CRA rules on the s. 85(1) transfer as capital property of farm land potentially held for subdivision and sale

"Eligible property" for s. 85 purposes does not include real estate inventory. Property transferred on a single-wing split up butterfly of a distributing corporation, whose farm land was being used on a share-crop basis to a neighbouring farmer, included a property which had been rezoned to permit the severance and sale of separate lots – which had already occurred and might continue to occur subsequently. The wording of the ruling letter suggests that CRA was not especially troubled by the proposition that it was capital property.

CRA did not comment on whether the property being used on a share-crop basis was a business or investment-type property for butterfly purposes, although in other contexts (e.g., 2015-0567231E5) it has indicated that it regards share-cropping as rental rather than business use.

Neal Armstrong. Summary of 2014 Ruling 2013-0498651R3 under s. 55(1) – Distribution.