Date: 20011019
Docket: 2000-1537-IT-G
BETWEEN:
GORDON CHABAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Miller, J.T.C.C.
[1] Farming, with all of its vagaries, hidden and apparent hazards is a way of life in Saskatchewan, a way of life that appealed to the Appellant, Gordon Chaban. For many years he laboured to achieve self-sufficiency as a farmer only to have his dream dissipate after a bankruptcy in 1994. In 1995 and 1996 the Minister disallowed Mr. Chaban's full farming losses restricting them in accordance with Section 31 of the Income Tax Act ("Act"). Mr. Chaban appeals those assessments. While there were several other issues raised in the pleadings, certain matters were resolved prior to trial, leaving only two issues: the first, the question of the applicability of Section 31 of the Act to restrict Mr. Chaban's losses from his farming business, and second, the deductibility of certain vehicle related expenses in calculating Mr. Chaban's losses. Mr. Chaban conceded that his calculation of losses in 1995 and 1996 was overstated by $24,617.00 and $36,434.29 respectively, while the Minister maintained such losses were overstated by $26,258.80 and $43,331.60 respectively, the difference being the vehicle repair expenses in question.
[2] Mr. Chaban provided a detailed history of his working life from childhood to the present day. It is unnecessary to relate all of that background, though there are a number of relevant highlights. Mr. Chaban left school in North Battleford, Saskatchewan after grade 8 and until he turned 16 he worked intermittently at his uncle's farm. After the age of 16, he worked a number of jobs including with a fencing company and with a paving company. He made two attempts at running his own business, one in men's retail clothing and the other in the gravel business with his father. Both ventures went out of business. In 1983 he commenced selling equipment for Vulcan Equipment and after a year transferred to Kramer Ltd. ("Kramer") in caterpillar sales. He has been with Kramer ever since as a commissioned salesperson of heavy equipment in western Saskatchewan.
[3] Mr. Chaban met his wife in 1969 and they were married in 1972. Mrs. Chaban's parents operated a mixed farming business. The Chaban's had four children. In 1989, Mr. Chaban suffered a heart attack, which he attributed to the stress of his sales job. Around the same time the Chabans were advised that two of their children were dyslexic and in Mr. Chaban's words "wouldn't amount to much". The Chabans determined that it would be in the best interests of the health of all of the family to become farmers.
[4] In 1989, Mr. Chaban purchased five quarter sections in the Meadow Lake, Saskatchewan area, adjacent to property owned by his father. He made a downpayment and borrowed the balance from Farm Credit Corporation. He described the property as bushland, rocky with marginal soil. The area just north was logging territory. Mr. Chaban bought a cat and started the laborious process of breaking the land. This involved taking the trees down, burning them, ploughing to break up the roots, cross-breaking followed by using a finer disc on the ground and finally picking up the roots and rocks. This was a three year project, ultimately resulting in the clearing of 800 acres.
[5] Mr. Chaban indicated that his intention at the outset was to be a cattle farmer, and that he anticipated a ten year time frame to achieve his goal. He indicated a typical viable cattle operation would be around 400-500 head. I will briefly describe the history of his farming operation.
[6] Before acquiring cattle, Mr. Chaban explained it was necessary to seed the land with cereal as a cover crop for a couple of years, followed by legumes, primarily alfalfa. In 1991 he bought just four head of cattle, adding another twenty in 1992. Mr. Chaban described 1993 as his last crop year with approximately 450 acres in canola and 300 in wheat and alfalfa. It was essential that he grow alfalfa as he was switching from crops to cattle: as Mr. Chaban put it, "the land was made by God for cattle". He acquired another 100 head of cattle in 1993 and just over another 100 in 1994. Throughout this time he was also selling his cattle. In 1994 he only grew alfalfa to support his cattle operation. He put up fences in 1993 and 1994. There are some discrepancies between Mr. Chaban's testimony and supporting documents as to the level of equipment involved in the farming operation up to this point, but I find that by the summer of 1994 he had three tractors, several trucks, grain bins, rock pickers, a baler and miscellaneous trailers and smaller farm implements.
