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:
Post-dated cheques
Position:
Post-dated cheques are normally accepted as security for debt without extinguishing the original debt. Income to cash basis farmer when cheque is cashable.
Reasons:
Paragraph 6 of IT-433R.
XXXXXXXXXX 963992
Attention: XXXXXXXXXX
February 11, 1997
Dear Sirs:
Re: Post-Dated Cheques for Grain Deliveries
This letter is in response to the comments contained in your letter of November 20, 1996, to XXXXXXXXXX, a copy of which was forwarded to this Department. Reference was made to our technical interpretation #9622404 of July 16, 1996, relating to a situation when a "producer requests and receives post-dated cheques... in full settlement of a debt in respect of grain deliveries". Our comments appear to have resulted in a perceived change in policy with regard to the timing of reporting income relating to post-dated cheques.
We would like to confirm that there has been no change in the Department's position with respect to post-dated cheques. As published in paragraph 6 of Interpretation Bulletin IT-433R, post-dated cheques are normally accepted as security for a debt without extinguishing the original debt and the value of a post-dated cheque is brought into income when it is cashable. This allows farmers who report on a cash basis and who receive cheques post-dated to January of the following year, to defer reporting the amount of the post-dated cheque as income until then. In rare cases, when a post-dated cheque is accepted in absolute settlement of a debt, such as described by the enquirer of the July 16, 1996 technical opinion, the value of the post-dated cheque is considered to be income at the time it is received.
We trust that our 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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