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.
XXXXXXXXXX 973084
B. Kerr
Attention: XXXXXXXXXX
April 27, 1998
Dear Sirs:
Re: Cost of Apple Trees
This is in response to your letter of November 11, 1997, concerning the deductibility of the cost of planting apple trees.
The situation described involves a taxpayer that acquired and planted apple trees. You stated that the cost was not deducted as an expense since it was considered capital. The entire orchard was destroyed by a disease in 1997. You have asked us whether, in 1997, the cost of the trees would be a capital loss or an income loss or whether the cost would be added to the cost of the farmland.
Trees and plants that are acquired to be grown for their produce (berries, fruit and nuts for instance) in connection with an orchard business would not in our view meet the definition of “inventory” within the meaning in subsection 248(1) of the Income Tax Act as, once planted, the cost of the property is not relevant in computing the taxpayer’s income from a business for a taxation year. It is the Department’s view that the cost of perennial plants, orchard trees and nut trees purchased would, on the initial establishment of an orchard, be considered to be capital expenditures that would be added to the cost of farmland. Accordingly, since the trees would not be inventory, the destruction of the trees would not result in an income loss, nor would there be a capital loss since there has been no disposition of the farmland.
We trust that these comments will be of assistance.
Yours truly,
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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