21 February 1994 External T.I. 9400895 - FARM SUPPORT PAYMENTS

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.

		940089
XXXXXXXXXX	A.M. Brake

Attention: XXXXXXXXXX

February 21, 1994

Dear Sirs:

Re: Tax Information Slips

This is in reply to your letter of January 6, 1994 wherein you asked for clarification as to whether certain payments or credits to producers would require Tax Information Slips to be issued in accordance with the requirements of Income Tax Regulation 234 which defines "farm support payments" to include

(a) a payment that is computed with respect to farm acreage or other area of land,

(b) a payment that is made in respect of a unit of commodity or animal grown, raised or disposed of, and

(c) a rebate of or compensation for all or a portion of

(i) a cost or capital cost incurred in respect farming, or

(ii) unsowed land or crops, destroyed crops or output or destroyed animals.

Young Farmer Rebate

These amounts are credited to the client's account during the year and you feel that showing the amounts on their annual statement should suffice as adequate reporting at least for the 1993 year
XXXXXXXXXX

In our view, the amounts in question fall within the definition as farm support payments as defined within the Regulation and would require Tax Information Slips. We suggest that you contact Mr. J. C. Laporte of our Client Assistance Directorate, telephone (613) 957-2000, with regard to the alternative which you have offered because of circumstances which you feel effectively precludes the assembling of this information in required format for the 1993 year.

Write-Offs

In our view the transfer of an asset by the client in exchange for a reduction of a particular debt would not fall within the definition of a farm support payment. Such an exchange could give rise to income tax implications, however, in that there would be a disposition of a property and the reduction or possible cancellation of a debt to which section 80 of the Income Tax Act could have application.

Financial Assistance/Guarantees

In our view any payments which are made to or on behalf of a producer to which he/she was legally obligated to pay would constitute a "farm support payment" at the time of payment and if in a later year the producer was required to repay these amounts he would be entitled to claim a deduction in computing income as is provided by paragraph 20(1)(hh) of the Income Tax Act in the year repayment is made.

We trust that we have clarified this matter

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch