Mr. and Mrs. X each have had, for over 10 years, a 50% interest in a partnership (SENC) holding land which as to 80% has been used in the farming business and as to 20% has been used for their residence (with the residence not being legally severable).
- On a sale of the land, would it be viewed as a single property, so that it qualified as being used principally in a farming business?
- What if the partnership interests instead were sold?
- If the residence were regarded as a separate property, could the partnership interests and the land qualify for the exemption?
- Would the answers change if the residence could be severed?
- If the residence were disposed of immediately before the sale, could the partnership interests qualify for the exemption?
- In such event, would the land also qualify?
CRA responded:
[A]n immovable referred to in paragraph (a) of the expression "qualified farm or fishing property" includes the building and the land on which the building is situated as one and the same property. Under Article 948 of the Civil Code of Québec … [a]n owner of an immovable (for example, a piece of land) is the owner by accession to all structures and works located on the immovable.
This position also applies to the term "property" used in the definition of "interest in a family farm or family fishing partnership" under subsection 110.6(1). …
[W]ith respect to the determination of whether or not property was used principally [over 50%] in the carrying on of a farming business … IT-373R2 [para. 18] states:
…Whether or not particular assets are "used principally in the business of farming" is a question of fact to be determined on a property by property basis … .