers, they seeded canola on 155 acres. They anticipated 40 to 50 bushels per acre at $10 per bushel gross. The land is close to the Assiniboine River and after unusually heavy rains, they lost the crop from 70 acres which flooded. The summer of 1994 was generally cold and rainy, the yield was low and the sale price was $7.65 a bushel. Filed as Exhibit A-1 is the Appellant's statement of "Expected Profit - 1994":

CANOLA

EXPECTED PROFIT -1994

Acres Seeded                                                        155

Acres Flooded                                                       70

Average Yield                                                        45 bushels per acre

Expected Sale Price                                               $10.00 per bushel

Actual Sale Price                                   $7.65 per bushel

Calculations:

Expected:                45 bushels x 155 acres = 6,975 bushels per acre

                                6,975 x $10.00 = $69,750 revenue

                                $69,750 - $44,631 expenses = $25,119 profit

[9]            Again, Douglas and Janice studied the situation for the 1995 season, informing themselves from farmers of experience including her sister and brother-in-law who farmed four miles from them. They decided to diversify and after extensive research, they prepared 10 acres and planted a fruit orchard growing Saskatoon berries. They felt confident this would be profitable for these reasons: (a) they had an excellent scenic location, close to a river that would attract customers to pick their own berries; (b) apparently the idea of U-Pick and Saskatoon berries was coming in vogue; and (c) Janice's sister had a successful U-pick strawberry farm close by. They purchased 2,000 trees[1] and the five-member family, with outside help, worked incredibly hard to prepare the land, plant, weed, cull and the many other duties that presented themselves. On the remaining acreage, they seeded flax as canola has to be grown on a four-year rotation. From their investigations, they concluded the land would yield 35 bushels per acre at $5.00 or $6.00 per bushel. Their fields were infested with weeds and they were deducted 24% at the elevator upon sale. Again, they lost money. A heavy frost of -7^oC on June 7 hurt their berry trees during blossom time. They obtained no fruit revenue although they did not expect any because it takes several years for the trees to mature before bearing fruit. The berry farm was labour intensive particularly because they had decided to farm organically using no inorganic weed killers or fertilizers. Their investigations revealed that organic produce was in demand and would obtain about 25% more revenue.

[10]          In 1996, they continued to work very hard. Repairing buildings and equipment, clearing stones and debris, planting cultivating etc. They continued with the berry farm but planted no crop (summer fallow). They had no farming income. Since 1996, they have continued to farm in the same manner, tending to their berry trees, having planted an additional 1,000 trees and seeding no crop but selling the hay. The Saskatoon trees are not expected to be profitable until 2001.

[11]          They were traumatized by Revenue Canada's audit in 1997 and have not been able to expend funds on the farm in the manner they anticipated. The installation of irrigation by piping water from the river to spray automatically on the berry trees has been delayed. Presently, watering is done arduously and inefficiently. They have investigated the profitability of their berries through Saskatchewan agriculture. No income to the present. Their oldest son intends to farm with them upon completing his education. They have made extraordinary sacrifices but have no intention of giving up and are convinced their berry farm will meet their predictions. A "Pro Forma Revenue Statement" filed as Exhibit A-2 (see Appendix "A" attached) reflects 100% mature yield in 2001 and gross income from berries alone of $53,600 in that year, increasing exponentially to $140,000 in the year 2019. This would provide them with net income probably in excess of $80,000. I have estimated expenses on the high side by using actual expenses during the years in question. Not having evidence with respect to projected expenses, these figures appear reasonable.

[12]          The Respondent did not challenge the accuracy of this projected revenue statement. The gross income after the year 2000 is dependent on the planting of an additional 4,000 trees by the year 2008 and upon the installation of an irrigation system to provide watering upon the pressing of a button. The berry farm is labour intensive and requires the whole family unit. The Appellant will work full-time on the farm in three years. They intend to farm grain on the remaining acreage of approximately 150 acres. They are in the difficult start-up stage having taken over the farm of the Appellant's uncle. They have spent thousands of hours and dollars, repairing and replacing antiquated buildings and equipment, preparing the land, removing stone and probably 101 other chores. They could not have achieved this without the additional earnings from the Appellant's work at IPSCO and Janice's work at the bank. Janice stated that although it has been tough they have no regrets about the decision to leave Regina to farm. She added "it is our life, we won't quit and our boys are interested". She feels that the difficult times are behind them. They have a powerful work ethic. They own the land, buildings and equipment with little or no debt. They have been cautious in that regard yet have no savings. All is invested in the farm. The weather appears to be the determining factor each year and they are located in a harsh environment.

