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: Are dogs held as breeding stock considered to be inventory for the purposes of the Act.
Position: Yes.
Reasons: The law.
September 17, 2008
Julie Cuerrier Headquarters
Business Programs Section Michael Cooke
Field Support and Communications 613-446-0484
750 Heron Road, Canada Post Place
2008-028807
Business Income - Dog Breeders
We are writing in response to your email correspondence of July 24, 2008, wherein you requested our views on whether dogs held as breeding stock in a dog breeding operation and the resultant puppies are treated as inventory for the purposes of the Income Tax Act (the "Act").
Subsection 248(1) defines "inventory" as a description of property of a taxpayer the cost or value of which is relevant in computing a taxpayer's income from a business for a taxation year or would have been so relevant if the income from the business had not been computed in accordance with the cash method and, with respect to a farming business, includes all of the livestock held in the course of carrying on the business.
Where a breeder is engaged in the business of selling a particular breed or breeds of dogs for profit, the cost of those dogs is relevant in computing income. As such in our view, all dogs owned by the breeder in such an operation, including the breeding stock, would be treated as inventory for the purposes of the Act.
We hope the above comments are of assistance.
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch
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