How can I transfer my farming business to my children?

Q. How can I transfer my farming business to my children?

A: Planning opportunities
The Income Tax Act and the Land Transfer Tax Act (“Ontario”) provide for tax deferrals on the unrealized capital appreciation on the transfer of farm operations to the next generation during one’s lifetime and as a consequence of one’s death.
Farm property may include land, buildings, equipment and quotas. It may also include an interest in a family farm corporation or an interest in a family farm partnership.
If structured properly, it may be possible to crystalize your $750,000 available capital gains exemption to increase the tax basis of property transferred to your children.

Incorporation of a farm proprietorship/partnership
By virtue of a special election, you may utilize you capital gains exemption on the transfer of quota to the corporation, without recapturing prior years’ amortization. A promissory note “due to shareholder” equivalent to the value of the quota, created on the transaction may be withdrawn without tax.

Ontario Soil and Crop Improvement Association
Applications must be submitted by January 15, 2013 to subsidize professional fees for business and succession planning. For an established farm business, they may finance 50% to $20,000 for up to 3 different plans, with an $8,000 cost-share limit per plan.

You should consult with your professional advisor on all related matters.