[7] Mr. Chaban financed his operation through a $40,000 Canadian Imperial Bank of Commerce line of credit and a $70,000 mortgage on his Saskatoon home. He also indicated that seventy percent of all his income went back into the farm. Mr. Chaban testified he went to several courses on cattle farming between 1992 and 1994 at a veterinary school, but no evidence was adduced as to the name of the school nor the duration of the courses.
[8] By 1994 Mr. Chaban had just over 200 head of cattle, but a string of events occurred which saw the unravelling of the dream of a viable cattle farm. Mr. Chaban's cattle developed a type of scour, which he was ultimately able to control after appropriate identification of the disease by specialists from the University of Saskatchewan, Agriculture Department. Not, however, before he lost fifty head of cattle. Coincidentally, Saskatchewan was suffering a drought; economic conditions generally were difficult for farmers. Mr. Chaban explained that he believed he lost $87,000 in 1993 and 1994 due to the cancellation of a government insurance program which he referred to as GRIP, the Gross Revenue Profit Insurance. There was no evidence led in support of this contention.
[9] Mr. Chaban declared bankruptcy in November of 1994. There was again some confusion as to the inventory of cattle at this point, as the Statement of Affairs in Bankruptcy listed only 45 head of cattle, while Mr. Chaban suggested there may have been more. I am satisfied that by 1996 he only had 45 head and that prior to the end of 1996 this was eliminated altogether. His machinery, equipment and plant listed in the Statement of Affairs filed in Bankruptcy, were shown as worth $21,000. This consisted primarily of two tractors and a baler. The trustee sold some of Mr. Chaban's property, leaving him with only three quarter sections. On the Statement of Affairs in Bankruptcy, signed by Mr. Chaban at this time, he indicated he anticipated no farm income. When questioned as to his expectation of profit in 1995 and 1996 Mr. Chaban responded that he simply could not remember what the projected profit might be.
[10] Mr. Chaban stated that he still held a round-up in both 1995 and 1996, though it is clear this involved the few cattle he had remaining plus some of his father's and a neighbour's. In 1995 he continued with an alfalfa crop though there is no evidence of how many acres. He also acquired twenty-five replacement cattle. He gave no indication of any plan for the future of the farm subsequent to his bankruptcy. Mr. Chaban commenced a hay operation in either 1997 or 1998.
[11] The following is a schedule of Mr. Chaban's gross farm income and losses for the years 1989 to 1996.
|
Year |
Gross Income |
Net Income |
|
1989 |
$900. |
($68,779.) |
|
1990 |
$45,051. |
($82,161.) |
|
1991 |
$44,635. |
($121,527.) |
|
1992 |
$88,928. |
($51,175.) |
|
1993 |
$93,212. |
($36,424.) |
|
1994 - pre-bankruptcy |
$183,453. |
($4,990.) |
|
1994 - post-bankruptcy |
$8. |
($14,050.) |
|
1995 |
$1,179. |
($41,483.) |
|
1996 |
$36,730. |
($82,292.) |
[12] Before examining the employment side of Mr. Chaban's life during the pertinent years, there are a few more salient facts regarding his farming side. In 1991 Mr. Chaban acquired a mobile home which he located on the farm property. Evidence included photos and a video of this mobile home. Mr. Chaban constructed an addition, which added two more bedrooms to the two bedroom mobile home. I am satisfied this was a liveable residence with all the usual amenities of a home in rural Saskatchewan.
[13] Mr. Chaban provided a number of documents to prove that he was a farmer; three of them specifically represented programs only available to farmers. These were NISA, a retirement fund available to farmers; Agri-Finance, a lending institution only available to fund farmers; and Case Credit, another financing institution which Mr. Chaban relied upon to finance some farm equipment.
[14] Mr. Chaban also produced telephone records from SaskTel for 1995 to June 1996 indicating that calls were made from the farm home on a regular basis. While Mr. Chaban suggested he was the sole user of the telephone, I am not satisfied on that point, though I accept he would have made the majority of the calls. The records do support a finding that he spent considerable time at the property. Mr. Chaban testified he spent two-thirds of his time devoted to the farm and one-third to his employment. While this may have been an accurate split in the early years of the operation, I do not find the evidence supports such a breakdown in 1995 and 1996. In those years he may have spent half of his time on the farm property, though that does not necessarily mean that time was spent farming. Mr. Chaban was a travelling equipment salesman whose territory was mid-west Saskatchewan. His farm property was situated conveniently in a central location for the carrying out of his employment duties. I turn now to a description of those employment activities.
[15] Mr. Chaban has worked for Kramer since 1984. While he described himself as a not particularly great salesman, his earnings were steady from 1989 to 1995 and increased significantly in 1996 onward. The following is a summary of his employment income:
|
Year |
Employment Income |
|
1989 |
$55,109. |
|
1990 |
$59,027. |
|
1991 |
$54,221. |
|
1992 |
$55,590. |
|
1993 |
$54,581. |
|
1994 - pre-bankruptcy |
$61,087. |
|
1994 - post-bankruptcy |
$8,808. |
|
1995 |
$55,212. |
|
1996 |
$93,293. |
|
1997 |
$92,092. |
|
1998 |
$107,181. |
[16] The Kramer office to which Mr. Chaban reported was in Saskatoon. His territory ran west of Saskatoon to the Alberta border and north in line with Prince Albert. His farm property was located approximately 300 kilometres from Saskatoon. His family lived in Saskatoon. His wife worked in Saskatoon and the children attended school there. Mr. Chaban testified that the family would go to the farm on weekends. It is clear Mr. Chaban spent a lot of his time on the road. He introduced his travel records from Kramer as an exhibit, but was quick to denounce them as unreliable. The records show a rough daily itinerary, including where he purportedly started and ended the day. They also indicate the kilometres covered on each day as well as the amounts spent for breakfast, lunch and dinner. The majority of the daily entries would suggest Mr. Chaban started and ended his day in Saskatoon. Some of the entries indicated the day started and ended at "Dad's" which was his label for the farm property. Many entries would indicate an overnight stay at a hotel. Mr. Chaban's evidence was that most of the entries indicating Saskatoon as a start and end point were incorrect, as he was actually at the farm. Further he explained that the reason he put Saskatoon as a start and end point was simply because this was his head office. A more plausible explanation might have been that he did not want his employer to know how much time he spent at the farm, given his relatively steady commission sales figures, though I am not sure why Kramer would care. I agree the records in this regard are unreliable but I am unable to draw any accurate conclusion as to how often I should read "Saskatoon" as really meaning the farm property.
[17] The employment records do suggest that Mr. Chaban spent a good deal of each day in his car. The entries regularly referred to 400 kilometres or more, which equate to several hours driving. Presuming he was contacting customers, which would necessarily take some time, it is easy to find that Mr. Chaban spent many hours every day on his equipment sales. Most days he also recorded the cost of breakfast, lunch and dinner, which supports a full day in the service of his employer. I accept Mr. Chaban's testimony that many days he would end up at the farm. How many exactly is uncertain. If his work for Kramer took him to the Meadow Lake area, where the family property is located, it is understandable that he would stay at the farm. The records also support a finding of a late arrival and early departure on many of the days which he overnighted at the farm. While Mr. Chaban may not always have been starting off from Saskatoon, as the Crown contends, the fact that he stayed overnight at the more central location of the farm does not satisfy me he was farming on those evenings. He gave no specific evidence to that effect for 1995 and 1996.
