farm corporations?

[farmaholic]

Richard5...as you mentioned, I believe your describing the creation of Shareholder's Loans that enable the person who rolled those assets into the Corp to be paid out tax free.

Would it be fair to say the tax liability gets transferred to the Corp at a more favorable tax rate? It is what was done here and unless I'm missing something, regarding the taxation, I'm surprised CRA is willing to give up the difference between the Corporate tax rate and the possibility of a "much" higher personal rate of tax...

[Richard5]

As i understand it, it really is no different than selling land to your corp and creating shareholder loan that way

However, would you rather sell land that already has special tax treatment from normal capital gains tax rules or other farming assets setup as a partnership that also qualifies for the capt gains exemption

To me its a no brainer if you can use everything else but land to use your capital gains exemption on

If anyone is not aware of this you better be talking to a firm that does or a tax lawyer as someone posted. Firms that lots of ag will have dedicated tax people at the same level as a tax lawyer

[pourfarmer]

Is this correct?

The partnership allows for 2 mil in capital gains exceptions when transferring into a corp... Which will allow you to remove 2 mil without personal taxes applied as they have been "taxed" with the capital gains exemption? The only tax paid on the 2 mil will be the 15% corp tax rate paid on the income used to generate the payments?

[Richard5]

You have hit it on the head pour farmer.

The partnership is a way to use your capital gains exemption differently on things that normally wouldn't be used or qualify for the capital gains exemption.

I am amazed from the responses. There are numerous articles in grain news and producer over the years.

I created a partnership 25 years ago, incorporated it over 15 years ago. Now doing it again with kids so that they can take me over or we can all get out with very low exit tax and get rid of company

[tmyrfield]

If you have a partnership you can roll your shares into the corporation (Section 85 rollover??) . since partnership shares are qualified farm property the partners get to claim the capital gains deduction on those shares. You will have to pay the alternate minimum tax on the capital gain but can claim it back over the next 7 years against personal income. The corporation then creates a shareholder loan account and pays the shareholders back as proscribed by the board of directors. You can decide to wait till 65 to take this money out as it won't be income and won't be used to claw back OAS.

[LEP]

Also in terms of taxplanning, don't set things up in a company because your income is too high and then take a ridiculous amount like 35k personally.

I am early 50's and figure there is enough time before I retire in 20 years to take a decent amount of cash out of the company to pay for retirement.

Don't wait until you have 5 years left or something to deal with it. Keep on top of your estimated tax bill under various scenarios.

[tstep]

Been incorporated for more than a dozen years and at the time I thought it was crazy but it was the best thing I ever did. Wife and I are equal shareholders. Land is not in the company, only assets( grain, machinery). No grain deferring anymore. Off farm income is personal. Also set up a family trust account and you can juggle money with kids, while in school, to save tax. Started this late as kids were in post secondary but saved a lot of tax. If I'm still around we can do this with grandkids also. Incorporating is time a money well spent. Hope Trudo doesn't fk it up.