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, if an individual files the capital gains election in respect of qualified farm property, the property will be considered to have been last acquired after June 17, 1987 for purposes of the definition of "qualified farm property".
Position TAKEN:
Property will be considered to have been last acquired after June 17, 1987, but the new acquisition date will not necessarily cause the property to cease to qualify as "qualified farm property".
Reasons FOR POSITION TAKEN:
When the capital gains election is filed in respect of capital property, the property is, pursuant to subparagraph 110.6(19)(a)(ii) of the Act, deemed to have been reacquired by the elector immediately after February 22, 1994. The property may continue to qualify as "qualified farm property" if it meets subparagraph (a)(vi) of the definition of "qualified farm property".
5-950671
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
April 11, 1995
Dear Sir:
Re: Capital Gains Election - Qualified Farm Property
We are writing in reply to your letter of March 9, 1995, wherein you requested our comments on the capital gains election as it applies to qualified farm property.
In the situation you describe, on January 1, 1985, an individual acquired real property which was used by the individual's father for more than five years in the course of carrying on a business of farming. Since 1985, the individual has not farmed the land, but instead rents it out on a share-crop and rental basis. In your opinion, the real property would qualify as "qualified farm property" within the meaning of subsection 110.6(1) of the Income Tax Act (the "Act"), since the property was last acquired by the individual before June 18, 1987 and it was used by the individual's father principally in the course of carrying on the business of farming in Canada for at least five years during which the property was owned by the individual's father.
You ask whether, if the individual files the capital gains election in respect of the property described above, the property will be considered to have been last acquired after June 17, 1987 for purposes of the definition of "qualified farm property".
When the capital gains election is filed in respect of capital property, the property is, pursuant to subparagraph 110.6(19)(a)(ii) of the Act, deemed to have been reacquired by the elector immediately after February 22, 1994. Therefore, in our opinion, if the capital gains election were filed in respect of the qualified farm property described above, the property would be considered to have been last acquired after June 17, 1987. However, the fact that the capital gains election gives rise to a new acquisition date does not necessarily mean that property which previously qualified as "qualified farm property" will no longer qualify as such. Although the individual has not farmed the property since he or she acquired it, in our opinion, the person meeting the gross revenue test need not be the person who owns the property and may be any of the persons described in subparagraphs (a)(i) to (iii) of the definition of "qualified farm property". Therefore, in the situation described above, the property may continue to meet the definition of "qualified farm property" notwithstanding the new acquisition date, if, in at least 2 years while the property was owned by the father of the individual, the gross revenue of the father from the farming business in which the property was principally used and in which the father was actively engaged on a regular and continuous basis exceeded his income from all other sources for the year.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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