| 920756 | |
| 24(1) | J.D. Brooks |
| (613) 957-2103 |
Attention: 19(1)
June 15, 1992
Dear Sirs:
Re: Definition of Farming
This is in reply to your letter of March 10, 1992 in which you requested our opinion as to whether certain business activities would be considered to be farming. You described a situation where a taxpayer
24(1) Although you have a specific taxpayer in mind, we advise that we only provide binding income tax rulings with respect to proposed transactions of identified taxpayers. Nevertheless, on the understanding that this matter is not presently under review by a district office or taxation centre, we have stated below our general view on this issue.
Our view
The definition of farming in subsection 248(1) of the Income Tax Act is quite broad and, while not an exhaustive list, specifically includes tillage of the soil. Tillage refers to cultivation of land, and it is apparent that farming itself is an activity which may or may not be a business, depending on the facts.
The determination as to whether a taxpayer has a source of income which is farming would depend in part on the nature and extent of the operation and the resultant expectation of profit. Without a reasonable expectation of profit, there would be no source of income from farming. For instance, a taxpayer who carries on farming on a very small scale may be considered to be a hobby farmer rather than a person who has a business of farming. Furthermore, although there may be an expectation of profit, it may be that the source of income is not farming. Normally farming which takes the form of tillage of the soil involves the sale of the resultant crop, and typically the farmer's income will vary depending on the success of his crop each year. In the situation you described, the taxpayer earns income by providing a service to another taxpayer, and his income is independent of the success or failure of the crop. Any farming which he performs is merely incidental to the service which he is providing. It would thus appear that his income is from the provision of a service rather than from a business of farming.
These comments represent an expression of opinion and, as stated in Information Circular 70-6R dated September 28, 1990, are not binding on the Department.
Yours truly,
G. Thornleyfor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch