Levy v. Minister of National Revenue, (1990) 36 F.T.R. 17 (TD)

• Judge: Rouleau, J.
• Court: Federal Court (Canada)
• Case Date: February 28, 1990
• Jurisdiction: Canada (Federal)
• Citations: (1990), 36 F.T.R. 17 (TD)

Levy v. MNR (1990), 36 F.T.R. 17 (TD)

MLB headnote and full text

Louis S. Levy (plaintiff) v. Her Majesty The Queen (defendant)

(No. T-2082-85)

Indexed As: Levy v. Minister of National Revenue

Federal Court of Canada

Trial Division

Rouleau, J.

May 10, 1990.

Summary:

The taxpayer was a member of a group investing in the purchase of horses for profit by breeding, racing or reselling yearlings. The taxpayer claimed losses were from property and fully deductible. The Minister determined that the taxpayer was involved in a farming operation which was not his chief source of income, therefore, deductible losses were restricted to $5,000.00/year under s. 31(1) of the Income Tax Act. The taxpayer appealed.

The Federal Court of Canada, Trial Division, dismissed the appeal.

Income Tax - Topic 1061

Income from business or property - Carrying on business - What constitutes - The Federal Court of Canada, Trial Division, rejected the proposition that passive investment in a syndicate, where the subject matter of the syndicate was exploited by an independent contractor, did not constitute "carrying on business" - See paragraph 7.

Income Tax - Topic 1136

Income from business or property - Deductions - Farming losses - Section 31(1) of the Income Tax Act made the restricted farming losses provisions applicable to "all farming businesses carried on by him" - The Federal Court of Canada, Trial Division, held that the inclusion of the words "carried on by him" did not restrict the application of s. 31(1) to persons actively participating in the farming operation - The court stated that "carried on by him" was not synonymous with "actively engaged" - Business could be "carried on" by a taxpayer who invested capital only, with a view to sharing the proceeds - See paragraphs 16 to 24.

Income Tax - Topic 1136

Income from business or property - Deductions - Farming losses - A group invested in horses for profit by breeding, racing or reselling yearlings - The Federal Court of Canada, Trial Division, held that the group was involved in "farming" as defined in s. 248 of the Income Tax Act - See paragraphs 10 to 15.

Income Tax - Topic 1136

Income from business or property - Deductions - Farming losses - An accountant and a group of others invested in horses for a profit by breeding, racing or reselling yearlings - One of them was entrusted with the care, training and maintenance of the horses; all equally shared in the costs and profits - The taxpayer claimed his losses were from property and were, accordingly, fully deductible - The Federal Court of Canada, Trial Division, held that the taxpayer was carrying on the business of farming under s. 248 of the Income Tax Act and, since it was not his chief source of income, deductible losses were restricted to $5,000.00/year under s. 31(1).

Partnership - Topic 5

Partnership - Nature of - Levy and three others invested in horses for a profit by breeding, racing or reselling yearlings - One of them was entrusted with the care, training and maintenance of the horses; all equally shared the costs and profits - The Federal Court of Canada, Trial Division, opined that Levy was a member of a partnership, where he carried on business in association with others, with a view to profit - See paragraph 9.

Cases Noticed:

Tara Development Co. Ltd. v. Minister of National Revenue, 70 D.T.C. 6370 (Ex. Ct.), refd to. [para. 6].

California Copper Syndicate v. Harris, [1904] 5 T.C. 159, refd to. [para. 7].

Kit-Win Holdings Limited v. Minister of National Revenue, 81 D.T.C. 5030, refd to. [para. 8].

Juster v. Minister of National Revenue (1974), 5 N.R. 219; 74 D.T.C. 6540 (F.C.A.), refd to. [para. 12].

Hollinger v. Minister of National Revenue, 73 D.T.C. 5003, refd to. [para. 13].

Moldowan v. Minister of National Revenue (1977), 15 N.R. 476; 77 D.T.C. 5213 (S.C.C.), refd to. [para. 19].

Minister of National Revenue v. Morrissey, 89 D.T.C. 5080, refd to. [para. 19].

D.R. Fraser v. Minister of National Revenue, 49 D.T.C. 521, refd to. [para. 22].

Johns-Manville Canada Inc. v. Minister of National Revenue (1985), 60 N.R. 244; 85 D.T.C. 5373 (S.C.C.), refd to. [para. 22].

Statutes Noticed:

Income Tax Act, R.S.C. 1952, c. 148, sect. 13 [para. 17].

Income Tax Act, S.C. 1970-71-72, c. 63, sect. 31 [para. 18]; sect. 248 [para. 11].

Authors and Works Noticed:

Report of the Royal Commission on Taxation (1966), generally [para. 20].

Counsel:

R. Fitzsimmons, for the applicant;

Patricia Lee, for the defendant.

Solicitors of Record:

Fitzsimmons, Macfarlane, for the applicant;

John C. Tait, Q.C., Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

This appeal was heard on February 28, 1990, at Toronto, Ontario, before Rouleau, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on May 10, 1990.