,canada ,cu/oms #a & ,rev5ue ,ag5cy ,9t]pret,n ,bullet9 ,numb]3 ,,it-#cgc;,r#b 7,3solidat$7 ,date3 ,see ,bullet9 ,revi.ns sec;n ,subject3 ,9come ,tax ,act--,woodlots ,ref];e3 ,sec;n #i 7al subp>agraph #dj7#b77g77;iii72 p>agraphs #ab7#a77g71 #ah7#a77a7 & #ah7#a77h72 subsec;ns #ah7#b71 #bh7#a71 #gj7#i71 #gj7#i.a71 #gj7#i.b71 #gj7#i.c71 #gc7#c7 & #bdh7#a72 & sec;ns #ca1 #dc1 #df1 #ed1 #fg1 #aaj.f & #aaa7 ,late/ ,revi.ns--,p>agraphs #aj1 #ab1 #ag & #ah ,at ! ,canada ,cu/oms & ,rev5ue ,ag5cy 7,,ccra71 we issue 9come tax 9t]pret,n bullet9s 7,,it's7 9 ord] 6provide te*nical 9t]pret,ns & posi;ns reg>d+ c]ta9 provi.ns 3ta9$ 9 9come tax law4 ,due 6_! te*nical nature1 ,,it's >e us$ prim>ily 0\r /aff1 tax speciali/s1 #a ,,it-#cgc;,r#b7,c7 a#a & o!r 9dividuals :o h an 9t]e/ 9 tax matt]s4 ,= ^? r1d]s :o pref] a less te*nical explan,n (! law1 we (f] o!r public,ns1 s* z tax guides & pamphlets4 ,:ile ! -;ts 9 a "picul> p>agraph 9 an ,,it may relate 6provi.ns (! law 9 =ce at ! "t !y 7 made1 s* -;ts >e n a sub/itute =! law4 ,! r1d] %d1 "!=e1 3sid] s* -;ts 9 li tax,n ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any relevant am5d;ts 6^? provi.ns or relevant c\rt deci.ns o3urr+ af ! date on : ! -;ts 7 made4 ,subject 6! abv1 an 9t]pret,n or posi;n 3ta9$ 9 an ,,it g5],y applies z (! date on : x 0 publi%$1 un.s o!rwise specifi$4 ,if "! is a subsequ5t *ange 9 t 9t]pret,n or posi;n &! *ange is b5eficial 6taxpay]s1 x is usu,y e6ective = future assess;ts & reassess;ts4 ,if1 on ! o!r h&1 ! *ange is n fav\ra# 6taxpay]s1 x w norm,y 2 e6ective =! curr5t & subsequ5t tax,n ye>s or = #b ,,it-#cgc;,r#b7,c7 b#a transac;ns 5t]$ 96af ! date on : ! *ange is publi%$4 ,if y h any -;ts reg>d+ matt]s 4cuss$ 9 an ,,it1 pl1se s5d !m to3 ,manag]1 ,te*nical ,public,ns & ,projects ,sec;n ,9come ,tax ,rul+s ,directorate ,policy & ,legisl,n ,bran* ,canada ,cu/oms & ,rev5ue ,ag5cy ,ottawa ,,on ,k#a;,a #j;,l#e ,mo/ ( \r public,ns >e availa# on \r ,web site at3 _+www.ccra.gc.ca_: #c ,3t5ts c#a ,applic,n ,summ>y ,4cus.n & ,9t]pret,n ,9troduc;n ,m1n+ ( 8,woodlot0 7p>agraph #a7 ,tax,n ( ,woodlots 7p>agraphs #b-c7 ,/eps 6,foll[ 6,det]m9e ,: ,tax ,rules ,apply 7p>agraph #d7 ,/ep ;,i3 is ! ,woodlot ,3sid]$ a ,-m]cial ,woodlot or a ,non- ,comm]cial ,woodlot8 ,-m]cial ,woodlot ,r1sona# expect,n ( pr(it 7p>agraphs #e-g7 ,o!r -m]cial woodlots ,g5]al 7p>agraph #h7 ,adv5ture 9 ! nature ( trade 7p>agraph #i7 ,pay;ts bas$ on produc;n or use --p>agraph #ab7#a77g7 7p>agraph #aj7 ,non-,comm]cial ,woodlot 7p>agraph #aa7 #d ,,it-#cgc;,r#b7,c7 d#a ,capital ,transac;n 7p>agraph #ab7 ,/ep ,,ii3 is ,-m]cial ,woodlot ,op]at$ z a ,f>m8 ,m1n+ ( 8,f>m+0 ,g5]al 7p>agraphs #ac-ad7 ,*ri/mas tree gr[]s 7p>agraph #ae7 ,-m]cial ,f>m ,woodlot ,9come tax rules 7p>agraph #af7 ,capital ga9s deduc;n = -m]cial f>m ,r1l prop]ty require;t 7p>agraph #ag7 ,use & pr(its te/s 7p>agraph #ah7 ,g5]al 7p>agraph #ai7 ,9come tax def]ral on transf] ( -m]cial f>m prop]ty 7p>agraphs #bj-bb7 ,-m]cial ,non-,f>m ,woodlot--,9come ,tax ,rules 7p>agraph #bc7 ,/ep ,,iii3 is ,f>m+ ! ,*ief ,s\rce ( ,9come8 ,g5]al 7p>agraphs #bd-be7 #e ,,it-#cgc;,r#b7,c7 e#a ,f>m+ ,is ,*ief ,9come ,s\rce 7p>agraph #bf7 ,f>m+ ,is ,n ,*ief ,9come ,s\rce 7p>agraph #bg7 ,bullet9 ,revi.ns --------------------------------------#b ,applic,n ,? bullet9 is a 3solid,n (! foll[+3 --,,it-#cgc;,r#b dat$ ,july #af1 #aiii2 & --subsequ5t am5d;ts "!to4 ,= fur!r "picul>s1 see ! 8,bullet9 ,revi.ns0 sec;n ne> ! 5d ( ? bullet94 ,summ>y ,? bullet9 d1ls ) "s (! issues 9 ! det]m9,n ( taxa# 9come1 = 9come tax purposes1 ( [n]s & op]ators ( woodlots1 ..9clud+ woodlots op]at$ z .f>ms4 ,! bullet9 is n direct$ at ! op],n ( lo7+1 lumb]+1 pap]mak+ or o!r simil> busi;ses1 ev5 if !y >e "s"ts call$ 8tree #f ,,it-#cgc;,r#b7,c7 a#b f>ms0 or !y 5gage 9 re=e/,n4 ,9 a4i;n1 x does n a4ress hunt+1 recre,n1 mu%room pick+ or wildfl[] op],ns4 ,a li/ ( factors 63sid] 9 det]m9+ :e!r a woodlot is op]at$ )a r1sona# expect,n ( pr(it is provid$4 ,bo? woodlots op]at$ z f>ms & non-f>m woodlots >e 4cuss$ &! bullet9 id5tifies "s (! 