,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,f>m+ or ,fi%+--,use ( ,ca% ,me?od
,numb]3 ,,it-#dcc;,r
,date3 ,june #d1 #aiic
,ref];e3 ,sec;n #bh 7al sec;n #aai &
  subsec;ns #bb7#a71 #fi7#a71 #gf7#d71
  #he7#a71 #bdh7#g7 &! def9i;ns ( 8f>m+0
  & 8fi%+0 9 #bdh7#a77

               ,applic,n
    
  ,? bullet9 replaces & c.els ,9t]pret,n
,bullet9 ,,it-#dcc dat$ ,june #be1
#aigi4 ,curr5t revi.ns >e 9dicat$
0v]tical l9es4

                ,summ>y
    
  ,? bullet9 d1ls ) v>i\s matt]s relat+
6! ca% me?od ( -put+ 9come : may 2    #a
              ,,it-#dcc;,r           a#a
us$ 0a taxpay] 9 ! busi;s ( f>m+ or
fi%+4 ,basic,y1 ! ca% me?od 9come or
loss is calculat$ z ! di6];e 2t ! ca%
rev5ue rcvd 9 ! ye> &! ca% rev5ue
exp5ditures pd 9 ! ye> ) appropriate
adju/;ts = non-ca% items s* z capital
co/ all[.e &! recapture ( capital co/
all[.e4 ,! topics 4cuss$ 9 ! bullet9 >e3
    --h[ 6make ! elec;n 6use ! ca%
      me?od1
    --! m1n+ ( rcvd1
    --:5 a *eque is 9clud$ 9 9come (a
      taxpay] us+ ! ca% me?od1
    --! c>ry+ on ( sep>ate busi;ses1
    --! m1n+ (a f>m+ or fi%+ busi;s1
    --! 9v5tory adju/;ts p]ta9+
      6taxpay]s 9 ! f>m+ busi;s :o use !
      ca% me?od1
    --! transf] ( 9v5tory & a3.ts
      receiva# 6a corpor,n1 &
    --! use (! ca% me?od 9 a "pn]%ip4
    
    
                                      #b
          ,4cus.n & ,9t]pret,n       b#a
            7p>agraphs #a-b7
    
#a4 ,9 -put+ ! 9come (a taxpay] f a f>m+
  or fi%+ busi;s1 ! 9come may 2 -put$ 9
  a3ord.e )! 8ca% me?od0 if ! taxpay] s
  elects4 ,sec;n #bh (! ,9come ,tax ,act
  provides ! au?or;y & rules = us+ ?
  me?od4
--------------------------------------#b
#b4 ,a taxpay] may make an elec;n
  6det]m9e 9come f a f>m+ or fi%+ busi;s
  "u sec;n #bh simply 0fil+ a tax return
  report+ ! f>m+ or fi%+ busi;s 9come
  us+ ! ca% me?od4 ,once a taxpay] has
  fil$ a return us+ ? me?od1 subsec;n
  #bh7#c7 requires t 9come f ! busi;s =
  ea* subsequ5t tax,n ye> 2 -put$ 9
  a3ord.e ) ? me?od un.s ! taxpay] rcvs
  ! 3curr;e (! ,m9i/] 6adopt "s o!r
  me?od ^u s* t]ms & 3di;ns z ! ,m9i/]
  may specify4 ,a reque/ 6*ange f ! ca%
  me?od 6"s o!r me?od %d 2 made 6!
  ,director-,tax,n (! taxpay]'s ,4trict
  ,(fice4                             #c
        ,m1n+ ( ,rcvd 7p>agraphs     a#b
                 #c-d7
    
