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.
Revenue Canada Revenu Canada Taxation Impôt
Head Office Bureau principal
Your file Votre reference Our file Notre reference V.A. Sider (613) 995-1178
January 15, 1985
Dear Sirs:
Re: Subsection 85(1) --------------------
In your letter of November 6, 1984 you requested our opinion concerning whether subsection 85(1) could be used to transfer a right to income that arises in the following circumstances.
A dairy farmer sells bulls subject to the condition that he share in future revenues generated by the sale of bull semen. The agreement entitles the farmer to a percentage of future sales plus a fixed amount per vial used in specific geographic areas. There is also a ceiling on potential earnings. The number of years before sales of semen commence is indeterminable. You have indicated that the farmer is likely involved in purchases of semen for use in his own herd and may sell semen produced by his own bulls, but is not involved in purchases and sales of rights to future semen sales of the type referred to above other than in connection with transactions involving the bulls themselves.
In our opinion the right described above would likely be an eligible capital property of the farmer and therefore would be eligible for transfer under subsection 85(1). This opinion represents our interpretation of the circumstances described herein and should not be construed as an advance income tax ruling.
Yours truly,
for Director Corporate Rulings Division Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1985
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