9come tax rules t apply 6ea* type ( woodlot4 ,? bullet9 is 9t5d$ 6assi/ taxpay]s 9 det]m9+ ! ma9 9come tax rules t apply 6_! woodlot op],ns4 ,x is n 9t5d$ 6be a -preh5sive tax guide4 ,4cus.n & ,9t]pret,n ,9troduc;n ,m1n+ ( 8,woodlot0 7p>agraph #a7 #a4 ,! ^w .woodlot is nei us$ nor def9$ 9 ! ,9come ,tax ,act4 ,9 ? bullet91 8woodlot0 is us$ 9 a broad s5se #g ,,it-#cgc;,r#b7,c7 b#b 6m1n l& cov]$ ) trees4 ,a woodlot 9cludes tre$ l& held prim>ily z a s\rce ( fuel1 po/s1 logs or trees1 ..:e!r ! trees >e gr[n ) or )\t human .9t]v5;n4 ,! t]m al 9cludes tre$ l& t is "p (a cottage prop]ty &a f>m]'s wood$ l&4 ,9 ? bullet91 ": a taxpay] op]ates a woodlot z a busi;s )a r1sona# expect,n ( pr(it1 x is ref]r$ 6z a .-m]cial .woodlot4 ,! t]m .-m]cial .woodlot0 is al us$ ": "! is an adv5ture 9 ! nature ( trade 9 3nec;n )a woodlot 7see p>agraph #i71 & ": an am.t bas$ on ! use (1 or produc;n f1 a woodlot 7see p>agraph #aj7 is rcvd4 ,if a woodlot is n op]at$ 0a taxpay] z a -m]cial woodlot1 x is ref]r$ 6z a .non- comm]cial .woodlot4 #h ,tax,n ( ,woodlots c#b 7p>agraphs #b-c7 #b4 ,"! is no specific set ( 9come tax rules t applies solely 6woodlot [n]s or woodlot op],ns4 ,! g5]al rules =! -put,n ( 9come & taxa# 9come apply4 ,! foll[+ is an illu/r,n ( ?ree ma9 issues t m/ 2 resolv$ 9 ord] 6det]m9e ! 9come tax rules t w apply 6a "picul> woodlot ,transcrib]'s note3 7,! foll[+ 0 set-up z a fl[ *>t 9 ! pr9t v].n47 ,"*iz,n ( ,woodlots = ,9come ,tax ,purposes ,/>t fl[ *>t ,/ep ;,i3 ,is x a ,-m]cial ,woodlot8 ,see p>agraphs #e-aj 6answ]4 ,if ,no #i ,,it-#cgc;,r#b7,c7 d#b ,non-comm]cial ,woodlot4 ,see p>agraphs #aa-ab = rules4 ,if ,yes g to ,/ep ,,ii3 ,is x a ,-m]cial ,f>m ,woodlot8 ,see p>agraphs #ac-ae 6answ]4 ,if ,no ,-m]cial ,non-,f>m ,woodlot4 ,see p>agraph #bc = rules4 7,ca% me?od n an op;n47 ,if ,yes g to ,see p>agraphs #af-bb = rules 7,ca% me?od p]mitt$47 ,g to ,/ep ,,iii3 ,is ,f>m+ ,*ief ,s\rce ( ,9come8 ,see p>agraphs #bd & #be 6answ]4 ,if ,no ,f>m+ is n *ief ,s\rce ( ,9come4 ,see p>agraph #bg = rules4 7,deductibil;y ( losses is re/rict$ 0! ,act47 ,if ,yes #aj ,,it-#cgc;,r#b7,c7 e#b ,see p>agraph #bf = rules4 7,deductibil;y ( losses z p]mitt$ 0! ,act47 ,5d ( fl[ *>t4 --------------------------------------#c #c4 ,:e!r a taxpay] op]ates a woodlot z a -m]cial woodlot or a non-comm]cial woodlot1 s"eal specific provi.ns 9 ! 9come tax legisl,n1 c\rt cases & g5]al a3.t+ rules re/rict ! deductibil;y ( exp5ses4 ,9 "picul>1 "! is a g5]al purpose te/ 9 p>agraph #ah7#a77a71 : provides t exp5ses >e only deducti# 6! ext5t t !y >e made =! purpose ( e>n+ 9come f busi;s or prop]ty4 ,9 a4i;n1 p>agraph #ah7#a77h7 g5],y precludes ! deduc;n ( p]sonal & liv+ exp5ses & sec;n #fg provides t only r1sona# exp5ses may 2 deduct$4 #aa ,/eps 6,foll[ 6,det]m9e ,: a#c ,tax ,rules ,apply 7p>agraph #d7 #d4 ,! foll[+ /eps %d 2 foll[$ 6det]m9e h[ a taxpay]'s 9come f a "picul> woodlot w 2 tax$3 ,/ep ;,i3 ,is ! woodlot 3sid]$ a -m]cial or a non-comm]cial woodlot8 ,see p>agraphs #e 6#g 6det]m9e if a taxpay] op]ates a woodlot )a r1sona# expect,n ( pr(it4 --,if ! taxpay] op]ates ! woodlot z a busi;s )a ..r1sona# expect,n ( .pr(it1 x is a -m]cial woodlot4 ,see ,/ep ,,ii4 --,if "! is an ..adv5ture 9 ! nature ( .trade 7= example1 ": ! activities "utak5 6sell trees or ! "r 6cut trees >e simil> 6! activities t wd 2 foll[$ 0a taxpay] 9 ! busi;s ( sell+ trees or ! "r 6cut trees71 ! woodlot #ab ,,it-#cgc;,r#b7,c7 b#c w 2 3sid]$ a -m]cial woodlot4 ,see p>agraphs #h & #i & ,/ep ,,ii4 --,if an am.t rcvd =! sale ( trees or ! "r 6cut trees is bas$ on ! use (1 or produc;n f1 ! woodlot 7i4e41 if x is a p>agraph #ab7#a77g7 .am.t71 ! woodlot w 2 3sid]$ a -m]cial woodlot4 ,see p>agraphs #h & #aj & ,/ep ,,ii4 --,if ! woodlot is n a -m]cial woodlot1 x is 3sid]$ a non- comm]cial1 or ho2y1 woodlot4 ,see p>agraphs #aa & #ab4 ,/ep ,,ii3 ,is -m]cial woodlot op]at$ z a f>m8 ,see p>agraphs #ac & #ad 6det]m9e :e!r a -m]cial woodlot is op]at$ z a f>m 7a 8-m]cial f>m woodlot07 or :e!r ! -m]cial woodlot is n op]at$ z a f>m 7a 8-m]cial non-f>m woodlot074 ,*ri/mas tree gr[]s %d al see p>agraph #ae4 #ac ,,it-#cgc;,r#b7,c7 c#c --,if ! woodlot is a -m]cial f>m woodlot1 see p>agraphs #af 6#bb & ,/ep ,,iii4 --,if ! -m]cial woodlot is n op]at$ z a f>m1 see p>agraph #bc4 ,/ep ,,iii3 ,is f>m+ ! *ief s\rce ( 9come8 ,see p>agraphs #bd & #be 6det]m9e :e!r f>m+ is ! *ief s\rce ( 9come4 --,if f>m+ is ! *ief s\rce ( 9come1 see p>agraph #bf4 --,if f>m+ is n ! *ief s\rce ( 9come1 see p>agraph #bg4 #ad ,/ep ;,i3 is ! ,woodlot d#c ,3sid]$ a ,-m]cial ,woodlot or a ,non-,comm]cial ,woodlot8 ,-m]cial ,woodlot ,r1sona# expect,n ( pr(it 7p>agraphs #e-g7 #e4 ,:e!r or n a taxpay] r1sonably expects 6pr(it f ! taxpay]'s woodlot op],n is an objective det]m9,n 6be made af a review ( all ! facts4 ,! ma9 focus is ! activities (! .taxpay] &! expect,n t ! taxpay] w h a pr(it4 ,! relevant factors 6be 3sid]$ w di6] )! nature & ext5t (! activ;y or "utak+ (! sole proprietor%ip 7an 9dividual71 ! corpor,n1 ! "pn]%ip1 or ! tru/4 #f4 ,no s+le factor describ$ 9 p>agraph #g w det]m9e 3clusively :e!r or n an activ;y is c>ri$ on 0a taxpay] )a r1sona# expect,n ( pr(it4 ,al? all relevant crit]ia >e 3sid]$ 9 mak+ a det]m9,n1 dep5d+ ^u ! situ,n1 #ae ,,it-#cgc;,r#b7,c7 e#c c]ta9 factors may 2 m important ?an o!rs4 ,! non-exi/;e ( any "o "picul> factor w n necess>ily preclude ! taxpay]'s activities 9 respect (a woodlot f qualify+ z a -m]cial 5t]prise4 #g4 ,factors : ! ,de"p;t w 3sid] 9 det]m9+ :e!r or n a taxpay] c r1sonably expect 6e>n a pr(it f a woodlot 9clude3 7a7 ,! ext5t ( plann+ =! woodlot op],n --= example1 :e!r ! taxpay] has a =e/ry manage;t plan or a simil> res\rce plan )a descrip;n (! res\rce & s*$ule ( h>ve/+ & gd =e/ry practices 6be "utak5 6su/a9ably manage ! \tput ( timb] & o!r products2 :e!r ! taxpay] has a f9ancial plan t projects ! taxpay]'s co/s1 rev5ues1 & pr(its2 & :e!r gd records =! imple;t,n (! plans >e ma9ta9$4 7b7 ,! ef=t ! taxpay] has made 6p]son,y acquire or 6hire ! #af ,,it-#cgc;,r#b7,c7 f#c exp]tise nec 6su3ess;lly imple;t ! plans 9 7a74 7c7 ,! imple;t+ & updat+ (! plans 9 7a74 7d7 ,"t sp5t on ! woodlot op],n 9 -p>ison 6t sp5t 9 employ;t or o!r 9come-e>n+ activ;y4 ,if ! taxpay] sp5ds mo/ (! "t att5d+ 6! woodlot1 "! is a /r;g presump;n t ! taxpay] is c>ry+ on a busi;s1 "picul>ly if ! taxpay] has =e/ry backgr.d or exp]i;e4 ,( c\rse1 ! "t sp5t 9 runn+ ! busi;s m/ 2 adequate 6prop]ly imple;t ! =e/ry manage;t1 f9ancial & o!r plans =! woodlot4 7e7 ,! ext5t ( activ;y 9 rel,n 6t ( woodlot op],ns (a -p>a# nature & size 9 ! same or simil> local;y4 ,"o te/ is ! size (! prop]ty us$ z a woodlot4 ,= example1 if ! prop]ty --------------------------------------#d is1 3sid]+ ! type ( trees &! geographic loc,n1 m* too small 6give a r1sona# expect,n ( pr(it1 ! #ag ,,it-#cgc;,r#b7,c7 a#d presump;n is t ! prop]ty is 2+ held = p]sonal use or 5joy;t (! taxpay]4 7f7 ,qualific,n (! taxpay] = "s type ( gov]n;t assi/.e4 ,9 a "picul> assi/.e program1 x may 2 use;l 6det]m9e :e!r ! grant+ au?or;y requires or presumes ! recipi5t 6be 9 ! busi;s ( f>m+1 =e/ry or o!rwise op]at+ a -m]cial woodlot4 7g7 ,! hi/orical record ( annual rev5ue & pr(its or losses relevant 6! op],n (! woodlot1 &! gr[? (! gross rev5ue & pr(its ov] "t4 ,9 apply+ ? factor1 ext]nal 9flu;es s* z w1!r 3di;ns 7e4g41 w9d /orm1 prol;g$ dr"\1 sev]e hail1 fro/ or flood7 & fire1 9sects or 41se & economic 3di;ns : may a6ect ! trees w 2 tak5 963sid],n4 ,:5 "! is no1 or a v small am.t (1 gross 9come = s"eal ye>s1 "! is a presump;n t ! op],n 0 3duct$ 0a taxpay] :o _c r1sonably expect 6pr(it f ! woodlot4 ,? presump;n may 2 rebutt$ #ah ,,it-#cgc;,r#b7,c7 b#d dep5d+ ^u evid;e s* z ! res\rce manage;t or f9ancial plans (! op],n &! o!r factors else": 9 ? p>agraph4 ,x is recognis$ t ! nature (a woodlot is s* t a 3sid]a# p]iod ( "t may pass 2f ! taxpay] may rcv rev5ue f ! woodlot1 s9ce _m v>ieties ( trees require a 3sid]a# am.t ( "t 9 : 6gr[ 2f !y c 2 h>ve/$4 ,! r1sona# expect,n ( pr(it te/ may recognize t x takes "t 6cr1te a m>keta# product2 h["e1 x is ! woodlot busi;s xf1 :e!r ! busi;s is op]at$ z a sole proprietor%ip1 a corpor,n1 a "pn]%ip or a tru/1 : m/ 2 expect$ 6g5]ate a pr(it =! taxpay]4 7h7 ,! type ( exp5ditures claim$ & _! relev.e 6! 5d1v\rs4 7i7 ,! [n] or op]ator's f>m+ or =e/ry qualific,ns1 z evid;ed 0$uc,n & exp]i;e4 #ai ,,it-#cgc;,r#b7,c7 c#d 7j7 ,! memb]%ip 9 any associ,n ( woodlot [n]s or o!r relevant profes.nal or busi;s organiz,ns4 ,o!r -m]cial woodlots ,g5]al 7p>agraph #h7 #h4 ,a sale ( timb] is subject 6tax on 9come1 n capital1 a3.t z a .-m]cial .woodlot if ! transac;n is an ..adv5ture 9 ! nature ( .trade 7see p>agraph #i7 or if a ..pay;t 0 bas$ on ! use ( or produc;n f ! .prop]ty 7see p>agraph #aj74 ,adv5ture 9 ! nature ( trade 7p>agraph #i7 #i4 ,9come rcvd f an adv5ture or 3c]n 9 ! nature ( trade is 3sid]$ 6be busi;s 9come "u ! ,act4 ,! prim>y 3sid],n 9 det]m9+ :e!r an activ;y1 s* z ! sale ( timb]1 is an adv5ture or 3c]n 9 #bj ,,it-#cgc;,r#b7,c7 d#d ! nature ( trade is :e!r ! taxpay]'s ac;ns ) reg>d 6! prop]ty 9 "q 7 ess5ti,y :at wd 2 expect$ (a d1l] 9 ! same prop]ty4 ,see ! curr5t v].n ( ,,it-#dei1 ,adv5ture or ,3c]n 9 ! ,nature ( ,trade1 = m details on h[ 6det]m9e :e!r an activ;y or "utak+ is an adv5ture or 3c]n 9 ! nature ( trade4 ,pay;ts bas$ on produc;n or use--p>agraph #ab7#a77g7 7p>agraph #aj7 #aj4 ,": an am.t 7except an 9/al;t (! sale price ( agricultural l&7 t 0 dep5d5t on ! use ( or produc;n f prop]ty is rcvd1 x may 2 3sid]$ z 9come f busi;s or prop]ty "u p>agraph #ab7#a77g74 ,= example1 ": a woodlot [n] or op]ator grants a p]son a 3t9u+ "r 6cut & take timb] ov] a p]iod ( "t &! 3sid],n t ! woodlot [n] or op]ator rcvs is bas$ on ! volume ( timb] #ba ,,it-#cgc;,r#b7,c7 e#d tak51 ! am.t rcvd is taxa# "u p>agraph #ab7#a77g74 ,= fur!r 9=m,n ab ! applic,n ( p>agraph #ab7#a77g71 ref] 6! curr5t v].n ( ,,it-#dfb1 ,pay;ts ,bas$ on ,produc;n or ,use4 ,non-,comm]cial ,woodlot 7p>agraph #aa7 #aa4 ,": a woodlot is a non-comm]cial woodlot1 & m"oy or o!r valua# 3sid],n is rcvd =! sale ( timb] or ! "r 6cut timb]1 ! sale proce$s >e subject 6tax on capital a3.t1 g5],y z a 4posi;n ( 8p]sonal-use prop]ty40 ,g5],y1 a loss on ! sale ( p]sonal-use prop]ty is n deducti#4 ,": ! proce$s f a sale ( timb] exce$ 4#a1jjj1 ! sale may result 9 a capital ga91 ?ree-qu>t]s ( : is taxa#4 ,= fur!r 9=m,n ab capital ga9s &! det]m9,n (! adju/$ co/ base (a prop]ty1 see ! curr5t v].n (! guide call$ ,capital ,ga9s &! curr5t v].ns ( ,,it-#ccb1 ,p]sonal-,use #bb ,,it-#cgc;,r#b7,c7 f#d ,prop]ty1 & ,,it-#def1 ,capital ,prop]ty--,"s ,adju/;ts 6,co/ ,base4 ,capital ,transac;n 7p>agraph #ab7 #ab4 ,": a p]son :o is .n op]at+ a woodlot z a -m]cial 5t]prise z describ$ 9 ,,/ep ,i abv rcvs an am.t = all[+ "s"o 6cut & remove timb] f 8 or h] woodlot1 ! sale w 2 taxa# on capital a3.t if .all ! foll[+ 3di;ns >e met3 7a7 ! l& 0 n acquir$ )! specific 9t5t ( sell+ timb] or l&2 7b7 x is an isolat$ sale ( capital prop]ty 0! p]son 7& n ! sale (a 3t9u+ "r 65t] & take away timb]72 7c7 ! total price =! timb] sold is fix$2 = example1 ! 