How do you exit farming?

[SASKFARMER3]

hopper Don't quit we need guys like you. But I would down size and rent some of your land out. Play on a smaller acreage. Again Play. Go to a great accountant and discuss your situation talking about it on here is useless let the accountant see your situation and help you through it. Plan it right and you win plan it wrong and you think this fall sucked.
Good luck

[sagewood]

I just attended a seminar last week put on by Pellegrini Leblanc called 'The Great Escape' and they address all the exiting from farming issues. Hopperbin, I don't know where you are, but these folks are out of Red Deer, AB., but one of the fellows is from Sask., so maybe a call to them might find you someone you can talk to if you are in Sask. (Phone # 1 800 665 8459 or 403 347 8833 Perry Pellegrini. They laid out a lot of ways one can use the Cap. gains--you and your wife can both use it so there is 750,000 each to help out--the fellow summed up by saying that there are so many ways one can get out of farming and not give it all away in tax--I know they will give you a free consultation and then will discuss their charges after that it you think they can work for you and they can help you. I know that when I am ready to start selling off I am going to have them look at my situation--accountants are good, but if they do not exclusively deal with the 'retirement' end of things in ag. I don't think they are up to speed on everything that can be done in the agriculture arena. Good luck.

[cafa]

Let me introduce the Canadian Association of Farm Advisors (CAFA) Inc.
CAFA is a national non-profit professional organization dedicated to assisting farm families and businesses by increasing the skills and knowledge of farm advisors. CAFA members include, among others, accountants, lawyers, agrologists, financial planners, lenders, human resource consultants, insurance agents, government staff, and interested farmers.
As CAFA is a secondary organization, most of our members have professional degrees, certifications, licenses, etc… in their field of expertise and have joined CAFA as part of their commitment to stay current and aware of the unique planning issues associated with farming and agriculture in general. They have made that commitment and are dedicated to farm families and businesses because the majority have both a professional and personal connection to the farm. They are professionals who understand many aspects of farming.
When looking for a professional to help with things like preparing business plans or financial statements or working through a succession plan, there are identifiable professionals with farm knowledge. CAFA has 400 members across Canada. You can find them at www.cafanet.com.

[bucket]

If you exit quick stage right - grow durum for two consective years and you will exit farming.

[Burbert]

Why would anyone want to quit farming? It is a glorious, meaningful, occupation. Just think, where else can you work so hard, produce so much, spend so much, to earn so little. What a truly patriotic occupation. Producing cheap calories so's the city cousins can have their cake and eat it too, while still having coin to spend on plastic, electronic crap from Chinie!

[checking]

So what did the Saturday accountant say? Or do we have to pay for that information!!

Be happy that your inventory isn't in shelf life products like bins of carrots. Although, that wouldn't be the end of the world either since you could convert carrot sale dollars into a storable product to sell in your retirement years. It sounds like this is a worry about the taxes on your grain, over that of capital gains on your land base, and value of depreciated out equipment.

Does land and equipment sale offset your debt obligations? If they do, the guy above, and many of the rest of us dirt sluggers would like to be in your predicament.

[Hopperbin]

The accountant didn't show, car trouble. Now have the year end consultation scheduled for next Sunday. Thanks Sagewood for your contact I will definitely be contacting them. My farm was incorporated by my father in the 70's. I originally had the thinking I needed to take a year off near the end of the late harvest as grain inventory does appear to cover all payments as long as I can stay out of the 45 percent tax rate, that said I would need to defer grain tickets to the next year and possible some to a year after that. That said having expenses bought in the year of use instead of a year ahead is a plus to me. All land and machinery is in the corporation. I feel set in my thinking not to sell any land and want to live off the rent. Machinery sales would become a gain. Not sure how I can use a capital gains exemption in this case as my thinking is to keep the corporation. I think there is a way to start a second corp buying out the first to use a capital gains exemption. so need to talk to accountant or financial adviser. I believe the capital gain exemption is not designed to be used that way and may come back to bite. My preference now after thinking more is to hire someone who can take a much larger management position. I don't believe I can find someone but one never knows. I suppose my situation is envious of most, I believe there are many more farmers out there that don't know what they have. I did expand the farm for in the last 8 years for financial competition reasons. Then made land purchases at the right time so equity was built up instead of committing to a lifetime of rent. Saskfarmer99 I hope the advice and service you provide your clients are understood by them, not that they are setting themselves up for an audit and a 20,000 accountant bill after plus out of control tax re evaluation.

[Hopperbin]

Hopper, my advice to you is just what I have learned over the years. Consider me a very knowledgeable corporate grain farmer. I use a very good accountant with a well known firm that has a huge client base in agriculture. As a bonus, he is an active grain farmer as well and he knows the industry and the tax/succession/financial planning side.

I still don't understand where you are gettting the 45% tax rate and why you feel you need to pay at that rate. Our farm has been running at the corporate limit (now $500,000 net income) for the last 4 years, we also try to maximize the personal low tax bracket through rent and/or wages.

In 2008, my estimate of any well managed grain farm should have had a $150-200 per acre bottom line. My guess for 2009 is around $100-125. With this guide in mind, I am just not understanding how/why you need to pay 45% tax.

Take your corp to $500,000 in the next couple year, pay you and your wife a salary of up to $75,000 each. Because you are considering reducing your farming, consider buying some RRSP's to get your personal incomes to $60,000 each.

I don't think you can set up a second corp and strip assets out and at the same time utilize your capital gains exemption. I think you can do this if the shareholders of the new entity are not related to you.

You also talked about an audit, if the company you deal with (which most likely would have people knowledgeable in this ares) tried this, you would be guaranteed an audit. But then again, personal experience with these guys is that the "audit protection" is just fluff.

I have never went through an audit but have went through a GST review. If there ever was an audit I am not worried because I don't feel I am pushing the fine line. I focus on profitablity and management of my farm, my accountant does the same. I pay my tax each year and don't focus on the amount. Its a part of life!

I have many friends that go out of their way to avoid tax. Although I don't get that impression from you Hopper, those are the guys that need to be worried about an audit.

And I ask you this. What profession organization (referring to a CA firm) would not stand behind their work in the event CRA comes a calling. With the civil penalties now being assessed on professionals (again referring to CA firms) no one is going to take a client down a road that puts them at risk. I would never ask my accountant to do this, nor would I expect it.

[timm]

saskfarmer99 do u roll all your equipment every year
and r u buying more land these days...do u have any
debt??

[skhadenuf]

just wondering is that 200 and 125 bucks an acre clear? Is that what you are saying? So those poor incompetant managers who had drought in those years still should have 100 to 150 bucks clear, how do you get that when your gross isn't even that? Are you growing some other cash crops on the side maybe?