12 February 1990 Ruling 59391 F - Cash Purchase Ticket Assigned to a Partnership

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.

February 12, 1990

Dear Sirs:

Re:  Cash Purchase Ticket Assigned to a Partnership

We refer to your letter of January 12, 1990, in which you requested a technical interpretation with respect to an individual who carries on  24(1)

You have requested that we advise you if a cash purchase ticket can be transferred to a partnership pursuant to a joint election filed by the individual and the other members of the partnership under subsection 97(2) of the Act.  You also wish to know whether the agreed amount could be as little as $1.00 notwithstanding the value of the cash purchase ticket.

Comments

It appears that your request relates to a specific situation in respect of which no proposed transactions are contemplated. Since the responsibility for determining the tax consequences arising from specific completed transactions rests with the district taxation offices, the appropriate district taxation office may, upon disclosure of all of the relevant facts, be able to assist you in clarifying the tax consequences pertaining thereto.

Although we are unable to respond to your situation directly, the following general comments may be helpful.  If a cash purchase ticket is issued in one taxation year of a taxpayer in respect of grain delivered in that year, but the payment thereof is not made until a date that is after the end of that taxation year, then by virtue of subsection 76(4) of the Act, the amount of the purchase price stated in the ticket shall be included in computing the income of the taxpayer for his taxation year immediately following the taxation year in which the grain was delivered, and not for the taxation year in which the grain was delivered.

For the purposes of a transfer to a partnership pursuant to the provisions of subsection 97(2) of the Act, the Department would consider a cash purchase ticket received by a taxpayer in the course of earning income from a grain farming business to be an eligible property.  Consequently, and pursuant to paragraph 97(2) (a) of the Act, the amount agreed on between the taxpayer and the partnership would be governed by the provisions of paragraph 85(1)(c.1) of the Act, and could not be less than the lesser of the fair market value of the cash purchase ticket at the time of the transfer and the cost amount thereof to the taxpayer. Since the cash purchase ticket represents a "right" of the taxpayer to receive an amount, its cost amount would, in our opinion, generally be its face value, pursuant to paragraph (e) of the definition of "cost amount" as set out under subsection 248(1) of the Act.

We would like to point out that notwithstanding that a taxpayer may transfer a cash purchase ticket to a partnership, pursuant to subsection 97(2) of the Act, in the taxation year in which he would deliver the grain to a primary elevator or process elevator, subsection 76(4) of the Act still requires the taxpayer to include the amount of the purchase price stated on the ticket in computing his income for his taxation year immediately following the taxation year in which the grain was delivered. The ultimate receipt by the partnership of the purchase price paid when the cash purchase ticket is redeemed would not, of course, result in income to the partnership.  However, depending on the circumstances, the partnership may have a capital gain as a result of the redemption of the cash purchase ticket.  We would also point out that either of subsection 103(1) or 103(1.1) of the Act may also have application, if the circumstances contemplated therein exist.

As stated in paragraph 24 of Information Circular 70-6R dated December 18, 1978, the opinions expressed in this letter are not rulings and are consequently not binding on the Department.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch