October 07, 2011

Dr. Noel A. Kerin (Appellant) v. The Minister of National Revenue (Respondent)

85 DTC 67
Tax Court of Canada
November 29, 1984

Loss — Restricted farm loss — Taxpayer commencing farm operation in 1977 but chief source of income continuing to be medical practice — Taxpayer failing to establish intention to change chief source of income — Income Tax Act, S.C. 1970-71-72, c. 63, s. 31.

The taxpayer, a medical doctor, acquired a farm in 1977. The taxpayer reduced his family medical practice by 50% and took up industrial medicine in order that he be able to spend more time working on the farm. When the taxpayer’s livestock operation proved to be unprofitable, the taxpayer became involved in a seed mill. In 1979, the taxpayer’s farming activities resulted in a net loss of $30,470. The taxpayer deducted the loss from his income. The Minister allowed only the restricted farm loss as a deduction. The taxpayer appealed to the Tax Court of Canada.

Held: The taxpayer’s appeal was dismissed. The Court found that farming could not be regarded as the taxpayer’s primary source of income in 1979. The taxpayer’s ongoing medical practice activity and his plan to continue that practice precluded a finding that the taxpayer had changed his occupational direction.