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
Attention: XXXXXXXXXX
Dear Sirs:
RE: Tax Information Slips
This is in reply to your letter of June 29, 1993 regarding taxability of various grants and other assistance offered to farmers and farm associations XXXXXXXXXX
XXXXXXXXXX
We will be referring in our comments regarding the various programs to inclusion in income of amounts pursuant to paragraph 12(1)(x) of the Income Tax Act (the "Act") which provides that certain inducements, reimbursements, contributions, allowances, and assistance received by a taxpayer are required to be included in income. However, where such an amount relates to an expense or outlay the taxpayer may choose to reduce the amount of his deduction in respect of such outlay or expense. Where the amount relates to the cost of capital or depreciable property the taxpayer may choose to reduce the capital cost of such property. The amount by which the farmer reduces his deduction of an outlay or expense or reduces his cost or capital cost of property would not be required to be included in income. (See Appendix A for technical description.)
Where a taxpayer repays an inducement, assistance, etc., that was included in income under paragraph 12(1)(x) of the Act, the taxpayer in computing income may pursuant to paragraph 20(1)(hh) of the Act deduct the amount repaid in that year.
We also make reference to subsection 80(1) of the Act which applies when a loan, debt or obligation of a taxpayer is settled or extinguished without any payment having been made or by a payment of an amount less than the principal amount of the debt or obligation. The resulting gain, for income tax purposes, must be applied to reduce certain losses of the taxpayer, or reduce the capital cost to him of certain depreciable property, or the adjusted cost base to him of certain capital property. The application of subsection 80(1) of the Act is discussed in more detail in Interpretation Bulletin IT-293R and the special release thereto.
T-Slips will not be required for farm support payments where the total amount paid to the recipient in the year in respect of a specific program is less than $100. For example, if a producer receives in a year farm support payments totalling $50 from program A and $125 from program B, T-Slips will be required in respect of the $125 from program B but T-Slips will not be required in respect of the $50 received from program A. If you wish to discuss this further, please contact Jean-Claude Laporte at 954-5377, or Yvon Racine at 952-0510 at our Client Assistance Directorate.
We trust that our comments made herein and in the attachments will be useful.
Yours truly,
R. Albert for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. J-C Laporte Client Assistance Directorate
Appendix A
Paragraph 12(1)(x) of the Act provides that certain inducements, reimbursements, contributions, allowances, and assistance received by a taxpayer are required to be included in income. In particular, subparagraphs 12(1)(x)(ii) through (iv) would bring into income amounts received by a taxpayer from a government that
"... can reasonably be considered to have been received
(iii) as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or
(iv) as a reimbursement, contribution, allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of property or in respect of an outlay or expense".
However, if one of the exceptions in subparagraphs 12(1)(x)(v) through (viii) applies then the amount, to the extent of the exception, would not be brought into income under paragraph 12(1)(x).
Subparagraph 12(1)(x)(v) provides that paragraph 12(1)(x) of the Act will not apply to an amount that was otherwise included in income or deducted in computing any balance of undeducted outlays, expenses or other amounts, for the year or a preceding taxation year under some other provision of the Act, such as subsection 9(1) in accordance with generally accepted accounting principles ("GAAP"). The Department's position is that in general a taxpayer should apply GAAP in determining profit unless a provision of the Act permits a departure from GAAP.
Subparagraph 12(1)(x)(vi) refers to adjustments to the cost or capital cost of the property which have been made under other provisions of the Act, usually non-elective provisions such as subsection 13(7.1) and paragraph 53(2)(k) or reductions to the amount of outlay or expense.
Subparagraph 12(1)(x)(vii) refers to adjustments under subsections 12(2.2) or 13(7.4) or paragraph 53(2)(s), each of which is an elective provision, to the cost or capital cost of the property or reductions to the amount of outlay or expense. It should be noted that these elective provisions are only in respect of amounts that would otherwise be included in income under paragraph 12(1)(x). Subparagraph 12(1)(x)(viii) refers to situations where the amount paid is in respect of the acquisition by the payor or the public authority of an interest in the taxpayer, his business or the property.
Where a taxpayer repays an inducement, assistance, etc., that was included in income under paragraph 12(1)(x) or items to which a subsection 12(2.2) election was made, the taxpayer in computing income may pursuant to paragraph 20(1)(hh) of the Act deduct the amount repaid in that year. However, if the amounts repaid were not included in income under paragraph 12(1)(x) but were instead paragraph 53(2)(k) or (s) or subsection 13(7.1) or 13(7.4) items then the cost grinds under those provisions would be the net of the amount received less the amounts repaid.
MINISTRY OF AGRICULTURE AND FOOD PROGRAMS
NAME: ARTIFICIAL INSEMINATION OF LIVESTOCK ACT
PURPOSE: To provide grants to licensed breeder associations in northern Ontario to promote the use of artificial insemination and to provide artificial insemination to Northern farmers at a cost similar to that charged in southern Ontario.
DESCRIPTION: Grants are paid to breeder associations in an amount not to exceed $4.00 for each cow inseminated.
TAXATION: Payments under this program would pursuant to paragraph 12(1)(x) of the Act be required to be brought into income. However, it is likely that the associations could qualify for exemption from tax by virtue of paragraph 149(1)(l) of the Act.
T- SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: COMPENSATION FOR LIVESTOCK KILLED BY BEARS (BEAR DAMAGE)
PURPOSE: To provide for the payment of compensation for loss or damage to livestock or poultry injured or killed by bears.
DESCRIPTION: Agricultural Representative investigates the loss or damage claim, and accesses the award. If the damage was caused by bears, an application for compensation is forwarded to Farm Assistance Programs Branch.
The maximum compensation rates prescribed in Regulation 244, of Livestock, Poultry and Honey Bee Protection Act apply.
TAXATION: Payments would pursuant to paragraph 12(1)(x) of the Act be required to be included in the income of the recipient.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: LIVESTOCK, POULTRY AND HONEY BEE PROTECTION ACT
PURPOSE: To provide for the payment of compensation for loss or damage to livestock or poultry injured or killed by wolves, coy-dogs, coyotes, dogs.
To provide for compensation to owners of honey bee colonies and equipment, for loss or damage caused by bears.
DESCRIPTION: Each municipality pays the compensation for both wolf and dog damage. The Ministry then reimburses the municipalities for wolf damage claims only. Municipalities are responsible for dog damage claims. In unorganized municipalities, compensation is paid directly to the producer for wolf damage only. Compensation is also provided to owners of honey bee colonies for loss/damage caused by bears.
The maximum compensation rates prescribed in Regulation 244, of Livestock, Poultry and Honey Bee Protection Act apply.
TAXATION: Payments would pursuant to paragraph 12(1)(x) of the Act be required to be included in the income of the recipient.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: GRANTS IN LIEU OF TAXES
PURPOSE: To provide grants to the municipalities where the agricultural colleges are located.
DESCRIPTION: The Agricultural Colleges do not pay municipal taxes. Instead, the municipalities receive a grant of $75.00 (in 1990) per student enrolled in the college.
TAXATION: While Canadian Municipalities are exempt from tax under the Income Tax Act, such amounts would still be required to be taken into consideration in the computation of income.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: GRANTS TO LOCAL POULTRY ASSOCIATIONS
PURPOSE: To assist local poultry associations to promote, protect and develop purebred poultry.
DESCRIPTION: Payments are made to associations in the amount of $1.00 per registered member up to a maximum of $50 per association.
Provides for per diem ($15/day) and travelling expenses for appointed poultry judges to attend and judge at poultry shows in the province.
TAXATION: These amounts would be required to be brought into income by the association to the extent that they were not offset against its expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: HUNTER DAMAGE COMPENSATION ACT
PURPOSE: To provide compensation to farmers for loss or damage to livestock, farm machinery or equipment, which results from the actions of careless hunters.
DESCRIPTION: Compensations payments made by OMAF directly to applicant up to the following maximums per animal:
Cattle $1000 Horse $ 500 Goat $ 200 Sheep $ 200 Swine $ 200
Payments for machinery and equipment are determined by a valuer on a case by case basis.
TAXATION: Compensation payments received in respect of livestock would be treated as regular farm income. Amounts received for machinery or equipment would constitute proceeds of disposition or where repairs were made such amounts would be applied to decrease the cost of that expense.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: ONTARIO FARM-START
PURPOSE: To assist cash flow during the difficult first years of farming.
TIME FRAME: Registrations were accepted beginning January 1, 1988. As of July 28, 1988, no further registrations were accepted as the program funds were fully committed. Participants have up to three years to establish themselves before applying to the Program's grant phase. Grants are paid over a seven year period; therefore, the last payments will likely be made during 1999.
