Income Tax Folio S4-F11-C1, Meaning of Farming and Farming Business

Series 4: Businesses

Folio 11: Farmers

Chapter 1: Meaning of Farming and Farming Business

Table of contents

Discussion and interpretation

What is considered farming?

General farming definition

1.1 Generally, farming is the raising and harvesting of animals or plants in a controlled environment. The courts have determined that taxpayers are farming if they make an appreciable contribution to the growth and maturity of the animals or crops. The activity of farming would generally involve the whole aspect of commercial production of any crop or plant that has economic value.

Subsection 248(1) farming definition

1.2 Farming is defined in subsection 248(1) to include:

Common or ordinary definition of farming

1.3 The definition of farming in subsection 248(1) is not exhaustive, and typically one must look to the common, ordinary and generally accepted meaning of the word as well as to the specific activities detailed in the Act. The ordinary definition of farming is somewhat fluid and the particular activities undertaken by a taxpayer would normally have to be considered on a case-by-case basis.

Additional guidance on farming

1.4 In evaluating whether a particular activity is farming, guidance from Agriculture and Agri-Food Canada, or a provincial counterpart (for example, the Ontario Ministry of Agriculture, Food and Rural Affairs), may help. For instance, where the particular activity qualifies for assistance under a government program, the conditions that must be met in order to qualify for assistance under that program may be considered in determining if the particular activity is farming. In other words, the granting authority may require or presume the recipient to be in the farming business.

Other farming activities

1.5 In addition to the activities described in the definition of farming in subsection 248(1), farming can also include:

Whether activities constitute farming in any particular case is a question of fact to be determined based on the specific activities undertaken by a taxpayer.

Raising or exhibiting livestock

1.6 The definition of farming specifically includes raising or exhibiting livestock. The term livestock is not defined in the Act and is therefore given its ordinary meaning. Further, livestock should be interpreted consistently with the equivalent term, farm animals, or animaux de ferme, in the French version of the Act. In Sniderman v MNR, 89 DTC 323, [1989] 2 CTC 2027, the Tax Court of Canada  stated that livestock are domestic animals such as cattle and pigs, bred or kept on a farm for use and commercial profit. Common definitions refer to cattle, horses, and similar animals, kept for domestic use but not as pets, especially on a farm or ranch; and domesticated animals raised in an agricultural setting to produce commodities such as food and fiber.

1.7 A taxpayer's farming activities could mainly involve the raising or breeding of livestock or other animals (husbandry) for use as a food source even if the food source is non-traditional or novel. Regardless of whether the food source is for animal or human consumption, the fact that a food source is produced is not enough on its own to conclude that a particular activity is farming.

Raising poultry

1.8 The definition of farming includes raising poultry. The term poultry is not defined in the Act, however, it is ordinarily considered to include:


1.9 Farming may include raising fish or shellfish in water, if they are stocked and harvested in a controlled environment. To determine whether a particular fish or shellfish activity is farming, consider the following:

Generally, the greater the extent of the activity, and the more sophisticated or organized the methods employed, the more likely the activity is farming rather than fishing.

1.10 To qualify as farming, the activity must involve the growth process and natural biological changes. For example, raising fish, even in highly artificial conditions, is normally farming since the end product is the result of natural growth.

Operation of a woodlot

1.11 Whether the operation of a woodlot is a farming, logging, or other business, is a question of fact. If the business’ main focus is planting, nurturing, and harvesting trees under a forest management or similar resource plan (in other words, managing the growth, health, quality and make-up of the woodlot), it may be a farming business. If, on the other hand, the main focus of a business is logging or the production of timber, reforestation will not change that business into a farming operation. For more information, see Interpretation Bulletin IT-373R2 (Consolidated), Woodlots.

Christmas trees

1.12 If a taxpayer has a woodlot which involves planting, caring for, and harvesting Christmas trees to sell, it is generally considered farming. This may also be the case for a taxpayer who buys land so planted, in order to harvest the Christmas trees for sale. For more information, see Interpretation Bulletin IT-373R2 (Consolidated).

What farming does not include

1.13 Farming does not include:

Fishing is not farming

1.14 Although farming can include aquaculture, as noted above, farming excludes fishing. Fishing is defined in subsection 248(1) to include fishing for or catching shell fish, crustaceans, and marine animals. Harvesting wild clams or oysters from the seabed, for example, is fishing rather than farming.

