Principal Issues: Whether farm property was eligible for the capital gains deduction as "qualified farm property" under a number of scenarios and variations.
Position: General comments only. Referred taxpayer to Guide T4003 - Farming Income 2006.
Reasons: Questions not specific enough.
2007-023733 XXXXXXXXXX Charles Rafuse 613-957-8967 June 25, 2007
Dear XXXXXXXXXX:
Re: Farm Property Transactions
This is in reply to letter of April 6, 2007, concerning your request for an opinion on a number of questions related to transactions involving farmland.
You presented a number of scenarios involving a disposition of farmland by a taxpayer to a third party or to a spouse or children.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Section 110.6 of the Act permits a lifetime capital gains deduction of up to $500,000 for an individual resident in Canada throughout the year who disposed of qualified farm and fishing property or qualified small business corporation shares. We would mention that in the March 19, 2007, Federal Budget there is a proposal to increase the lifetime capital gains deduction to up to $750,000 of capital gains realized by an individual on qualified properties. This measure will apply to dispositions of property that occur on or after March 19, 2007.
For more information regarding qualified farm property, please see the guide T4003 - Farming Income 2006. This publication is available on our website at www.cra-arc.gc.ca. Chapter 6 - Capital Gains of the guide T4003 explains how to calculate a capital gain, provides an explanation of "qualified farm property" and discusses transfers of farm property to a spouse or child. More details concerning capital gains can be found in the guide T4037 - Capital Gains 2006, which is also available on the CRA website mentioned above.
For additional information concerning the tax implications in the scenario you described, you may wish to seek professional tax advice.
We trust this information is helpful.
Yours truly,
S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch