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What are OIA and MIA and when are they used?

There are two income averaging tools available to farmers. First is the Optional Inventory Adjustment (OIA). If farm income is below the optimum amount in any year, this feature allows you to add to your income for any amount up to the value of inventory on hand. This effectively pre taxes unsold inventory, and becomes a deduction in the following year. You would use this in cases where the farm is in a loss and you have no other taxable income to apply the loss against. As well, if you don't have enough income to utilize your non-refundable tax credits you could use this adjustment to increase your income and utilize those credits. Finally, if you expect a high income next year it may be used just to top up the bottom 26% tax bracket this year, and use as a deduction in the next year when you may be at a higher rate.

The second tool is somewhat similar to OIA but instead of being optional it is mandatory to use. It is referred to as the Mandatory Inventory Adjustment (MIA). MIA only comes into play when the farm is in a loss, and you have purchased inventory on hand at the end of the year. This forces you to add purchased inventory back into income. The value of purchased inventory includes, pre purchased crop inputs, purchased livestock in your herd, purchased feed and pre purchased fuel. This feature makes it of no value to increase a loss by pre purchasing inputs or buying livestock so that you can write off your farm loss against other income. As with OIA the amount you add into income in one year will be a deduction in the next.