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 parcel of land which has not been farmed since 1961 constitutes qualified farm property.
Position TAKEN:
Only the portion that is not the taxpayer's principal residence constitutes qualified farm property.
Reasons FOR POSITION TAKEN:
Paragraph 40(2)(c) provides that any gain on the disposition of farming property that includes property that is a principal residence must be calculated using one of two methods.
The remaining portion would constitute "qualified farm property" if it meets the requirements of the definition of "qualified farm property".
5-943265
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
February 8, 1995
Dear Sir:
Re: Qualified Farm Property
We are writing in response to your letter of December 8, 1994, wherein you requested our comments on the definition of "qualified farm property" as it relates to a particular situation.
In the situation you describe, the taxpayers acquired 1300 acres of real property in 1948. From the date of acquisition until 1961, the property was used by the taxpayers as a cattle ranch. The taxpayers were actively engaged in the cattle ranch business and it was their chief source of income during this period. In 1961, the taxpayers sold the property, except for 53 acres on which their principal residence is situated. You inquire whether the 53 acre parcel the taxpayers presently own meets the definition of "qualified farm property". In your view, the 53 acre parcel constitutes "qualified farm property", since it is real property owned by the taxpayers, that was used by the taxpayers in the course of carrying on the business of farming in Canada in at least 5 years during the period of ownership.
Where a taxpayer disposes of land used in a farming business and such land includes property that was at any time the taxpayer's principal residence, paragraph 40(2)(c) of the Income Tax Act (the "Act") provides that any gain on the disposition of the land may be calculated using either one of two methods described in paragraphs 27, 28 and 29 of Interpretation Bulletin IT-120R4, a copy of which is enclosed.
As regards the land which does not constitute the taxpayer's principal residence, we agree with your views that it would qualify as a "qualified farm property", since it appears to meet the requirements of the definition of "qualified farm property" in subsection 110.6(1) of the Act, namely, it is real property acquired prior to June 18, 1987 and it was used by the taxpayers in the course of carrying on the business of farming in Canada in at least five years during which the property was owned by the taxpayers.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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