[13]          The Appellant considers himself a natural farmer in that he is skilled at carpentry, electrical work, machine repairs, plumbing and preparing soil. The Appellant and Janice are making a farming foundation for their children and grandchildren. Since 1992, they have trained themselves and gained the experience necessary to make their farm profitable. The Minister concedes that there is a reasonable expectation of profit. I have no reason not to accept their projections which would have them earning over $50,000 annually after 2010. The projections are realistic and not an impossible dream.

[14]          The Appellant's counsel referred to Phillips v. The Queen,[2] Federal Court Trial Division, where the Court found that the Appellant, Donald Phillips, was a farmer with a side-line job as a teacher. Campbell J. found that the evidence indicated that the taxpayer's psychological, physical, and professional activity was farming and not teaching. Thus, he was a farmer and not a teacher, and teaching was only an essential support for his successful farming efforts. He was, therefore, entitled to the unrestricted deduction of his farming losses for the years in issue. The Minister was ordered to reassess accordingly. This conclusion applies in the same manner to the present facts. All his work is directed towards establishing a successful farm operation.

[15]          The Appellant had to retain his job if the farm was to get started towards profitability. The following passage from Finch v. Canada[3] applies to the Derwores family and the adoption of a family unit being a "family farmer" has been of assistance in my decision. At pages 9 and 10, Beaubier J. stated:

... A number of questions were asked relating to Mr. Finch's time at the mine in the Arctic. The premise of the questions was that he could not spend all that time in the Arctic and be on the farm at the same time. However Mr. Finch and the family (and the government farm authorities) understood from 1989 that Mr. Finch had to take this job if the farm operation was to survive, and at the same time Mr. Finch, Mrs. Finch, and the family would have to devote themselves wholly to the farm. This is what they did.

In the light of these facts, the definition of "farming" in subsection 248(1) of the Act reads:

"farming" includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;

There is no definition of a farmer in the Act. But Canada's Farm Debt Review Act, 1986, c. 33 describes a "farmer" in section 2 as an "individual ... engaged in farming". It then defines "farming" as "the production of field-grown crops..., the raising of livestock, poultry ..."

Black's Law Dictionary defines a "family farmer" as:

"A person or entity whose income and debts primarily arise from and family-owned and operated farm;"

The Appellant, Mrs. Finch and their children lived on the farm. All of them, from an early age, produced field-grown crops and raised livestock and poultry. The farm is still the residence of both Brian and Brenda Finch. (This is noteworthy because Brian's income taxes in the North West Territories would be less than in Saskatchewan.) It was the residence of all of their children while they grew up and did their chores. Farming was the principal occupation of each of them while they resided on the farm, whether they got paid or not. Brenda has foregone outside employment, a salary and possible benefits to operate the farm. All of Brian's debts arise from a family owned and operated farm. Brian obtained employment and the consequent salary for the sole purpose of operating the farm and paying down its debts. His salary has been devoted to paying those debts and operating the farm. They have no registered retirement savings plans or similar savings. In these circumstances, both Brian's income and his debts primarily arise from a family owned and operated farm as does Brenda's lack of income and their apparent lack of equity of any kind in the farm for many of its years of operation. It is a farm at which, and for which, the entire family works. It is and has always been a family farm.

The Derwores family have worked as a single unit since moving to the farm in 1992.

[16]          All of his working life the Appellant has wanted out of IPSCO. He finds it very stressful. He describes himself as a farmer first and foremost. IPSCO is just a means to that end.

[17]          The total capital investment in the farm, as of the end of 1995, was $43,580; $1,780 in total building additions and $41,800 in equipment. The Derwores family has a deep devotion and commitment to their farm. I would venture to say that while an adverse decision in this appeal would increase their hardship significantly, they would not abandon their dreams. Douglas intends to leave IPSCO with a pension in three years, after having worked there for 30 years. Their oldest son intends to farm with the Appellant after completing his education.

[18]          Both parties referred me to the leading case of Moldowan v. The Queen,[4] Dickson J. stated that farmers in Canada, for the purposes of the Act fall into three categories. At page 5216 he explained:

In my opinion, the Income Tax 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. 13(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. 13(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.

No single factor is determinative in deciding whether the Appellant's chief source of income is or is not farming. The factors referred to in Moldowan, are to be taken cumulatively, "while a quantum measurement of farming income is relevant, it is not alone decisive".

