XXXXX
This is further to the referral to our office of two letters sent out by your office concerning the tax treatment of joint tenancies of farmland.
Your first letter was in response to a submission from the XXXXX[.] The issue on which you sought our comments concerns the following question:
"Would there be a taxable supply if a non-farming joint tenant (e.g., the spouse or a child) begins to farm the property prior to the death of the farming joint tenant(s)?"
There would be no supply occurring in this situation. The fact that the non-farming joint tenant now begins to farm the land does not trigger a supply. We have assumed that there is no change in title to the farmland and that the joint tenants have not formed a partnership.
We have also reviewed your responses to the other questions raised in the XXXXX letter and are in agreement with them.
Your second letter was in response to a submission from the XXXXX[.] You sought our comments on the following issue:
"All four conditions set out in the administrative policy [on farmland transferred into joint tenancy] must be met in order for that policy to apply to a joint tenancy in farmland. You are particularly concerned with the condition No. 2 [now condition No. 4] where it states 'The non-farming joint tenant does not independently received any proceeds from the farming business which are treated as income on their own account.' If the farming husband pays his wife a salary either in cash or in kind, the wife must report that as income and that would appear to violate the above condition."
As we discussed in our recent telephone conversation, the condition in question was amended prior to the policy statement receiving final approval and being placed on the policy database. Condition number 4 now provides that "If the non-farming joint tenant receives employment income from the farming operation, the policy still applies". This would be the case whether the income was received in cash or in kind.
We have also reviewed your responses to the other questions raised in the XXXXX letter and are in agreement with them.
If you have any further questions, please contact Gunar Ozols at (613) 952-9589.
H.L. Jones
Director
General Tax Policy
Rulings and Interpretations GST
XXXXX
c.c.: Imposition Team
L. Kottachchi
XXXXX
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