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
5-932117
Attention: XXXXXXXXXX
February 17, 1994
Dear Sirs:
RE: Subsection 73(3) of the Income Tax Act (the "Act")
This is in reply to your letter of July 14, 1993 requesting clarification relating to the amendment to the above-noted provision wherein the words "... and the property was, immediately before the transfer, used by him,..." with the words "... and the property was, before the transfer used principally in the business of farming in which the taxpayer...". Specifically, you ask whether by virtue of the present wording, "used principally" in the business of farming, means that a property could qualify for transfer within the wording of subsection 73(3) of the Act as long as the use of the property is more than 50% for the farming business and also, where several properties are involved, whether this test would be applied on a property by property basis. In addition, you asked whether under the amended provision there is no longer a requirement that the property in question be used in farming at the point in time immediately prior to the transfer.
The questions asked appear to relate to definite contemplated transactions. Assurance as to the tax consequences of contemplated transactions can only be given in response to a request for an advance income tax ruling. If you wish to obtain any binding commitment with respect to an actual case, an advance income tax ruling application should be submitted. We do, however, provide the following general comments for your information.
Where reference is made to an asset being used "principally" in the business of farming, the asset will meet this test where its use is primarily in the business of farming. That is, more than 50% of the asset's use must be in the business of farming. An asset will be considered to meet the usage test if it is used primarily in the business of farming, or the asset will not meet the usage test if it is not used primarily in the business of farming. You are referred to paragraph 15 of IT-268R3 which states, "for purposes of subsection 73(3), it is always a question of fact whether a particular property ... is used in a farming business and consequently no general guidelines for such a determination can be given in this bulletin."
Whether or not particular assets are "used principally in the business of farming" is also a question of fact. In this respect paragraph 5 of IT-486R outlines the Department's position concerning assets used in a business. It is our view that the test has to be applied on a property by property basis.
It is not necessary that a particular asset be used in farming at a point in time immediately prior to the transfer. However, using the asset for some purpose other than farming for an extended period prior to the date of transfer, could cause the asset to be considered to be used primarily for some other purpose rather than having been used primarily in the business of farming.
These comments represent an expression of opinion and, as stated in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.
Yours truly,
R. Albertfor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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