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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Where an individual disposes of "qualified farm property," is the taxpayer's inclusion rate for the entire 2000 taxation year (as calculated under section 38 of the Act when there are dispositions in periods where the capital gain inclusion rates differ) used to determine the appropriate rate to calculate the capital gains deduction for "qualified farm property," assuming paragraph 110.6(2)(d) were the applicable provision to determine the exemption.
Position:
No - The appropriate rate for determining the capital gains deduction for "qualified farm property" would be the same rate at which the capital gain of the property is determined
Reasons:
Paragraph 110.6(2)(d) of the Act indicates that the deduction for the capital gains deduction should be the "amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties."
XXXXXXXXXX 2001-009400
Randy Hewlett, B.Comm.
January 16, 2002
Dear Sir or Madam:
Re: Technical Interpretation Request - Capital Gains Exemption Qualified Farm Property
We are writing in response to your letter dated July 16, 2001, wherein you requested our opinion on the above-noted issue.
In your letter you describe two hypothetical scenarios where an individual disposes of "qualified farm property" as defined in subsection 110.6(1) of the Income Tax Act (the Act). You inquire whether the taxpayer's inclusion rate for the entire 2000 taxation year, as calculated under section 38 of the Act (when there are dispositions in periods where the capital gain rates differ) would be used to determine the capital gains deduction for "qualified farm property," assuming paragraph 110.6(2)(d) were the applicable provision to determine the deduction.
In your view, the inclusion rate for the entire 2000 taxation year applies to determine the capital gains exemption under paragraph 110.6(2)(d) of the Act. Further, you feel that this can lead to a disparity between the amount of a capital gain included in income for a "qualified farm property" and the amount of the capital gains exemption for the property.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.
Paragraph 110.6(2)(d) of the Act indicates that the capital gains deduction for "qualified farm property" is the "amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties" (emphasis added). As such, the appropriate rate used to determine the exemption under paragraph 110.6(2)(d) of the Act would be the same inclusion rate in section 38 that determines the amount to include in income under paragraph 3(b) for "qualified farm property". Consequently, it is our view that, for purposes of calculating the capital gains deduction under subsection 110.6(2) of the Act, there is no disparity between the rate used to determine the amount of a capital gain included in income, and the rate used to determine the amount to be deducted in the calculation of taxable income for the 2000 taxation year.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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