At trial, the judge found that s. 31(1) did not stop the taxpayer from claiming farming losses for his horse breeding and racing business. He found that the taxpayer's farming constituted a significant part of his income in the years in question, and was more than a "sideline business." Therefore, under the framework set out in Gunn, s. 31(1) did not apply.
In affirming the trial judge's decision, Evans J.A. stated for the court at para. 27 that "it is not normally the function of an appellate court to second guess a trial judge's application of the law to the facts."