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: Is partner considered to be carrying on business of partnership?
Position: Yes.
Reasons: Previous position. Only asset of corporate partner is partnership interest. Then partner carrying on business if partnership carrying on business of farming which is a question of fact.
XXXXXXXXXX 1999-001137
S. Tevlin
Attention: XXXXXXXXXX
March 1, 2000
Dear Sirs:
Re: Definition of "Share of the Capital Stock of a Family Farm Corporation"
We are writing in response to your letter dated August 3, 1999 wherein you requested our comments with respect to the following hypothetical situation:
1. Aco and Bco are unrelated corporations.
2. Aco and Bco each hold a 50% interest in AB Partnership.
3. AB Partnership conducts a farming business and 100% of its assets are used in farming.
4. The assets have always been used in farming business.
5. Mr. and Mrs. A own all the non-voting preferred shares of Aco.
6. The common shares of Aco are all owned by the children of Mr. and Mrs. A.
7. The children of Mr. and Mrs. A are all actively engaged on a regular and continuous basis in the farming business of the AB Partnership and have been since its formation.
8. Aco has no other assets other than the partnership interest.
You have asked whether the shares of Aco held by Mr. and Mrs. A and their children would meet the definition of "share of the capital stock of a family farm corporation" as that term is defined in subsection 70(10) of the Income Tax Act (the "Act"). In particular you have asked that we confirm that, in determining that all or substantially all the fair market value of the property owned by Aco is used in the business of farming, it is possible to look-through the AB Partnership to the assets used by the partnership in the business of farming.
In this regard we offer the following general comments.
It is our opinion that for the purpose of subparagraph (a)(i) of that definition in subsection 70(10) of the Act it is reasonable to look-through the AB Partnership to the assets of AB Partnership. If all the AB Partnership assets are used in the business of farming then it would be reasonable to conclude that Aco, whose only asset is the partnership interest in AB Partnership, is carrying on the business of farming and therefore using those assets in that regard.
Whether a farming business has been carried on and whether a particular property has been used principally in the course of carrying on the business of farming in Canada are questions of fact which can only be best resolved by a tax services office.
The forgoing comments are given in accordance with the practice referred to in paragraph 21 of IC-70-6R3, and are not binding on the Canada Customs and Revenue Agency.
We trust our comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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