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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Does a capital gains election filed by a taxpayer pursuant to subsection 110.6(19) result in a deemed disposition and reacquisition of farm property?
Position: Yes.
Reasons: Pursuant to subparagraph 110.6(19)(a)(ii) the property is deemed to have been reacquired by the elector immediately after February 22, 1994. In determining whether such land would be considered "qualified farm property", the taxpayer would be required to meet the post June 1987 gross revenue and use tests outlined in subparagraph 110.6(1)(a)(vi) of the definition.
2002-015065
XXXXXXXXXX Karen Power, CA
(613) 957-8953
September 10, 2002
Dear XXXXXXXXXX:
Re: Qualified Farm Property - Capital Gains Election
This is in reply to your letter of April 18, 2002, (forwarded to our directorate on July 5, 2002) requesting confirmation that a capital gains election filed by a taxpayer pursuant to subsection 110.6(19) of the Income Tax Act (the "Act") will result in a deemed disposition and reacquisition of farm property. We apologize for the delay in replying to your letter.
When a valid capital gains election is filed in respect of capital property, the property is deemed, pursuant to subparagraph 110.6(19)(a)(ii) of the Act, to have been reacquired by the elector immediately after February 22, 1994. Therefore, in our opinion, if the capital gains election is filed in respect of "qualified farm property," the property will be considered to have been last acquired after June 17, 1987. In determining whether such property would be considered "qualified farm property" upon a subsequent disposition, the taxpayer would be required to meet the post June 1987 gross revenue and use tests outlined in subparagraph 110.6(1)(a)(vi) of the definition.
As you have suggested, the capital gains election may result in the taxpayer having to subsequently meet more stringent tests in determining whether the farm property is considered "qualified farm property". There may be situations where, as a result of filing the capital gains election, property which constitutes "qualified farm property" ceases to qualify as such since it fails to meet the gross revenue test found in the "qualified farm property" definition. For instance, farm property acquired by an individual prior to June 18, 1987 which, since its acquisition, has been farmed by the individual while he or she was employed in another capacity, would qualify as "qualified farm property" assuming it was used by the individual principally in the course of carrying on the business of farming in Canada in at least five years during which it was owned. However, if the capital gains election were filed in respect of this property, it might no longer qualify as "qualified farm property" since the individual might not meet the gross revenue test.
We trust that our comments are of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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