The taxpayer, who had grown up in a farming family, was a full-time medical doctor (working approximately 1,900 hours a year) who devoted almost all her other waking hours (approximately 2,500 hours a year) to her organic beef farm business. The taxpayer had acquired the farm in an abandoned and dilapidated state shortly after she began practising medicine in 1975. She had since invested millions of dollars and great effort trying several approaches to create a viable farming business, claiming farming losses for every year since the 1987 taxation year, with the exception of the 1993 and 1994 taxation years. In recent years, she had embarked on an organic beef farm business, and employed several full-time employees and various seasonal and part-time employees. In 2014 and 2015, the farm consisted of a total of 5,314 acres, the farmhouse where she lived, three large animal shelter and storage buildings, and construction had started on three additional buildings. The Minister relied on s. 31(1) in reassessing to restrict to $17,500 losses from farming incurred by the taxpayer in the amounts of $530,363 and $595,904 for the 2014 and 2015 years.
Before dismissing the taxpayer’s appeal, Owen J noted that Parliament had amended s. 31(1) to overrule Craig and provide that the taxpayer’s farming loss deduction will be limited under s. 31(1) for taxpayers who do not look to farming, or to farming and some subordinate source of income, for their livelihood, and stated (at para. 134):
[F]or the Taxation Years and for all prior taxation years in which the Appellant carried on the farming business … [t]he Appellant looked to her medical practice for her livelihood and used the net income from her medical practice to fund her farming business, which could not survive without that funding. The farming business has always been subordinate to the medical practice as a source of income of the Appellant and there is no evidence that that will change in the foreseeable future.
After having noted (at para. 108) that “[t]here is no evidence that calls into question … that the Appellant pursued her clearly commercial farming activity for profit”, Owen J stated (at para. 136):
The result in this appeal is most unfortunate. The amended version of the rule has the effect in this case of precluding the operator of a bona fide farming business from deducting losses that would be available to the operator of any other type of business.