Principal Issues: A taxpayer acquires land on which there is standing timber. Whether such property constitutes a "commercial non-farm woodlot," as this expression is used in IT-373R2. Whether such property constitutes a "timber limit."
Position: It is possible that the land acquired constitutes a "commercial non-farm woodlot," as this expression is used in IT-373R2, and a "timber limit." However, the facts provided are insufficient to confirm the income tax consequences resulting from the acquisition of the land. General comments provided only. In the context of a commercial non-farm woodlot, paragraph 23 (b) of IT-373R2 states that capital cost allowance may be available in respect of the cost to the taxpayer of the woodlot. The expression "timber limit" is not defined in the Act. However, paragraph 7 of IT-481 states that if a taxpayer acquires land on which there is standing timber (for example, freehold timberlands), such property is a timber limit. Furthermore, paragraph 3 of IT-481 states that paragraph 20(1)(a) and paragraph 1100(1)(e) of the Income Tax Regulations (the "Regulations") provide for a deduction in respect of the capital cost of a timber limit. The amount claimed may not exceed the amount calculated in accordance with Schedule VI of the Regulations. Each property that is a timber limit is prescribed by subsection 1101(3) of the Regulations to be a separate class of property. Finally, rather than deduct an amount calculated pursuant to section 1 and section 2 or section 3 of Schedule VI of the Regulations, a taxpayer may elect to deduct the lesser of $100 and the amount of his timber sales in the year in accordance with section 4 of Schedule VI of the Regulations.
Reasons: Wording of the Act and previous positions.