5 April 1994 External T.I. 9336485 - CAP. GAINS EX. FARM PROP.

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether a personally owned property of a deceased spouse which was used in a farming operation but is not used by the surviving spouse in farming but is rented to arm's length tenants meets the definition of a "qualified farm property " as found in subsection 110.6(1) of the Act.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

To be considered "qualified farm property" the individual need not use the property in the course of carrying on the business of farming at the time of disposition. As long as all the other conditions of the definition are met, prior use of the property in the circumstances described in 110.6(1)(a)(vi) of the Act will suffice.

XXXXXXXXXX 5-933648

Attention: XXXXXXXXXX

April 5, 1994

Dear Sirs:

Re: Capital Gains Exemption - Qualified Farm Property
Paragraph 110.6(1) of the Income Tax Act (the "Act")

This is in reply to your letter of December 8, 1993 concerning the above-mentioned subject. We apologize for the delay in replying to your letter.

You enquire as to whether a personally owned property of a deceased spouse which was used in a farming operation but is not used by the surviving spouse in farming but is rented to arm's length tenants would meet the definition of a "qualified farm property" as found in subsection 110.6(1) of the Act.

The fact situation which you set out is quite specific and it appears that it may relate to definite contemplated transactions by specific individuals. 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 with facts similar to your example, an advance income tax ruling application should be submitted. Information Circular 70-6R2 describes the guidelines respecting advance income tax ruling applications. If, on the other hand, your situation reflects a completed transaction, the determination with respect to entitlement to the capital gains deduction under subsection 110.6(2) of the Act would generally be carried out by officers from your local District Taxation Office. We do, however, provide the following comments for your information.

We share your understanding of the application of "qualified farm property" as defined in subsection 110.6(1) of the Act where real property was acquired after June 17, 1987. We also agree that, to be considered "qualified farm property", the individual taxpayer need not use the property in the course of carrying on the business of farming at the time of its disposition. As long as the other conditions of the definition have been satisfied, prior use of the property in the circumstances described in subparagraphs (a)(vi) of the Act will suffice.

The above comments represent our general views with respect to the subject matter of your letter. In accordance with paragraph 21 of Information Circular 70-6R2, dated September 28, 1990, the comments expressed herein do not constitute an advance income tax ruling and consequently are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate