2 November 1995 External T.I. 9517225 - FARM SUPPORT PAYMENTS - INDIVIDUAL PRODUCER ACCOUNT

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:

The tax treatment of amounts paid under the National Transition Scheme for Hogs - Individual Producer Account Program ("IPA").

Position TAKEN:

Amounts paid to a producer under the IPA would be taken into account in determining income from business for purposes of subsection 9(1). To the extent such amounts were for any reason not otherwise included in computing a taxpayer's income, the provisions of paragraph 12(1)(x) would include, in this computation, such amounts received by the taxpayer in the course of earning income from a business.

Amounts paid to producers under the IPA would represent farm support payments as defined in subsection 234(2) of the Income Tax Regulations and T-Slips will be required, unless the total amount paid to the recipient in the year in respect of the program is less than $100.

As we were not provided with details relating to "le programme d'assurance-stabilisation des revenus agricoles" ("ASRA") in the Province of Quebec, we could not comment on the tax treatment of the amounts transferred from the IPA to ASRA or on the requirement to file T-Slips for such amounts.

Reasons FOR POSITION TAKEN:

Under generally accepted accounting principles ("GAAP"), amounts paid to producers under the IPA would be included in the determination of net income for the period. In the absence of specific provisions of the Act to the contrary, this "net income" would constitute the taxpayer's "profit" from the business for purposes of subsection 9(1) of the Act.

Agriculture and Agri-Food Canada
Policy Branch
Finance and Management Services Division
2200 Walkley Road						5-951722
2nd Floor							M. Azzi
Ottawa, Ontario
K1A 0C5

Attention: Denna Dougan

November 2, 1995

Dear Madame:

Re: National Transition Scheme for Hogs - Individual Producer Account Program ("IPA")

This is in reply to your letter of June 21, 1995, requesting our views on the tax treatment of amounts paid under the IPA. We also acknowledge the information provided during our telephone conversation of October 10, 1995.

We understand that the purpose of the IPA is to provide benefits to eligible producers as a result of the early termination of the National Tripartite Stabilization Scheme for Hogs. Under the IPA agreement, the provincial government will contribute $1.50 per eligible hog marketed by an eligible producer during the eligible period (i.e., April 3, 1994 to December 31, 1994). This amount is credited to the producer's IPA account (established in the Consolidated Revenue Fund of the federal government) and earns interest at a rate fixed by the Minister of Finance for Canada from the deposit date. The federal government (as represented by the Minister of Agriculture for Canada) will contribute an amount equal to the provincial contributions, plus an amount equal to the interest credited to the producer's IPA account in respect of the provincial contributions. Eligible producers in all provinces, except producers enrolled in "le programme d'assurance-stabilisation des revenus agricoles" ("ASRA") in the Province of Quebec, will have the balances in their IPA accounts paid to them directly. The balances in the IPA accounts of eligible producers enrolled in the ASRA shall be transferred to Quebec for credit to ASRA accounts for hogs. The producers in Quebec that are not enrolled in ASRA will receive the balances in their IPA accounts directly.

We also understand that all benefits payable under the IPA were determined in 1995. The provincial contributions were invoiced and received by the federal government in 1995, and all payments out of the IPA were made in 1995. You also indicated that, as a general rule, once the provincial contributions, with respect to a producer, were received by the federal government, this amount was immediately paid out to the producer along with the federal contributions. Payment would only be delayed if, for example, a producer was being audited or the IPA agreement had not yet been signed by the province. All IPA accounts have now been settled.

Our Comments

Based on the above information, amounts paid to producers under the IPA would generally represent a supplement to business income. In our view, these amounts would be taken into account in determining a taxpayer's income from business for purposes of subsection 9(1) of the Income Tax Act (the "Act"); i.e., under generally accepted accounting principles ("GAAP"), such amounts would be included in the determination of net income for the period. In the absence of specific provisions of the Act to the contrary, this "net income" would constitute the taxpayer's "profit" from the business for purposes of subsection 9(1) of the Act. Note, however, that to the extent such amounts were for any reason not otherwise included in computing a taxpayer's income, the provisions of paragraph 12(1)(x) of the Act would include, in this computation, such amounts received by the taxpayer in the course of earning income from a business.

Furthermore, in our view, amounts paid to producers under the IPA would represent farm support payments as defined in subsection 234(2) of the Income Tax Regulations. Consequently, T-Slips will be required to be issued, unless the total amount paid to the recipient in the year in respect of the program is less than $100.

As we do not have any details relating to ASRA, we cannot comment on the tax treatment of the amounts transferred from the IPA to ASRA or on the requirement to file T-Slips for such amounts.

We trust that these comments will be of assistance.

Yours truly,

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