[18] Mr. Chaban received a base salary from Kramer, a car allowance and a commission. He used a Ford Explorer in the years in question for his sales work. He claimed that a great deal of his work was conducted over the telephone, though his travel records, as already indicated, suggest otherwise. He used his Saskatoon telephone number and a cellular telephone number as the contact numbers for his work. He sold a lot of construction equipment to one customer who, he maintained, did not require much time. In late 1995 he was transferred from what he referred to as the bush sector to the oil sector. This resulted in a move from Saskatoon to Lloydminister, at the request of his employer. According to Mr. Chaban, Kramer requested this move as Mr. Chaban was incurring too much expense on hotels. His family moved to Lloydminister in 1997.
[19] Mr. Chaban spent one week a year in training with Kramer.
[20] Turning now to the facts surrounding the vehicle expenses, the vehicles in question are a 1986 GMC truck registered to Chad Chaban, Mr. Chaban's son, a 1983 Ford registered to Chad, a 1981 Toyota truck registered to Chad and a 1988 Chevrolet registered to Mr. Chaban's son Quinton. The repairs on these vehicles in 1995 amounted to $3,283.52, of which the Minister allowed half, and repairs in 1996 amounted to $6,897.31, of which the Minister allowed none. Mr. Chaban maintained these were farm vehicles owned by him and only registered in his sons' names as they were inclined to speed and not drive as carefully as Mr. Chaban would have liked, and he did not want to attract any personal liability for these careless actions. He further indicated that these vehicles were never used for personal purposes but were for the farm. The only time they went to Saskatoon would be to pick up parts. The Crown's witness, a Canada Customs and Revenue Agency auditor, Ms. Sperling, in her report found no mention of these vehicles as farm vehicles. Neither did they appear on Mr. Chaban's capital cost allowance ("CCA") schedule.
[21] My overall impression from my review of the facts is of a hard-working individual who dreamed to be a cattle farmer, a rancher. He supported this desire with income from his ongoing employment, and up until 1993 or 1994 appeared to be on track to increase income and reduce losses. Then for several reasons his farming world fell apart and the bankruptcy ensued. He was never able to overcome those setbacks; a regrettable, but perhaps all too common situation in rural Saskatchewan. He provided no plan as to how he was going to rekindle his dream, and indeed he appeared to increase his reliance on his employment with Kramer.
[22] This is not a case of someone earning income in the city to lose it in the country as has been stated in other cases. This is a case of an equipment salesman in rural Saskatchewan having a run at farming, recognizing he was not going to make it and attempting, after his bankruptcy, to pursue the business on a reduced basis. It is only from that point that his status as a full-time farmer is at issue.
[23] The starting point for the determination of Mr. Chaban's status is the legislation itself, specifically section 31 of the Act.
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 111 the taxpayer's loss, if any, for the year from all farming businesses carried on by the taxpayer shall be deemed to be the total of
(a) the lesser of
(i) the amount by which the total of the taxpayer's losses for the year, determined without reference to this section and before making any deduction under section 37 or 37.1, from all farming businesses carried on by the taxpayer exceeds the total of the taxpayer's incomes for the year, so determined from all such businesses, and
(ii) $2,500 plus the lesser of
(A) 1/2 of the amount by which the amount determined under subparagraph 31(1)(a)(i) exceeds $2,500, and
(B) $6,250, and
(b) the amount, if any, by which
(i) the amount that would be determined under subparagraph 31(1)(a)(i) if it were read as though the words "and before making any deduction under section 37 or 37.1" were deleted,
exceeds
(ii) the amount determined under subparagraph 31(1)(a)(i).
[24] Considerable case law has developed around this section as to the meaning of "a combination of farming and some other source of income". Justice Dickson in Moldowan v. The Queen, 77 DTC 5213, identified three classes of farmers: full-time, part-time and hobby farmers. He indicated as follows:
It is clear that "combination" in section 13 cannot mean simple addition of two sources of income for any taxpayer. That would lead to the result that a taxpayer could combine his farming loss with his most important other source of income, thereby constituting his chief source. I do not think subsection 13(1) can be properly so construed. Such a construction would mean that the limitation of the section would never apply and, in every case, the taxpayer could deduct the full amount of farming losses.
