Stecko v. Canada
T-2255-87
Cullen J.
9/3/95
22 pp.
Action to set aside reassessments restricting deduction of plaintiff's farm losses for 1983 and 1984 taxation years under Income Tax Act, s. 31(1)-Plaintiff, orthopédic surgeon, experiencing knee problems -- Began plans for future career change by establishing vineyard in 1982--Purchased 16.4 acres of land in 1982 for approximately $70,000--Plaintiff, accountant meeting with Department of Revenue official to explain proposed farming operation and to obtain assurance plaintiff would be entitled to deduct start-up costs -- Assurance received not binding -- Between 1982 and 1985, plaintiff investing more than $300,000 in establishing, developing vineyard--Investment in vineyards presently estimated at $650,000 -- Over same period of time, investment in medical practice estimated at $50,000--Although time spent by plaintiff with vineyards increased, income from medical practice not decreasing -- Minister not convinced plaintiff changed occupational direction from practice of medicine to farming within meaning of Income Tax Act -- Plaintiff alleging abuse of process by defendant -- Argument based on two events: meeting between plaintiff, accountant, Department of Revenue official and subsequent audit of plaintiff by Revenue Canada--Plaintiff could not reasonably have relied on statements made by Revenue Canada official -- Advice, assurances made by Revenue Canada agent not binding -- Defence of estoppel cannot be invoked against Crown, acts of Crown's servants or agents -- Plaintiff's arguments on estoppel without merit -- Assessments, subsequent judicial processes nothing more than enforcement of Income Tax Act--Minister not estopped from proceeding because of abuse of process--Construction of Income Tax Act, s. 31(1) central to case at bar--Moldowan v. The Queen, [1978] 1 S.C.R. 480 leading decision on farming losses -- Only taxpayer for whom farming may reasonably be expected to provide bulk of income free of limitation imposed by s. 31(1) for farming losses -- Whether farming taxpayer's chief source of income or sideline business -- Proper approach in determining whether farming "chief source of income" to consider time spent, capital committed, profitability, both actual and potential, of vineyard operation -- Taxpayer spending approximately 20 hours per week working on vineyard, 60 to 80 hours per week in medical practice -- Farming not taxpayer's major preoccupation during years in question -- In terms of capital committed, plaintiff investing considerable sums of money in developing vineyard -- Amount of over $600,000 committed to establishment of vineyard since 1982 -- In both relative and absolute terms, capital committed by taxpayer to farming operation significant -- Three sets of projections of income and cash flow prepared by plaintiff's accountant for vineyard operations -- Projections reasonably accurate -- Third set of projections reflecting most accurately potential profitability of plaintiff's vineyards -- However, taxpayer's professional income appreciably higher, showing no indication of decreasing -- Actual or potential profitability of farming operation not sufficient to place it in "chief source of income" category -- Taxpayer not changing occupational direction significantly to make farming chief occupation -- Appeal from Minister's decision dismissed -- Costs of original plants and planting not deductible as expenses on account of capital -- Department's policy not to permit deduction of vines as expense -- Income Tax Act, S.C. 1970-71-72, c. 63, s. 31(1) (as am. by S.C. 1979, c. 5, s. 9).