Intergenerational farm transfer (s. 73(3))

A farm family handing land or equipment to a child meets subsection 73(3). It applies to property transferred at any time to the child where the property was land in Canada or depreciable property in Canada of a prescribed class, and the child was resident in Canada immediately before the transfer. The property must also have been used principally in a farming or fishing business in which the taxpayer, a spouse or common-law partner, a child or a parent was actively engaged on a regular and continuous basis; for a woodlot, the paragraph instead requires engagement to the extent a prescribed forest management plan requires.

What subsection 73(3.1) sets

Subsection 73(3.1) sets the parent’s deemed proceeds of disposition by separate rules for depreciable property and for land, says subsection 69(1) does not apply, and sets the child’s cost equal to those proceeds. The amounts are in the paragraphs themselves. Subsection 73(3) names land and depreciable property; shares of a family farm or fishing corporation and interests in a family farm or fishing partnership are dealt with separately, under subsections 73(4) and (4.1), and the CRA’s capital gains guide includes them in family farm or fishing property.

What to ask

• Whether the property was used principally in the farming or fishing business, and who was actively engaged
• Whether the child was resident in Canada immediately before the transfer
• Whether the land includes a home, which raises the principal residence exemption

For the wider planning picture, see planning the succession of a family farm.