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.
950517
XXXXXXXXXX A.M. Brake
Attention: XXXXXXXXXX
March 8, 1995
Dear Sirs:
Re: Qualified Farm Property
This is in reply to your letter of February 24, 1995 wherein you described a situation and asked for our opinion whether the property in question was qualified farm property within the definition contained in subsection 110.6(1) of the Income Tax Act. You are concerned that property owned by a taxpayer whose chief source of income is not farming will be prohibited from satisfying the definition of qualified farm property.
Although you have asked for a technical interpretation, the situation presented appears to be an actual fact situation. Should this situation involve a proposed transaction, you may wish to submit all relevant facts and proposed transactions for a binding advance income tax ruling. We are, however, prepared to provide some general comments.
The fact that section 31 of the Act may have application to restrict the amount of a farming loss does not, in and by itself, mean that a farming business was not carried on for purposes of the enhanced capital gains exemption on qualified farm property. It is a determination of fact based on the facts of a particular situation as to whether a farming business was in fact carried on. The application of section 31 to restrict the amount of a farm loss, in effect, recognizes that a farming business was carried on with a reasonable expectation of profit, otherwise, the loss would have denied in full. Section 31 recognizes the loss as being on account of carrying on a business of farming but merely restricts the loss because the taxpayer's chief source of income is neither farming nor a combination of farming and some other source of income.
According to the definition of qualified farm property in subsection 110.6(1) of the Act, real property acquired before June 18, 1987 may qualify if it was used by an individual taxpayer principally in the course of carrying on the business of farming in Canada
A)in the year the property was disposed of by the individual, or
B)in at least 5 years during which the property was owned by the individual.
It might be noted that the 5 years referred to above do not have to be consecutive years.
The foregoing comments are given in accordance with the practice of providing opinions referred to in paragraph 21 of Information Circular 170-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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