Date: 20001129
Docket: 98-9306-IT-G
BETWEEN:
RUDOLF LANGHAMMER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1]
This is an appeal by Rudolf Langhammer from income tax
assessments for 1993, 1994 and 1995 in which the Minister of
National Revenue ("Minister") disallowed the
appellant a non-capital loss in 1993 and did not permit the
appellant to carry forward the purported non-capital losses to
1994 and 1995. The Minister reassessed the appellant for 1993 on
the basis the losses he incurred were capital losses (and not
business losses) and recognized allowable capital losses to be
carried forward to 1994 and 1995.
[2]
Mr. Langhammer immigrated to Canada in 1951 from Germany. He
eventually went back to Germany but soon returned to Canada to
farm. The appellant purchased two farms which he later sold and
then moved to Burlington, Ontario. He did not like urban living
and then acquired and moved to another farm near Owen Sound.
[3]
In 1983 Mr. Langhammer started to lend money on the security of
second mortgages. The mortgages were for terms of two to three
years, and sometimes less. He was introduced to this activity by
a Mr. Morton, previously manager of a trust company that had been
Mr. Langhammer's tenant. Mr. Morton had left the trust
company to work as a mortgage broker and asked Mr. Langhammer if
he had money to invest.
[4]
Mr. Langhammer also built a fourplex in 1983 with money borrowed
on the security of his farm.
[5]
Much of the money he invested was in second mortgages,
Mr. Langhammer said, and a good part was money he borrowed
from friends in Europe. It appears he also mortgaged his property
to secure some of these loans. Since interest rates in Canada
were higher than in Europe, Mr. Langhammer was able to
borrow funds from Europeans at 9 per cent or 9½ per
cent and lend out at 15 per cent. He borrowed $158,000 from a
friend in Vienna on the security of his farm. Later
Mr. Langhammer borrowed $35,000 and then $40,000 from a
German friend. All the loans were repaid by
Mr. Langhammer.
[6]
Mr. Langhammer also borrowed funds from Victoria and Gray
Trust.
[7]
Loans were made by Mr. Langhammer to persons who were refused
loans by traditional institutional lenders such as banks and who
were prepared to pay a higher rate of interest for a shorter term
loan.
[8]
During the years in appeal, the appellant received income from
the fourplex and a rooming house, old age pension and a pension
of $40.00 a month from McMaster University.
[9]
Mr. Langhammer made only one loan in 1983 (to a
Mr. Goodfellow) since he required money to build the
fourplex. He then made three loans in 1986, one to Chapman in the
amount of $63,000, another to Henderson for $105,000 and a third
to Kuknen for $32,000. These three loans were referred to him by
a real estate agent.
[10] In 1988,
Mr. Langhammer made three loans, one of $19,500 and another of
$5,000 to his son-in-law and a third loan of $36,000 to Bartt
Construction to construct a building. The Bartt loan was secured
by a mortgage on the building property.
[11] One loan
was made in 1989, to a Mr. Gray for $25,000 with interest at
18 per cent per annum. Mr. Gray was referred to Mr.
Langhammer by Mr. Morton.
[12] In 1991
Mr. Langhammer made five loans: one to a Mr. Lane for $30,000,[1] at 15 per cent.
Mr. Lane's loan was secured by a third party. (A Mr. Lemke,
also a borrower of funds from Mr. Langhammer, recommended
Mr. Lane to the appellant). Mr. Lane's loan was a
"building loan". Mr. Langhammer also made two loans
to a Mr. Lemke, one for $20,500 at 15 per cent plus a $3,000
bonus and the other for $27,000 at an interest rate of 15 per
cent and a $3,000 bonus. Both Lemke mortgages were referred to as
"building mortgages" that were paid off within three
months. A fourth loan was made to a Mr. Kocher for $18,000 with
interest at 13 per cent and a fifth loan was made to a Mr. Lee in
the amount of $10,000 with interest at 16 per cent plus a bonus
of $1,000.
[13] Three
loans were made in 1992: to one Auld for $5,000 with interest at
13 per cent and a $500 bonus, to Jackson for $15,000 at
15 per cent interest and a bonus of $1,500 and to
Wrigley for $40,000 with interest at 15 per cent plus a bonus of
$3,000.
[14] In 1989
Mr. Langhammer invested $100,000 in a condominium building
development in Owen Sound, Ontario, called Harbour House, at the
suggestion of one Russell Howell, a real estate agent.
Mr. Langhammer also purchased a condominium unit in Harbour
House, which he subsequently sold at a small profit. [There is no
evidence how Mr. Langhammer treated the profit, whether on
income or capital account.] The appellant purchased four bonds in
Harbour House, each in a denomination of $25,000. The bonds had
an interest rate of 8 per cent and the right to participate in 75
per cent of the profits of the development. The bonds were
secured by a Trust Agreement and a subordinate mortgage on the
condominium property.
[15] At the
same time Mr. Langhammer invested money with
Mrs. Langhammer in guaranteed investment certificates. He
does not pretend this class of investment is part of a
moneylending business.
[16] Mr.
Morton referred Messrs. Gray, Kocher, Lee, Auld, Jackson and
Wrigley to Mr. Langhammer. A Mr. Byers, a realtor,
recommended Messrs. Goodfellow, Chapman, Henderson and
Kuknen.
[17] Mr. Lane
could not sell the property that secured the appellant's
loan. The prior mortgagee foreclosed on the property and the
appellant was able to obtain only $1,040 of the $30,000 he loaned
to Mr. Lane. The guarantor became bankrupt in 1993 and Mr. Lane
made an assignment of bankruptcy in 1994.
[18] No
interest was ever paid on the Harbour House bonds and in 1993,
Confederation Trust Company exercised a power of sale with
respect to the property, with the result that the bonds became
worthless.
[19]
According to the reply to notice of appeal the appellant deducted
the amount of $144,423 as a business loss in computing his income
in 1993 and reported an amount of $9,835 as business income in
1994.[2]
[20] In
reassessing the appellant for the 1993 taxation year, by notice
of reassessment dated April 24, 1997, the Minister disallowed the
deduction of the business loss claimed in the amount of $144,423.
The Minister assessed income from property in the amount of
$5,265 and allowed deductions of $10,435 on account of interest
expense, $4,170 on account of legal and accounting fees and
$18,821 on account of an allowable business investment loss. The
Minister also recognized allowable capital losses of $56,178 and
of $24,750 available for application to the other years. In
computing income for 1994 and 1995, the appellant appears to have
deducted non-capital losses carried forward of $34,274 and
$29,108 respectively, with respect to the purported
non-capital loss in 1993. None of the appellant's
income tax returns for any of the years before me was produced in
evidence. The notice of appeal makes no reference to the quantum
of any loss; the only material facts relied on by the appellant
in his notice of appeal are: "Clients records show his
occupation to be a Money Lender, and the forgivable loan was
forgiven at the end of term."(sic) Further reassessments in
1998 for 1993, 1994 and 1995 did not affect any aspect of the
assessments before me.
[21] Mr.
Langhammer acknowledged he did not advertise for borrowers. He
said people in the small community in which he lived knew he
loaned money to people who could not get a bank loan. Mr. Morton,
for example, once approached Mr. Langhammer to lend money,
knew Mr. Langhammer had an interest in doing so. Mr. Byers also
was aware of Mr. Langhammer's moneylending activity.
Mr. Langhammer, himself, never sought out borrowers.
[22] Mr.
Langhammer never "screened" any potential borrower.
He relied on the mortgage broker or realtor who recommended him
to the borrower. However, once someone recommended a potential
borrower to him, he did look at the properties that would secure
the loans before he agreed to any loans. The appellant kept no
general ledger but he did have available a sheet of paper for
each mortgage, stating the due date of interest and when the
interest was paid.
[23] After Mr.
Langhammer lost money in 1993, he became depressed and his
financial situation became dire, he said. He testified that at
the time of trial he is still prescribed tranquilizers and
anti-depressant drugs. Any money he had in 1994 and 1995 was
invested in guaranteed investment certificates. At the end of
1995 he had no outstanding mortgages. At time of trial he was
investing in first mortgages "almost
exclusively".
[24]
Apparently some of the mortgages, the Lane mortgages in
particular, indicate that Mrs. Langhammer is the mortgagee. Mr.
Langhammer explained "we practically own everything
jointly...". Mr. Langhammer was the source of the
funding of all of the loans. The respondent did not raise the
issue as to whether Mr. Lane was entitled to only 50 per
cent of the loss or had to report only 50 per cent of the income.
I consider Mr. Langhammer as the mortgagee.
[25] Mr. David
Broomer, C.A. met Mr. Langhammer in March 1993 when the latter
asked him to prepare his 1992 tax returns. Mr. Broomer knew of
Mr. Langhammer because some of his building clients had
borrowed money from him. Mr. Broomer did not prepare any of Mr.
Langhammer's tax returns for taxation years prior to 1992.
In assessing, the Minister had assumed that for 1987 to 1992
taxation years, inclusive, Mr. Langhammer reported his interest
income as such and did not report the carrying on of a
moneylending business.
[26] Mr.
Langhammer had no losses before 1992, according to Mr.
Broomer.
[27]
Appellant's counsel queried Mr. Broomer for the reason
Mr. Langhammer claimed the losses as business losses. Mr.
Broomer said he listened to the appellant describe his
activities, saw that he borrowed money to advance to others at
higher interest rates, that Mr. Langhammer took security in the
form of second mortgages and concluded from this information that
Mr. Langhammer was in the moneylending business. Moreover, Mr.
Broomer testified, the appellant sought not only a high rate of
interest for his loans, but in many cases, sought a bonus as
well. The fact that Mr. Langhammer included the bonus in interest
(or in income) suggests that he was a moneylender. Some people,
Mr. Broomer volunteered, claim such bonuses as capital gains.
[28] As far as
the investment in the Harbour House bonds is concerned,
Mr. Broomer was of the view the investment was a venture in
the nature of trade since there were "wheeler-dealers in
Harbour House ... and all the people in Harbour House were
local people..."
[29] Mr.
Broomer also declared that many lenders in Toronto, including
banks "wouldn't lead north of Highway 9",
adding that people living "north of Highway 9"
who wish to borrow money are "left to their own
devices". In the community where Mr. Langhammer resided,
Mr. Broomer suggested, a prospective borrower frequently has to
look to non-traditional lenders and Mr. Langhammer was
one of these lenders.
[30] I was not
impressed with Mr. Broomer's testimony, much of it opinion
evidence. He was not qualified as an expert witness to give
opinion evidence. I do not accept his view that Mr. Langhammer
was a moneylender or that the appellant's acquisition of
the Harbour House bonds was a venture in the nature of trade or
that people living "north of Highway 9" had to look
to non-traditional moneylenders from which to borrow money.
My findings are independent of Mr. Broomer's evidence
to which I gave little, if any weight.
[31]
Paragraph 20(1)(p) of the Income Tax Act
("Act") provides, inter alia, for the
deduction of losses incurred due to the uncollectibility of loans
which arose in the ordinary conduct of a taxpayer's
business, which included the lending of money. Thus, the
deductibility of losses arising from uncollectible loans hinges
on such loans having been made in the ordinary course of a
moneylending business.
[32]
Respondent's counsel suggested that it is difficult to
distinguish between the appellant and any other pensioner who
invests in mortgages and guaranteed investment certificates. The
infrequency of transactions indicate that the appellant invested
his money rather than carrying on the business of a
moneylender.
[33] In the
appeals at bar, the appellant made loans for the purpose of
earning interest income. Generally, interest income that is
received on investments is considered to constitute income from
property rather than income from a business.[3]
However, there are exceptions to this general principle. The
distinction between income from a business and income from
property was considered in Canadian Marconi Company v. The
Queen,[4] where
Wilson J. stated, at page 6528:
The distinction between income from a business and income from
property is a difficult one to draw but it is one which the Act
compels us to make. There are two reasons for the difficulty.
First, the terms "business" and
"property" are broadly and loosely defined in
s. 248(1) of the Income Tax Act. As a consequence the
definitions on a fair reading can be construed in such a way as
to overlap. Second, persons or corporations generally engaged in
trading-type activity often use property as a means of earning
income. On first reflection this sort of income could
realistically be considered either business income or property
income. The observation of Thurlow J. (as he then was) in
Wertman v. Minister of National Revenue, 64 DTC 5158 (Ex.
Ct.) at p. 5167, that cases are "readily conceivable where
particular income may be accurately described as income from
property and just as accurately regarded as income from a
business" is frequently apposite. The courts have handled
the difficult task of deciding whether a particular receipt is
business income or property income by applying certain set
criteria or indicia of trading activity and, in the case of a
corporate taxpayer, by applying a presumption in favour of the
characterization of its income as income from a business.
[34] Mr.
Langhammer did not use a corporation to make the loans in
question. Thus, the rebuttable presumption that income earned by
a corporation is presumed to be income from a business is not
relevant in this appeal. With regards to the criteria or
indicia that are relevant in discerning whether a given
stream of income is income from property or income from a
business, Wilson J. wrote in Marconi, at pages
6529-30:
It is trite law that the characterization of income as income
from a business or income from property must be made from an
examination of the taxpayer's whole course of conduct
viewed in the light of surrounding circumstances: see Cragg v.