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 subsection 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 carried on farming as a sideline business. Such a taxpayer is entitled to the deductions spelled out in subsection 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 carried 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.
[25] Associate Chief Judge Bowman in Miller v. The Queen, 1999 T.C.J. No. 761 indicated that in relying upon Moldowan,
... it is clear that in determining whether a person's chief source of income is or is not farming, no single factor - time, mode of living, profitability, capital committed - may be taken as determinative. No single factor - either its presence or its absence - can be taken as governing in isolation.
...
[26] To qualify in either class 1 or class 2 as identified by Justice Dickson, a farming operation must give rise to a reasonable expectation of profit. Only then can a distinction be made between class 1 and 2 on the basis of whether the taxpayer's major preoccupation was farming. As reasonable expectation of profit was not argued, (an acceptance that Mr. Chaban was carrying on a farming business) I need only concentrate on the issue of whether farming was Mr. Chaban's chief source of income. In doing so I will address the following factors: profitability, time spent, capital committed and mode of living.
[27] Profitability
What was Mr. Chaban's actual profit in the years in question and what was his expectation of profit? It is necessary to ask this double barrelled question because, as Justice Robertson put it in The Queen v. Donnelly, 97 DTC 5499:
With respect to the section 31 profitability factor, however, quantum is relevant because it provides a basis on which to compare potential farm income with that actually received by the taxpayer from the competing occupation. In other words, we are looking for evidence to support a finding of reasonable expectation of "substantial" profits from farming.
[28] Justice Strayer had previously explained this requirement in the case of Mohl v. The Queen, 89 DTC 5236:
It now appears clear from the Supreme Court decision in Moldowan v. Her Majesty The Queen [1978] 1 S.C.R. 480 at 487 as recently interpreted by the Federal Court of Appeal in Her Majesty the Queen v. Morrissey, (1988) 89 DTC 5080 that, for a person to claim that farming is a chief source of income, he must show not only a substantial commitment to it in terms of the time he spends and the capital invested, but also must demonstrate that there is a reasonable expectation of it being significantly profitable. I use the term "significantly profitable" because it appears from the Morrissey decision that the quantum of expected profit cannot be ignored and I take this to mean that one must have regard to the relative amounts expected to be earned from farming and from other sources. Unless the amount reasonably expected to be earned from farming is substantial in relation to other sources of income then farming will at best be regarded as a "sideline business" to which the restriction on losses will apply in accordance with subsection 31(1).
[29] Actual losses in 1995 and 1996 by Mr. Chaban were $41,483 and $82,292 respectively, based on the Appellant's figures and $15,225 and $38,960 respectively, based on the Minister's calculations. The Appellant gave no evidence of what profits might have been earned in those years, but indicated in his Statement of Accounts in Bankruptcy that there was no expectation of profits from farming. His employment income in 1995 and 1996 respectively was $55,212 and $93,293. There was no major occupational shift from employment to farming in 1995 and 1996 but rather a shift in the other direction. Mr. Chaban's employment earnings increased significantly in 1995 to 1998 and gross income from farming dropped to nothing by 1999. Any comparison between actual or potential profit from farming and employment income leads to a negative conclusion for the Appellant: that is, there was no potential for profitability in 1995 and 1996 and there was significant employment income. I cannot find on these facts that farming was a chief source of income.
[30] Time spent
Although I have no doubt Mr. Chaban overnighted at the farm on more occasions than set out in his expense reports, he did not provide evidence that on these occasions he took the opportunity to conduct farming activities in 1995 and 1996. Neither was there any accurate estimate of the actual time spent. His expense report suggests a considerable amount of time travelling, presumably calling on customers and potential customers. The vast majority of meals on workdays were at company expense. Taking into account travel time of several hours a day, time visiting with customers and time on the telephone, Mr. Chaban's daily work routine was centered on his sales job. He took at least one week a year for training purposes with the Company. He did indicate he conducted a round-up in 1995 and 1996 but there were few head of cattle left at that time. When the Canada Customs and Revenue Agency auditor visited the farm property in 1997 it was her clear impression that not much farming had been carried on for some time; there was no sign of livestock, the equipment appeared in poor shape and the grass was tall.