[19]          The weather and fluctuating prices and the Revenue Canada audit are probably the greatest hurdles the Appellant faces. Typical of most farmers, with the support of his family, he perseveres. During the relevant years, Janice worked 15 hours a week in a Kamsack Bank. The entire family earnings went into the farm, after maintaining their family. They are the farthest thing one can imagine from being hobby farmers. Janice wept with emotion as she recalled the difficult years. They gave up an upscale style of life in Regina, uprooted three children from established schools and invested all their money and lives to make a living from farming some 180 acres of Saskatchewan soil. Are they to be penalized because the Appellant retained employment that he disliked in order to create a successful farm for himself and family? Because of IPSCO slowdowns, he has been laid off 19 times over the years. Presently, he is three years from retirement from the steel plant when he will devote more time yet less money to the farm.

[20]          Both counsel commented on the decisions in Miller v. Canada[5] and Finch, supra. The facts in both cases can be favourably compared to the facts in this appeal, although the Derwores family were in the farming business start-up years trying to establish a commercial enterprise.

[21]          In Miller Bowman J. referred to a similar case he decided, Martin v. The Queen.[6] His quote from Martin is of assistance. At page 1917, he stated:

                Farming has had for Mr. Martin - as, I daresay, for farmers all over Canada - its ups and downs. Drought, fire, excessive rain, fluctuating prices and escalating costs, have taken their toll. Yet still he hangs in, like so many other members of this integral part of the Canadian economic fabric.

                What is the composite picture that emerges? A typical Canadian farmer. Not a wealthy professional or executive who dabbles in exotic cattle or horses with a view to enhancing his social standing but as a hard working Canadian farmer who cleans stables, harvests grain, fixes broken machinery, cares for sick cows and pigs and lives through the major and minor tragedies and heartbreaks that have beset farmers for millennia. Mr. Lockwood described him as a farmer who teaches and not a teacher who farms and I think this is an accurate characterization. The scale of his farming operation was comparable to that of persons who do nothing but farm and who do not have another job. Why is he denied his losses? Because he had another job that made it possible for him to engage in a full time farming operation. Whatever may be the type of person at whom subsection 31(1) is aimed, it is not Mr. Martin. Whatever may be the object and spirit of subsection 31(1), it is not to destroy the backbone of our farming community.

                Mr. Martin's mode of life, commitment of time, commitment of capital, and dedication to farming all point inexorably to the conclusion that Mr. Martin is a full time farmer within Class 1 of the Moldowan categories. Yet the Crown would deny him that on the basis of one factor, the lack of profitability. There are two reasons why this factor cannot determine the result in this case. In the first place although pleaded as a separate allegation, the so-called "no reasonable expectation or profit" point was not pressed by the Crown and no evidence was advanced to substantiate it. I must therefore assume, as Mr. Martin undoubtedly did, that there was a reasonable expectation of profit.

                Even more importantly, to permit this factor to prevail against all of the other factors would be to ignore the principles laid down by the Federal Court of Appeal in such cases as Morrissey, Poirier, and Connell, which require that no single factor can be determinative.[7]^,[8]^,[9]

Bowman J. refers to the Federal Court of Appeal in R. v. Donnelly,[10] and states that it puts section 31 in its proper perspective.

... It involved a wealthy doctor who took up raising racehorses, and lost large amounts of money. One needs only to state those facts to realize why he lost. He was, one of those persons who, as Robertson, J.A. said, "earned their income in the city and lost it in the country". This cannot be said of Mr. Miller, whose situation is not even comparable. Dr. Donnelly was a doctor who dabbled in raising racehorses. Mr. Miller is a full time farmer who works at Safeway. It is instructive to re-read what Robertson, J.A. said in paragraphs 19 to 21 of the Donnelly judgment at pages 526 to 527:

In the end, Graham stands or falls on its unique facts. But there is at least one lesson that can be derived from the case. It seems to me that Graham comes closer to a case in which an otherwise full-time farmer is forced to seek additional income in the city to offset losses incurred in the country. The second generation farmer who is unable to adequately support a family may well turn to other employment to offset persistent annual losses. These are the types of cases which never make it to the courts. Presumably, the Minister of National Revenue has made a policy decision to concede the reasonable expectation of profit requirement in situations where a taxpayer's family has always looked to farming as a means of providing for their livelihood, albeit with limited financial success. The same policy considerations allow for greater weight to be placed on the capital and time factors under section 31 of the Act, while less weight is given to profitability. I have yet to see a case where the Minister denies such a taxpayer the right to deduct full farming losses because of a competing income source. Perhaps this is because it is unlikely a hog farmer such as Mr. Graham would pursue the activity as a hobby.

