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: In the year of death, on what return do you claim the amount included in the prior year's income pursuant to paragraph 28(1)(b) of the Act (i.e., the optional inventory adjustment), the final return or the rights and things return?
POSITION: The final return.
Reasons: A taxpayer is required to report his farming business income for the taxation year of death in his final return. Paragraph 28(1)(f) of the Act requires the deduction of the optional inventory adjustment that was added to the taxpayer's farming business income for the immediately preceding taxation year in arriving at the taxpayer's deemed farming business income for a taxation year.
XXXXXXXXXX 992919
J. E. Grisé
November 26, 1999
Dear Sirs:
Re: Optional Inventory Adjustment
This is in reply to your letter of November 5, 1999, requesting our opinion concerning the optional inventory adjustment relating to a farmer who died in 1999.
In 1998, the taxpayer specified and reported the amount of $20,000 pursuant to paragraph 28(1)(b) of the Income Tax Act (the optional inventory adjustment). A final return will be filed on behalf of the taxpayer to report the taxpayer's farming business income for the year of death and a rights and things return will be filed pursuant to subsection 70(2) of the Act to report the value of cattle on hand at the date of death.
The $20,000 optional inventory adjustment included in the taxpayer's 1998 farming business income is required, pursuant to paragraph 28(1)(f) of the Act, to be deducted in computing the taxpayer's farming business income for 1999. As indicated in your letter, the taxpayer's farming business income is required to be reported in the taxpayer's final return. Furthermore, as noted in paragraph 10 of interpretation bulletin IT-427R, Livestock of Farmers, the optional inventory adjustment does not apply in a year in which the farmer died.
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
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.../cont'd
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