3tract = sale ( timb] specifies ! #bc ,,it-#cgc;,r#b7,c7 #e 3sid],n -put$ 0ref];e 6! timb] actu,y remov$ )9 a specifi$ "t or f a specifi$ >ea2 & 7d7 ! timb] is 6be remov$ ov] a %ort p]iod ( "t 7s* z s"eal mon?s or s* %ort] p]iod ( "t t1 giv5 ! "picul> set ( circum/.es1 wd 2 r1sona# 63sid] z a %ort p]iod74 ,/ep ,,ii3 is ,-m]cial ,woodlot ,op]at$ ,z a ,f>m8 ,m1n+ ( 8,f>m+0 ,g5]al 7p>agraphs #ac-ad7 #ac4 ,= purposes (! ,act1 ! ^w 8f>m+0 is def9$ 9 subsec;n #bdh7#a7 69clude a numb] ( activities4 ,g5],y1 f>m+ 3templates ! rais+ & h>ve/+ ( v>i\s animals or plants 9 a 3troll$ 5viron;t4 ,x is def9$ 69clude tillage (! soil1 live/ock rais+ or exhibit+1 ma9ta9+ ( horses = rac+1 rais+ ( #bd ,,it-#cgc;,r#b7,c7 a#e p\ltry1 fur f>m+1 dairy f>m+1 fruit gr[+ &! keep+ ( bees4 ,h["e1 8f>m+0 does n 9clude an (fice or employ;t )a taxpay] 5gag$ 9 ! busi;s ( f>m+4 ,? li/ is n exhau/ive & x has be5 decid$ 0! c\rts t ! ^w 8f>m+0 c 9clude gr[+ trees4 ,9 c]ta9 factual circum/.es1 x is 3sid]$ t f>m+ 9cludes ! op],n ( nurs]ies & gre5h\ses4 #ad4 ,:e!r a woodlot 3/itutes a f>m+ op],n or a lo7+ busi;s or ano!r -m]cial op],n is a "q ( fact4 ,if ! ma9 focus (a busi;s 3duct$ )a r1sona# expect,n ( pr(it 7a .-m]cial .woodlot7 is n lumb]+ or lo7+1 b is plant+1 nurtur+ & h>ve/+ trees pursuant 6a =e/ry manage;t or o!r simil> res\rce plan & significant att5;n is pd 6manage ! gr[?1 h1l?1 qual;y & -posi;n (! /&s1 x is g5],y 3sid]$ a f>m+ busi;s 7a .-m]cial .f>m .woodlot74 ,if ! ma9 focus (a busi;s is lo7+ 7a -m]cial non-f>m woodlot71 & is n gr[+1 nurtur+ & h>ve/+ trees1 ! fact t #be ,,it-#cgc;,r#b7,c7 b#e re=e/,n activities >e c>ri$ \ wd n trans=m t busi;s 96a f>m+ op],n4 ,*ri/mas tree gr[]s 7p>agraph #ae7 #ae4 ,! plant+1 c>+ =& h>ve/+ ( ,*ri/mas trees 0a taxpay] :o gr[s & nurtures "egre5s 6sell z ,*ri/mas trees--or :o buys l& s plant$ 6t5d & h>ve/ ! trees --is reg>d$ z a f>m+ busi;s reg>d.s ( :e!r ! taxpay] is c>ry+ on any o!r type ( f>m+ op],n1 provid$ ! op],ns >e c>ri$ on )a r1sona# expect,n ( pr(it4 ,": a taxpay] relies on natur,y se$$ reg5],n1 :e!r a "picul> busi;s w 2 a f>m+ busi;s w dep5d ^u ! focus (! busi;s & h[ ! trees >e nurtur$4 ,*ri/mas tree gr[]s %d foll[ ! same /eps z o!r woodlot [n]s & op]ators 7describ$ 9 p>agraph #d7 6det]m9e ! tax rules t w apply4 #bf ,,it-#cgc;,r#b7,c7 c#e ,a /& ( ,*ri/mas trees is n view$ z a timb] limit s9ce ! \tput is trees1 n timb] or simil> products1 &! capital co/ 7#a7 all[.e 9 ,s*$ule ,,vi (! ,9come ,tax ,regul,ns is n applica#4 7#a7 ,correct$ on ,janu>y #c1 #bjjc ,-m]cial ,f>m ,woodlot ,9come tax rules 7p>agraph #af7 #af4 ,": a taxpay] is op]at+ a -m]cial woodlot z a f>m1 ! foll[+ rules w-- subject 6! provi.ns ( sec;n #ca 7: may re/rict ! deductibil;y ( losses71 ! g5]al rules describ$ 9 p>agraph #c1 & c]ta9 specific rules 7s* z subsec;n #ah7#b77--apply3 7a7 ,! taxpay] is 5titl$ 6report ! 9come f t op],n 9 a3ord.e )! ca% me?od if an elec;n is made "u sec;n #bh4 ,! taxpay] may 9/1d *oose #bg ,,it-#cgc;,r#b7,c7 d#e 6report ? 9come 9 a3ord.e )! a3rual me?od4 ,= fur!r 9=m,n1 ref] 6! curr5t v].n ( ,,it-#dcc1 ,f>m+ or ,fi%+--,use ( ,ca% ,me?od1 &! guide call$ ,f>m+ ,9come4 7b7 ,! co/s ( pur*as+ & plant+ ! trees >e deducti# 9 ! ye> if ! taxpay] is report+ ! 9come f ! op],n "u ! ca% me?od4 ,! op;nal & m&atory 9v5tory adju/;ts "u p>agraphs #bh7#a77b7 & 7c71 respectively1 apply 6a taxpay] us+ ! ca% me?od 6-pute 9come f a f>m+ busi;s 7see ! curr5t v].n ( ,,it-#ebf1 ,f>m+--,ca% ,me?od ,9v5tory ,adju/;ts74 ,": a taxpay] buys l& t is alr plant$ ) trees1 ! trees wd n g5],y 2 9v5tory4 ,h["e1 ": trees >e pur*as$ z 9v5tory sep>ately f ! l& on : !y /&1 ! co/ ( pur*as+ ! trees is a4$ 69v5tory4 #bh ,,it-#cgc;,r#b7,c7 e#e ,se$s or se$l+s t h be5 plant$ >e n 3sid]$ pur*as$ 9v5tory on h& at ! 