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.
XXXXXXXXXX
Dear XXXXXXXXXX
RE: Small Business Investment Tax Credit
This is in reply to your letter dated March 11, 1993 concerning whether a new tandem axle truck with a mounted new custom-built manure spreader (the "equipment") that you plan to acquire will qualify for the 10% investment tax credit (the "Small Business ITC") under the recent proposed legislation.
You have confirmed, during our telephone conversation (Fontaine/XXXXXXXXXX), that the equipment will be used from mid-spring to late fall and that it will be used for no purpose other than to provide contract work to farmers. Such work will entail cleaning up livestock manure and bedding waste, loading it in to the equipment, hauling from the farmers' feedlots and spreading the manure on the farmers' fields as organic fertilizer. The proximity between the feedlots and the fields will generally determine that the work is carried out locally.
As explained in Information Circular 70-6R2 (the "Circular"), it is not the Department's practice to comment on proposed transactions other than in the form of an advance income tax ruling. Based on the comments at paragraph 21 of the Circular, we are, however, prepared to offer the following general comments:
Based on the information described above, the determination as to whether the equipment can qualify for the Small Business ITC appears to depend on whether the equipment is to be used primarily in the activity of farming. The following interpretation of the meaning of "farming" may be useful:
The term "farming", for the purpose of the Income Tax Act is defined to include "tilling" which is defined as preparing and using (land) for crops. The activity of fertilizing the soil in order to promote the growth of crops is considered to be an essential and integral part of a farming operation. Accordingly, where the taxpayer carries out this work on a custom basis, the activity would be considered to be farming even though the taxpayer may not be a farmer or carry on the entire business of farming.
These comments are an expression of opinion only based on the legislation as presently proposed and are not binding on the Department.
We hope our comments will be of assistance to you.
Yours truly,
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993