6 October 1994 External T.I. 9414895 - QUALIFIED FARM PROPERTY & CAPITAL GAINS DEDUCTION

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:

Does an additional name to the title of a property trigger a disposition?

Position TAKEN:

	Question of facts. Beneficial ownership must pass at 	that time for a disposition to occur.

Reasons FOR POSITION TAKEN:

54(c)

			5-941489
XXXXXXXXXX		M. Shea-DesRosiers

Attention: XXXXXXXXXX

October 6, 1994

Dear Sirs:

Re: Qualified Farm Property
Capital Gains Deduction
Paragraph 54(c) and subsection 110.6(2) of the Income Tax Act (the "Act")

This is in reply to your letter of June 3, 1994 concerning the above-mentioned subject. We apologize for the delay in replying to your letter.

The situation outlined in your letter appears to relate to actual proposed transactions involving identifiable taxpayers. Confirmation as to the income tax consequences of proposed transactions can only be given in the context of an advance income tax ruling. However, we can offer the following general comments.

The Act does not provide the answer to the particular question you raise since the question of title to a property is a question of common law. However, where a qualified farm property as defined in subsection 110.6(1) of the Act is transferred by an individual to his/her adult child who becomes the beneficial owner with all the rights attached to ownership such as possession, control, transfer of title, a disposition pursuant to paragraph 54(c) of the Act will occur. A capital gain can result and if it does, the taxpayer may be allowed to claim the capital gains deductions in accordance with subsection 110.6(2) of the Act.

We enclose for your information a copy of Interpretation Bulletin IT-263R3 entitled "Inter Vivos Transfer of Farm Property to Child", with a copy of Special Release IT-263R3 which discusses transfers of farms assets to a child.

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. However, we trust they will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Legislation and Policy Branch