J O Weldon:—This appeal with respect to the appellant’s 1967 taxation year was heard at Edmonton, Alberta, on October 19, 1971 under the Tax Appeal Board as it was then constituted.
Al Oeming Investments Ltd was incorporated by A F “Al” Oeming, MSc on August 1, 1961 for the express purpose of taking over the operation of his now world-famous Alberta Game Farm situated 14 miles east of the City of Edmonton in the Province of Alberta. The taxpayer’s fiscal period ends June 30. The primary object for which the appellant was established reads as follows:
To purchase or otherwise acquire as a going concern, Alberta Game Farm, and all the equipment, lands, stock in trade, goodwill, cash on hand, book accounts, furniture, fixtures, effects, animals, birds and assets of every kind and description, and all interest therein, and to pay for same such consideration as may be agreed upon, and to carry on the business so acquired.
Prior to the incorporation of the appellant, the Alberta Game Farm was operated by Mr Oeming as a proprietorship business from August 1, 1959 to August 1, 1961. The income therefrom in the 1959 and 1960 taxation years and from January 1 to August 1, 1961 was computed and declared by Mr Oeming on a “cash basis” pursuant to subsection 85F(1) of the Income Tax Act, RSC 1952, c 148 as amended, which said section provides a special method of computing income for a taxpayer carrying on “a business of the following description, namely
(a) farming”. Following the incorporation of the appellant, the above method of computing and declaring income on a cash basis in connection with the operation of the same business known as the Alberta Game Farm was expressly permitted to continue by the Director of Taxation at Edmonton with respect to the taxpayer’s first 5 fiscal periods ending on June 30 in the years 1962, 1963, 1964, 1965 and 1966. In its 1967 taxation year, the Minister reversed the position taken by his officials in the earlier taxation years from 1959 to 1966 — as he clearly had the right to do — and assessed the appellant on the basis that it is not in the business of farming within the meaning of paragraph 139(1)(p) of the Act and, therefore, is not entitled to report its income in accordance with the provisions of subsection 85F(1) of the Act. In other words, the position taken by the Minister in this appeal is that, of the two methods of computing income, namely, the cash and accrual methods, the taxpayer should have used the accrual method which is the one appropriate to all businesses except those which come within said subsection 85F(1) of the Act, namely, farming businesses and those carried on by taxpayers who practise a profession. This appeal with respect to the 1967 taxation year followed and was heard at Edmonton, Alberta, the parties being represented by counsel as follows: Melvyn A Binder, Esq for the appellant, and S A Hynes, Esq for the Minister.
On the basis that the taxpayer should have computed its income using the accrual method, as stated above, the Minister added the following item to its net income in the 1967 taxation year — “Inventory of guide books $21,000”. According to the pleadings herein, the taxpayer, admittedly, incurred expenses of $40,532.24 in the said taxation year covering the printing of 50,729 guide books of which it distributed free of charge approximately 16,280 copies to schools, libraries, travel and tourist bureaus and various other institutions (it has, apparently, also followed the practice of sending free copies to students writing in from distant lands), and sold approximately 8,199 copies for a consideration of $20,498.33 (at $2 per copy this amount appears to be high) leaving on hand as of June 30, 1967 approximately 26,250 copies of the guide book.
According to the Minister’s reply to the notice of appeal, the appellant was reassessed with respect to its 1967 taxation year on the basis that it was not during the said taxation year or any other taxation year engaged in the business of farming within the meaning of paragraph 139(1)(p) of the Act and, accordingly, was not entitled to elect to compute its income in the taxation year under appeal on the basis of the cash method provided in subsection 85F(1) of the Act. Clause 7 of the above-mentioned reply reads as follows:
The Respondent further submits that he has not concurred in the adoption by the Appellant of the “cash method” of computing its income for its 1967 or earlier taxation years; that he advised the Appellant on November 13th, 1962, that its income from its business must not be computed by using the “cash method”, with the specific exception that the Respondent agreed to allow the Appellant to compute its income from the sale of its animals on that basis.
For the record, it should be noted that the letter of November 13, 1962, referred to in the above quotation, was written by the Director of Taxation at Edmonton to Mr Oeming’s accountant in response to his letter dated October 18, 1962 posing the following questions:
(a) Is the Alberta Game Farm to be treated as a farm or is it to be treated as another business enterprise?
