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.
Dear XXX
We are writing in reply to your letter of August 3, 1989, wherein you requested our interpretation of the phrase “proceeds of disposition otherwise determined” as used in subparagraph 73(3)(b)(i) of the Income Tax Act.
Our understanding of the situation described in your letter is as follows:
A father engaged in the business of farming has transferred by way of gift inter-vivos qualified farm property that is land to his son.
XXX
As you understand it, “proceeds of disposition otherwise determined” may be any amount between the adjusted cost base and fair market value.
Therefore, the transferor would include a capital gain of XXX in his income for tax purposes, which may be sheltered from taxation by utilizing the available XXX capital gains deduction with respect to the disposition of qualified farm property.
Our Comments
Paragraph 5 of IT-268R3 states, in part, that “... proceeds of disposition otherwise determined' means the amount of consideration paid or payable by a child on a transfer of farm property. In the case of a gift, there is no consideration paid or payable and, because of paragraph 73(3)(c) section 69 does not apply to otherwise determine the proceeds o.f disposition on such a transfer.
In view of the above, it is our opinion that in the situation described in your letter “proceeds of disposition otherwise determined” would be a NIL amount and subparagraph 73(3)(b)(iii) would apply. The land would be transferred to the son at its adjusted cost base of XXX. The transferor would not, therefore, realize a capital gain on the transfer of the land and would not need to claim the capital gains deduction under subsection 110.6(2).
We hope these comments will be of assistance to you.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1989
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1989
Email this Content