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.
Principal Issues: Whether farm property repossessed in 1983 and used prior to that for more than 5 years in the business of farming would be qualified farm property under the definition in 110.6 subparagraph (a)(vii).
Position: Yes.
Reasons: The requirement that the property be used 5 or more years in the business of farming is for the period when it was owned and not for the period after it was last acquired.
Charles Rafuse
XXXXXXXXXX (613) 957-8967
2005-014077
August 10, 2005
Dear XXXXXXXXXX:
Re: Definition of Qualified Farm Property and Section 110.6(1)
I am writing in response to your letter of July 5, 2005, concerning an interpretation of the farming period considered in subparagraph (a)(vii) of the definition of qualified farm property in Subsection 110.6(1) of the Income Tax Act ("the Act"). In the situation described in your letter, an individual owns farmland that was farmed by his grandfather and father for 60 years and that he had farmed for 20 years. He sold that land in the early 1980s and took back a mortgage. The purchaser subsequently defaulted on the mortgage and the individual repossessed the farmland in 1983. Since the land was repossessed, it has been rented on a cash basis.
Where a taxpayer sells property and subsequently reacquires it as a result of a foreclosure, he or she would for the purposes of subparagraph (a)(vii) of the definition of qualified farm property in subsection 110.6(1) be considered to have acquired the property on the date of reacquisition. Accordingly, it is our opinion that, in the example given, the individual will be considered to have acquired the farmland in 1983.
Subparagraph (a)(vii) applies where a property was last acquired before June 18, 1987 and clause (B) indicates that the property is qualified farm property where it was used by the individual, or a parent of the individual principally in the course of carrying on the business of farming in Canada in at least 5 years during which the property was owned by the individual, or a parent of the individual. Since the property is only required to be used in farming for 5 years when it was owned by the individual or parent and not after the date the property was last acquired, it is our view that in the example given the property would meet the definition of qualified farm property.
We trust this information is helpful.
Yours truly,
Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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