Flooded cattle producers ineligible for tax deferral

Flooded Manitoba farmers who are selling off cattle and hoping for an income tax break are out of luck unless Ottawa changes the rules.

Producers may defer income from livestock sales for one year only if they are forced to sell animals because of drought, not flood.

That leaves out flooded cattle farmers who are liquidating herds and hoping to take advantage of the tax rules, a Keystone Agriculture Producers district meeting learned.

KAP is asking federal Finance Minister Jim Flaherty to extend the tax deferral to cover flood as well as drought.

KAP wants the change made by Dec. 31 in time for the 2008 tax year. If it’s not, the Canada Revenue Agency will be reluctant to do it retroactively, Ian Wishart, KAP president, told a Nov. 13 district meeting here.

“Only drought-induced impacts are considered in the designation of eligible areas for tax deferral.”

– Agriculture and Agri-food Canada website

Unusually heavy rains this summer left vast expanses of the Interlake and Westlake regions flooded and hay unharvestable. Many farmers are selling cattle they can’t afford to feed.

Section 80.3 of the Income Tax Act allows farmers affected by a weather disaster to sell part of their breeding herd and become eligible for a one-year tax deferral on income from those sales.

To defer income, breeding herds must be reduced by at least 15 per cent. Proceeds from deferred sales can be partially offset by the cost of buying new breeding animals the next year.

But there’s a catch.

“Only drought-induced impacts are considered in the designation of eligible areas for tax deferral,” says a fact sheet on the Agriculture and Agri-Food Canada website.

That means flooded farmers don’t qualify because they have too much water instead of too little.

In an Oct. 31 letter to Flaherty, KAP asked the government to “give serious consideration to expanding the tax deferral for producers in flooded areas as well and making it a permanent program.”

Flaherty’s office acknowledged receipt of the letter Nov. 13. Conservative MP James Bezan, whose constituency includes much of the flooded area, has promised support.

The law also requires the affected area to be designated on the advice of the federal agriculture and finance ministers. CRA requires designated areas to have recognized boundaries (e. g., municipalities).

Seven municipalities in the Interlake and Westlake regions last summer applied for federal-provincial disaster assistance aid because of flooding. But disaster assistance does not cover lost crops, including hay. [email protected]

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