The Court considered whether farming losses were fully deductible where a taxpayer's law practice and horse-racing farming business together formed a chief source of income under s. 31(1) of the Income Tax Act.
It held that prior precedent had improperly narrowed the statutory combination test, overruled that aspect of Moldowan, and confirmed a contextual approach examining capital, income, time, and the taxpayer's mode of living.
Applying that approach, the Court found no basis to disturb the trial findings that the taxpayer significantly emphasized both activities, so the farm-loss limitation did not apply.
The Crown's appeal was dismissed with costs.
