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 FORESTRY TAX CONFERENCE
PRESENTATION BY RULINGS
OCCASIONAL SALES OF TIMBER OR CUTTING RIGHTS
Our attention is directed to the treatment of proceeds related to the removal of logs, lumber, poles, firewood and trees from property when the landowner is not normally in the business of logging. Amounts that are received for permitting trees to be cut and removed from the property is a related concern.
Interpretation Bulletin IT-373R paragraphs 2 and 3 provides insight into the appropriate treatment for amounts that a farmer receives related to a woodlot located on the farm property. According to the bulletin, any incidental proceeds from sales of logs, lumber, firewood or trees should be included as farming income. Receipts for permitting another person to cut and remove standing trees is considered to be a receipt by the farmer on account of capital which reduces the adjusted cost base of the property. When the woodlot is more than incidental to the farming activity, amounts received by the farmer for granting a right to cut and remove trees is income.
The bulletin establishes that the reduction of the property's adjusted cost base is permissible where the facts and circumstances relevant to the particular farmer and transaction indicate that the removal of trees is occasional and incidental to the principal business activity.
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
The decisions of Her Majesty the Queen v Mel-Bar Ranches Ltd. [[1989] 1 C.T.C. 309] (89 DTC 5189 FCTD, appealed to Federal Court of Appeal) and Frederick and Rose Cromwell v MNR [[1990] 1 C.T.C. 2438] (90 DTC 1335 TCC) indicate that in the court's view paragraph 12(1)(g) is not applicable to instances where a payment is received with respect to a fixed price for a fixed quantity of timber to be taken within a fixed period of time. The court decisions suggest that paragraph 12(1)(g) only applies to amounts related to use of or production from property on a continuing basis.
It is our view, that the appropriate treatment including the application of paragraph 12(1)(g) and the comments in IT-373R to amounts received by a landowner in connection with the activities described above, will depend on the specific facts and circumstances as well as the purpose and objective of the particular transaction.
Prepared by: Bruce Rankin
Date: September 2, 1992
File #: 7-922562
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
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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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