Kroeker v. R., 2002 DTC 7436, 2002 FCA 392 -- summary under Subsection 31(1)

The taxpayer, who together with her husband had a farming background and who in partnership with him operated a mixed farming business (both grain farming and a cow-calf operation) worked full-time as a controller but with flexibility to take time off when the firm operations required it. She was entitled to deduct losses without limit since her capital, time and labour were focussed on the farm, whose potential profitability was such that in a subsequent year it was profitable. The statement in the Donnelly decision that there should be demonstration of a reasonable expectation of "substantial" profits should be viewed as having been stated in the context of a case where the activity in question (raising horses for racing) might potentially be a hobby.