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.
Agriculture Canada
Policy Branch
930 Carling Avenue 961175
Ottawa, Ontario A.M. Brake
K1A 0C5
Attention: Gordon Andrusiak
April 24, 1996
Dear Sirs:
Re: Nova Scotia Feed Freight Adjustment Program
This is in reply to your letter of March 28, 1996, relating to the tax treatment to be accorded certain payments to the farm community. Your Department will transfer the funds to the Nova Scotia Federation of Agriculture who will disburse the individual amounts to each farmer based on their particular entitlement. The payments are generally considered to be capital in nature on the basis that the farm assets have been devalued because of reduced earnings caused by higher freight cost as a result of the termination of the feed freight subsidy. The payments will be made against the cost of the affected assets as listed in the application forms to be prepared by each applicant.
Provided the documentation clearly describes the payment as one that is to be treated as a reduction to the capital cost of a particular depreciable property within the wording of subsection 13(7.1) of the Act or a required reduction of the adjusted cost base of a particular property, other than depreciable property, as set out in subsection 53(2) of the Act, the proposed payments would be treated as cost or ACB reductions only in respect of the respective properties for which the payment relates. Should the ACB of a non-depreciable property reflect a negative position, a capital gain would result in accordance with the provisions of subsection 40(3) of the Act. In the event that the reductions in the cost of depreciable property in any particular Class causes the undepreciated capital cost of that Class to have a negative balance, a recapture of capital cost allowance would be the result.
Any part of a payment that does not relate to specific assets, in all likelihood, would be income to the recipient or would reduce otherwise deductible costs.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1996
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© Sa Majesté la Reine du Chef du Canada, 1996
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