Minister of National Revenue, [1952] Ex. C.R. 40, [52 DTC
1004], per Thorson P. at p. 46. In following this method
courts have examined the number of transactions, their volume,
their frequency, the turnover of the investments and the nature
of the investments themselves.
[35] Wilson J.
appears to imply that a "level of activity" test
distinguishes income from property or from that of a business.
Mr. Langhammer did more than earn interest income from
merely owning investments. He earned interest as a result of the
activity carried on by him to earn such income. For example, he
actively sought funds from European sources, whose interest cost
was lower than in Canada. By borrowing at a low cost and lending
at a higher rate of interest, the appellant was conducting
himself in the same manner as would a commercial moneylender.
Moreover, similar to a commercial lender, he would typically take
security on loans granted in the form of second mortgages. As my
colleague Judge Bowman stated in Kaye v. The Queen,[5] in asking whether
a "business" exists, one would also consider
"whether the person claiming to be in business has gone
about it in an orderly, businesslike way and in the way that a
business person would normally be expected to do". In this
case, the appellant has arguably acted in such fashion. With
regards to the "level-of-activity"
criteria affirmed in Marconi (number of transactions,
frequency, turnover, nature of the investments), they must be
viewed after examining the appellant's "whole course
of conduct viewed in the light of surrounding
circumstances". Given the appellant's course of
conduct and the surrounding circumstance such as the
appellant's available financial resources, 17 lending
transactions totalling $571,000 between 1983 and 1992 could be
viewed as significant enough to construe the appellant's
lending activities as constituting a business.
[36] There
are, of course, factors that may indicate a lack of business
indicia, including: a lack of advertising; lack of
actively seeking out new clients; lack of an accounting system;
and a lack of "screening" new borrowers. But these
factors must be weighed against factors indicating active conduct
on the part of the appellant in his lending activities.
[37] In
Orban v. MNR,[6] Mr. R.S.W. Fordham considered the issue of
whether a taxpayer carried on a moneylending business, and in
doing so reviewed the leading British cases on the issue. In what
is an often cited passage, he stated, at
pages 149-50:
If the appellant is to succeed, it must be established that he
qualifies as a professional money-lender. The determination of
this point has afforded me some difficulty and resort has been
had to reported cases on the subject. In Litchfield v.
Dreyfus, (1906) 1 K.B. 584, at p. 589, Farwell, J.,
said:
But not every man who lends money at interest carries on the
business of money-lending. Speaking generally, a man who carries
on a money-lending business is one who is ready and willing to
lend to all and sundry, provided that they are from his point of
view eligible . . . it is a question of fact in each case.
He found that the plaintiff in that case, a long-established
art dealer, was not a money-lender also. Referring to that case
later, Walton, J., said in Newton v. Pyke, (1908)
T.L.R. 127, at p. 128:
Whether a man was carrying on business as a money-lender
must be, as was pointed out in Litchfield v.
Dreyfus, a question of fact in each case. It seems
impossible to lay down any definition or description which would
be of much assistance, but I feel that it is not enough merely to
shew that a man has on several occasions lent money at
remunerative rates of interest; there must be a certain degree of
system and continuity about the transactions.
In Nash v. Layton, (1911) 2 Ch. 71, at p. 82,
Buckley, L.J., said:
Whether a man is a money-lender or not is an investigation
whether he has done such a succession of acts as that upon the
facts proved by establishing that those acts were done the Court
arrives at the conclusion as matter of law that he falls within
the definition of a money-lender . . .
It is true that in all three cases the effect of the British
Money-lenders Act, 1900 was under consideration, but
in each of them the court concerned had, in addition, to deal
with the subject of money-lending generally.
[38] In the
appeal at bar, the appellant typically lent money for terms of
three years or shorter. Furthermore, the appellant kept track of
interest payment due dates and outstanding balances in such
manner that by 1995, only three years after his last loans were
made, he had no more loans outstanding. There was a
"continuity or system" in the appellant's
lending activities until that time.
[39] In
Jackson v. M.N.R.,[7] my colleague Judge Sarchuk stated, at page
149:
The presence or absence of any single factor referred to does
not by itself establish whether that the appellant was not
carrying on the business of money-lending. It is the cumulative
effect of this evidence that leads the Court to that conclusion .
. .
[40] The
decision in M.R.T. Investments Ltd. v. The Queen,
E.S.G. Holdings Ltd. v. The Queen, and
Rockmore Investments Ltd. v. The Queen[8] is of some
assistance in determining Mr. Langhammer's appeals. Each of
the appellants was a corporation engaged in lending money. The
three cases were heard together on common evidence in the Federal
Court, Trial Division. The issue was whether the taxpayer
corporations were carrying on an "active business" in
Canada during their 1972 taxation year and thus entitled to the
small business deduction under subsection 125(1) of the
Act as it then read. The three corporations were engaged
in lending money on a comparatively small scale, such that at the
end of December 31, 1972: M.R.T. held 14 mortgages involving
$104,636, and earned interest and other income for the year
totaling $12,471; Rockmore held three mortgages involving
$11,084, and earned interest and other income for the year
totaling $4,609; and E.S.G. held 10 mortgages involving $106,577,
and earned $12,204 of interest income for the 1972 taxation year.
Moreover, each company had a very small staff, did not undertake
any advertising, and made most of their loans through independent
agents who earned commissions from the borrowers. Despite the
small scale of operations, Walsh J. allowed the appeals of M.R.T.
and Rockmore, and dismissed E.S.G.'s appeal on different
grounds. He stated at page 5239: "... there is little
doubt that these companies were all actively carrying on business
in the year 1972." In his reasoning, Walsh J. considered
that each of the taxpayers were making loans to high-risk
borrowers, investigated potential borrowers carefully, and
negotiated extensively over terms, indicating that an active
business of moneylending was being carried on in each instance.
Also, Walsh J. weighed heavily the fact that the taxpayers were
corporations that were incorporated specifically for the purposes
of engaging in moneylending activities.
[41] At the
Federal Court of Appeal, Chief Justice Jackett affirmed the
decision of the Trial Division. He added the following with
respect to what constitutes a "business":
In considering whether there is an ‘active
business' for the purposes of Part I, the first step is to
decide whether there is a ‘business' within the
meaning of that word. Section 248 provides that that word, when
used in the Income Tax Act, includes ‘a profession,
calling, trade, manufacture or undertaking of any kind
whatever' and includes ‘an adventure or concern in
the nature of trade' but does not include ‘an office
or employment'. Furthermore, the contrast in section 3(a)
of the Act between ‘business' and
‘property' as sources of income makes it clear, I
think, that a line must be drawn, for the purposes of the Act,
between mere investment in property (including mortgages) for the
acquisition of income from that property and an activity or
activities that constitute ‘an adventure or concern in the
nature of trade' or a ‘trade' in the sense of
those expressions in section 248 (supra). Apart from these
provisions, I know of no special considerations to be taken into
account from a legal point of view in deciding whether an
activity or situation constitutes the carrying on of a business
for the purposes of Part I of the Income Tax Act. Subject
thereto, as I understand it, each problem that arises as to
whether a business is or was being carried on must be solved as a
question of fact having regard to the circumstances of the
particular case.
[42] These
decisions support the appellant's position that he carried
on a moneylending business. All three corporations operated on a
very small scale, with Rockmore, for example, holding only three
loans in 1972. Despite this, and despite the fact that none of
the taxpayers undertook any advertising, the Courts held that not
only were the taxpayers engaged in a business of lending money,
they were engaged in an active business of lending money. At bar
I need only to consider whether Mr. Langhammer was engaged
in a business, a threshold lower than that of whether he may be
engaged in an active business. I do not believe that simply
because the appellant is not a corporation, his moneylending
activity ought not be considered a business.
[43] In
Singh v. The Queen,[9] Judge Bonner considered whether the taxpayer was
in the business of lending money for purposes of paragraph
20(1)(p). In Singh, the taxpayer was a professional
engineer working as a project manager through corporations
controlled by him and employing him. Over the course of six
years, the taxpayer had only made four loans. Also, for purposes
of his moneylending activities, the taxpayer had not printed
business cards or letterhead nor used a separate business
telephone line. At page 2033, Judge Bonner stated:
In Morflot Freightliners Limited v. The Queen,[10] at 5185, Strayer, J.
(as he then was) noted that ‘... in cases of this
nature ... one must try to characterize a situation from a
practical business point of view...'. As I see it,
when the facts are viewed in this manner it is clear that
the appellant in making the loans entered into the business of
lending money. He evaluated the lending opportunities and
considered both the potential gain for himself and the ability of
the borrowers to repay. He obtained security when possible. The
loans appear to have been made at ordinary commercial rates of
interest. The loans though few in number, were not
remarkable for any feature which distinguished them from the
operations of an ordinary commercial money-lender. The 1992 and
1993 loans were not investments of the appellant's own
capital. Rather, they were made with money borrowed at an
interest cost expected to be lower than the interest earned. In
short, the appellant expected to earn money on the spread between
the two rates and thus to mimic the operations of other
commercial lenders. Neither the fact that the operation
eventually failed nor the fact that it was short-lived can
support a conclusion that the operation was not an ordinary
commercial venture. The use of borrowed money to make the last
three loans negates any suggestion that the loans were simple
investments of accumulated capital.
