| Mr. Gordon Pugh | |
| Director, Grains and Oilseed | |
| Agriculture Canada | 903207 |
| Room 1041 | Glen Thornley |
| Sir John Carling Building | (613) 957-2101 |
| 930 Carling Ave | |
| Ottawa, Ontario | |
| K1A 0C5 |
November 16, 1990
Dear Mr. Pugh:
Re: Cash Flow Enhancement Program ("CFEP")
This is in reply to your facsimile transmittal notice of November 13, 1990 concerning the taxability of the interest-free benefit under the CFEP.
As we understand it, a farmer who receives a loan under the CFEP actually obtains it from his producer association. The producer association in turn obtains an interest bearing loan from a lending institution but the interest on the first $50,000 of loans is paid to the lending institution by the federal government. As discussed with you over the telephone on November 15 and 16, 1990, because the payment of interest is from the federal government to a third party such as the 24(1) or other producer organizations, the producer/farmer is not in correct receipt of a benefit and thus not taxable on the interest free loan.
Where the producer association is a taxable entity, tax could be exigible on the portion of the interest paid by the federal government. However, it is your understanding that all the producer association are non-taxable, non-profit agriculture or farming organizations.
We trust this is the information you require.
Yours truly
for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch