[OFFICIAL ENGLISH TRANSLATION]
2000-2122(IT)I
BETWEEN:
JEAN PLOMTEUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on October 26, 2000, at Sherbrooke, Quebec, by
the Honourable Judge Alain Tardif
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Valérie Tardif
JUDGMENT
The appeal from the assessments made under the Income Tax Act for the 1996, 1997 and 1998 taxation years is dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 10th day of November 2000.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 24th day of September 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20001110
Docket: 2000-2122(IT)I
BETWEEN:
JEAN PLOMTEUX,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal concerning the 1996, 1997 and 1998 taxation years.
[2] In assessing the appellant for these three taxation years, the respondent relied in particular on the following assumptions:
[translation]
(a) during the taxation years at issue, the appellant operated a veterinary clinic for dogs and cats; he did not treat farm animals outside the clinic;
(b) during the taxation years at issue, the appellant owned two non-working foals and a horse;
(c) during the taxation years at issue, the appellant did not own a farm; he entered into contracts to house, maintain and train his horse and two foals;
(d) the appellant's activity consisted of entering his horse in races;
(e) the appellant spent very little time on his horses¾approximately one hour per day;
(f) from 1992 to 1998, the appellant sustained the following losses from the horse racing activity:
(i) 1992 $ 3,928
(ii) 1993 $ 9,643
(iii) 1994 $ 7,499
(iv) 1995 $ 10,589
(v) 1996 $ 12,106
(vi) 1997 $ 13,960
(vii) 1998 $ 13,424
(g) from 1992 to 1998, winnings and other income from the horse racing activity were minimal, as follows:
(i) 1992 nil
(ii) 1993 nil
(iii) 1994 $ 1,000
(iv) 1995 $ 1,744
(v) 1996 $ 493
(vi) 1997 $ 1,965
(vii) 1998 $ 1,552
(h) the appellant carried on this activity solely for recreational purposes;
(i) in carrying on this activity, the appellant was simply engaging in a hobby, with no reasonable expectation of profit;
(j) the expenditures incurred each year for the racehorses were personal or living expenditures of the appellant; he did not incur them in order to earn income from a farming business operated by him.
[3] At issue is whether, during each taxation year at issue, the appellant incurred the expenditures on racehorses in order to earn farming income.
[4] The appellant alone testified in support of his appeal. During the taxation years at issue, the appellant, a veterinarian by profession, sustained losses, which he deducted from his professional income. The losses were from activities relating to horse racing.
[5] First, the appellant acknowledged that it was unlikely that this activity would ultimately be profitable or viable.
[6] The appellant went so far as to say that this activity had about a five percent chance of becoming successful. He explained that he spent very little time maintaining his horses and having them run in races since his profession as a veterinarian kept him quite busy. He stated that he wanted to improve the chances of winning by using a different and special method of training horses. He provided very few details on this method; he acknowledged that his horses had been trained using traditional methods.
[7] The burden of proof was on the appellant. The evidence produced with respect to the odds that a particular training method would increase the potential for winning and objectively make that activity cost-effective was not very convincing.
[8] The Court was unable to assess the merits of this particular method since the appellant said very little about it, much less objectively demonstrate its advantages.
[9] Instead, it was established on the balance of evidence that the appellant enjoyed racehorses and entered them in various races, hoping that fortune would eventually smile on him.
[10] While horse racing is a very interesting activity, the odds of winning or possibly breaking even are based more on dreams than on reason. According to the appellant, horse racing was not a hobby for him at all¾he did not spend enough time on it to justify describing it as such.
[11] Dreaming takes no time and often provides as much satisfaction for some individuals as do more time-consuming activities, such as golfing, fishing, hunting, sailing or skiing, for others.
[12] Essentially, the possibility of winning enough money to break even and ultimately turn a profit was theoretical and based on luck. The evidence has not established that the appellant had a serious business plan or a valid, objective strategy for making the activity minimally profitable.
[13] The Court also considers it important to reproduce some excerpts from a July 5, 1999, letter sent by the appellant to Revenue Canada, specifically, paragraphs 4, 10, 11, 12 and 17, as follows:
[translation]
...
4. Concerning horse racing as an activity, I have never participated professionally; I am a veterinarian by profession, not a trainer or driver of racehorses.
...
10. Strictly speaking, for me racehorses are certainly not a ''hobby''; as a veterinarian I have little time to spend on an activity that is not or will not ultimately be profitable.
I consider the time and money invested in racehorses a necessary apprenticeship (or education) for learning about all aspects of racing.
As well, I have always considered and hoped that the racehorses would become a retirement project, generating additional income for the time when I could no longer practice my profession.
I stated that I had to come to a decision (which is far from being reached, however): either to give up the racehorses or, better yet, to sell my business and invest the proceeds in a racehorse training centre. This decision calls for a great deal of time and thought but, I repeat, this decision is far from being reached in the manner you indicate.
11. I spend approximately one hour per day on the racehorse activity; since I am still a veterinarian, I cannot spend more time on the racehorses.
12. The racehorses are NEVER used as saddle horses. At this stable, there are saddle horses for rent and racehorses that are trained for racing; the two activities must not be mixed.
...
17. In my view, the conclusion is based on criteria that have not been considered in depth and on lack of knowledge of the horse racing industry.
Although I agree that horse racing is a risky business, there are owners who, after losing money for years, make substantial profits. This activity calls for a great deal of patience.
When I began, I made some money almost instantly, which encouraged me to stick with it. I consider that these years have given me experience (like going to school) in an industry that I did not know well, and I sincerely think that I can make that experience profitable as soon as the conditions for more logical training can be fulfilled.
...
[14] The preponderance of evidence produced by the appellant has shown that he was interested in racehorses; although this interest resulted in losses year after year, the appellant spent very little time on this activity because he was occupied mainly by his professional veterinary practice. The activity's ultimate profitability or viability hinged on luck or chance, two concepts that cannot serve as a basis for planning or developing a genuine, money-generating business. Hoping and wanting a business to be profitable is not enough: a person must take objective, effective, and realistic steps to reach that goal. The evidence in this case does not show that this was done in any way.
[15] For these reasons, the appeal is dismissed.
Signed at Ottawa, Canada, this 10th day of November 2000.
|
"Alain Tardif" |
J.T.C.C.
Translation certified true
on this 24th day of September 2003.
Sophie Debbané, Revisor