[44] As in
Singh, the appellant borrowed money at an interest cost
expected to be lower than the interest earned, and expected to
earn money on the spread between the two rates, and thus mimicked
the operations of other commercial lenders. He obtained security
and made loans at ordinary commercial rates of interest. However,
unlike the taxpayer in Singh, the appellant did not
"screen" potential borrowers. On the other hand, as
in Singh, the loans made by the appellant were not
remarkable for any feature that distinguished them from those
made by a commercial moneylender.
[45] I
therefore find that the loan to Mr. Lane was made by the
appellant in the course of a moneylending business. The loss was
a risk of the business. Mr. Langhammer conducted his affairs
in an orderly way. He found no need to advertise. Why should he
incur needless expense if persons know him and of his willingness
to lend money? The factors indicating a moneylending business far
outweigh the factors that suggest otherwise.
[46] The
respondent's position concerning the Harbour House bonds is
that the bonds were capital property to the appellant. The
respondent did not suggest that even if one acknowledges the
appellant carried on the business of a moneylender when he loaned
money on the security of mortgages, his purchase of the Harbour
House bonds was an investment, having little, if anything, to do
with the moneylending business. I am therefore reluctant to
consider this possibility.
[47] I do
note, however, that the term "lending asset" in
subparagraph 20(1)(p)(ii) is defined by subsection 248(1)
of the Act means a bond. Also, in Muttart Industries
Ltd. v. M.N.R.,[11] my former colleague Judge Taylor, notwithstanding
that he dismissed the appeal, recognized that under certain
circumstances a debenture could be part of a portfolio held by a
person carrying on the business of lending money; debentures,
bonds and term deposits are loans.
[48] I
therefore consider that Mr. Langhammer purchased the bonds in the
course of carrying on the business of lending money within the
meaning of paragraph 20(1)(p) of the Act.
[49]
Mr. Langhammer acquired the Harbour House bonds in 1989 and
loaned $30,000 to Mr. Lane in 1991 in the course of his
moneylending business. The respondent states that the issue to be
decided is whether the appellant carried on the business of a
moneylender in 1993, 1994 and 1995 and, if so, whether the losses
with respect to the Lane mortgage and the Harbour House bonds
were incurred in the course of carrying on that business. That is
not the issue. The issue is (a) whether, when he made the loan to
Mr. Lane in 1991, Mr. Langhammer made the loan in the
course of carrying on the moneylending business, and, (b) whether
in 1993, he still carried on the moneylending business.
[50]
Paragraph 20(1)(p) of the Act permits a taxpayer
whose ordinary business includes the lending of money to deduct,
in computing his or her income for the year from the business,
amounts (of loans) established by the taxpayer to have become
uncollectable in the year. It is paragraph 111(1)(a) of
the Act that permits a taxpayer to deduct non-capital
losses for the seven taxation years immediately preceding and the
three taxation years immediately following a taxation year.
Mr. Langhammer suffered his non-capital loss in 1993. He
would be permitted to carry forward any non-capital loss suffered
in 1993 to 1994 and 1995 by virtue of paragraph 111(1)(a)
whether or not he was in the moneylending business in 1994 or
1995.
[51] The
appeals are allowed with costs and the appellant will be allowed
a non-capital loss in 1993 of $128,960. Any unused
non-capital loss will be carried forward to 1994 and 1995.
If I have erred in determining the amount of the loss in 1993
(see footnote 2), the parties should so advise me within 30 days
of the date of these reasons and I will consider the
representations. If I do not receive any representations I shall
issue formal judgment that the non-capital loss was $128,960.
Since the appellant's notice of appeal was not in the form
required by section 48 of the Tax Court of Canada Rules
(General Procedure) and did not relate the material facts
relied on, refer to the statutory provisions relied on, nor set
forth the reasons he intended to rely on, among other things,
and, as a result, caused some problems at trial, his costs shall
be reduced by $250.00.
Signed at Ottawa, Canada this 29th day of November
2000.
"Gerald J. Rip"
J.T.C.C.
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