30 November 1997 Ruling 9802093 - QUALIFIED FARM PROPERTY

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 owned by the taxpayer and used in the business of farming in Canada is "qualified farm property".

Position:

The property qualifies as "qualified farm property".

Reasons:

The property is real property owned by the taxpayer and used in the course of carrying on the business of farming in Canada. The land meets all of the requirements set out in both 110.6(1)(a)(vi) and 110.6(1)(a)(vii). Therefore under either subsection the land qualifies as "qualified farm property".

XXXXXXXXXX							3-980209
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: Advance Income Tax Ruling Request,
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX requesting an advance income tax ruling on behalf of the above named taxpayer.

We understand that, to the best of your knowledge, none of the issues raised in this ruling is being considered by a Taxation Services Office or Taxation Centre in connection with an income tax return already filed, is the subject of any notice of objection or is under appeal.

Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:

Facts:

1.XXXXXXXXXX purchased 2 quarters of land XXXXXXXXXX.

2.XXXXXXXXXX actively farmed this land along with land in the XXXXXXXXXX area until XXXXXXXXXX. From XXXXXXXXXX until present, XXXXXXXXXX has farmed the XXXXXXXXXX land on a crop share basis and has reported the income as rental income on his personal tax return.

3.XXXXXXXXXX continues to farm the 2 quarters of land XXXXXXXXXX and has reported the income on his personal tax return as farming and has claimed losses as restricted farm losses.

4.Gross revenue from farming has been greater than income from other sources from XXXXXXXXXX as demonstrated in the following table:

	Gross Revenue		Net Income		Total Income
	from Farming		from Farming	from Other
								Sources

XXXXXXXXXX

Note 1: For the following years reference above, gross revenue from farming and net income from farming include amounts from land farmed in the XXXXXXXXXX area on a crop share basis and reported as rental income on the tax return. The amounts included above that represent gross revenue and net income from farming on a crop share basis are as follows:

1.XXXXXXXXXX has a permit book and is classified as a producer by the Canadian Wheat Board.

2.XXXXXXXXXX currently resides on a small portion of the quarters of land XXXXXXXXXX. The remaining land XXXXXXXXXX has always been used for farming while owned by XXXXXXXXXX.

3.Substantially more than XXXXXXXXXX% of the acres of land XXXXXXXXXX have been used for farming by XXXXXXXXXX while he has owned the land.

Proposed Transaction

1.XXXXXXXXXX is proposing to sell the XXXXXXXXXX. The proposed sale will result in a capital gain.

2.The proposed sale of the property is intended to take place prior to XXXXXXXXXX.

Purpose of the Proposed Transaction

1.XXXXXXXXXX intends to claim the enhanced capital gains exemption pursuant to subsection 110.6(2) of the Act in respect of the sale of qualified farm property as defined in subsection 110.6(1) of the Act.

2.The purpose of the land sale is to determine XXXXXXXXXX net cash after-tax that will allow XXXXXXXXXX to purchase a parcel of land in XXXXXXXXXX and retire in that province.

Rulings Requested and Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions and provided further that the proposed transaction is carried out as described above, our ruling is as follows:

We confirm that the 2 quarters of land XXXXXXXXXX, which does not include the "principal residence" referred to in paragraph 6, held by XXXXXXXXXX will qualify as "Qualified Farm Property" as defined in subsection 110.6(1) of the Act, for purposes of the capital gain exemption pursuant to subsection 110.6(2) of the Act.

Other Comments

Nothing in this advance income tax ruling should be construed as implying that we are ruling on whether XXXXXXXXXX carried on a farming business at any particular time. Neither are we confirming that each of the quarters of land were used principally for the purpose of farming by XXXXXXXXXX. These are given facts and our ruling is given on the basis that all of the facts are correct.

The ruling is given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 31, 1996 and is binding on the Department provided that the sale of the farmland is made before XXXXXXXXXX.

Yours truly,

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch