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Proposed Tax Changes May Hit Your Family Farm Hard!

Published with permission Author: Allan Sawiak, CPA, CA, CAFA, TEP, Partner - Taxation

Copyright Kingston Ross Pasnak LLP 
 

On July 18, 2017, the Department of Finance released shocking changes to the Lifetime Capital Gains Deduction, Income Sprinkling and released other extremely complex rules involving corporations and trusts. These changes do affect your farm and I have tried to summarize the most significant farm tax issues. Trust me; it is time to visit your MP. While these changes will impact small business of every kind across Canada, this article focuses specifically on the farmers. The Department of Finance has given Canadians a short window of time to raise your issues, only until October 2, 2017. Hopefully this information will help to discuss your concerns with your MP. It is important to note that most of the historical proposed changes from the Department of Finance have become law and therefore these proposals cannot be taken lightly. Your lobbying efforts up to October 2nd are critical at this stage to shape the tax issues surrounding your farm and all Canadian farms.

 

DOWNLOAD THE FULL PDF ARTICLE  
In the article:

 

  • Proposed Capital Gains Deduction (“CGD”) Rules for Utilizing your Child's Capital Gains Deduction
    Children realizing a capital gain when they are UNDER 18 years of age will not be allowed to use their CGD on any property, including eligible farm property...

     

  • Proposed Income Splitting Rules
    After December 31, 2017, income splitting with your relatives will be subject to various restrictions. Splitting income with common relatives such as your adult children and with your spouse will be subject to a reasonableness test...

     

  • Proposed Special Election in 2018 and Alternative Minimum Tax Cost
    There will be a special election available until December 31, 2018 for an individual, like a child, to use their CGD on farmland under the current tax rules. However, there are a number of tax concerns...

     

  • Incorporating the Farm
    As if these changes are not complex enough, the proposals also include a very broad anti-avoidance provision intended to prevent transactions that “converts” a dividend from a corporation to another form of income taxable at a lower tax rate...
     

  • Planning ahead
    ...If you believe your farm will have an issue under the proposed tax changes with managing your capital gains exposure on one of the three common farm properties: farmland, farm partnership interest or shares in a farm corporation, then first, it is important to review with your professional advisor to ensure your farm properties qualify for the CGD...

 

CONCLUSION
Overall, these proposed tax changes will ultimately lead to all of these tax results:

  • more taxes paid by the family farm,

  • more complex farm succession planning,

  • more complex estate planning or,

  • more farms caught by surprise by the new rules!

 

Time to talk to your advisor and your MP.

 

 

 

Published with permission.

 

 

 

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