Program closed to new applications.
DESCRIPTION: The program provides annual grants totalling $38,000 over a seven year period.
ELIGIBILITY: New farmers willing to operate a farm business that will contribute $5,500 to family living expenses (accrual basis). Applicant must demonstrate adequate education and experience to successfully operate a farm. Applicant must have a farm equity of 10-75%.
ELIGIBILITY CHANGES EFFECTIVE 1992 PROGRAM YEAR:
Only program participants applying for their 1st or 2nd grant, must have a minimum net farm income of $5,500. For subsequent grants, no minimum net farm income requirement would apply.
TAXATION: These grants would pursuant to paragraph 12(1)(x) of the Act be required to be included in the income of the recipient.
T-SLIPS: Required.
CONTACT: Program Consultant: XXXXXXXXXX
NAME: ONTARIO FARM TAX REBATE PROGRAM (FTRP)
PURPOSE: Provides municipal tax rebates to eligible owners of farm properties in Ontario.
TIME FRAME: The program has been in place since 1970. In June, 1990, program criteria were announced for the 1990 and 1991 programs.
DESCRIPTION: Rebate of 75% of property taxes on eligible farmland and outbuildings. The rebate is not paid on taxes levied on farm residences and one acre of land.
ELIGIBILITY: Property must be assessed as a farm and be in agricultural production in 1990 and 1991. Property must be owned by a Canadian citizen or permanent resident of Canada. The property must be used as part of a farming operation with a gross farm production of $7,000 in a normal production year. Property rented is eligible if the tenant farmer has a gross production of at least $7,000.
TAXATION: Pursuant to 12(1)(x) of the Act these amounts would be required to be included into income to the extent that they were not applied to reduce the expense for taxes otherwise deductible in the year.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: THE ONTARIO ESTABLISHMENT LOAN CORPORATION
PURPOSE: The Corporation made loans to assist young qualified farmers in the establishment, development and operation of their farms.
TIME FRAME: The act came into force on April 10, 1952. The last loan was made in 1969. The last loan is due December 1, 1999.
Program closed to new applications.
DESCRIPTION: Mortgages of up to $40,000 were provided at 4% or 5% per annum, for a maximum term of 29 years. The Bank prime rate in 1952 was 4.5%.
Governing Legislation is the Ontario Junior Farmer Establishment Act.
ELIGIBILITY: Applicants had to be 21-35 years of age.
TAXATION: There are no tax consequences respecting the fact that the loans bear low rates of interest.
T-SLIPS: Not required.
CONTACT: Program Manager XXXXXXXXXX
NAME: ONTARIO PRIVATE MORTGAGE GUARANTEE PROGRAM
PURPOSE: To improve access to affordable long-term credit for the purchase of farm real estate or refinancing of existing farm mortgages by beginning or expanding farmers.
TIME FRAME: Implemented in 1993. No application deadline. However,applications will be accepted until the approved amount of loans that can be guaranteed is committed.
Ongoing.
DESCRIPTION: Guarantee of up to 80% on loans provided by private lenders. Maximum loan that can be guaranteed under the program is $500,000 per farm business.
In exchange for the guarantee, the maximum interest rate that lenders could charge on loans is the average rate on the chartered banks' GIC rate + 1%.
ELIGIBILITY: Individuals, partners and farm corporations. Net worth of individual must not exceed $500,000. Total net worth of partners and shareholders must not exceed $1 million.
TAXATION: The guarantee itself will not give rise to tax. However, section 80 should apply to the borrower with respect to the settlement of the debt without any payment by him or by payment of an amount less than the principal amount.
T-SLIPS: Not required.
CONTACT: Program Manager XXXXXXXXXX
NAME: PROFESSIONAL SERVICES ASSISTANCE PROGRAM
PURPOSE: To make expertise available to farmers/producers faced with crucial decisions in times of financial stress.
DESCRIPTION: The program provides financial assistance to hire financial management consultants, accountants, lawyers or qualified health professionals to assist farmers work through difficult financial situations.
These services are: Development of business and/or production plan. Negotiation with creditors. Legal and tax assessments of proposed settlements. Follow up business plans. Stress counselling for family members.
Assistance is paid directly to the professionals providing the service.
TAXATION: These amounts would be treated as regular business receipts by the professionals receiving such payments made on behalf of services provided to the farmer with no tax consequence to him in respect of having received the service.
T-SLIPS: Required to be issued to the professionals.