Manufacturing and processing is usually not farming

1.15 Farming generally excludes manufacturing and processing. For more information, see Income Tax Folio S4-F15-C1, Manufacturing and Processing.

1.16 Further, farming usually excludes the processing of harvested agricultural product. However, processing may be considered farming in some cases. This will be the case if the processing is:

This could include activities which on their own may be processing activities, such as drying or curing tobacco, winemaking by an estate winery, or transforming harvested switchgrass into pellets, if they are an integral part of the taxpayer's farming business.

What is a farming business?

1.17 Business income is generally computed under section 9 on an accrual basis, following ordinary commercial accounting and business practices. However, under the authority of section 28, a taxpayer can make an election to compute the income from a farming (or fishing) business under the cash method. For more information, see Interpretation Bulletin IT-433R, Farming or Fishing - Use of Cash Method.

1.18 Whether a taxpayer’s farming activities constitute a farming business is a question of fact. Generally, a farming business includes the activities described above under What is considered farming? Further, the taxpayer must be actively engaged in either the management or day to day activities of earning income from the business  to be considered in the business of farming.

1.19 However, even where a farmer hires another person (an employee or an independent contractor) to do almost all of the work of the farm operation, the operation may still be considered a farming business. This could be the case where the farmer, to the extent the operation allows, exercises general management and control of the overall farm operation. For example, the farmer may determine which fields to plant, the type of crops to seed, and the times to spray and harvest.

Business or personal activities

1.20 In order to determine if a farming business exists, it is important to consider whether the farming activities are undertaken in pursuit of profit, or whether they are simply a personal endeavour. This is consistent with the approach taken by the Supreme Court of Canada in Stewart v Canada, [2002] 2 SCR 645, 2002 DTC 6969 and Walls v Canada [2002] 2 SCR 684, 2002 DTC 6960. Where there is a personal element to the farm activity, it must be determined if the operation is carried out in a sufficiently commercial manner. If it is, the income or a loss from the activities is generally considered to be from a business and will be treated as such for income tax purposes.

1.21 The following factors are relevant to determining whether farm activities are carried out in a commercial or business-like manner:

This test is based on the capital invested by the taxpayer in the operation, over years. It also depends on the purchase of buildings, machinery, equipment, and inventory, by the taxpayer.

Same or separate businesses

Separate business operations

1.22 A taxpayer may carry on two or more business operations at the same time. Where a farmer carries on more than one business operation, it is necessary to determine whether the operations are all considered part of one farming business, or are separate farming and non-farming businesses. This is important because for income tax purposes different rules can apply to a farming business.

1.23 Where a taxpayer carries on a farm operation together with a non-farm operation, it is a mixed question of fact and law whether the operations are considered one business or separate businesses. Whether these are part of the same business depends upon the connection, interlacing, dependence, and unity, of the operations. For example, in the case of an estate winery, the winemaking activities could be so interlaced with the vineyard operation that both are considered parts of one farm operation, starting with the grape growing to the commercialization of the grapes by producing wine. For more information, see Interpretation Bulletin IT-206R - Separate businesses.

Different farm activities are usually one business operation

1.24 To determine if a taxpayer’s different operations are part of the same business, the main thing to consider is the type of business. It is not essential that the same inventory, or machinery and equipment, be used in the operations. Things like a name change, or a change in the location of a business, alone, are not important to decide if business operations are the same kind. For example, different farming activities of a taxpayer are generally considered part of the same business operation, even if they are conducted in different places.

Incidental activities

1.25 Certain non-farming incidental activities may be considered part of a farming business where:

1.26 Incidental in this case means a subordinate or minor relationship compared to the farm activities. If the involvement in the non-farm activities goes beyond this, the activities may be considered a separate business from the farming business. For more information, see ¶4 to 6 of Interpretation Bulletin IT-73R6, The Small Business Deduction.


This updated Chapter, which may be referenced as S4-F11-C1, is effective October 3, 2017.

When it was first published on November 8, 2016, it replaced and cancelled the following:

The history of updates to this chapter as well as any technical updates from the interpretation bulletins can be viewed in the Chapter History page.

Except as otherwise noted, all statutory references herein are references to the provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Links to jurisprudence are provided through CanLII.

Income tax folios are available in electronic format only.


The definitions of farming and fishing in subsection 248(1) (and sections 9 and 28).

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