Principal Issues: Whether horse boarding services and horse riding lessons are considered farming.
Position: Generally no
Reasons: Does not meet the definition of farming in ss.248(1) unless the activities are incidental to an activity that otherwise qualifies as farming.
XXXXXXXXXX 2010-039002 S. D'Angelo (613)952-5803
December 23, 2010
Dear XXXXXXXXXX :
Re: Farming Income
This is in response to your e-mail dated December 10, 2010, inquiring whether certain activities will be considered farming for the purposes of the Income Tax Act (the "Act").
The taxpayer purchased some land and started a riding stable business, where riding lessons were provided to customers. The taxpayer has expanded the operations to also include horse boarding services to customers. You are wondering if the horse riding lessons and the horse boarding activities will be considered farming for the purposes of the Act.
Our Comments
The situation outlined in your e-mail appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the Canada Revenue Agency (CRA) website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Whether income from a particular activity is income from a farming business or business income from an activity other than farming under the Act is a question that can only be resolved after a complete review of the facts and circumstances of the case.
The definition of "farming" in subsection 248(1) of the Act includes the tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees. This list is not exhaustive.
A taxpayer's activities involving the provision of services (e.g., horse riding lessons and horse boarding) are generally not considered farming unless the activities are incidental to an activity that otherwise qualifies as farming and the income generated by these activities is not material in relation to the taxpayer's other farming income. The expression "incidental" is not defined in the Act, but implies a subordinate relationship or "having a minor role in relation to". Factors that may be relevant in the determination of whether a particular activity is incidental to another would include the income generated and the capital or labour invested in each activity.
In and of themselves, the activities you described would not, in our opinion, be considered farming under the Act.
We trust our comments will be of assistance.
Yours truly
S. Parnanzone
Manager
For Director
Business and Partnership Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch