There was no evidence that the taxpayer had acquired condominium rental units for his personal benefit. Accordingly, his property rental activity was clearly a commercial activity, so that it was a source of income. Only where the nature of a taxpayer's venture contained elements which suggested that it could be considered a hobby or other personal pursuit did it become necessary to establish that the taxpayer had an objective intention of profit and that there was evidence of businesslike behaviour which supported that intention. Thus, it did not matter that a projection of operating revenue and expenses at the time of acquisition showed negative cash flow for the 10-year projection period (and the actual performance was worse).
Iacobucci and Bastarache JJ. stated (at paras. 5, 53 and 60):
[I]n order to determine whether a particular activity constitutes a source of income, the taxpayer must show that he or she intends to carry on that activity in pursuit of profit and support that intention with evidence. The purpose of this test is to distinguish between commercial and personal activities, and where there is no personal or hobby element to a venture undertaken with a view to a profit, the activity is commercial, and the taxpayer's pursuit of profit is established. …
We emphasize that this "pursuit of profit" source test will only require analysis in situations where there is some personal or hobby element to the activity in question. . . . Where the nature of an activity is clearly commercial, there is no need to analyze the taxpayer’s business decisions. Such endeavours necessarily involve the pursuit of profit. As such, a source of income by definition exists, and there is no need to take the inquiry any further. …
In summary, the issue of whether or not a taxpayer has a source of income is to be determined by looking at the commerciality of the activity in question. Where the activity contains no personal element and is clearly commercial, no further inquiry is necessary.