[31] While Mr. Chaban was able to provide some considerable detail of extensive farming work in the early years, he was not as specific for the years in question. He was the only witness to testify and he provided no corroboration for his claim that two-thirds of his time was spent farming. Mr. Chaban relied heavily on his telephone records as proof of his steady attendance at the farm. Many calls were early morning, evening and on weekends. Other family members had access to the telephone. I am not convinced a listing of calls from the farm property verify Mr. Chaban's claim that a majority of his time was spent farming. I find the majority of his work time was spent in connection with his employment activity. This is further borne out by his move for employment purposes from Saskatoon to Lloyminister when his sales region was modified.
[32] Capital Committed
From a review of the CCA schedules provided as an exhibit, it is clear that Mr. Chaban acquired and disposed of several trucks, tractors and other farm equipment in the early 1990s. By the time of his 1994 bankruptcy however, the equipment was minimal (approximately $21,000 worth), inventory was low and his real property was cut back. Mr. Chaban maintained he had all the capital needed to carry on farming though this struck me more bravado than realism. If 1995 and 1996 are viewed as starting afresh after the bankruptcy, the capital was considerably less than what had been committed in Mr. Chaban's first run at the farming business in the early 1990s. It is necessary to distinguish between his pre and post-bankruptcy activities as I do not accept that the after bankruptcy activity was a continuation of the pre-bankruptcy activity. Prior to the bankruptcy, Mr. Chaban was committing time, effort and capital to a potentially viable cattle operation. After the bankruptcy, Mr. Chaban's plans were at best confused and at worst, non-existent. He had insufficient capital to pursue the cattle farm. He was down to a minimum number of cattle. He tried haying but there was no suggestion by Mr. Chaban that this would ever become a profitable farm activity. Mr. Chaban, though claiming the bankruptcy would not impair his chances of obtaining sufficient credit to carry on, provided no evidence of a successful application for such sufficient credit to jump-start a new farm operation.
[33] The auditor's evidence was that in 1997 the equipment she saw at the farm appeared to be in disrepair. There is no sign at that time of any cattle inventory.
[34] In 1995 and 1996, Mr. Chaban was not in a position to and did not commit sufficient capital for the development of a full-time farm.
[35] Lifestyle
While this has not historically been cited as one of the factors in analysing restricted farm loss cases, I raise it as it assists me in determining the taxpayer's major preoccupation. Was Mr. Chaban's employment activity a source of income contemplated by the words "combination of farming and some other source of income"? If that other source of income is subsumed within the lifestyle of a farmer, rather than the individual's farm life having to be adapted to accommodate another "source", then there is greater likelihood the major preoccupation is farming. I have already found that Mr. Chaban spent less than half of his work time working on the farm in the years in question. His routine appears to have been having most of his meals not at the farm, but on the road. His wife and children remained in Saskatoon, his wife working and the children attending school. Neither his wife nor adult children gave evidence. He was a travelling salesman in rural Saskatchewan, trying to get to his farm property as often as he could. I am not convinced he was a full-time farmer fitting in his sales work around his farming activities. His lifestyle was governed more by his employment duties than his farming duties. I find the employment income is not "some other source of income" as contemplated by section 31 of the Act.
