If you own farm property (land or building), an interest in a family farm partnership, or shares in a family farm corporation you might be able to claim a $1 million-lifetime capital gains exemption (LCGE) once the farm property is sold.
Per Person Lifetime Capital Gains Exemption
This lifetime capital gains exemption is per person. This means that if a property is farmed by two individuals, then they would each qualify for the exemption, assuming all other criteria had been met.
Qualified farm property is:
- a real or immovable property, such as land or buildings, (i.e., not machinery & equipment that can be moved) that was used in the course of carrying on a farming business in Canada by:
- the individual
- if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,
- a spouse, common-law partner, parent or child of a person referred to in (i) or (ii),
- a family farm corporation where any of the persons in (i) to (iii) above owns shares in the corporation, or
- a partnership, an interest in which is an interest in a family farm partnership of an individual referred to in any of (i) to (iii) above,
- a share of the capital stock of a family farm corporation of the individual or the individual’s spouse or common-law partner
- an interest in a family farm partnership of the individual or the individual’s spouse or common-law partner, or
- an eligible capital property (such as production quotas) used by a person or partnership referred to in any of (a) (i) to (v) above, or by a personal trust from which the individual acquired the property, in the course of carrying on the business of farming in Canada.
Planning is Key
Make sure you start planning in advance of your farm sale since there are criteria which must be met 24 months in advance of the sale.
Contact our firm sooner rather than later if you are thinking of selling your farm.