5d (! ye> = purposes (! m&atory 9v5tory adju/;t4 7c7 ,g5],y1 "u ! ca% me?od1 recurr+ exp5ses directly relat$ 6! -m]cial activ;y >e deducti# 9 ! ye> 9 : !y >e pd4 ,:e!r a "picul> plant+1 prun+1 ?9n+1 f]tiliz+1 cultivat+1 & prop]ty tax exp5diture is a recurr+ exp5se w dep5d on ! "picul> circum/.es4 ,if l& is n us$ 9 ! busi;s 9 a "picul> ye>1 subsec;n #ah7#b7 may re/rict ! deductibil;y ( 9t]e/ & prop]ty taxes4 7d7 ,capital co/ all[.e may 2 availa# 9 respect (! co/ 6! taxpay] (! woodlot4 ,= 9=m,n on ? topic1 see ! curr5t v].n ( ,,it-#dha1 ,timb] ,res\rce ,prop]ty & ,timb] ,limits4 --------------------------------------#f 7e7 ,c]ta9 assets us$ 9 a woodlot 7roads1 dra9age sy/ems1 etc47 may 2 writt5 (f z curr5t exp5ses or #bi ,,it-#cgc;,r#b7,c7 a#f m/ 2 depreciat$ 9 a3ord.e )! ,act &! ,regul,ns4 ,! appropriate 9come tax tr1t;t is describ$ 9 ! curr5t v].n ( ,,it-#eja1 ,capital ,co/ ,all[.e-- ,lo7+ ,assets4 ,= fur!r 9=m,n1 9clud+ 9=m,n ab *ang+ ! sy/em ( a3.t+ =a f>m op],n1 see ! guide call$ ,f>m+ ,9come4 ,see ! curr5t v].n ( ,,it-#abh1 ,capital ,co/ ,all[.e--,deprecia# ,prop]ty1 = guidel9es 9 det]m9+ :e!r an exp5diture is on capital a3.t or may 2 deduct$ z a curr5t exp5se4 ,capital co/ all[.e is only availa# if an asset 0 acquir$ =! purpose ( ga9+ or produc+ 9come4 #cj ,capital ga9s deduc;n = b#f -m]cial f>m ,r1l prop]ty require;t 7p>agraph #ag7 #ag4 ,subsec;n #aaj.f7#b7 provides =a 4#ejj1jjj capital ga9s deduc;n = f>m]s4 ,9 ord] =a transac;n 6be eligi# = ? 5h.ed deduc;n = an 9dividual f>m] :o is a resid5t ( ,canada1 "! m/ 2 a 4posi;n (a 8qualifi$ f>m prop]ty10 : is def9$ 9 subsec;n #aaj.f7#a74 ,a -m]cial f>m woodlot1 z describ$ 9 ? bullet91 may 2 a qualifi$ f>m prop]ty =! purpose ( ? def9i;n if x is a 8r1l prop]ty0 at law4 ,= example1 ! capital ga9s deduc;n may 2 availa# ": an 9dividual sells a fee simple 9 tre$ l&1 s9ce x is a r1l prop]ty4 ,h["e1 s9ce ! capital ga9s deduc;n is n availa# :5 8p]sonal prop]ty0 is sold1 ! capital ga9s deduc;n _c 2 claim$ on ! sale ( #ca ,,it-#cgc;,r#b7,c7 c#f timb]1 or on ! sale (a lic;e 6cut & take timb]4 ,": an 9dividual sells a prop]ty t is a "r 6cut & take timb]1 : is a r1l prop]ty 7a pr(it @a prendre71 ! capital ga9s exemp;n w n 2 availa# ": ! 4posi;n 0 tax$ on 9come a3.t "u p>agraph #ab7#a77g74 7,see ,b]kheis] v4 ,b]kheis] & ,glai/]1 ,7#aieg7' ,s4,c4,r4 #chg2 ,laidlaw v4 ,vaue 9v5tory s9ce 4posi;ns ( timb] res\rce prop]ties & 9v5tory >e taxa# on 9come1 n capital1 a3.t4 ,use & pr(its te/s 7p>agraph #ah7 #ah4 ,9 a4i;n 6! require;t t ! prop]ty 4pos$ ( m/ 2 a r1l prop]ty1 c]ta9 o!r require;ts1 s* z a use te/ &a pr(its te/1 m/ 2 satisfi$ 6qualify = ? capital ga9s deduc;n4 ,= prop]ty acquir$ on or 2f ,june #ag1 #aihg1 r1l prop]ty may qualify if ! prop]ty has be5 us$ pr9cip,y 9 ! c\rse ( c>ry+ on ! busi;s ( f>m+ 9 ,canada 0any (! taxpay]s describ$ 9 subp>agraphs #aaj.f7#a77a77;i7 to 7;v7 (! def9i;n ( 8qualifi$ f>m prop]ty0 9 ! ye> ( xs 4posi;n1 or if x 0 us$ pr9cip,y 9 ! busi;s ( f>m+ = at l1/ #e ye>s #cc ,,it-#cgc;,r#b7,c7 e#f dur+ : x 0 [n$ 0any (! taxpay]s describ$ 9 subp>agraphs #aaj.f7#a77a77;i7 to 7;iii7 & 7;v74 ,:5 ref];e is made 6an asset 2+ us$ 8pr9cip,y0 9 ! busi;s ( f>m+1 ! asset w meet ? te/ ": m ?an #ej@3p (! asset's use is 9 ! busi;s ( f>m+4 ,:e!r or n "picul> assets >e 8us$ pr9cip,y 9 ! busi;s ( f>m+0 is a "q ( fact 6be det]m9$ on a prop]ty 0prop]ty basis 7i4e41 ? te/ wd h 6be satisfi$ = ea* legal p>cel ( l&74 ,": p>agraph #ab7#a77g7 did n apply1 a prop]ty t is a "r 6cut & take trees t is 3sid]$ a pr(it @a prendre may satisfy ! use te/1 provid$ t ei ! trees or ! tre$ l& _h be5 us$ 0! specifi$ taxpay]s =! requisite p]iod ( "t 9 c>ry+ on a f>m+ busi;s4 ,= prop]ty acquir$ af ,june #ag1 #aihg1 a gross rev5ue te/ m/ 2 satisfi$ =a "picul> f>m prop]ty #cd ,,it-#cgc;,r#b7,c7 f#f 6be qualifi$ f>m prop]ty =! purposes (! 5h.ed capital ga9s deduc;n4 ,? gross rev5ue te/ m/ al 2 satisfi$ ": a capital ga9s elec;n 0 fil$ on ! prop]ty 7&! elec;n 0 n revok$7 &1 z a result1 ! prop]ty 0 deem$ 6h be5 reacquir$ 0! elector immly af ,febru>y #bb1 #aiid4 ,g5]al 7p>agraph #ai7 #ai4 ,! fil+1 9 &( xf1 (! capital ga9s elec;n 9 respect ( l& on : timb] gr[s w n cause 9come f subsequ5t sales ( timb] 6be tr1t$ z on capital a3.t4 ,= fur!r 9=m,n on ! capital ga9s exemp;n = f>m]s1 9clud+ xs applic,n ": ! f>m is held "? a corpor,n or a "pn]%ip1 ref] 6! curr5t v].ns (! guides call$ ,capital ,ga9s & ,f>m+ ,9come4 #ce ,9come tax def]ral on g#f transf] ( -m]cial f>m prop]ty 7p>agraphs #bj-bb7 #bj4 ,": a woodlot is op]at$ z a f>m+ busi;s1 subsec;n #gc7#c7 may apply 6provide =a def]ral (a capital ga9 & recapture :5 a p>5t1 :ile liv+1 transf]s-to 8 or h] * 7or gr&*ild or /ep*ild1 etc47 :o is a resid5t ( ,canada-prop]ty us$ 9 a f>m+ busi;s 0! p>5t1 or 0! p>5t's sp\se or *4 ,! prop]ty may 2 l& 9 ,canada1 deprecia# prop]ty 9 ,canada (a prescrib$ class1 or eligi# capital prop]ty (a busi;s c>ri$ on 9 ,canada4 ,! transf] may 2 0way ( sale or gift4 ,no 9t] vivos 9come tax def]ral is availa# on a transf] ( prop]ty held z 9v5tory4 --------------------------------------#g #ba4 ,simil> rollov]s >e provid$ 0subsec;ns #gj7#i71 #gj7#i.a71 #gj7#i.b7 & #gj7#i.c7 = transf]s on ! d1? (a p>5t 6*n 7or gr&*n or /ep*n1 #cf ,,it-#cgc;,r#b7,c7 a#g etc47 :o op]ate _! p>5ts' woodlot f>ms4 #bb4 ,= fur!r 9=m,n on 9t]g5],nal rollov]s ( f>m prop]ty1 9clud+ _! applic,n ": ! f>m is held "? a corpor,n or "pn]%ip1 ref] 6! curr5t v].ns ( ,,it-#bfh1 ,9t] ,vivos ,transf] ( ,f>m ,prop]ty 6,*1 & ,,it-#cdi1 ,9t]g5],nal ,transf]s ( ,f>m ,prop]ty on ,d1?4 ,-m]cial ,non-,f>m ,woodlot-- ,9come ,tax ,rules 7p>agraph #bc7 #bc4 ,": a -m]cial woodlot is n op]at$ z a f>m1 ! foll[+ rules w--subject 6! g5]al rules describ$ 9 p>agraph #c & specific rules s* z subsec;n #ah7#b7 7: may re/rict ! deductibil;y ( 9t]e/ & prop]ty taxes7--apply3 7a7 ,9come m/ 2 report$ us+ ! a3rual me?od4 ,": a taxpay] buys l& t is alr plant$ ) trees1 ! trees wd #cg ,,it-#cgc;,r#b7,c7 b#g n g5],y 2 9v5tory4 ,h["e1 ": trees >e pur*as$ z 9v5tory sep>ately f ! l& on : !y /&1 ! co/ ( pur*as+ ! trees is a4$ 69v5tory4 ,g5],y sp1k+1 recurr+ exp5ses directly relat$ 6! -m]cial activ;y >e deducti# 9 ! ye> 9 : !y >e 9curr$4 ,:e!r a "picul> plant+1 ?9n+1 f]tiliz+ or prop]ty tax exp5diture is a recurr+ exp5se w dep5d on ! "picul> circum/.es4 ,if l& is n us$ 9 a busi;s 9 a "picul> ye>1 subsec;n #ah7#b7 may re/rict ! deductibil;y ( 9t]e/ & prop]ty taxes4 7b7 ,capital co/ all[.e may 2 availa# 9 respect (! co/ 6! taxpay] (! woodlot4 ,= 9=m,n1 see ! curr5t v].n ( ,,it-#dha1 ,timb] ,res\rce ,prop]ty & ,timb] ,limits4 7c7 ,c]ta9 assets us$ 9 a woodlot 7roads1 dra9age sy/ems1 etc47 may 2 writt5 (f z curr5t exp5ses or #ch ,,it-#cgc;,r#b7,c7 c#g m/ 2 depreciat$ 9 a3ord.e )! ,act &! ,regul,ns4 ,! appropriate 9come tax tr1t;t is describ$ 9 ! curr5t v].n ( ,,it-#eja1 ,capital ,co/ ,all[.e-- ,lo7+ ,assets4 7d7 ,sec;n #ca1 : re/ricts ! deductibil;y ( losses f c]ta9 f>m+ busi;ses1 does n apply 6non-f>m -m]cial woodlot op],ns4 7e7 ,! 4#ejj1jjj capital ga9s deduc;n = f>m l& is n applica#4 7f7 ,! 9come tax def]ral rules = transf]s ( f>m prop]ty 6*n 7see p>agraphs #bj1 #ba & #bb7 d n apply4 ,= fur!r 9=m,n1 see ! ,guide = ,canadian ,small ,busi;s &! guide call$ ,busi;s & ,profes.nal ,9come4 ,see ! curr5t v].n ( ,,it-#abh1 ,capital ,co/ ,all[.e--,deprecia# ,prop]ty1 = guidel9es 9 det]m9+ :e!r an exp5diture is on capital a3.t or may 2 deduct$ z a curr5t exp5se4 #ci ,,it-#cgc;,r#b7,c7 d#g ,capital co/ all[.e is only availa# if an asset 0 acquir$ =! purpose ( ga9+ or produc+ 9come4 ,/ep ,,iii3 is ,f>m+ ! ,*ief ,s\rce ( ,9come8 ,g5]al 7p>agraphs #bd-be7 #bd4 ,9 ord] 6det]m9e :e!r losses f a -m]cial f>m woodlot >e fully deducti#1 or :e!r ! deductibil;y ( ^? losses is re/rict$ 0sec;n #ca1 x is nec 6f/ det]m9e :e!r ! *ief s\rce ( 9come is f>m+4 ,if a -m]cial f>m woodlot is ! *ief s\rce ( 9come1 sec;n #ca does n apply 6re/rict ! deductibil;y ( losses f op]at+ t busi;s4 ,if f>m+ is n ! *ief s\rce ( 9come1 sec;n #ca may re/rict ! am.t ( any loss t may 2 claim$ 9 a ye>4 ,= m 9=m,n 3c]n+ ! calcul,n &! deductibil;y ( losses1 ref] 6! curr5t v].ns ( ,,it-#bcb1 ,losses--,_! ,deductibil;y 9 ! #dj ,,it-#cgc;,r#b7,c7 e#g ,loss ,ye> or 9 ,o!r ,ye>s1 & ,,it-#cbb1 ,f>m ,losses4 #be4 ,9 det]m9+ ! *ief s\rce ( 9come1 ! ,c\rts h 3sid]$1 9 rel,n 6! o!r s\rces ( 9come1 ?ree crit]ia1 t is1 "t -mit;t1 capital -mit;t & expect,n ( significant pr(itabil;y 7see ,! ,que5 v4 ,raymond ,morrissey1 #hi ,,dtc #ejhj1 ,7#aihi7' #a ,,ctc #bce1 7,,fca71 & ,william ,mold[an v4 ,! ,que51 #gg ,,dtc #ebac1 ,7#aigg7' ,,ctc #caj1 7,,scc774 ,a taxpay] may h a f>m+ loss )\t a6ect+ ! /atus ( f>m+ z a *ief s\rce ( 9come 9 ! tax,n ye> 9 : ! loss o3urs4 ,acly1 ! te/ ( simply -p>+ net 9come f ea* s\rce z ! te/ = det]m9+ ! *ief s\rce ( 9come 9 a tax,n ye> is n necess>ily 3clusive 9 & 0xf4 ,see ! curr5t v].n ( ,,it-#cbb1 ,f>m ,losses1 = m 9=m,n4 #da ,f>m+ ,is ,*ief ,9come f#g ,s\rce 7p>agraph #bf7 #bf4 ,! losses f a -m]cial f>m woodlot (a taxpay] ^: *ief s\rce ( 9come is f>m+ or a -b9,n ( f>m+ & "s o!r s\rce ( 9come >e deducti# "u ! g5]al rules (! ,act & deductibil;y is n re/rict$ 0sec;n #ca4 ,s* a taxpay]'s f>m+ op],ns may r1sonably 2 expect$ 6provide ! bulk ( 9come or ! c5tre ( "w r\t9e1 & >e ! taxpay]'s major preo3up,n4 ,! phrase 8a -b9,n ( f>m+ & "s o!r s\rce ( 9come0 m1ns t :ile ! *ief s\rce ( 9come is f>m+ "! >e al subord9ate s\rces ( 9come s* z employ;t1 busi;s or prop]ty t may 2 unrelat$ 6! f>m+ op],ns4 ,f>m+ ,is ,n ,*ief ,9come ,s\rce 7p>agraph #bf7 #bg4 ,! am.t (! f>m+ loss t wd o!rwise 2 deducti# 9 a ye> 0a taxpay] :o op]ates a woodlot z a f>m+ busi;s1 b ^: #db ,,it-#cgc;,r#b7,c7 g#g *ief s\rce ( 9come is nei f>m+ nor a -b9,n ( f>m+ & "s o!r s\rce ( 9come1 is re/rict$ 0sec;n #ca4 ,al? --------------------------------------#h a taxpay] may devote ! major "p ( 8 or h] "t & ef=t 6a busi;s o!r ?an ! woodlot or 6employ;t1 he or %e m/ op]ate ! woodlot )a r1sona# expect,n ( pr(it =! losses f op]at+ ! woodlot 6be deducti# 6! ext5t p]mitt$ 0sec;n #ca4 ,": "! is a r1sona# expect,n ( pr(it1 any f>m+ loss t is n deducti# 9 ! ye> 0r1son ( sec;n #ca 2comes a 8re/rict$ f>m loss40 ,x may 2 c>ri$ back ?ree ye>s & =w>d t5 ye>s1 b xs deduc;n 9 a giv5 ye> is limit$ 6! am.t (! taxpay]'s 9come f all f>m+ busi;ses =! ye>4 --------------------------------------#i ,bullet9 ,revi.ns ,! .,3t5t sec;n _h be5 modifi$ 0a4+ a new subject z p>agraph #ab1 ,capital ,transac;n4 #dc ,,it-#cgc;,r#b7,c7 a#i ,p>agraphs #a 6#i1 #aa1 #ac 6#af1 & #ai 6#bg h n be5 *ang$ s9ce ! issu.e ( ,,it-#cgc;,r#b dat$ ,july1 #aiii4 ,2c (! a4i;n (a new p>agraph 7p>agraph #ab71 p>agraphs #ab 6#bf ( ,,it-#cgc;,r#b ( ,july #af1 #aiii h be5 renumb]$ p>agraphs #ac 6#bg1 respectively4 ,new p>agraph #ab has be5 a4$ 6cl>ify \r 9t]pret,ns & 6take 963sid],n ! impact (! deci.n (! ,f$]al ,c\rt ( ,app1l 9 ! case ( ,h] ,maje/y ! ,que5 v4 ,j5s ,l>s5 7#ii ,,dtc #egeg1 ,7#bjjj7' #a ,,ctc #bji74 ,7,febru>y #ba1 #bjja7' ,p>agraphs #aj1 p>agraph #ag 7=m]ly p>agraph #af7 & p>agraph #ah 7=m]ly p>agraph #ag7 h be5 revis$ z a result (! deci.n 9 ! ,l>s5 case4 ,7,febru>y #ba1 #bjja7' #dd