As is well known, section 31 of the Act is aimed at preventing "gentlemen" farmers who enjoy substantial income from claiming full farming losses: see Morrissey v. Canada, supra, at pages 420-423. More often than not it is invoked in circumstances where farmers are prepared to carry on with a blatant indifference toward the losses being incurred. The practical and legal reality is that these farmers are hobby farmers but the Minister allows them the limited deduction under section 31 of the Act. Such cases almost always involve horse farmers who are engaged in purchasing or breeding horses for racing. In truth, there is rarely even a reasonable expectation of profit in such endeavours much less the makings of a chief source of income.

It may well be that in tax law a distinction is to be drawn between the country person who goes to the city and the city person who goes to the country. In future, those insisting on obtaining tax relief in circumstances approaching those under consideration should do so through legislative channels and not through the Tax Court of Canada. The judicial system can no longer afford to encourage taxpayers or their counsel to pursue such litigation in the expectation that hope will triumph over experience.

Bowman J. goes on to comment:

This passage clearly describes the type of person at whom section 31 is aimed and the type of person at whom it is not.

Agriculture in Canada and particularly in the western provinces is going through a difficult time. It will survive through the courage, sacrifices, initiative, optimism and dedication of people like Mr. Miller and his family. Section 31 was never intended to destroy such people but if it is applied indiscriminately to genuine farmers such as the Millers, it will.

[22]          The facts in Finch, supra, are somewhat similar to Derwores and Miller. Beaubier J. found that Mr. Finch's job working in a mine was subordinate to his farm and he was far from being a gentleman farmer. He relied on the Supreme Court of Canada in Moldowan, supra, and quoted extensively from Hover v. The Queen.[11] In Hover, Bowman J. stated at pages 107 and 108, referring to the Appellant Dr. Hover:

...Farming was for him no sideline nor was he merely testing the water. He had plunged fully and without reservation into the water. As early as 1984, and increasingly thereafter, it was for him a major preoccupation. If Class II farmers are those who carry on farming as a sideline business, as Moldowan and Roney suggest, I cannot conclude that Dr. Hover falls into that category. His commitment of time, capital, energy and dedication to farming precludes such a finding.

                The Act does not specifically require that the other source of income be either subordinate or sideline. It would seem that if farming can be combined with another source of income, connected or unconnected, it can as readily be combined with a substantial employment or business as with a sideline employment or business. Indeed, if the other source were merely subordinate or sideline it would not prevent farming alone from being itself the taxpayer's chief source of income without combining it with some other unrelated subordinate source.

In Finch, Beaubier J. added:

In the light of these and other comments, the following should be pointed out in this case:

                1.              Farming was the Appellant's only business, and it was a family farm in every sense of the phrase.

                2.              Mr. Finch took permanent employment in 1990 to help carry the farm on the direction of Farm Credit Corporation and the Farm Debt Review Board to save the farm, expecting it would only require two or three years of employment, whereupon it would be making a reasonable profit and he could quit his job. Moreover, all of that income and all of the gifts Mr. Finch received went into the farm. In these circumstances, the question becomes: "How much more 'combined' can you get?"

                3.              The continual, long-lasting occurrences of weather and low prices which have been described, are real and are public knowledge. They have occurred to farmers generally in North America and constitute a farm depression, which in this Court's view exceeds the farm disaster of the Great Depression of the 1930's: that view is generally and publicly expressed throughout the North American agricultural industry. Every year, something different and unexpected has happened which has prevented a recovery - the loss of the Crow Rate in western Canada, the removal of rail lines and cheap transport, drought, frost, low prices, higher costs (Mr. Finch testified that during the last five years when cattle prices rose, farm equipment prices associated with a livestock farm doubled), higher fuel costs, and the amalgamation of farm suppliers and customers into oligopolies. More than 80% of Saskatchewan farmers work at off-farm jobs to survive.

[23]          The facts in both Miller and Finch are similar to the present case. I adopt the reasoning in both cases and similarly apply it to the Derwores family who are true and genuine Saskatchewan farmers in every sense. During the 1994, 1995 and 1996 taxation years, their only source of income was a combination of farming and some other source of income. I do not believe that section 31 was intended to destroy the spirit of such people. I view the years 1992 through to the present as start up and learning years for the Derwores family. They are now poised to realize profits dependent of course on the weather and other factors.

[24]          The appeals are allowed, with costs, and the reassessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the deduction of the Appellant's farming losses in 1994, 1995 and 1996 taxation years is not restricted by section 31 of the Income Tax Act.

Signed at Ottawa, Canada, this 21st day of November, 2000.

"C.H. McArthur"

J.T.C.C.

COURT FILE NO.:                                                 1999-2024(IT)I

STYLE OF CAUSE:                                               Douglas Derwores and

                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Regina, Saskatchewan

DATE OF HEARING:                                           November 2, 2000

REASONS FOR JUDGMENT BY:                      The Honourable Judge C.H. McArthur

DATE OF JUDGMENT:                                       November 21, 2000

APPEARANCES:

Counsel for the Appellant:                                  Jeffrey Reimer

Counsel for the Respondent:                              Tracy Harwood-Jones

COUNSEL OF RECORD:

For the Appellant:                                

Name:                                                                      Dwayne M. Anderson

Firm:                                                                        Mellor & Anderson

For the Respondent:                                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

Appendix 'A'

Douglas Derwores

Saskatoon Berry Farm Operations

Pro Forma Revenue Statement

Year of Operation	1	2	3	4	5	6	7	8	9	10	11	12	13
Fiscal Year	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007
Potential Yield As % of Mature Yield	0%	0%	0%	10%	40%	70%	100%	100%	100%	100%	100%	100%	100%
First Planting (pounds)	0	0	0	1000	4000	7000	10000	10000	10000	10000	10000	10000	10000
Second Planting (pounds)		0	0	0	250	1000	1750	2500	2500	2500	2500	2500	2500
Third Planting (pounds)			0	0	0	250	1000	1750	2500	2500	2500	2500	2500
Regeneration/new planting						410	650	750	780	790	790	800	800
Total Yield (pounds)
Market Revenues	0	0	0	1000	4250	8660	13400	15000	15780	15790	15790	15800	15800
at $4.00 per pound	0	0	0	$4,000	$17,000	$34,640	$53,600	$60,000	$63,120	$63,160	$63,160	$63,200	$63,200

NOTES:

                1)              Potential yields are based on a report produced by Saskatchewan Agriculture and Food and Saskatchewan Rural                                                         Development

                2)              Revenue rates are based on the "Saskatoon Berry Production Guide" produced by Paul Hamer of The Saskatoon Farm in                                           DeWinton, Alberta.

                3)              The first planting consisted of 2000 Saskatoon trees in 1995. The second and third plantings consisted of 500 Saskatoon trees in each of 1996 and 1997. Saskatoon trees are expected to regenerate each year. The life expectancy of a tree is 70 years.

                4)              It is expected that by the year 2008, the combination of regeneration and new plantings will maximize the farm's capacity at 7000 trees (700 trees per acre).

14	15	16	17	18	19	20	21	22	23	24	25
2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%
10000	10000	10000	10000	10000	10000	10000	10000	10000	10000	10000	10000
2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500
2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500	2500
800	800	2000	8000	14000	20000	20000	20000	20000	20000	20000	20000
15800	15800	17000	23000	29000	35000	35000	35000	35000	35000	35000	35000
$63,200	$63,200	$68,000	$92,000	$116,000	$140,000	$140,000	$140,000	$140,000	$140,000	$140,000	$140,000

Unfortunately the estimated operating expenses and capital cost allowance are not included. Their expenses from 1993 to 1997 averaged under $40,000.

                                                                                                                Prepared by:

                                                                                                                                Joanne M. Vollbrecht, B. Admin

                                                                                                                                Priority-One Business Services

                                                                                                                                2732-13th Ave. Regina, SK S4T 1N3

                                                                                                                                306-565-2380

1999-2024(IT)I

BETWEEN:

DOUGLAS DERWORES,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on November 2, 2000 at Regina, Saskatchewan, by

the Honourable Judge C.H. McArthur

Appearances

Counsel for the Appellant:          Jeffrey Reimer

Counsel for the Respondent:      Tracy Harwood-Jones

JUDGMENT

          The appeals from assessments of tax made under the Income Tax Act for the 1994, 1995 and 1996 taxation years are allowed, with costs, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the deduction of the Appellant's farming losses in 1994, 1995 and 1996 taxation years is not restricted by section 31 of the Act.

Signed at Ottawa, Canada, this 21st day of November, 2000.

"C.H. McArthur"

J.T.C.C.

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