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.
Dear Sirs:
Re: Family Farm Partnerships
This is in reply to your letter of August 10, 1990, concerning the qualification of a partnership as a "family farm partnership" as defined in paragraph 70(10(c) of the Income Tax Act (the "Act").
You describe a situation where a partnership carries on the business of farming and has 20% of the fair market value of its property consisting of the beneficial ownership of shares of the capital stock of a family farm corporation. All other property of the partnership is used directly in the operation of its farming business in Canada. You seek our comments as to whether the interest in the partnership would qualify as an "interest in a family farm partnership" as described in paragraph 70(10)(c) of the Act.
Our Comments
An interest of an individual in a partnership will be an interest in a family farm partnership as described in paragraph 70(10)(c) of the Act, where the partnership is such that all or substantially all of its property was used in the course of carrying on the business of farming in Canada by the partnership itself. In addition, the individual, a spouse, or child of such individual must have been actively engaged on a regular and continuous basis in the carrying on of the business of farming in Canada. Consequently, it is our opinion that the partnership, in the situation you describe, which owns shares in the capital stock of a family farm corporation, does not satisfy the above definition. As you mentioned, paragraph 70(10)(c) of the Act does not specifically provide for the ownership of shares of family farm corporations whereas paragraph 70(10)(b) of the Act contemplates the holding of debt and shares of other corporations. Paragraph (b) was amended in order to achieve that result, which in our view implies that a similar amendment would be required if the same result was intended with respect to paragraph (c).
We have, however, brought the matter to the attention of the Department of Finance for their consideration.
We trust our comments are of assistance.
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