24 January 2000 Ministerial Letter 1999-0004898 - ICE STORM 1998

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.

January 24, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your letter of September 9, 1999, concerning the income tax treatment of provincial government assistance received by Ontario Christmas tree growers to replace trees damaged by the 1998 ice storm.

I should point out that, for the most part, it is likely that this money was provided to Christmas tree farmers who have already received full tax assistance through annual income tax deductions when the trees were first purchased and planted, and for which there was never an income inclusion. Thus, even if the farmers did not replant the damaged trees, they would already have received annual tax deductions for the initial plantings, so that a full income inclusion for the assistance would simply be an offset against these tax deductions. It is recognized, however, that there may be some tax disparity, because of differing levels of annual income and tax rates.

There are specific rules in the Income Tax Act to determine the income tax consequences when a person in business receives government assistance to replace destroyed or damaged business properties. Generally, such assistance must be included in income in the year received, but there are usually no income tax consequences to the recipient because, in the case of Christmas trees, it may be offset by the expense of replacing the damaged property.

When government assistance is received in a particular year, but for some reason is not spent to replace the damaged property until the year following receipt, income tax relief may be obtained by filing an election to defer recognition until the following year when the rest of the related expenses are incurred. These rules were

explained earlier this year by officials in the Income Tax Rulings and Interpretations Directorate to XXXXXXXXXX, as well as others who made inquiries, such as XXXXXXXXXX.

For Christmas tree farmers who have received assistance from Ontario but take six to seven years to replace the trees, there is currently no provision in the Act that would allow them to defer the reporting of the assistance beyond one year. An amendment to the Act would be required to provide the tax treatment requested by your constituent. Any changes to the Act would require a recommendation by the Honourable Paul Martin, Minister of Finance. I have, therefore, forwarded our correspondence to him for consideration.

I trust this is of assistance.

		Yours sincerely,

		Martin Cauchon, P.C., M.P.

C.C. The Honourable Paul Martin, P.C., M.P.

Minister of Finance