#c4 ,:5 -put+ 9come us+ ! ca% me?od
  p>agraph #bh7#a77a7 requires t am.ts 2
  9clud$ 9 9come :5 rcvd or :5 deem$ 0!
  ,act 6be rcvd4 ,! m1n+ (! t]m rcvd is
  n necess>ily limit$ 6^? situ,ns ": !
  9come 0 actu,y rcvd 9 ca%4 ,rcvd has a
  broad] m1n+1 & an am.t may 2 sd 6h be5
  rcvd 0! taxpay] at ! "t :51 = example1
  7a7 x 0 rcvd 0a p]son au?oriz$ 6rcv x
    on 2half (! taxpay]
  7b7 x 0 (fset ag/ an am.t [+ 0!
    taxpay]
  7c7 x 0 pd or transf]r$ 6a ?ird "py
    pursuant 6! direc;n ( or )! 3curr;e
    (! taxpay] 7? may 2 implicit7
  7d7 a secur;y or o!r "r or a
    c]tificate ( 9debt$;s or o!r evid;e
    ( 9debt$;s 0 rcvd 9 pay;t or "p
    pay;t (a pre-exi/+ debt ( an 9come
    nature4 ,= fur!r explan,n see !
    curr5t v].ns ( ,,it-#gg1 ,securities
    9 ,satisfac;n ( an ,9come ,debt   #d
              ,,it-#dcc;,r           b#b
    & ,,it-#ahd1 ,def]r$ ,ca% ,pur*ase
    ,tickets ,issu$ = ,gra9
  7e7 a -mod;y is a3ept$ 9 lieu ( ca%4
#d4 ,a pay;t made 6a taxpay] 0f/ class
  mail or xs equival5t is deem$ 0virtue
  ( subsec;n #bdh7#g7 6be rcvd 0!
  taxpay] on ! date ( xs mail+4 ,an item
  5tru/$ 6a c\ri] s]vice = prompt
  deliv]y is 3sid]$ equival5t 6f/ class
  mail4

     ,receipt (a ,*eque 7p>agraphs
                 #e-f7
    
#e4 ,! value (a *eque t is rcvd 0a
  taxpay] :o uses ! ca% me?od 6-pute
  9come is 3sid]$ 6be 9come at ! "t !
  *eque is rcvd f a p]son :o 0 9debt$ 6!
  taxpay] provid$ ! foll[+ 3di;ns >e
  applica#3
--------------------------------------#c
  7a7 ! debt is paya# at ! "t ! taxpay]
    rcvs ! *eque1
                                      #e
              ,,it-#dcc;,r           a#c
  7b7 ! debt is ( s* a nature t x wd 2
    9come (! taxpay] if x 7 pd 9 ca%1
  7c7 ! *eque does n h any 3di;ns atta*$
    6x s* z1 = example1 po/dat+ or an
    >range;t t ! *eque is n 6be us$ =a
    specific "t1 &
  7d7 ! *eque is hon\r$ on pres5t,n =
    pay;t4
  
  ,": a debt is n paya# at ! "t a
  taxpay] rcvs a *eque1 ! value (! *eque
  is 3sid]$ 6be 9come at ! e>li] (3
  7e7 ! "t ! *eque is ca%$ or o!rwise
    negotiat$1 &
  7f7 ! "t ! debt 2comes paya#4
#f4 ,norm,y1 a po/-dat$ *eque w 2 a3ept$
  z secur;y =a debt )\t ext+ui%+ !
  orig9al debt4 ,": s* a debt is an
  9come debt !n paya#1 ! value (! po/-
  dat$ *eque w 2 br"\ 969come at ! e>li]
  (! date t ! *eque is paya# &! date !
  *eque is negotiat$4 ,9 ! ev5t t ! debt
  is n paya# at ! "t ! po/-dat$ *eque is
  paya#1 ! value (! *eque w 2 br"\    #f
              ,,it-#dcc;,r           b#c
  969come at ! e>li] (! date t ! debt
  2comes paya# &! date t ! *eque is
  negotiat$4 ,on ! o!r h&1 ": a po/dat$
  *eque is a3ept$ 9 absolute pay;t (
  debt1 ! value (! po/dat$ *eque is
  norm,y 3sid]$ 6be 9come at ! "t x is
  rcvd subject 6a subsequ5t adju/;t if x
  is n hon\r$ on subsequ5t pres5t,n =
  pay;t4 ,9 ? situ,n1 ! taxpay] a3epts !
  po/-dat$ *eque z full pay;t (! debt &
  z s* a3epts x at ! risk ( x 2+ 4hon\r$
  )! only rec\rse 2+ an ac;n ag/ ! mak]
  (! *eque = failure 6hon\r ! *eque4

     ,c>ry+ on ( ,sep>ate ,busi;ses
             7p>agraph #g7
    
#g4 ,:5 a taxpay] is c>ry+ on a f>m+ or
  fi%+ op],n tgr ) "s o!r busi;s op],n
  7e4g41 ! process+ ( fi% or f>m
  products--see ! curr5t v].n (
  ,,it-#ade1 ,canadian ,manufactur+ &
  ,process+ ,pr(its--,reduc$ ,rate (
  ,corporate ,tax71 x is a "q (       #g
              ,,it-#dcc;,r           c#c
  fact dep5d5t ^u ! circum/.es (! case z
  6:e!r or n ! f>m+ or fi%+ op],n c 2
  3sid]$ a sep>ate busi;s = : ! taxpay]
  c elect 6report ! 9come us+ ! ca%
  me?od4 ,norm,y1 a taxpay] w 2 3sid]$
  6op]ate two sep>ate busi;ses if !
  busi;ses >e n s 9t]lac$1 9t]dep5d5t &
  9t]connect$ t x is virtu,y impossi#
  6sep>ate "o
--------------------------------------#d
  op],n f ! o!r4 ,if x is e/abli%$ t two
  sep>ate busi;ses >e 2+ c>ri$ on1 !
  taxpay] may elect 6report ! f>m+ or
  fi%+ busi;s 9come us+ ! ca% me?od
  provid$ a sep>ate set ( books &
  records =! f>m+ or fi%+ busi;s is
  ma9ta9$4

         ,m1n+ (a ,f>m+ ,busi;s
            7p>agraphs #h-i7
    
#h4 ,f>m+ is def9$ 9 sec;n #bdh 69clude
  ! v>i\s activities (a p]son :o is
  5gag$ 9 ! busi;s ( e>n+ 9come f     #h
              ,,it-#dcc;,r           a#d
  7a7 ! tillage ( soil1
  7b7 ! rais+ or exhibit+ ( live/ock1
  7c7 ! ma9t5.e ( horses = rac+ or
    exhibit+1
  7d7 ! rais+ ( p\ltry1
  7e7 ! keep+ ( bees1
  7f7 fur f>m+1
  7g7 dairy f>m+1 &
  7h7 fruit gr[+4
  ,! def9i;n is n exclusive & x has be5
  decid$ 0! c\rts t f>m+ al 9cludes
  7i7 tree f>m+ 7,h] ,maje/y ! ,que5 v4
    ,d\glas ,c4 ,mat!ws #gd ,,dtc #faic
    --7#aigd7 ,,ctc #bcj 7,,fctd771
  7j7 ! op],n (a wild game res]ve 7,al
    ,oem+ ,9ve/;ts ,ltd4 v4 ,m9i/] (
    ,n,nal ,rev5ue #gb ,,dtc #ajeg--
    7#aigb7 ,,ctc #bjjh 7,,trb771 &
  7k7 a me*anical hat*+ op],n ": e7s >e
    acquir$1 hat*$ 9 9cubators &! *icks
    sold )9 a few "ds ( hat*+ 7,june ,a4
    ,pollon & ,clif=d ,m4 ,pollon v4 ,h]
    ,maje/y ! ,que5 #hd ,,dtc #faci--
    7#aihd7 ,,ctc #aca 7,,fctd774     #i
              ,,it-#dcc;,r           b#d
  ,9 c]ta9 factual circum/.es x is
  3sid]$ t f>m+ 9cludes
  7l7 rais+ fi%1
  7m7 m>ket g>d5+1 &
  7n7 ! op],n ( nurs]ies & gre5h\ses4 ,!
    cultiv,n ( crops 9 wat] &
    hydroponics >e al 3sid]$ f>m+
    activities4 ,h["e1 8f>m+0 does n
    9clude trapp+ or an (fice or
    employ;t "u a p]son 5gag$ 9 ! busi;s
    ( f>m+4
#i4 ,! foll[+ -;ts 3c]n :e!r or n a
  s\rce ( 9come c 2 3sid]$ 6be "p (a
  f>m+ busi;s3
  7a7 ,%>ecropp+
    ,! crop %>e rcvd 0a l&"l 9 a
    %>ecropp+ >range;t is 3sid]$ 6be
    r5tal 9come & n 9come f f>m+4 ,h["e1
    s* 9come is1 0r1son ( subsec;n
    #aai7#g71 3sid]$ 6be 9come f !
    busi;s (
--------------------------------------#e
    f>m+ = purposes (! five ye> block
    av]ag+ provid$ 0sec;n #aai       #aj
              ,,it-#dcc;,r           a#e
    7note t subsec;n #aai7#d7 elim9at$ !
    block av]ag+ provi.ns = any five-ye>
    block t -m;es af #aihg74 ,9 a4i;n1 a
    def]ral ( 9come result+ f t por;n (
    r5t t relates 6gra9 deliv]$ ag/ ca%
    pur*ase tickets w 2 p]mitt$ pursuant
    6subsec;n #gf7#d7 7see ! curr5t v].n
    ( ,,it-#ahd74
  
    ,! abv ref];e to 8%>ecropp+
    >range;t0 m1ns an >range;t ": a
    taxpay] or l&"l rcvs f a t5ant a %>e
    ( crop 9 lieu ( r5t4 ,"! may 2 o!r
    types ( %>ecrop >range;ts1 =
    example1 ": ! %>ecropp] is actu,y an
    employee (! taxpay] & rcvs a %>e (!
    crop z remun],n = s]vices r5d]$4 ,"u
    ^! o!r types ( >range;ts ! l&"l cd 2
    9 ! busi;s ( f>m+ dep5d+ ^u ! facts
    (a specific case4
  7b7 ,woodlot ,op]ators
    ,al?1 /rictly sp1k+1 an e/abli%$
    woodlot op],n is a lo7+ busi;s1 ": x
    is -b9$ )a f>m+ busi;s ! -b9$    #aa
              ,,it-#dcc;,r           b#e
    op],n w 2 view$ z a f>m+ busi;s if !
    taxpay] elects 6report s* busi;s
    9come "u ! ca% me?od4 7,see ! curr5t
    v].n ( ,,it-#cgc1 ,f>m ,woodlots &
    ,tree ,f>ms74
  7c7 ,*ri/mas ,tree ,gr[]s
    ,! plant+1 c>e & h>ve/+ ( ,*ri/mas
    trees1 0p]sons :o plant "egre5s
    6sell & 0^? :o buy l& s plant$
    6obta9 & h>ve/ ! trees1 is 3sid]$ a
    f>m+ busi;s reg>d.s ( :e!r or n !
    taxpay] is c>ry+ on any o!r f>m+
    op],n4 7,see ! curr5t v].n (
    ,,it-#cgc74
  7d7 ,surface ,r5tals
    ,am.ts t >e rcvd 0a taxpay] actively
    5gag$ 9 ! busi;s ( f>m+ f ! l1s+ (
    surface "rs 6p]sons explor+ or
    drill+ = petroleum or natural gas >e
    9come f ! busi;s ( f>m+ 6! ext5t t
    !y >e 3sid]$ 6be 9come4 7,see !
    curr5t v].n ( ,,it-#bjj1 ,surface
    ,r5tals & ,f>m+ ,op],ns74
                                     #ab
              ,,it-#dcc;,r           c#e
  7e7 ,m>ket+ ,quotas
    ,pay;ts rcvd 0f>m]s = grant+ o!r
    f>m]s p]mis.n 6use _! m>ket+ quotas
    7e4g41 toba3o1 egg1 milk7 >e 3sid]$
    6be 9come f a f>m+ busi;s4
--------------------------------------#f
  7f7 ,sale ( ,s&1 ,gravel & ,topsoil
    ,! sale ( s&1 gravel & topsoil or a
    simil> -mod;y remov$ f ! f>m l&s (a
    taxpay] actively 5gag$ 9 ! busi;s (
    f>m+ is norm,y 3sid]$ 6be 9come f !
    busi;s ( f>m+4
  
         ,m1n+ ( ,fi%+ ,busi;s
             7p>agraph #aj7
    
#aj4 ,fi%+ is def9$ 9 subsec;n #bdh7#a7
  69clude ! v>i\s activities (a p]son :o
  is 5gag$ 9 ! busi;s ( e>n+ 9come f
  fi%+ or cat*+ %ell fi%1 cru/ac1ns &
  m>9e animals4 ,h["e1 fi%+ does n
  9clude an (fice or employ;t "u a p]son
  5gag$ 9 ! busi;s ( fi%+4
                                     #ac
      ,9v5tory 7p>agraphs #aa-ac7    a#f
    
#aa4 ,= fiscal p]iods -m5c+ af #aihh1 !
  op;nal & m&atory 9v5tory adju/;ts "u
  subsec;ns #bh7#a77b7 & 7c7
  respectively apply 6a f>m] 7o!r ?an !
  fiscal p]iod 9 : ! f>m] has di$7 us+ !
  ca% me?od 9 -put+ 9come f a f>m+
  busi;s4 ,p>agraph #bh7#a77f7 requires
  t ! am.t 9clud$ 9 9come "u p>agraph
  #bh7#a77b7 or 7c7 reduces 9come 9 !
  immly subsequ5t fiscal p]iod4 ,see !
  curr5t v].n ( ,,it-#ebf1 ,f>m+--,ca%
  ,me?od ,9v5tory ,adju/;ts1 =a 4cus.n
  on ^! adju/;ts4 ,= fiscal p]iods -m5c+
  prior 6#aihi1 only ! op;nal 9v5tory
  adju/;t "u p>agraph #bh7#a77b7 0
  availa# 6a f>m] us+ ! ca% me?od & only
  ) respect 6c]ta9 live/ock 9v5tory4
#ab4 ,a taxpay] us+ ! ca% me?od 6-pute
  9come f a f>m+ or fi%+ busi;s may
  elect 6roll ov] 9v5tory [n$ 9 3nec;n
  )! f>m+ or fi%+ busi;s 6a corpor,n "u
  subsec;n #he7#a74 ,": s* a taxpay]
  c>ries on a f>m+ busi;s & 4poses   #ad
              ,,it-#dcc;,r           b#f
  ( 9v5tory [n$ 9 3nec;n ) t busi;s 6!
  corpor,n1 p>agraph #he7#a77c4#b7 w
  apply = 4posi;ns o3urr+ af ,july #ac1
  #aiij4 ,p>agraph #he7#a77c4#b7
  re/ricts ! selec;n (! deem$ proce$s (
  4posi;n (! taxpay] &! co/ 6! corpor,n
  9 respect ( pur*as$ 9v5tory (! taxpay]
  6an am.t t is ! a7regate (
  7a7 ! propor;n (! am.t t wd h be5
    9clud$ "u p>agraph #bh7#a77c7 9
    -put+ ! taxpay]'s 9come1 if !
    taxpay]'s tax,n ye> _h 5d$ at ! "t
    (! 4posi;n1 t ! value (! pur*as$
--------------------------------------#g
    9v5tory 4pos$ ( is (! value ( all
    pur*as$ 9v5tory [n$ 0! taxpay] at t
    "t1 &
  7b7 s* a4i;nal am.t z ! taxpay] &
    corpor,n may designate1 n exce$+ !
    excess (! fair m>ket value (!
    pur*as$ 9v5tory 4pos$ ( ov] ! am.t
    describ$ 9 7a7 abv4
  
                                     #ae
              ,,it-#dcc;,r           a#g
  ,! am.t select$ may al 2 re/rict$
  0p>agraph #he7#a77b74
#ac4 ,subp>agraph #he7#a77c4#b77;ii7
  5sures t ! taxpay] w 2 requir$ 69clude
  ! deem$ proce$s ( 4posi;n 9 9come "u
  subp>agraph #bh7#a77a77;i74 ,on ! o!r
  h&1 subp>agraph #he7#a77c4#b77;iii7
  5sures t ! corpor,n w 2 5titl$ 6deduct
  ! deem$ co/ (! 9v5tory "u subp>agraph
  #bh7#a77e77;i7 ": ! corpor,n -putes xs
  9come us+ ! ca% me?od & w 2 requir$
  63sid] s* 9v5tory z pur*as$ 9v5tory =!
  purpose (! m&atory 9v5tory adju/;t
  7see #aa abv74

        ,*ange 9 ,9come ,report$
             7p>agraph #ad7
    
#ad4 ,if a taxpay] has 9clud$ an am.t 9
  9come "u p>agraph #bh7#a77b71 a writt5
  reque/ 6*ange ? am.t w only 2 a3$$ 6if
  ! "t has n expir$ = fil+ a notice (
  objec;n = t ye>4 ,": ! ,de"p;t
  reassesses a "picul> ye>1 a        #af
              ,,it-#dcc;,r           b#g
  reque/ 6adju/ ! am.t 9clud$ 9 9come "u
  p>agraph #bh7#a77b7 = t ye> w 2 a3$$
  6provid$ x is made 9 writ+ 2f !
  reassess;t is issu$ or )9 ! "t = fil+
  a notice ( objec;n =! "picul> ye>4

      ,rollov] ( ,a3.ts ,receiva#
             7p>agraph #ae7
    
#ae4 ,a sec;n #he rollov] is n availa#
  6a taxpay] us+ ! ca% me?od 9 respect (
  a3.ts receiva# s9ce !y >e an 9come
  am.t 6! taxpay] :5 rcvd4 ,subsec;n
  #bb7#a7 does n apply 6a taxpay] :o is
  us+ ! ca% me?od ( report+ 9come4 ,if !
  taxpay] 4poses ( a3.ts receiva# 6a
  corpor,n 9 a non->m's l5g? transac;n =
  %>es1 ! co/ (! receiva#s 6! corpor,n
  wd 2 det]m9$ z ! fair m>ket value (!
  %>es except 6! ext5t t p>agraph
  #fi7#a77a7 applies4 ,9 ! h&s (!
  corpor,n ! receiva#s wd 2 reg>d$ z
  capital prop]ty &! usual implic,ns
  3c]n+ subsequ5t receipts & bad     #ag
              ,,it-#dcc;,r           c#g
  debt write (fs foll[ 7see ! curr5t
  v].n ( ,,it-#ahh1 ,sale ( ,a3.ts
  ,receiva#74

         ,us+ ! ,ca% ,me?od 9 a
      ,"pn]%ip 7p>agraphs #af-ag7
    
#af4 ,! elec;n 6/>t -put+ 9come 9
  a3ord.e )! ca% me?od does n apply =!
  purposes ( -put+ ! 9come (a taxpay] =a
  tax,n ye> f a f>m+ or fi%+ busi;s
  c>ri$ on jo9tly ) "o or m o!r p]sons
  7e4g4 a "pn]%ip71 un.s ea* (! o!r
  p]sons has elect$ 6h ! 9come f !
  busi;s -put$ 9 a3ord.e )! ca% me?od4
  ,3sequ5tly1 if a "pn] 79clud+ a p]son
  n resid5t 9 ,canada7 9 a f>m+ or fi%+
  "pn]%ip is n taxa# 9 ! ye> ( elec;n1 !
  "pn] m/ / file an 9come tax return 9
  ord] t ! o!r "pn]s may elect 6-pute _!
  9come f ! f>m+ or fi%+ busi;s 9
  a3ord.e )! ca% me?od4
#ag4 ,! 9v5tory adju/;ts ref]r$ 6in #aa
  abv =m "p (! 9come (! "pn]%ip :    #ah
              ,,it-#dcc;,r           d#g
  >e alloca# 6! "pn]s 9 a3ord.e )! t]ms
  (! "pn]%ip agree;t4

  ,if y h any -;ts reg>d+ ! matt]s
4cuss$ 9 ? bullet91 pl1se s5d !m to3

  ,director1 ,te*nical ,public,ns
    ,divi.n
  ,legislative & ,9t]gov]n;tal ,a6airs
    ,bran*
  ,rev5ue ,canada1 ,tax,n
  #hge ,h]on ,road
  ,ottawa1 ,ont>io
  ,k#a;,a #j;,l#h
  








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