[36] From a review of these factors I conclude that Mr. Chaban was not a full-time farmer in 1995 and 1996: farming was not his major preoccupation in those years. What was he? Had he given evidence that after the bankruptcy in 1994 his only farming efforts were in winding up the farm operation, I would have had some difficulty in applying the four pronged test of time, capital, lifestyle and profitability. How could any such farmer ever have an expectation of significant profits? How could such a farmer spend the majority of his time in winding up an operation? Applying the guidelines to such a farmer would result in a legitimate class 1 farmer being relegated to a class 2 farmer. I do not believe this was the intention of such tests, nor an appropriate application of section 31. The tests are guidelines to distinguish between different classes of farmers, not to distinguish between different phases of a full-time farming operation, from a start-up phase to an ongoing viable operation and finally to a winding-up phase. Mr. Chaban's counsel however did not argue that Mr. Chaban was winding-up the business in 1995 and 1996 but quite the opposite. She argued Mr. Chaban was still in a start-up phase in 1995 and 1996 with every intention to pursue a full-time farming operation. However, I compare his efforts in 1995 and 1996 to his efforts in 1989 to 1992 and they pale by comparison. In the early 1990s Mr. Chaban was truly in a start-up phase of a full-time farming operation. In 1995 and 1996 the writing was clearly on the wall. The land that God had made for cattle was not sustaining a cattle operation. Mr. Chaban clung to some hope of a farm and tried his hand at a hay crop. This was not the realization of Mr. Chaban's dream; it could not be described as even the start-up phase of a full-time farmer. At best in 1995 and 1996 he was in the sideline business of farming. There were no plans of growth, no plans of a herd of 400 or 500 cattle, there was less time and effort on farming than on selling equipment and there was no expectation of significant profit. What had started as an objective of a full-time farm, had by 1995 and 1996 realistically become a sideline business. In the years that followed it became clear that even a sideline business was not sustainable.
[37] Turning now to the vehicle expenses, I find that Mr. Chaban has been unable to demolish the Crown's assumption that fifty percent of the vehicle repair expenses in 1995 ($1,641.71) and all of the vehicle repair expenses in 1996 ($6,897.31) were not incurred for the purpose of earning income from farming. The vehicles were registered in Mr. Chaban's sons' names; they did not appear on Mr. Chaban's CCA schedule. Mr. Chaban claimed they were in the boys' names so that he would not be liable for their shaky driving habits. At the same time he suggested the four vehicles were used exclusively for farm work, for example, hauling and obtaining parts. I find this explanation somewhat contradictory, as if the vehicles were only used for farming purposes, how much risk was there of the boys' bad driving habits impacting on Mr. Chaban. There were photographs of the vehicles on the farm, though none that I could make out to be the 1986 GMC truck which was the vehicle on which the bulk of the expenses were incurred in 1996. The owner of that particular vehicle, Mr. Chaban's son Chad, did not testify as to his use of the vehicle. In 1996 Mr. Chaban's farming activities consisted primarily of selling off the few remaining head of cattle. I find on balance that Chad's truck was not involved in his limited farm activity.
[38] For these reasons I find Mr. Chaban's losses for 1995 and 1996 are as determined by the Minister and are restricted in accordance with Section 31 of the Act. The appeal is dismissed.
Signed at Ottawa, Canada, this 19th day of October, 2001.
"Campbell J. Miller"
J.T.C.C.
COURT FILE NO.: 2000-1537(IT)G
STYLE OF CAUSE: Gordon Chaban v. The Queen
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: October 9, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge Campbell J. Miller
DATE OF REASONS: October 19, 2001
APPEARANCES:
Counsel for the Appellant: Allison M. Downey
Counsel for the Respondent: John O'Callaghan
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1537(IT)G
BETWEEN:
GORDON CHABAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 9, 2001 at Edmonton, Alberta by
the Honourable Judge Campbell J. Miller
Appearances
Counsel for the Appellant: Allison M. Downey
Counsel for the Respondent: John O'Callaghan
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1995 and 1996 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 19th day of October, 2001.
|
"Campbell J. Miller" |
J.T.C.C.
2000-1537(IT)G
BETWEEN:
GORDON CHABAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 9, 2001 at Edmonton, Alberta by
the Honourable Judge Campbell J. Miller
Appearances
Counsel for the Appellant: Allison M. Downey
Counsel for the Respondent: John O'Callaghan
JUDGMENT
The appeals from the reassessments made under the Income Tax Act for the 1995 and 1996 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 19th day of October, 2001.
|
"Campbell J. Miller" |
J.T.C.C.