| 24(1) | 5-902239 |
| R.D. Mundell | |
| (613) 957-2139 | |
| 19(1) | EACC9614 |
September 27, 1990
Dear Sirs:
Re: Paragraph 70(10)(b) of the Income Tax Act
This is in reply to your letter of August 21, 1990 in which you request our opinion of the phrase "in which it used all or substantially all of its property" as it is used in the definition of a share of the capital stock of a family farm corporation in paragraph 70(10)(b) of the Income Tax Act (the "Act"). In addition you have requested our comments related to the use of original cost, "cost amount" as defined in subsection 248(1) of the Act and fair market value when applying the "all or substantially all" test to a family farm corporation's assets.
It is the Department's view that the "all or substantially all" requirement referred to in paragraph 29 of Interpretation Bulletin IT-268R3 is considered to be met where a level of 90% is reached.
In applying the "all or substantially all" test the cost of assets will be the appropriate basis of measurement in many cases. With respect to paragraph 70(10)(b) of the Act, the statement made in paragraph 29 of IT-268R3 as it relates to family farm corporations indicates the Department's view that the normal basis of measurement is historical cost. However, this basis is subject to displacement where another basis of measurement is demonstrated to be more reasonable under the circumstances.
In summary, it is a question of fact to be determined on an individual basis whether, for the purposes of paragraph 70(10)(b) of the Act, "all or substantially all" of the property of a family farm corporation could be said to be used in a particular farming business. The facts will determine the basis of measurement and whether or not any particular asset can be said to be used in the farm operation.
We trust our comments will be of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch