Principal Issues: How are amounts received for the forced destruction of livestock as the result of the Avian flu outbreak treated?
Position: Amounts are taxable but the inclusion in income can be deferred for one year by virtue of subsection 80.3(2) of the Act.
Reasons: 80.3(2)
February 2, 2005
XXXXXXXXXX
Dear Colleague:
I write in reply to your correspondence addressed to the Honourable Bob Speller, former Minister of Agriculture and Agri-Food, regarding tax deferrals on government assistance received by poultry farmers in British Columbia as a result of the discovery of avian influenza. The Honourable Andy Mitchell forwarded a copy of your letter to me on September 21, 2004.
Compensation received by farmers from a government for their loss of farming income is taxable under the Income Tax Act. However, I am pleased to advise you that farmers may delay reporting this income for one year if it relates to a forced destruction of livestock under statutory authority. Therefore, farmers who operate on a cash basis and replace their livestock by the end of the year after receiving the government compensation should experience no income tax consequences since the cost of replacement will be offset against the income inclusion.
The income tax consequences for farmers who receive compensation for destroyed livestock is explained in Chapter 2 of the guide Farming Income. I am attaching a copy of the guide, for your convenience. The guide is also available on the Canada Revenue Agency Web site at www.cra.gc.ca/E/pub/tg/t4003/.
I appreciate the opportunity to address your concerns.
Yours sincerely,
The Honourable John McCallum, P.C., M.P.
Attachment
c.c.: Minister's Office
Political Assistant
Terry Young
2004-009662
October 7, 2004