Capital Gains Exemption

[jazz]

Forage made the comment the other day about the real prospect of losing some or maybe all of that exemption. Thats a big hit. $1M to husband and another $1M to spouse and if you have had your kids on any title, another $1M to each of them. Thats huge especially these days.

We are considering crystalizing our gains with sale to the company before Trudeau comes after it. My accountant hasnt been too agreeable for doing this over the past few yrs but maybe he will change his mind now after this yr is in the books. Says its easier to gift land to family if it stays personal, but cant family become shareholders just as easy?

Just wondering what others are doing. Book it or wait out Trudeau and hope another govt restores them?

[LEP]

I am considering doing this as well. My concern is the downside of having the land in the company. I have one child that is farming and so maybe it is less of a concern. I have used MNP in the past for estate planning and corporate restructuring even though I don't use them for my annual tax returns. I considered it money well spent at the time even though it was a big bill.

I am thinking about spending the money and getting them to advise me on this plan. There is something to be said for experience.

I don't want to give the Liberals one extra dime. They get enough already.

[fjlip]

MNP advised using part of CGE rolling partnership into a farming Corp. Land stayed out. New land purchases are easier due to LOW tax rate. Yes ask about gifting shares or adding shareholders.

[sumdumguy]

I can pay them with my new bitcoin, Kronadium?

[foragefarmer]

Investment gains would be the first place the Capital Gains Exemption would be changed as it's the easiest.

It would be a very hard sell though, as the investment community is a large group of Canadians.

[jazz]

Investment gains would be the first place the Capital Gains Exemption would be changed as it's the easiest.

It would be a very hard sell though, as the investment community is a large group of Canadians.

They wont touch Bay Street, I am willing to bet money on that.

You will see tinkering on the investment side. Stock options and then restrictions on who can use corps to shield income and invest RE like doctors and lawyers. Probably some more crackdown on passive investments inside a company.

But thats not big dollars. To get to the billions they will have to hit residential and commercial real estate and likely farmland. You just know they are looking at these gains. There has to be 10s of billions sitting there for the taking.

[Rareearth]

It was a couple of governments ago they were talking about increasing the capital gains limit to catch up to today’s marketplace, and stimulate the economy.

[Flatlander]

Forage made the comment the other day about the real prospect of losing some or maybe all of that exemption. Thats a big hit. $1M to husband and another $1M to spouse and if you have had your kids on any title, another $1M to each of them. Thats huge especially these days.

We are considering crystalizing our gains with sale to the company before Trudeau comes after it. My accountant hasnt been too agreeable for doing this over the past few yrs but maybe he will change his mind now after this yr is in the books. Says its easier to gift land to family if it stays personal, but cant family become shareholders just as easy?

Just wondering what others are doing. Book it or wait out Trudeau and hope another govt restores them?

Why not use a family trust? How do you think old money in the east does it(Morneau/Trudeau etc)? Do you think they wil attack their own nest eggs? We in the west were never able, or maybe allowed, to gather enough to warrant it before but a trust may be the way forward depending on your situation.

[LEP]

Why not use a family trust? How do you think old money in the east does it(Morneau/Trudeau etc)? Do you think they wil attack their own nest eggs? We in the west were never able, or maybe allowed, to gather enough to warrant it before but a trust may be the way forward depending on your situation.

I have one. That is what the last round was about. Can only pay out of the trust those that contribute to operating the farm at a rate that is considered reasonable for their input. Used to be able to pay to any trust beneficiaries at dividend rates of tax. But no longer.

[jazz]

We are looking at a 4 tier structure.

First crystalize capital gains and then we can withdraw that equity out and invest it in stocks. My wife and I will then be totally separate from the farm and wont draw an income from it anymore. We will live on our dividends and currently you can collect $50k each tax free in dividends with no other personal income.

Then the farm will be split into 3 divisions, Landco, Opco and Investco. All Retained earnings will stay in the farm and invested in funds that favor capital gains over dividends. At some future point the land will be rented out and perhaps my kids can draw some of that income and the investment income that has accrued.

Cant think of another way to structure it.

[blackpowder]

Good topic.
Use it or lose it I think.
I have a landlord that has to get creative with his Co owning then renting out farmland. Tax rate way high so he says. He is in a high bracket personally and corporate.

[jazz]

I was looking at this article on the FCC website. https://www.fcc-fac.ca/en/knowledge/farm-tax-planning-the-basics.html Farm tax planning: the basics

Seems to imply there is an intermediate step using a partnership structure to trigger the CGE but retain psuedo personal ownership. This is only available to farms and fisherman.

If your farm operates as a sole proprietorship, accountants will often recommend that it becomes an interim partnership, before being switched to a corporation. Rather than selling assets to the corporation and potentially triggering personal income, you can sell your partnership interest to the corporation, creating a capital gain that’s eligible for the Capital Gains Exemption. This sale will, in turn, create a shareholder’s loan that the corporation can then pay you without tax implications, provided you don’t exceed the capital gains exemption limit.

[LEP]

I was looking at this article on the FCC website. https://www.fcc-fac.ca/en/knowledge/farm-tax-planning-the-basics.html Farm tax planning: the basics

Seems to imply there is an intermediate step using a partnership structure to trigger the CGE but retain psuedo personal ownership. This is only available to farms and fisherman.

If your farm operates as a sole proprietorship, accountants will often recommend that it becomes an interim partnership, before being switched to a corporation. Rather than selling assets to the corporation and potentially triggering personal income, you can sell your partnership interest to the corporation, creating a capital gain that’s eligible for the Capital Gains Exemption. This sale will, in turn, create a shareholder’s loan that the corporation can then pay you without tax implications, provided you don’t exceed the capital gains exemption limit.

Richard5 has mentioned this in the past. The equity in the partnership can be from all assets in the partnership that have value. Essentially like a share sale of the corporation. I think you need to operate for 2 years before selling your partnership interest to a corporation. I don't see the need to do so with just straight land.

[farming101]

I was looking at this article on the FCC website. https://www.fcc-fac.ca/en/knowledge/farm-tax-planning-the-basics.html Farm tax planning: the basics

Seems to imply there is an intermediate step using a partnership structure to trigger the CGE but retain psuedo personal ownership. This is only available to farms and fisherman.

If your farm operates as a sole proprietorship, accountants will often recommend that it becomes an interim partnership, before being switched to a corporation. Rather than selling assets to the corporation and potentially triggering personal income, you can sell your partnership interest to the corporation, creating a capital gain that’s eligible for the Capital Gains Exemption. This sale will, in turn, create a shareholder’s loan that the corporation can then pay you without tax implications, provided you don’t exceed the capital gains exemption limit.

Not being nosy but you seem to indicate you have a company already? If it owns the farming equipment and inventory then that changes things somewhat.

This works well if the partnership is a verifiable entity. (Can be tested by asking if the partnership was dissolved or its assets sold would the named partners share the proceeds) Also I think the partnership has to be in existence for a minimum of two? years before selling to a corporation.
A few years back I think it became mandatory for Partnerships to file an annual Partnership Financial Return with CRA.
The great benefit is that inventory can be sold to the corporation by the partnership without triggering a huge income tax bill by the individuals in the partnership. Instead you get to use the lifetime Capital Gains Exemption.
However there will be an Alternative Minimum Tax that has to be paid in the year of the partnership sale by the individuals in the partnership. This can in most cases be recaptured in future years as long as the individual continues to have some employment income.


Just my comments, might not be entirely accurate. Need Richard to comment.
I see LEP commented before I posted this

[jazz]

Not being nosy but you seem to indicate you have a company already? If it owns the farming equipment and inventory then that changes things somewhat.

101, we just have an operating company since 2011 and that holds the equipment and inventory and runs the expenses, holds cash and RE. Land and buildings (where all the CG gains are) still held personal.

We werent really thinking CGE when we set this up in 2011. Just wanted to manage cashflow in a low tax environment.

I dont really like the thought of moving assets even further away from personal ownership.