15 February 2000 External T.I. 1999-0014525 - Woodlots

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: administrative position in IT-373R for farmers to defer gain on certain minor capital amounts

Position: section 43 applies; administrative position does not apply to taxation years commencing after July 16, 1999

Reasons: interpretation of Act

February 15, 2000

XXXXXXXXXX

Dear XXXXXXXXXX:

Thank you for your correspondence of December 3 and 16, 1999, written on behalf of your constituents, concerning Interpretation Bulletin IT-373R2, Woodlots. As you know, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA).

The interpretation bulletin was revised in response to requests to consider certain factors in determining whether a woodlot is operated with a reasonable expectation of profit. CCRA officials were also asked to clarify some of the various income tax rules that may apply to transactions in connection with a woodlot, so that interested parties could seek legislative change to obtain the desired results. The outcome of this process, which involved considerable consultations with various government departments and non-governmental organizations, was the publication of the revised interpretation bulletin on July 16, 1999.

The former Interpretation Bulletin IT-373R allowed certain farmers to defer capital gains on timber sales that were considered minor in relation to the income from farming operations, by reducing the adjusted cost base of their property. This position was administrative and was intended to apply to only very small amounts. It has, however, become the subject of differing views as to what should be considered minor. Accordingly, and along with our commitment to provide an accurate interpretation of the income tax rules that apply to woodlots, this administrative position was removed from the interpretation bulletin effective for taxation years that begin after July 16, 1999.

The treatment of income from the sale of standing timber as a reduction of the adjusted cost base would require legislative changes, which is the responsibility of the Department of Finance. Accordingly, I have sent a copy of our correspondence to the Honourable Paul Martin, Minister of Finance, for his consideration.

I trust my comments have explained the CCRA's position on this matter.

                                          Yours sincerely,

                                          Martin Cauchon

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

Minister of Finance