How do farmers avoid Inheritance Tax?

Many farmers can potentially pass on farms to their children free from Inheritance Tax due to Agricultural Property Relief and Business Property Relief. As capital gains are wiped away on death, children inheriting can sell and only face Capital Gains Tax on any rise in value between the date of death and the sale.

How can I avoid capital gains tax on farm sale?

To avoid this level of tax, three planning options can be considered: Installment Sale. Instead of recognizing all of the gain in one year, an individual can sell farmland on an installment basis.

Is it easy to sell a farm property?

Selling real property especially a farm or land that has been in a family for generations, is not easy. Seek the guidance of a trusted financial advisor or estate tax attorney to explore the options including a 1031 exchange.

When is the right time to sell your farm?

The old adage: nothing is certain except death and taxes rings true for many farmers determining the right time to sell farm assets. Given the tough economic drought farmers are facing, many are looking for ways to generate cash and are considering selling non-productive assets, while others may be looking to sell the entire operation.

How is the sale of a farm taxed?

The sale occurs as normal with a trust receiving the proceeds that are invested over a horizon and investment strategy determined by the taxpayer and his/her financial advisors. Selling real property especially a farm or land that has been in a family for generations, is not easy.

When to sell a farm for capital gain?

CRA has indicated that if the farm property was used principally in the course of carrying on a farming business in Canada for a majority of the period of ownership, then the property will meet the usage requirements. RBC Royal Bank Selling the farm and the capital gain exemption 5