January 23, 2019 by Luther VanGilst
The tax treatment of clearing and tile drainage of agricultural land differs based on the ownership and use of the land. This article discusses the treatment under the most common scenarios. Compared to other businesses, farmers receive favourable tax treatment for these types of expenditures.
December 12, 2018 by Denver Nicklas
In Canada, corporations may claim a small business deduction (SBD) on their corporate tax returns, effectively reducing the corporate tax rate on the first $500,000 of taxable income from active business income (ABI). ABI does not include aggregate investment income.
Accountants regularly advise of the tax and accounting benefits available to corporations. But there remain some producers who are reluctant to take the next step and incorporate their farm operations. With some recent harvest reports of higher than average yields, it is time once again to look at the pros and cons of incorporating.
June 15, 2018 by Peter Hobb
When planning for the succession of your farm operation to the next generation, several important issues can arise. Some of the key issues include how the goals and objectives of key stakeholders align with your goals, how you will be spending your time in retirement, ensuring you have adequate financial resources in retirement and how to divide assets among your children, some of whom may not wish to be involved in the farm operation. There are many issues, and they will vary depending on your particular circumstances.
March 2, 2018 by Denver Nicklas
In Canada, qualified farmland can be transferred from one generation to the next for any dollar amount between cost and fair market value (FMV) at the time of the transfer. Any capital gain triggered by the transfer is covered by the capital gains exemption (up to $1,000,000 for farmland), assuming the land is qualified farm property.
December 19, 2017 by Ranjan Thiruchelvam
Historically, the Government of Canada has supported the agricultural sector with favourable rules in the Income Tax Act (the Act), among other strategies. Recently, the government announced its intention to lower the small business tax rate from 10.5 per cent to 10 per cent, effective January 1, 2018, and to 9 per cent on January 1, 2019.
Effective January 1, 2017, the income tax treatment of farm quota and other eligible capital property (ECP) underwent a complete overhaul.
October 18, 2017 by Thomas Blonde
There are several major planning items that need to be considered before and after incorporating a farm business. If you have consulted your Collins Barrow advisor and decided incorporation is right for you, gaining an up-to-date understanding of these issues is the best way to ensure your corporation is set up correctly. This infographic offers a refresher on the most important aspects of incorporation, helping your business devise the most optimal tax strategy.
October 16, 2017 by Bud Arnold
Farmers and farm corporations in supply management sectors buy and sell quota regularly. While operational and financial considerations rightly drive these transactions, they are sometimes completed without considering the tax implications. Consequently, these transactions can lead to unexpected income tax results.
September 26, 2017 by Katherine Lamont
On July 18, 2017, Minister of Finance Bill Morneau proposed comprehensive changes to the taxation of private corporations, based on concerns that private corporations “give unfair tax advantages to certain – often high-income – individuals.” While these proposed amendments will affect all private corporations, several of the proposals will have a significant impact on tax planning for family farm corporations (FFCs) and on inter-generational transfers of farm property (e.g. land, shares of FFCs or an interest in a family farm partnership).
September 20, 2017 by Jason Melo, Derek Krakana
With farmland values on the rise in Canada, many farmers are contemplating selling some or all of the land used in their farming businesses. Farmland sales may have GST/HST implications depending on such factors as the nature of the purchaser and the intended use of the land subsequent to sale.
March 27, 2017 by Luther VanGilst
The time may come for operators of a farm corporation to split up as a corporate entity. Family members who have farmed together may desire independence, or they may want to segregate aspects of their operations into multiple separate corporations. Siblings who have farmed together for years may decide to go their separate ways as either part of succession planning for their children or simply a desire to farm on a stand-alone basis. A portion of the operations may also be spun out of the corporation in order to maintain the corporation’s status as a “family farm corporation.” While operations such as a grain elevator or a custom spraying machine may be related to farming, if these assets are not used principally in a farming business they could put the farm offside of the definition of a share of the capital stock of a family farm corporation.
February 14, 2017 by Lee Littlejohns
Shareholders and family members of incorporated farming operations have a number of options for receiving compensation from their corporation. These options can range from compensation for services rendered, to a return of equity invested in the corporation or merely income derived from owning shares.
In a hot real estate market, farmland owners may start thinking about turning their dirt into cash.
Most people have heard there’s no tax on the sale of farmland in Canada, but it’s more complicated than that.
The Income Tax Act allows a capital gains deduction for individuals who are resident in Canada throughout the year and dispose of qualified farm property. This deduction may be claimed on their tax return to off-set profit on the land sale.
October 17, 2016 by Thomas Blonde
The Canadian government is going to change the way it calculates tax on farm quota sales beginning January 1, 2017 – and it’s not for the better. The changes will impact not only how much farmers are able to “write-off” but also how much tax they’ll pay on the sale of a quota.
September 14, 2016 by Thomas Blonde
Changes to eligible capital property rules
The Canadian government is planning to change the way it calculates tax on quota sales beginning January 1, 2017. Many farmers are worried about how this will impact their operations, particularly if they are incorporated. This article seeks to clarify the coming changes and provide some suggestions to help farmers prepare.
July 27, 2016 by Denver Nicklas
With an increasingly global farm commodity market and a lower Canadian dollar, Canadian farmers are finding it much easier to sell their products in the United States. However, it is important that producers are aware of potential U.S. tax issues and filing requirements, particularly if this is common practice on their farm operation.
June 20, 2016 by John Bujold
A common question that we often get as farm tax advisors is whether or not farm property can be transferred to the next generation by way of a gift. This topic is becoming more and more important as nearly half of all farmers in Canada are 55 years of age or older and are preparing themselves for succession. Succession planning is the most discussed topic between farmers and their tax advisors. Contributing to this dilemma is that rising land values is creating significant amounts of wealth and making life difficult for the farmers to equalize their estates when there are active and non-active children involved in the farming business. Succession has become much more difficult, and a traditional solution of life insurance and non-farm assets may not be enough to equalize the estate.
March 30, 2016 by Ranjan Thiruchelvam
Farm groups regularly raise awareness about the importance of succession planning, but many farmers have been slow to commit. According to studies, many believe it is simply “too early” in the life cycle of their business to devise a succession plan. But, those who put in the work to build a succession plan benefit enormously from a host of benefits and rewards.
February 23, 2016 by Ranjan Thiruchelvam
Previous issues of Farm Alert have discussed the benefits of incorporating a farming business, factors to consider before and after incorporating, and the importance of maintaining a pure farm corporation in order to take advantage of the lifetime capital gains exemption on a potential sale or transfer of family farm corporation shares. This article discusses issues to be aware of when a family farm corporation must be discontinued or reorganized. A few practical scenarios demonstrate the downside of holding farm assets in a corporation.