| 24(1) | 903239 |
| C. Tremblay | |
| (613) 952-1361 |
19(1)
December 19, 1990
Dear Sirs:
Re: Changing from the Accrual Method to the Cash Method under the Income Tax Act (the "Act")
This is in reply to your letter of November 7, 1990 and further to a telephone conversation 19(1) Tremblay of December 18, 1990. You requested we rule that 24(1) be allowed to change its reporting method for tax purposes from the accrual method to the cash method. The major issue involved in your ruling request requires that 24(1) be engaged in the business of farming as defined under section 248 of the Act which is a question of fact at that time. Consequently, pursuant to paragraph 14(j) of Information Circular 70-6R2 issued by Revenue Canada, we are unable to rule on the matter requested in your letter.
The fee remitted by you will be returned under separate cover.
We are however prepared to offer the following comments:
The Farming income tax guide states that a taxpayer carrying on in the business of farming may change from the accrual method to the cash method. In our opinion, the only requirement is that a return be properly filed using the cash method and that a statement which properly reflects the changeover adjustments to both income and expenses be included. In our view, there is no requirement to seek Department approval. The change in reporting method requested will, once adopted by the company, come within the frame-work of section 28 of the Act.
The Department will not, however, accept retroactive changes. Furthermore, if at a later date, the company wishes to return to the accrual method, permission must be obtained from the Department. This can be accomplished by sending a letter to the Director of the Hamilton District Office outlining the reasons why such a change is required at that time.
We trust this information is of assistance.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch