21 June 1995 External T.I. 9515415 - WESTERN GRAIN

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.

Mr. Gordon R. White

Director
Financial Operations and 951541
Special Projects A.M. Brake
Agriculture Canada
Ottawa, Ontario
K1A 0C5

Attention: Bill Johnston

June 21, 1995

Dear Sirs:

Re: Western Grain Transition Payments Act

This is in reply to your letter of June 9, 1995 regarding the issuance of AGR1's as a result of payments that will be made to landowners under the Western Grain Transition Payments Act.

Section 234 of the Income Tax Regulations requires information slips (AGR1's) in respect of "farm support payments" as defined in subsection (2) of that Regulation which reads as follows:

"(2) For purposes of subsection (1) "farm support payment" includes

(a) a payment that is computed with respect to an area of farmland;

(b) a payment that is made in respect of a unit of farm commodity grown or disposed of or a farm animal raised or disposed of; and

(c)a rebate of or compensation for all or a portion of

(i) a cost or capital cost incurred in respect of farming, or.

(ii) unsowed or unplanted land or crops, or destroyed crops, farm animals or other farm output."

In our view, the proposed payments fall within the purview of farm support payments as defined within the Regulation and AGR1's are required. Since these payments could represent a capital receipt to one recipient or income to another, and you are not in a position to determine the tax treatment to be accorded these payments, you would only be expected to show the amount in block 14 of the form with an asterisk beside it as a cross-reference to block 22 which would contain an explanation of the source., i.e., (* WGTP Act payment). The recipients will make the determination as to how their respective amounts will be reported in their returns.

With regard to the payments being made to one or more persons and the actual monies eventually ending up in the hands of other persons, who hold underlying interests in the respective lands, it will be the responsibility of the person receiving the cheque to account for the disbursement of the funds, should an audit be conducted. The AGR1 slip should show the name of the person to whom the payment was made and if intended for multiple ownership, it should be made out to the person representing the group. Should you require additional information regarding the actual preparation of these AGR1's, you may contact Mr. Guy Levesque, Client Assistance Directorate, telephone (613) 957-1999.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch