Roland St-Onge:—This appeal concerns purses totalling $103,397 that the appellant won from racing her horse, So Long’s Prince, over a period of 9 years, from 1960 to 1968 inclusive.
The respondent allowed the deduction of expenditures made in connection with this horse for each taxation year, in addition to the purchase price for the 1960 taxation year, for a total amount of $36,100.
The respondent alleges that the purses won by So Long’s Prince are income from the appellant’s business, that they were duly included in the calculation of her income for the years under appeal, and that penalties and interest were also imposed on her because she had failed to file a return in the manner and at the time prescribed by the Income Tax Act.
The evidence showed that the appellant has always lived at Angers. Her father was a farmer, and at the age of 12 she quit school to help her parents with the farm work. At the age of 20 she married Edmond Filion, a farmer’s son, who lived close by. Her husband bought his father’s farm, and the latter lived with them for 15 years. In her testimony the appellant affirmed that she had always been first and foremost a mother and a housewife and that she had raised her ten children on the family farm. She also helped her husband with the work on the farm where they had all kinds of animals, including horses.
On February 11, 1959 her father died, leaving her an inheritance of $1,000. With this money her husband purchased So Long’s Prince for her at a horse auction for the sum of $950; it was a five-year old that had lost all 23 races in which it had run.
The appellant has an account at the Angers branch of the Provincial Bank, which in 1959 showed savings of about $1,203.
The appellant also related that she was very fond of horses and had purchased the small horse, So Long’s Prince, with the intention of enjoying herself by training it with her children for racing at the racetracks nearby. Never would she have believed that this small horse would one day be racing at the large racetracks. In 1960 her children, who were already familiar with the sport, offered to race it at larger tracks. So it was that this horse won purses totalling $103,397. Sometimes she had to hire drivers, but most of the time her sons Denis, Rénald and Hervé, well Known drivers, raced So Long’s Prince to victory. Twice she lost ownership of the horse (through claiming races) but both times Hervé repurchased it for his mother.
The appellant further stated that she had trained and ridden her horse, but had never driven it at the racetracks. She preferred to leave that to her sons, who knew the horse and were certainly more competent than she in this type of sport. She had never owned horses other than So Long’s Prince; it was now 20 years old and had ended its racing career at the age of 14. It was kept in its own stall on the family farm and was still the appellant’s “mascot”. She did not want to sell it or destroy it, and hoped that it would live to the age of 30.
The appellant still has one son at home and is still living on the family farm.
In cross-examination she admitted that her father and her father-in- law had raised horses for sale; that before the purchase of So Long’s Prince her husband had two other racehorses and that he raced them at the nearby tracks.
Mr Donald Aberfeld, a chartered accountant of Montreal, a large number of whose clients are successful in the racehorse business, testified that his clients never kept their horses after their racing careers were ended, and that the reason for So Long’s Prince’s being registered at one time with the United States Trotting Association was solely to race it in the United States. The evidence revealed that the horse raced only a few months a year.
Counsel for the appellant contended that before 1955 the courts, in deciding whether purses won by a horse should be considered as income, had used the principles adopted in cases involving property transactions, but since that time they have tended to examine the extent of the horse owner’s involvement in the activity. They (counsel) submitted that the evidence in the present case had not shown that the owner of the horse had so organized her activities that they constituted an enterprise of a commercial character and consequently, her racing gains for the years in question could not be considered as income.
They referred the Board, among other cases; to that of Hammond v MNR, [1971] FC 341; [1971] CTC 663; 71 DTC 5389, a decision of the Federal Court of Canada in which Pratte, J states as follows at page 346 [667, 5392]:
The fact of purchasing and racing a horse is not, in itself, a trading venture because it is not normally made with a view to profit. For this reason, purses won by a racehorse cannot be considered as income from a business except in exceptional circumstances showing that the owner of the horse had so organized his activities that he was in fact conducting an enterprise of a commercial character. In the present case, no such exceptional circumstances having been proved, I conclude that the appellant cannot be considered as having been, during the years under consideration, in the business of racing horses for profit and that, therefore, his racing gains during these years were not income.
It should be noted that a farmer’s wife can take up this sport more easily than any other taxpayer since she has all the facilities for engaging in this hobby at her disposal. The appellant was even more fortunate since she had children who were among the best harnessracing drivers, and whose services did not cost her a cent. They had trained with So Long’s Prince, knew it well and could make it win.
A trader who deals in racehorses does not have all these advantages, and rarely is a person in as good a position as the appellant to engage in such a sport.
According to the principles stated in Hammond (supra) and MNR v Beaudin, [1964] Ex CR 899; [1964] CTC 70; 64 DTC 5077, it cannot be said that by purchasing her horse and racing it in the circumstances as we know them, the appellant had organized her activities in such a way as to make them a commercial enterprise. On the contrary, she took advantage of the fact that her children were very successful in this sport. She loved the sport, and her behaviour towards the horse proves it.
The extent of the appellant’s involvement in this sport is in no way similar to that of a racehorse trader, and the appeal is therefore allowed.
Appeal allowed.