1993 External T.I. 9334315 F - Ontario Farm Start Program

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

5-933431

Attention:  XXXXXXXXXX

January 14, 1994

Dear Sirs:

RE:  Ontario Farm Start Program

We are writing in reply to your letter of November 24, 1993 and your inquiry of August 1993 regarding the tax treatment of grants received under the above-captioned program.

In particular, you ask whether such grants will be considered capital in nature where spouses form a new partnership to purchase assets. You also ask about the tax treatment of these grants from the perspective of a proprietor receiving them.

Our Comments:

It is the purpose for which the assistance is given by the government body and not the use that governs the tax status of such grants. The purpose of the yearly grants under the Ontario Farm Start Program is to assist new farmers with their cash flow during the difficult first years of farming. Thus amounts received, other than amounts that fall within the exception, will be taxable under 12(1)(x) of the Income Tax Act (the "Act") because the amounts were not received in respect of the cost of a property acquired, as is stipulated in paragraph 53(2)(s) in conjunction with subsection 53(2.1) of the Act, and neither were they received in respect of, or for the acquisition of property as set out in paragraph 53(2)(k) of the Act.

The Ontario Farm Start Order in Council provides, in paragraph 5(4b), an exception to the rule that the grants are to assist cash flow during the difficult first years of farming. The exception reads as follows:

"(4b) Subsection (4) does not apply to an applicant who is applying for a grant to assist in acquiring a share in his or her parent's farm."

Hence, only where the recipient has applied for and used the grant to acquire shares or a partnership interest in his or her parent's farm, according to subparagraph 12(1)(x)(vi) of the Act, is the grant not taxable as it must be applied to reduce the adjusted cost base of the shares or partnership interest as is required by paragraph 53(2)(k) of the Act.

We trust that these comments will be of assistance.

Yours truly,

Murray Brake for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch