Section 31 — Income Tax Act: Restricted farm loss

If a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income that is a subordinate source of income for the taxpayer, then for the purposes of sections 3 and 111 the taxpayer’s loss, if any, for the year from all farming businesses carried on by the taxpayer is deemed to be the total of the lesser of the amount by which the total of the taxpayer’s losses for the year, determined without reference to this section and before making any deduction under section 37, from all farming businesses carried on by the taxpayer exceeds the total of the taxpayer’s incomes for the year, so determined from all such businesses, and $2,500 plus the lesser of 1/2 of the amount by which the amount determined under subparagraph 31(1)(a)(i) exceeds $2,500, and $15,000, and the amount, if any, by which the amount that would be determined under subparagraph (a)(i) if it were read without reference to “and before making any deduction under section 37”, exceeds the amount determined under subparagraph 31(1)(a)(i). For the purposes of this Act, a taxpayer’s “restricted farm loss” for a taxation year is the amount, if any, by which the amount determined under subparagraph 31(1)(a)(i) in respect of the taxpayer for the year exceeds the total of the amount determined under subparagraph 31(1)(a)(ii) in respect of the taxpayer for the year and all amounts each of which is an amount by which the taxpayer’s restricted farm loss for the year is required to be reduced because of section 80. Subsection (1) does not apply to a taxpayer for a taxation year if the taxpayer’s chief source of income for the year is a combination of farming and manufacturing or processing in Canada of goods for sale and all or substantially all output from all farming businesses carried on by the taxpayer is used in the manufacturing or processing.