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:
1)Is a payment received from the Ice Storm relief for replacement of fencing on a farm operation taxable ?
2) Is compensation received from the Ice Storm relief for damages to trees in a sugar bush taxable?
Position:
1) Proceeds of disposition
2) Yes- amount is taxable if recipient in business
Reasons:
1) 13(21), 13(1)
2) 9 - Business Operation
April 27, 1999
KINGSTON TSO HEADQUARTERS
C. Tremblay
Attention: D. Carey
990652
Ice Storm Relief
This is in reply to your facsimile of March 9, 1999, wherein you ask us whether certain amounts received by victims of the 1998 ice storm as assistance are taxable? In the first situation, a taxpayer received $2,100.00 from the Ice Storm Relief Committee for replacement of fencing on his farm operation. In a second situation, a taxpayer was paid $1,200.00 as compensation for damage to trees in his sugar bush during the ice storm.
In the first situation, government assistance received by the taxpayer to help pay for the cost of replacing depreciable property (the new fencing) that was damaged during the ice storm is considered “proceeds of disposition” for purposes of calculating “undepreciated capital cost” as defined in subsection 13(21) of the Act, or “recaptured depreciation” as defined in subsection 13(1) of the Act. The tax implications should be minimal as the cost of the new fencing should offset the government assistance received for the damaged fencing.
In the second situation, it is our view that government assistance received by a taxpayer to compensate for damages to trees in a sugar bush during the ice storm and that is used in a business is considered income for income tax purposes. This will, however, be offset by related costs incurred in the same year as the assistance is received. If the related expense is incurred in the following year, you could consider the application of subsection 12(2.2) of the Act.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. Request for this latter version should be made by you to Jackie Page at 613-957-0682. The severed copy will be sent to you for delivery to the client.
J. F. Oulton, CA
Manager
Business, Property and Employment Section III
Business and Publications Division
Policy and Legislation Branch
Income Tax Rulings and
Interpretations Directorate
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