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Blog

August 7, 2019 by Luc Joye

Purifying your farm corporation

Purified farm corporations have access to some major tax advantages, including the lifetime capital gains exemption and the ability to transfer assets to the next generation at cost. In order to qualify for these opportunities, 90 per cent of your farm corporation’s assets need to be active farming assets. If non-farming assets exceed 10 per cent, you will no longer qualify unless you remove some of these assets. This article will take a closer look at the tax opportunities available to purified farming corporations and the steps you can take to ensure you have access to them.

July 8, 2019 by Thomas Blonde

The new rules surrounding capital cost allowance

In your farming business, you are likely to acquire depreciable property such as buildings or equipment. Since this property wears out or becomes obsolete over time, you can deduct the cost of each item over a period of several years in an annual deduction known as the capital cost allowance (CCA). For example, before recent changes to the rules, you would receive half of the 30 per cent CCA in the first year after purchasing a Class 10 asset (e.g., a self-propelled vehicle). If you bought a tractor that cost $100,000, you would receive a $15,000 write-off in the first year. In subsequent years, that 15 per cent would increase to 30 per cent of the remaining balance.

June 11, 2019 by Ryan Kitchen

Capitalizing on the AgriStability deadline extension

Traditionally, farmers had to sign up in order to participate in the AgriStability program by April 30 (just prior to seeding). The program is designed in such a way that you have to sign up and pay your fees before your production season begins to be declared eligible for the upcoming year. However, the government recently announced a one-time extension of the deadline from April 30 to July 2, 2019.

November 7, 2018 by Craig Hoover

Farm activities most likely to receive government funding

There are roughly 80 government funding programs available under the Canadian Agricultural Partnership (CAP). Most farmers and agriculture processors are aware of the grants available, but many choose not to apply due to the labour intensive nature of the application process. Others aren’t aware that their activities are eligible for funding.

October 10, 2018 by Kyle Martin

Reviewing the pros and cons of AgriStability

AgriStability is a program that provides financial protection to farmers in the event that their margin drops compared to the prior year of production. In essence, this is a financial safety net for farmers: they receive payments when their net income drops below 70 per cent of their reference margin, which is determined by averaging their net income over five years after eliminating the highest and lowest years. In many cases, the benefits of the program are worth the time and expense required to participate, but earlier this year, changes were introduced that may affect the program’s relevance to your farm operation. With that mind, here is a closer look at the pros and cons of AgriStability.

July 12, 2018 by Leanne Alexander

8 questions to ask when buying or selling farmland

If you make the decision to buy or sell farmland without first talking to an advisor, you are likely to find yourself in a predicament that can be difficult (and costly) to resolve. With that in mind, never sign off on a deal without first sharing the particulars of your situation with an expert. The advice you receive will help in the strategic structuring of your business, which can go a long way toward minimizing your future tax obligations and put you in a better financial position moving forward. But before you meet with an advisor, here is an overview of the key questions you should keep in mind when buying or selling farmland.

June 19, 2018 by Kathy Byvelds

Farmers in a loss position: consider your options

If you’re a farmer using the cash method to report income and claim expenses, you have flexibility in determining your taxable income on a year-to-year basis. For example, if you hold off on selling crop inventory, you can reduce your income in that year because you only have to record income when it is cashed in. In most cases, it is beneficial for farmers to estimate their cash income before the end of their tax year, as this allows them to plan for their taxes. 

May 7, 2018 by Luc Joye

Transferring farm property from partnerships to individuals

Inter-generational farm transfers are common as succession plans. When parents transfer farms to their kids, they have rights that other business owners do not have. For example, if a farm or fishing property meets the criteria for a favourable intergenerational transfer, they can transfer at less than fair market value. However, many farming operations function as unincorporated partnerships, which can lead to complications. Typically, this is a mom and dad type scenario, where both parties are individuals farming multiple pieces of land, and they want to transfer one piece to the next generation.

February 12, 2018 by Ryan Kitchen

Take advantage of AMT opportunities, farmers!

Most people in the farm industry know they can sell qualifying farm property as a sole proprietor or partnership and use their lifetime capital gains exemption to avoid paying tax on the sale. However, many are unaware of the fact that there is a second calculation called the Alternative Minimum Tax (AMT).

January 4, 2018 by Ryan Kitchen

The pros and cons of deferred grain income

When the federal budget was announced last March, many missed the announcement of a consultation program exploring whether or not the Canadian government should continue allowing farmers to defer grain income. Part of the government’s efforts to promote a fair tax system, this program gave everyone affected by this issue an opportunity to provide input. There are several credible arguments for and against deferred grain income, but these are the most widespread and persuasive positions.

November 28, 2017 by Thomas Blonde

9 issues to consider when incorporating your farm business

In a 2012 article, I summarized a few of the major planning items that need to be considered before and after incorporating a farm business. Over the last five years, some of these issues have changed and some have stayed the same. If you have consulted with your Collins Barrow adviser and decided incorporation is right for you, it is important to have an up-to-date understanding of these issues to ensure your corporation is set up correctly. This article offers a refresher on nine important aspects of incorporation, helping your business devise the most optimal tax strategy.

November 23, 2017 by Robert Fischer

How AgriInvest and AgriStability are changing

AgriInvest and AgriStability are two government subsidy programs that have been extremely valuable to Canadian farmers in recent years. AgriInvest allows farmers to put a percentage of their sales into a fund, where these contributions are matched by the government. The idea is to put money away in your best years, creating a cushion if you are ever short of cash or need extra funds to pay for equipment and supplies. 

November 21, 2017 by Denver Nicklas

How good records benefit your farm

Even if you run a successful farm business, there is probably room for improvement in your record-keeping. Good records provide a snapshot of your operation and a more precise sense of where your business is throughout the year. 

July 31, 2017 by Leanne Alexander

Using replacement property to defer capital gains on farmland

With replacement property rules, you can purchase farmland to replace a previous piece of farmland sold – as long as it’s used in the same (or a similar) business – and elect to defer any capital gain that might be incurred. Replacement might occur for the following reasons:

(a) farmers swap land with neighbours due to proximity to their farm business
(b) land is expropriated by government bodies and farmers find replacement land to continue their operations
(c) succession planning

December 21, 2016 by Ryan Kitchen

The advantages of leasing farm equipment

Historically, farmers running successful businesses have preferred buying equipment to leasing, as it allows them to own assets with value that they can sell in the future. Many farmers also believe there is a stigma associated with leasing, as it suggests that that they can’t afford to buy farm equipment and, therefore, don’t have a healthy farm. However, there are many overlooked advantages to leasing, rather than buying. For farmers who are struggling to obtain financing – or simply want to consider the alternatives – leasing is usually a viable option.

November 29, 2016 by Luther VanGilst

Changes in quota rules for corporate farming businesses

For farmers, the quota system is in place for supply-managed commodities. In Canada, that includes milk, eggs, chicken, turkey and hatching eggs. Essentially, you have to own a license to be able to sell any of those commodities. Under the current rules for corporate businesses (which are still in effect until January 1, 2017), half of the gain is tax-free and the other half is taxed like it’s business income. For the 50% that is taxed, you’d probably pay at a rate of 26.5% under the current rules (all rates in this post are Ontario rates). As of January 1, 2017, you will still pay tax on the same amount of income, but instead of it being considered active business income, it will be considered investment income. In light of these changes, here are a few issues farmers planning to sell quota should keep in mind.

September 14, 2016 by John Bujold

Succession planning? Here’s why you want to gift the farm

There can be a significant amount of wealth tied-up in farm businesses—including partnerships and corporations—and there are opportunities in the succession process to distribute that wealth on a tax-free or tax-deferred basis. Much of this wealth is eligible for capital gains exemptions, allowing it to pass on to the next generation, so that they can continue farming without a heavy debt burden. If you’re in the process of planning the succession of your farming business, it’s important to consider taking advantage of gifting, as it allows you to apply tax benefits to farming assets.