(b) If the accrual method of accounting is used then will the tax department consider that an inventory of animals should be set up?
(c) Would the tax department consider that the animals can be turned over to the Company at no value with the understanding that any sales will be added to income of the Company?
(d) If a value is to be placed on the animals when they are turned over to the Company what method of valuation is to be used?
The pertinent part of the Director’s letter dated November 13, 1962 dealing with the above questions reads as follows:
Indications are that the cost of the animals, in actual fact, has entered into the picture of determining net income as the animals have been expensed when purchased in the hands of Mr A F Oeming. However, because of the somewhat unusual features involved in this business, the views of this office with regard to your queries are as follows:
(a) The enterprise known as the “Alberta Game Farm” should be treated as a business for income tax purposes. It will, however, be allowed special treatment insofar as accounting for the animals is concerned.
(b) The company will be allowed to account for the animals on a cash basis just as Mr A F Oeming has been allowed to do in the past. No year end inventories of animals will, therefore, be necessary in the normal! course of operations.
(c) This office is prepared to allow Mr A F Oeming to transfer all of the animals to the company at a nominal or a nil value with the understanding that any sales of the animals are to be treated as income of the company.
So, having been duly authorized in writing to set up its books of account on a certain basis, the taxpayer was advised on the occasion of its reassessment herein that it had been proceeding incorrectly all along and must pay about $7,000 additional taxes and interest with respect to the above-mentioned amount of $21,000 (the Director’s own valuation) covering the stock of guide books on hand as of June 30, 1967 (some 26,250 copies as mentioned earlier) which the director classified as “inventory”. In that connection, on the basis of the evidence before me in this matter, there should be a finding — and I so find — that the taxpayer was not at any relevant time in the business of preparing and selling books. So far as the guide books in question herein are concerned, it should be observed: that they were prepared and sold to the extent that they were sold — actually, 8,199 copies were sold and 16,280 copies were distributed free of charge, as mentioned earlier — in furtherance of the primary object for which the appellant was incorporated, namely, the operation of the Alberta Game Farm, and that the expense involved in the preparation of the guide books less the total amount recovered through sales thereof should be treated as being entirely incidental to the overall operation of the Alberta Game Farm.
In reply to Mr Binder’s question — “Could you tell us a bit of the history of the guide book and how it came about and why it came about”, Mr Oeming testified, in effect, as follows: that as the collection of animals grew and the demand from visitors to the Alberta Game Farm and from schools across Canada increased he had to come to grips with the expensive problem of providing these people with something tangible at hand; that, at first, the Alberta Game Farm had gone to an open-leaf brochure which was not satisfactory for various reasons; that he was impressed with the requests from many many schools across Canada principally for something that would be permitted in an educational program; that he also required something which would serve as a guide in helping people to find their way around the Alberta Game Farm and in identifying a multiplicity of species of animals and birds, and that he personally wrote the guide book and made up the format of the pictures, and so on, for it.
The above guide book prepared in the appellant’s fiscal period ending June 30, 1967 will now be briefly described (apparently, there is now a more recent edition). It measures 10% inches by 8% inches and is only about ¥% of an inch thick when tightly compressed. In keeping with the obvious high standards maintained throughout the entire operation of the Alberta Game Farm, the 65-page guide book in respect thereof has clearly been prepared with painstaking care on fine quality coated paper. The first page of the guide book entitled: ‘‘A Visit to Al Oeming’s Alberta Game Farm”, shows Mr Oeming holding a 3 /2- gallon bottle of milk to the muzzle of a huge squatting grizzly bear and carries the following inscription:
THIS BOOK IS RESPECTFULLY DEDICATED
TO PEOPLE THE WORLD OVER WHO LOVE AND APPRECIATE ANIMALS AS MUCH AS I DO
“Al Oeming”
A F “Al” Oeming, MSc, MBOU, FZS Founder and Director
Except for pages 2, 3 and 4 which briefly explain “The Scope of the Book”, “How It All Began” and “Visiting The Alberta Game Farm’’, all the remaining pages in the book are devoted to short, interesting and scientifically correct notes of the 2,000 or so animals and the 1,000 or so birds to be seen at the Alberta Game Farm. The descriptive notes mentioned above are supplemented with many pictures mostly in beautiful colour showing the various animals and birds in the surroundings in which they appear at the Alberta Game Farm. Incidentally, the animal population at the Farm has increased since 1967 to about 2,400, the bird population has also similarly increased, and the acreage of the Farm has increased from 1,250 acres to 1,500 acres. Printed on a heavy stock, the cover of the guide book shows on the front thereof, Mr Oeming’s youthful son Todd Oeming proudly carrying a rare baby snow leopard born at the Alberta Game Farm, a muskox and several clever illustrations of a zebra, a giraffe, a stag and an eagle. On the back of the cover of the guide book there is a clear comprehensive plan of the general layout of the inhabited portion of the Alberta Game Farm for the benefit of the many thousands of visitors who come to the Farm each year. In that connection, Mr Oeming testified that on a peak day he has had as many as 15,000 visitors, the average day running about 3,000 people depending on the weather, and that small children from the ages of 1 to 6 years making up better than 55% of the attending public are admitted to the Farm free of charge.
