9 September 1999 External T.I. 9922565 - LEVELLING AND SLOPING LAND

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, for the purpose of constructing a feedlot for cattle, the amount paid in the year for levelling and sloping land for proper drainage is deductible by the taxpayer in computing his income from the farming business (i.e., the feedlot business)

Position: Yes.

Reasons: Section 30 requires the amount to be paid for "clearing land, levelling land or installing a land drainage system for the purpose of the business". In this situation it is the levelling of the land for the purpose of the business.

	xxxxxxxxxx	992256
J. E. Grisé
Attention:	xxxxxxxxxx
September 9, 1999
Dear Sirs:

Re: Section 30 of the Income Tax Act

This is in reply to your letter of August 10, 1999, requesting a technical interpretation on the possible application of section 30 of the Income Tax Act to a hypothetical situation outlined in your letter.

In the situation you have presented, a taxpayer is constructing a feedlot for cattle. The feedlot operation is a farming business to the taxpayer. In order to construct the feedlot, the land needs to be levelled and sloped for proper drainage. The amount of work required to obtain the proper slope depends on the ground conditions where the feedlot is to be located. On this land, fences are built to create corrals. Feed bins or bunks which are usually made of cement are also constructed. Water lines are put in and waterers are built. The feedlot may include other structures and equipment such as a scale and a scale house.

In our view, the costs paid in a year, that have not been deducted in a preceding year, in preparing the land for the feedlot operation by levelling and sloping the land would be deductible under section 30 of the Act in computing the taxpayer's farming business income and would not form part of the capital cost of the feedlot.

We hope our comments are helpful.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch