Captial Gains Exemption
You have worked hard over the years to acquire farmland, buildings, quota, shares in a family farm corporation or perhaps an interest in a family farm partnership. But what happens when it’s time for you to sell or transfer? How much of the proceeds will end up with the Canada Revenue Agency in the form of capital gains tax?
Did you know there is an income tax saving mechanism that allows eligible individuals to avoid paying tax on some or all of a capital gain resulting from the sale or transfer of a qualified farm property.
The lifetime capital gains exemption provides an eligible individual who owns a qualified farm property with a $1,000,000 capital gains exemption for use on the sale or transfer of the qualified farm property. So how do you know if your farm property qualifies for the $1,000,000 capital gains exemption?
First of all, as long as you own the farm, you don’t necessarily have to farm the land yourself. If the farm has been owned within family and used by another family member like a spouse, common-law partner, child, or parent, then the farm could be considered qualified farm property.
Additionally, determining if you own qualified farm property depends on when your farm was purchased as different rules apply based on this date.
Finally, the capital gains exemption can also be utilized for the benefit of the beneficiaries in the event of an untimely death of a qualified farm property owner.
Ultimately, with proper planning, families may be able to structure their affairs to access multiple capital gains exemptions to offset the tax payable on the sale or transfer of a qualified farm property.
If you are contemplating the sale or transfer of farm property and want to know if it qualifies for the lifetime capital gains exemption, please contact Allied Associates to learn more.