Testifying in connection with the operation of the Alberta Game Farm, Mr Oeming — the director thereof — stated, in effect, as follows: that he and his wife Mrs May Oeming are the president and secretarytreasurer of the appellant corporation, respectively, also its shareholders and directors; that he holds a bachelor’s degree and a master’s degree in zoology from the University of Alberta; that the entire business of the taxpayer is, in fact, the operation of the Alberta Game Farm; that, as a zoologist, he has always been interested and concerned with animals wild and domestic and particularly those that are becoming increasingly rare today; that he has long been of the opinion that the breeding of rare wild animals cannot properly be carried out in a successful manner in a municipal zoo set-up located in a crowded urban area which simply cannot provide its animals with the spacious surroundings approaching those of their natural habitat; that it has, accordingly, been his primary purpose to try to fill a void between the existing natural parks of this country and the type of zoo maintained in some municipalities; that the principal aim of the Alberta Game Farm is to preserve the animals which it acquires by perpetuating their kind in captivity (ie one of the main functions of the Farm is to breed animals); that, subject to a number of variables, the annual increase in the population of the Farm is close to 10% which he qualified by saying that breeding is controlled; that there are some species that must be limited because of their space requirements so you do not allow them to breed every year but others which do not need so much space are allowed to reproduce freely; that the Alberta Game Farm has sold some animals but it principally tries to accumulate other varieties by exchanging its own surplus animals for animals of other countries such as the United States (a number of exchanges have been made with that country), Great Britain, France, the Soviet Union, Finland, Belgium, Italy, principally about every nation in Europe. Mr Oeming has found that a country exchanging a rare animal will ask for a trade of equal rarity in return.
Mr Oeming further testified, in effect, as follows: that the Alberta Game Farm was planning to present a muskox calf (which is about the size of a large dog) to Premier Alexei Kosygin of the Soviet Union on his then approaching visit to the City of Edmonton (according to a Canadian Press despatch the above-mentioned gift appears to have been duly made as a gift “from the children of Edmonton and the Alberta Game Farm to the children of Moscow”); that the Alberta Game Farm was currently trying to work out an exchange of animals with the People’s Republic of China, and that in the appellant’s 1967 taxation year the Alberta Game Farm had produced close to 20,000 bales of hay from about 350 acres of land with only a single cutting which was fed to various varieties of hoof stock on the Farm.
On the basis of all the evidence and other material before me in this most unique matter involving the operation of the Alberta Game Farm of which the facts and figures set out in these reasons constitute a very inadequate and skimpy picture indeed, I have come to the conclusion that the appellant’s operation of the above Farm in its 1967 taxation year did constitute farming within the meaning of paragraph 139(1)(p) of the Act which reads:
139. (1) In this Act,
(p) “farming” includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming,
and that the appellant was, accordingly, entitled to elect to compute its income on a cash basis under subsection 85F(1) of the Act in its 1967 taxation year.
The following are a few of the reasons which 1 had in mind inter alia in reaching the above conclusion:
1. While the term “farming” ordinarily calls to one’s mind a broad acreage in a rural area worked and maintained for the production of crops and the raising of cattle for food, Parliament has seen fit to give that term not only the enumeration of meanings which are set out in paragraph 139(1 )(p) quoted above, but has made it clear by the use of the word “includes” that such enumeration of meanings is subject to extension from time to time as circumstances arise which warrant such extension.
