30 August 2002 External T.I. 2002-0155355 - INVESTMENT LOSS

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Can a loss on an investment in commodities that included unleaded gas, soybeans and heating oil be deducted as a farming loss.

Position:

No.

Reasons:

The activity does not constitute farming. It may be a capital loss, but we do not have sufficient information to form an opinion. Directed taxpayer to the TSO.

XXXXXXXXXX 2002-015535

Randy Hewlett, B.Comm.

August 30, 2002

Dear XXXXXXXXXX:

Re: Technical Interpretation Request: Investment Loss

We are writing in response to your letter dated July 25, 2002, wherein you requested our opinion on how to deduct an investment loss you incurred as a "farming loss".

Information submitted with your letter indicates that in 2000, you paid $XXXXXXXXXX to a financial broker in the United States that invested the funds on your behalf in commodities such as unleaded gas, soybeans and heating oil. You liquidated your investments in 2001, and suffered a loss of $XXXXXXXXXX. You asked our advice on how to write-off this loss on your 2001 income tax return as a farming loss.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office (TSO). However, we offer the following comments.

Based on the limited information submitted with your letter, it appears that you have not incurred a loss from a farming business and therefore, cannot deduct the loss on your investment in 2001 as a farming loss. Farming is defined in subsection 248(1) of the Income Tax Act to include "tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming". A farming activity would not include investments of a speculative nature that are made in commodities such as unleaded gas, soybeans and heating oil. For more information, you may wish to consult the personal income tax guide published by the Canada Customs and Revenue Agency (CCRA), entitled Farming Income 2001.

It is possible that the investment loss you have incurred is a "capital loss" and therefore, may be deductible against any of your capital gains. However, we do not have sufficient information to comment further on your inquiry in this regard. Further information on capital gains and losses is available in the personal income tax guide entitled, Capital Gains 2001.

Given the complex nature of your investment, consideration should be given to consulting professional tax advice. The guides noted above are available at the TSO and can also be found on our website at www.ccra-adrc.gc.ca.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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