Capital Gains

[GDR]

Jazz I think we all understand your concern and thought process. We just did the partnership rollover others have talked about to use our CGE partly because it was time and partly because I too believe they are coming for more tax dollars.

The 1 million cap gains exemption isnt perfectly tax free. There is a complicated tax formula that will assess an Alternative Minimum Tax that you have to pay but you can sort of use it as a prepaid tax account that you can use over the next number of years to offset tax payable in those years. Need to do some planning here with someone who knows.

As for the kids, just because they are on title doesnt qualify them for CGE. The advice 25yrs ago was to add all the kids and the family dog to the title so lots did that. Now there seems to be some concern about this as it complicates other matters. ie personal residence exemption.


Relating to CGE, an FYI, I have neighbours going through a tough time after the mother passed away. 5 quarters, 4 children, one added to each quarter title, 5th quarter left to estate to pay tax burden. Problem is each quarter has a million dollar gain, the fifth quarter wont pay the taxes, none of the kids want to sell but none can afford the tax to be able to keep. There is a rule for the CGE to apply you have to have farmed one year longer than you have been a landlord. The father had passed away 26yrs ago and land has been rented since, he farmed for 25 yrs before he died so the family cannot use the CGE.

I also hear discussion about using Trusts to lock in or reset your ACB. Dont know anything about it but might be worth looking into.

[AlbertaFarmer5]

If the goal is to stay a step ahead of possible tax changes, keep in mind that companies don't vote, middle class taxpayers do.
Not much political fallout from taxing corporations. Where as taxing the voters is a sure way to lose the next election.
And farmers don't vote Liberal (except carpet farmers, right Chuck), so taxing corporate farms is the path of least resistance.
Be it gc, income tax, property taxes, environment tax or outright wealth tax.

[SASKFARMER]

I agree Alberta.

Plus you can bet there are more people working in Ottawa on how to tax Corporations more than taxing individuals. Plus these people will be working with gov to do all the steps that the best accountants in Canada cant prepare for.

Maybe that's why Little perogies' family sold out.

Who knows but I can bet they will be coming after us and hard. Give him a mandate and you will see.

[chuckChuck]

For all you Republicans who wanna be Americans, the bad news is there is no lifetime capital gains exemptions on farmland in the USA.

So all you chronic complainers and malcontents that think the USA is better place to live and farm you will be happily taxed more on your capital gains than you will be in Canada. God Bless America and the IRS!

https://www.fb.org/issues/tax-reform/capital-gains-taxes-and-stepped-up-basis/

"Capital gains taxes are due when farm or ranch land, buildings, breeding livestock and timber are sold. The tax is owed on the amount that the property increased in value since it was purchased. The current top capital gains tax is 20 percent. Farmers and ranchers often pay the top rate (which is assessed on high income taxpayers) because their capital gains can be realized in a single year, for example when a farm is sold."

[jazz]

If you dont have kids that are going to actually farm the land, does it still make sense to transfer it to them personally held or just use a company and let them hold shares? if they arent going to be active farmers I dont see the difference. Selling to the company kills 2 birds with one stone. My wife and I get the CGE but we technically still hold the land which my kids can then benefit from.

My calculation on saving taxes was based on income tax not taxes at disposition. With a sale to my company I can have the company pay me back $2M tax free. That should make my life time for sure.

Canada has gone full marxist, I mean its time to pull up the draw bridge now. Hoping for sanity to return is not a strategy. It took 15 yrs to get the marxists out of Ontario. By the looks of things, the CPC will never win an election again, Kenny wont separate so its down to what we can control personally.

Just bantered back and forth with my accountant, says she is seeing lots more clients locking in their gains now. Somethings coming.

[AlbertaFarmer5]

I know my opinion on this aren't popular amongst my fellow farmers.
But I am all in favour of capital gains taxes, estate taxes, death taxes. I will always choose any tax at the end of a successful career/business rather than punitive income taxes along the way making it impossible to invest capital and build a business in the first place.

How does society benefit from generation after generation inheriting the land/business almost tax free, while those without are stuck with huge income tax bills as punishment for working hard and trying to get ahead?

I'm in favour of a generational reset each time. Let the entrepreneurs have a chance instead of taxing them into the poor house while giving a free ride to freeloaders who won the genetic lottery. The big get bigger, the rich get richer, and we miss out on the innovations and work ethic of all the other candidates who never even get the chance. Who is to say that my kids are any more ambitious or capable or innovative than the kid across the road whose dad works nine to five paying extortionate income tax his whole life, leaving nothing to invest in starting his own farm or business? We never get to find out using the current system. Just look at the results, we have a "farmer" such as Chuck without an iota of business or financial sense. Or our Prime Minister. Myriad examples. Let the cream rise to the top based on their own merits, not based on their grandpa and grandma's hard work.

We are turning back into the situation our ancestors left the old country to get away from, where a handful of nobles own everything, and everyone else has no opportunity. The only way to join the club was to be born into it. Dynasties, landed nobility, and landless peasants doing the work.

[blackpowder]

Any idea when Hutterites pay capital gains? Same as trust every 25 years?

[chuckChuck]

I know my opinion on this aren't popular amongst my fellow farmers.
But I am all in favour of capital gains taxes, estate taxes, death taxes. I will always choose any tax at the end of a successful career/business rather than punitive income taxes along the way making it impossible to invest capital and build a business in the first place.

How does society benefit from generation after generation inheriting the land/business almost tax free, while those without are stuck with huge income tax bills as punishment for working hard and trying to get ahead?

I'm in favour of a generational reset each time. Let the entrepreneurs have a chance instead of taxing them into the poor house while giving a free ride to freeloaders who won the genetic lottery. The big get bigger, the rich get richer, and we miss out on the innovations and work ethic of all the other candidates who never even get the chance. Who is to say that my kids are any more ambitious or capable or innovative than the kid across the road whose dad works nine to five paying extortionate income tax his whole life, leaving nothing to invest in starting his own farm or business? We never get to find out using the current system. Just look at the results, we have a "farmer" such as Chuck without an iota of business or financial sense. Or our Prime Minister. Myriad examples. Let the cream rise to the top based on their own merits, not based on their grandpa and grandma's hard work.

We are turning back into the situation our ancestors left the old country to get away from, where a handful of nobles own everything, and everyone else has no opportunity. The only way to join the club was to be born into it. Dynasties, landed nobility, and landless peasants doing the work.

Jeez A5 your such a radical calling for land reform through estate and capital gains taxes on the rich! That sounds very similar to NFU policy to keep land holdings in the hands of more smaller family farmers instead of letting the mega corporate farms, corporate investors and families buy up and control all the land. You are full of surprise there A5. Are sure you are not a closet member of the NFU? LOL

So incorporated farm businesses currently have a 0% tax rates (2% in Alberta) on net income up to $600,000 in Saskatchewan and the federal tax rate on small business rate is only 9% on up to $500,000.

So you haven't had much luck buying land and expanding your farm with those low small business tax rates?

[jazz]

AB when prime ministers act like kings I don’t see any problem being a noble. Beats serf any day.

You are talking about a just society where capital and ingenuity are r rewarded. That ship sailed a long time ago. I can only think about protection now.

[AlbertaFarmer5]

Chuck, you couldn't be more wrong, or misunderstood me more if you tried.
I said nothing against farm size, or the rich.
I'm referring to how the tax structure punishes the ambitious and rewards the useless.
Anyone who has the ambition and the work ethic and the knowledge and the skills and the ideas should be encouraged to grow as big and as rich as they possibly can, society is absolutely better off when the most productive amongst us are permitted to do what they do best on hindered by taxes and regulations and meddling.


But to avoid the situation where a handful of Rich dynasties own everything regardless of skill or work ethic or ability.
But we still need tax revenue, without destroying all motivation to be profitable.
So instead of taxing profits along the way, tax at the end of life or end of career.

What's the nfu and NDP are saying is kneecap everyone who works too hard and is slightly more successful than the least common denominator. Destroying all work ethic. Drake everyone down until we are all equal. I suggest dragging everyone up with the opportunity to succeed but starting off from equality of opportunity. Not trying to engineer equality of outcomes, which has never worked and will never work.
I'm not jealous of someone who is exceedingly successful by their own hard work or innovative ideas. I'm just upset that countless other people who are possibly even more hard-working and more innovative never get the opportunity because the wealth and the assets and the opportunities get passed from generation to generation virtually tax free, bypassing the average tax paying citizen.

[blackpowder]

Good points all.
I'm not worried about an undeserving nobility because the third or fourth generation always pisses it away anyway.
What we don't want is handed down in perpetuity to increasing numbers of non farming descendants. I heard S.America that way?
Quite an evolution in farm accounting attitudes in my career. I feel sorry for the kids who have to sell to pay the tax but lay the blame squarely on the parents. I should know as mine sure kept their heads in the sand.
Hutterites are good neighbors here but do they have a distinct advantage in this area as well?
As for non farming beneficiaries, the higher the price goes, the more of those sell?

[AlbertaFarmer5]

AB5 you mustn’t have kids.

You work your whole lifetime to make things easier for the next generation, paying for assets with money you’ve already been taxed on and you think they should pay tax on it again. There are much better ways to keep the “dynasties” as you call them in line.

I’ve built my farm from scratch and would hope in someway it helps my kids not have to go through what I did. You might call that spoiled, but I’m sure they will earn their merit to society just the same.

WOW is all I can say!!!

I do have kids. I also spent 20 year working around the clock for wages, paying income tax in the top brackets trying to have enough capital left over to build a farm. No tax breaks. No inheritance. Buying most everything at arms length market value.

If I can pass on work ethic, and knowledge, and hands on experience and industry contacts to my kids and not a penny more, that will already put them head and shoulders above the average joe. I have no doubt that they would pick up the pieces, and start over and be just as successful.

I used to think the same, I don't want my kids to have to nearly kill themselves with work to succeed, as I had to. But there is a happy medium in there.

How do you propose to avoid a situation where a small minority have all the marbles, forever?

We can't all be like Chuck and NFU, and expect to just take it away from someone else who worked harder or smarter. Regardless of how we got here, we are the top of the 1%. The barriers to entry to anyone else to get into this business who isn't born into are massive, enabled in no small part by the tax system.

Even as blackpowder says, after 3 or 4 generations they will blow it all anyways. But that is 2 or 3 generations of coasting on the coat tails of hard working ancestors, of mediocre productivity, of lost opportunity for everyone else, and for the collective good of society.