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 land acquired by a taxpayer prior to June 18, 1987 that has been farmed by the taxpayer's grandparent for at least 25 years would qualify as "qualified farm property".
Position:
Land would likely qualify.
Reasons:
One of the persons mentioned in subparagraph (a)(vii) of the definition of "qualified farm property", namely the taxpayer's grandparent, appears to have farmed the land in at least 5 years while the grandparent owned the land. A grandparent can be considered a "parent" of an individual because of the extended definition of "child" in paragraph 70(10)(a) of the Act, which applies for purposes of section 110.6 of the Act.
5-961876
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
June 24, 1996
Dear Sir/Madam:
Re: Qualified Farm Property - Definition of Child
We are writing in reply to your letter of May 22, 1996 in which you inquired whether a grandparent would be considered a parent of a person for purposes of the definition of "qualified farm property" in subsection 110.6(1) of the Income Tax Act (the "Act").
In the situation you describe, a grandparent owned land for 25 years, during which time he used the land principally in the course of carrying on the business of farming in Canada. Prior to June 18, 1987, a granchild of the grandparent acquired the land and since that time, the land has been rented to an unrelated third party.
You inquire whether the land would qualify as "qualified farm property" of the grandchild. In your view, the land would be "qualified farm property" if the grandparent were considered to be the parent of the grandchild.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. The following comments are, therefore, of a general nature only, and are not binding on the Department.
One of the conditions that must be met for a property to be considered a "qualified farm property" within the meaning of subsection 110.6(1) of the Act, is that the property be used in the course of carrying on the business of farming in Canada. Property acquired before June 18, 1987 will qualify as "qualified farm property" provided it was used by the person claiming the capital gains exemption, a spouse, child or parent of such a person, a family farm corporation in which any of the above persons own shares or a family farm partnership in which any of the above persons have an interest, principally in carrying on the business of farming in Canada, either in the year the property is disposed of, or in at least five years during which it was owned by a person referred to above.
For purposes of the definition of "qualified farm property", "child" has the meaning assigned by subsection 70(10) of the Act. Accordingly, a grandparent can be considered a "parent" of an individual because of the extended definition of "child" in paragraph 70(10)(a) of the Act, which applies for purposes of section 110.6 of the Act. In the situation described above, since it appears that the grandparent farmed the land for at least five years while he owned it and as the grandparent would be considered to be a parent of the grandchild, it is likely that the land would qualify as "qualified farm property" of the grandchild.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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