Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Is it ever appropriate to exclude any type of income when calculating the income from all other sources for purposes of the definition of "qualified farm property" in subsection 110.691) of the Act.
Position: No.
Reasons: Income from all sources would include all amounts included in income by virtue of section 3 (division B) of the Act. There are no provisions to exclude certain types of income in the computation of income from all other sources for purposes of the gross revenue test in subparagraph (vi)(A) of the definition of “qualified farm property” in subsection 110.6(1) of the Act
5-981325
XXXXXXXXXX Karen Power, CA
(613) 957-8953
July 16, 1998
Dear XXXXXXXXXX:
Re: Qualified Farm Property, Subsection 110.6(1) of the Income Tax Act
We are writing in reply to your letter of April 22, 1998, requesting our comments regarding the words “income of the person from all other sources” in the definition of “qualified farm property” in subsection 110.6(1) of the Income Tax Act (the “Act”) as it relates to the following situations.
Situation 1
A farm property is acquired in January, 1996. The individual farmer meets the requirements of “qualified farm property” in subsection 110.6(1) of the Act up until January, 1997. In January, 1997, the individual receives a substantial lump-sum inheritance. The passive interest from the inheritance exceeds his gross revenue from the farming business. The farmer continues to hold the farm property for a period of more than 24 months and continues to meet the requirements of “qualified property” as defined in subsection 110.6(1) of the Act in all other aspects except that the inheritance interest income exceeds the gross revenue from the farming business.
Situation 2
A farm property is acquired in January, 1996. The individual farmer meets the requirements of “qualified farm property” as defined in subsection 110.6(1) of the Act except that he also receives a pension income from his former employment which exceeds the gross revenue from the farming business.
In general, you ask whether it is ever appropriate to exclude any type of income (“passive” or otherwise) when making the comparison to the gross revenue of the farming business for purposes of the definition of “qualified farm property” in subsection 110.6(1) of the Act.
The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R3, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district taxation office for their views. However, we are prepared to offer the following general comments which may be of some assistance to you.
In our view, there are no circumstances where it is appropriate to exclude any type of income from a source (“passive” or otherwise) for purposes of the gross revenue test in subparagraph (vi)(A) of the definition of “qualified farm property” in subsection 110.6(1) of the Act. Since the gross revenue test in subparagraph (vi)(A) of the definition of “qualified farm property” in subsection 110.6(1) of the Act has not been met in either situation 1 or 2, the farm properties would not be considered “qualified farm property” as defined in subsection 110.6(1) of the Act.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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