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Attention: XXXXXXXXXX
Dear Sirs:
RE: Subsection 70(9) of the Income Tax Act
This is in reply to your fax of November 10, 1992 in which you requested our opinion on the application of subsection 70(9) of the Income Tax Act in a hypothetical situation in which an individual, Mr. X, owns a 100 acre farm. 89 acres of the farm is used by Mr. X in his farming business but 11 acres is leased to another person who deals at arm's length with Mr. X. Assuming the farm land otherwise qualified, you queried whether, on the death of Mr. X, the entire 100 acre farm land would qualify for purposes of subsection 70(9).
Our Comments:
The fact situation which you set out is quite specific and may relate to a completed transaction. Assurance as to the tax consequences of completed transactions can only be given by officials of a District Taxation Office. Although we are unable to provide any opinion in respect of the specific case you have described, we have set out below some comments of a general nature which may be of assistance to you.
Only land in Canada or depreciable property in Canada of a prescribed class which is used in the business of farming qualifies for purposes of subsection 70(9). As stated in paragraph 12 of Interpretation Bulletin IT-349R2, property or any portion of property which is leased is not eligible for transfer under subsection 70(9). Accordingly, in the hypothetical situation you described, 11 acres would not qualify.
These comments represent an expression of opinion and are given pursuant to paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.
Yours truly,
E. Wheeler for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch