Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether a taxpayer can 1) deduct the value of his own labour in computing his income from a farming business and 2) include the value of lumber from his trees in calculating the adjusted cost base of a structure used in his farming business.
Position: 1) No; 2) No
Reasons: 1) Paragraph 18(1)(a) which states “an outlay or expense”; 2) the definition of “adjusted cost base” which, in the case of a depreciable property, is the capital cost to the taxpayer of the property
Author: El-Kadi, Randa
Section: 18(1)(a); Definition of "adjusted cost base" in section 54
June 17, 2015
Thank you for your correspondence of April 7, 2015, about deducting the value of your own labour and of the lumber from your trees when calculating your income from a farming business.
I can confirm that the Income Tax Act does not allow taxpayers to deduct the value of their own labour and material when calculating the cost of a property used in a business. The same principle applies when calculating business income.
You ask for a specific reference from legislation. Paragraph 18(1)(a) of the Act states:
18.(1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
(a) an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;
The structure you are building to store your equipment for your farming business is considered a depreciable capital property. You can find the definition of “adjusted cost base” in section 54 of the Act, which states:
“adjusted cost base” to a taxpayer of any property at any time means, except as otherwise provided
(a) where the property is depreciable property of the taxpayer, the capital cost to the taxpayer of the property as of that time…
You can find a copy of the Act at laws.justice.gc.ca/eng/acts. You can also find more information about expenses that you can deduct when calculating income from a business in Guide T4002, Business and Professional Income 2014, available at www.cra.gc.ca/E/pub/tg/t4002. Under the heading “Line 8960 - Maintenance and repairs,” the Guide explains:
You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. However, you cannot deduct the value of your own labour.
Under the heading “How to calculate your CCA,” in the second paragraph of page 34, the guide states:
Do not include the value of your labour in the cost of a property you build or improve.
I note your comment about not being able to email to the Canada Revenue Agency (CRA). Email is not a secure way of communicating confidential information. However, I am pleased to inform you that the CRA is looking into developing a secure service that will allow taxpayers to write to the CRA electronically. Thank you again for your feedback.
I trust the information I have provided is helpful.
Hon. Kerry-Lynne D. Findlay‚ P.C.‚ Q.C.‚ M.P.
Minister of National Revenue
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