CONTACT: Program Manager XXXXXXXXXX
NAME: PURE BRED BEEF CATTLE SALES ASSISTANCE POLICY
PURPOSE: To promote the distribution within Ontario of purebred beef cattle of superior quality, by helping to defray the costs of holding consignment sales.
DESCRIPTION: Grants of $5.00 per animal for each animal sold to a maximum of $250 per sale. Paid by OMAF directly to the sales organization (the breeders club).
If a provincial breeders club holds a show in conjunction with a sale then they may be eligible for a further (matching) grant of $1.00 for every $1.00 they put towards the show up to a maximum of $300.
TAXATION: These amounts would be required to be brought into income to the extent that they are not offset against expenses incurred by the club.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: PURE BRED DAIRY CATTLE SALES ASSISTANCE PROGRAM
PURPOSE: To promote the distribution within Ontario of purebred dairy cattle of superior quality, by helping to defray the costs of holding consignment sales.
DESCRIPTION: Grants of $5.00 per animal for each animal sold to a maximum of $250 per sale. Paid by OMAF directly to the sales organization (the breeders club).
TAXATION: These amounts would be required to be brought into income by the club to the extent they were not offset against its expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: PURE BRED SHEEP SALES ASSISTANCE POLICY
PURPOSE: To promote the distribution, within Ontario of purebred sheep of superior quality, by helping to defray the costs of holding consignment sales.
DESCRIPTION: Grants of $1.00 per animal for each animal sold to a maximum of $100 per sale. Paid by OMAF directly to the sales organization (the breeders club).
TAXATION: These amounts would be required to be brought into income by the club to the extent that they were not offset against expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: RABIES INDEMNIFICATION PROGRAM
PURPOSE: Program established to encourage the production of livestock in Ontario by providing compensation to owners of livestock which have died from rabies.
DESCRIPTION: Joint program through federal (40%) and provincial (60%) governments. Grants are paid directly to owners in the following amounts per animal:
Cattle $1000 Horse $ 500 Goat $ 200 Sheep $ 200 Swine $ 200
Claims must be submitted through Agriculture Canada. TAXATION: These amounts would be required by virtue of paragraph 12(1)(x) of the Act to be brought into income by the recipient.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: SHEEP & BULL INDEMNITY PROGRAMS
PURPOSE: To pay compensation to owners of livestock which die while on test at a provincial bull or ram test station.
DESCRIPTION: Compensation is paid according to the weight of the ram or bull at delivery, times the price of equivalent weight animal at the Ontario Public Stockyards during the week of delivery, minus any insured or salvage value.
TAXATION: These amounts would be required to be brought into income by virtue of paragraph 12(1)(x) of the Act.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: SPECIAL LIVESTOCK SHOWS ASSISTANCE PROGRAM 1979
PURPOSE: To encourage the improvement of livestock breeds raised for commercial purposes. Grants are paid to assist in the payment of prize money at special shows of breeding stock.
DESCRIPTION: Grants are paid directly to breeder associations or clubs for 25% of prize money awarded, to a maximum of $100 per show.
TAXATION: These amounts would constitute income to the recipient associations or clubs to the extent that they are not offset against expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: SWINE SALES ASSISTANCE POLICY
PURPOSE: To promote the distribution, within Ontario of purebred swine of superior quality, by helping to defray the costs of holding consignment sales.
DESCRIPTION: Grants of $2.50 per animal for each animal sold to a maximum of $100 per sale. Paid by OMAF directly to the sales organization (the breeders club).
TAXATION: These amounts should be included into income by the recipient clubs to the extent that they are not offset against expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
NAME: TRANSPORTATION OF LIVESTOCK EXHIBITS ASSISTANCE PROGRAM (LIVESTOCK EXHIBITS OUTSIDE ONTARIO)
PURPOSE: To assist members of purebred livestock associations by defraying the transportation charges of shipping livestock exhibits to shows or exhibitions of international or national repute held outside Ontario. DESCRIPTION: Grants are paid to purebred livestock associations for up to 50% of shipping costs (Rail or truck only) and 50% of any prize money awarded at the show.
Trips to Royal Winter Fair are not eligible.
Maximum of 1 show per year, per breeder association.
TAXATION: These amounts would constitute income in the hands of the recipient associations to the extent that they are not offset against expenses.
T-SLIPS: Required.
CONTACT: Program Manager XXXXXXXXXX
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