2. It should be noted that one of the meanings of farming enumerated in paragraph 139(1)(p), namely, livestock raising or exhibiting, covers two alternatives, first, livestock raising which ordinarily denotes the raising of livestock for food, and secondly, livestock exhibiting which calls to mind the competitions one is accustomed to see in fairs and exhibitions. That second alternative would seem to be a fairly narrow farming activity but it is, no doubt, a worthwhile one if it results in the raising of the standard of the livestock in any given area. However, it is, in my view, a definite refinement in the ordinary meaning of farming. Keeping the notion of livestock exhibiting in mind, regard should be had to another meaning of farming enumerated in paragraph 139(1)(p), namely, maintaining of horses for racing. Here, Parliament gets away entirely from any idea of farming for the production of food and gives its sanction to another even more drastic refinement in the ordinary meaning of farming. In my opinion, it is a very short and logical step indeed to hold that the term farming also embraces the type of activities outlined herein engaged in by the Alberta Game Farm in the appellant’s 1967 taxation year which involve the breeding, raising, maintaining and protecting of hundreds of wild animals and birds (on what is now a 1,500-acre tract of land much of which has been wrested from nature and now produces thousands of bales of hay) for the purpose of placing such animals and birds where they can be seen in natural and spacious surroundings comparable so far as practicable to those of their natural habitat thereby providing a wealth of interest and education to many many thousands of citizens each year of which 55% are from 1 to 6 years of age and are admitted free as mentioned earlier. In addition to its obvious main purpose outlined above, the Alberta Game Farm also serves many other important purposes such as, to name only a few, the building up of the population of rare animals and birds thereby preventing or holding off their extinction, the providing of opportunities for the observation and scientific study of many of the world’s most interesting and exciting animals and birds sometimes in cooperation with such institutions as universities, the awakening in people both young and old of a healthful interest in and a love of Mother Nature and her creatures, and so on.
3. Since the name Alberta Game Farm correctly indicates, in my view, the nature of its activities, it has not been possible for me to see why such activities should not be regarded as farming in the same way the raising of animals for their pelts is farming, the same way the maintaining of horses for racing is farming, the same way the keeping of bees is farming, and so on.
4. While there is no question in my mind that the operation of the Alberta Game Farm in its 1967 taxation year can properly be characterized as farming within the meaning of paragraph 139(1)(p) of the Act, I should like to make it perfectly clear that, in reaching my decision herein, all aspects of the present matter have been taken into consideration and weighed in the balance; that the decision in this appeal has, accordingly, been based on its own very special and peculiar facts in their entirety; that, in upholding the taxpayer’s position herein, it has been far from my intention to open the door, so to speak, to private zoos and animal parks generally to allege that their particular activities should be regarded as constituting farming under paragraph 139(1)(p) of the Act, and that it would seem to be highly unlikely that the decision herein could have any possible application to any other taxpayer in Canada in the foreseeable future.
In the course of argument, Mr Binder cited the case of Fermes Miron Farms Inc v MNR, [1970] Tax ABC 206, and Mr Hynes cited the case of Stewart v MNR, [1964] CTC 45.
Before completing these reasons, I should like to record: that the Alberta Game Farm is privately owned and operated and receives no outside assistance in the way of government grants or endowments, and that, quoting from the National Geographic School Bulletin April 5, 1971 No 27, Mr Oeming introduces children to a pet cheetah that goes everywhere with him, and he shares his formula for making friends with wild animals, which is:
Start with one young enough to lose his heart to you, add patience and a sense of freedom, and you can make a pet of the fiercest creature.
For the reasons and observations set out above, I have come to the conclusion that the appellant has been successful in this matter in destroying the basis of the Minister’s disputed assessment with respect to the addition of the sum of $21,000 to its net (taxable) income in its 1967 taxation year covering an alleged inventory of guide books, and that the aforesaid sum of $21,000 should, accordingly, be deleted from the appellant’s income in the said taxation year. In the result, the appeal with respect to the 1967 taxation year should be allowed and the relevant assessment referred back to the Minister for amendment as stated above.
Appeal allowed.