Can the “used principally” requirement in s. 110.6(1.3)(a)(ii)(A)(II) (potentially relevant for the property qualifying as a “qualified farm or fishing property” for capital gains deduction purposes) be met where an individual owns a 70 acre parcel of land of which 25 acres is workable farmland and 45 acres is forest?
CRA indicated that where in a particular year, more than 50% of a particular property is being used for some purpose other than farming (or fishing) or is otherwise vacant or idle, generally speaking, such non-farming use would result in the entire property not being considered as being used principally in the business of farming in Canada for the year. However, if the unusable portion was not suitable for any use, then it may be excluded from the “used principally” determination.
Before so concluding, CRA stated:
Notwithstanding the comments made in Otteson, it is our view that the determination of whether a property is being used principally by a taxpayer in carrying on a farming or fishing business in Canada for purposes of subsection 110.6(1.3) of the Act must be made on a property-by-property basis. Once so determined, the entire property would either qualify or not, as the case may be.