October 07, 2011

Linfields Limited (Appellant) v. Her Majesty the Queen (Respondent)

97 DTC 545
Tax Court of Canada
April 12, 1996

(Court File No. 93-1248(IT)G.)

Deductions — Farming losses — Whether taxpayer having reasonable expectation of profit from farming — Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, ss. 9(1), 18(1)(a) and 111(1)(d).

On reassessment, the Minister permitted the corporate taxpayer to deduct its 1982 farming losses in computing its income for 1987. However, the Minister disallowed the deduction of the taxpayer’s farming losses for 1984, 1985, and 1986 in the computation of its income for 1987 and 1988. The taxpayer appealed to the Tax Court of Canada.

Held: The taxpayer’s appeal was allowed. Considering all of the evidence, it could be said that, in the years in question, the taxpayer had a reasonable expectation of profit. The tests in terms of time spent, and expertise and involvement, were met. And although the capital committed was not significant, it was adequate. Considering the size of the taxpayer’s operation, moreover, the losses were neither extensive nor exaggerated. For these reasons, the taxpayer was entitled to the deductions which it had sought. The Minister was ordered to reassess accordingly.