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.
| 24(1) |
920883 |
| |
L. Holloway |
| |
(613) 957-8953 |
Attention: 19(1)
May 29, 1992
Dear Sirs:
Re: Section 245(2) of the Income Tax Act (the "Act")
This is in reply to your enquiry dated March 18, 1992, requesting our comments on a hypothetical situation whereby a farmer wishes to transfer farm property to an adult child at fair market value taking back a note as consideration. The father then gifts to his child enough funds to allow for repayment of the note. Specifically you were asking if S.245(2) of the Act would be applied to such a transaction.
Our Comments
Since the situation described above appears to involve actual taxpayers and proposed transactions, we are unable to comment specifically on the circumstances set out in your letter. A request for an Advance Income Ruling would be more appropriate in these instances. However, we offer the following general comments regarding the issues raised.
IT-268R3 Intervivos Transfer of Farm Property to Child provides in paragraph 31: "Where a taxpayer makes an intervivos transfer of farming property pursuant to subsection 73(3) for a stipulated sale price, any subsequent forgiveness of part or all of the debt obigation arising on that transfer will bring section 80 into play unless one of paragraphs 80(1)(c) to (h) applies."
The receipt of a cash gift followed by the repayment of a debt owing to the individual who provided the gift, may be undertaken by the taxpayer solely to avoid the results of a straightforward forgiveness of a debt (section 80). Such a case would be subject to subsection 245(2).
We trust this information will be of assistance to you.
Yours truly,
E. Wheelerfor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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