25 November 1996 Ruling 940873A - deferred grain tickets

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.

									940873
XXXXXXXXXX							A.M. Brake

Attention: XXXXXXXXXX

November 25, 1996

Dear Sirs:

Re: Deferred Cash Grain Ticket and Cash Advances

This is further to your recent inquiry relative to the above-noted matter regarding the timing of reporting income for a cash basis farmer in the following scenario:

1.A cash basis farmer, reporting on a calender year, receives an advance of $50,000 in October 1995 for stored grain.

2.In November 1995, the farmer delivers $20,000 worth of grain to an elevator, of which $18,000 is applied against the $50,000 advance and a Deferred Cash Purchase Ticket to January 1996 was accepted for the $2,000 net balance.

We were asked whether the full $20,000 or the $18,000 off-set is taxable in 1995 with the remaining $2,000 being deferred to 1996.

Our response (file #953237) of May 27, 1996, with respect to the $18,000 deduction, was that $18,000 would be income at the time the cash ticket was received. The cash grain ticket would show the purchase price of the grain to be $20,000 and the net amount of the producer's entitlement being only $2,000, which would be the amount of the deferral.

We have been made aware that this position is not in line with an earlier position of the Department that the entire $20,000 would be deferred in that it represented the purchase price of the grain which is specifically stated in subsection 76(4) of the Act to be the deferred amount. However, any deferral is, of course, subject to the ticket meeting the requirements of subsection 76(4) of the Act. These requirements include:

• The ticket must entitle the holder thereof to payment, on the deferred date, of the purchase price stated in the ticket for the grain, without interest.

The past practice of deferring the entire $20,000, representing the purchase price of the grain as stated in subsection 76(4) of the Act, will continue to be the position of the Department. The question of whether these tickets meet the requirements of subsection 76(4) of the Act is under review and should there be any change to current published positions, Interpretation Bulletin IT-184R would be appropriately revised with effect on some future date.

We trust that these comments will be of assistance.

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch