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 unharvested grain can be inlcuded in the calculation of the optional inventory adjustment.
Position:
yes
Reasons:
Unharvested grain is considered inventory.
J. Gibbons
XXXXXXXXXX 5-972064
Attention: XXXXXXXXXX
October 28, 1997
Dear Sir:
We are replying to your letter of July 28, 1997, in which you request our opinion as to whether unharvested grain is inventory for purposes of the “optional inventory adjustment” under paragraph 28(1)(b) of the Income Tax Act (the “Act”).
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 70-6R3. The following comments are, therefore, of a general nature only.
The optional inventory adjustment under paragraph 28(1)(b) of the Act may be made by a taxpayer who has elected to use the “cash basis” method under subsection 28(1) of the Act. The amount of the optional inventory adjustment which may be included in income cannot exceed the amount by which the fair market value of the inventory in the farming business at the end of the year exceeds the amount of the mandatory inventory adjustment under paragraph 28(1)(c) of the Act. In our view, a farmer’s unharvested crop may be considered inventory for purposes of paragraph 28(1)(b) of the Act. Therefore, an amount equal to its fair market value at the end of the year may be included for purposes of the optional inventory adjustment.
We trust that these comments will be of assistance.
Yours truly,
C. Chouinard
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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