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Bill to level the tax burden of selling the farm to a family member crosses the finish line

By: Kelvin Heppner

June 23, 2021

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A private member’s bill designed to level the tax burden when selling an incorporated small business to a family member versus selling to a non-family member received final approval from the Senate on Tuesday, clearing the path for Bill C-208 to become law.

The bill, brought forward by Manitoba MP Larry Maguire, addresses the issue of it being more costly to transfer an incorporated farm to a child or grand-child’s corporation than to a third party.

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The Senate approved the bill on the second-last scheduled day of its spring sitting, as Parliament is set to rise on Wednesday.

“This is tremendously positive news for farm families, who will now will not have to face an additional tax bill, potentially in the hundreds of thousands of dollars. This reduced financial strain on the next generation will directly contribute to a more robust and vibrant Canadian Agriculture sector,” says Mary Robinson, president of the Canadian Federation of Agriculture, in a statement issued Wednesday.

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“We feel this legislation is going to help enable sustainable business and farm succession,” notes Alanna Gray, policy manager for Keystone Agricultural Producers (KAP), in the interview below.

Previously, when a farmer or small business owner sold shares in their corporation to a family member’s corporation, the difference between the original purchase price and sale price was considered a dividend — a measure designed to prevent tax avoidance between related companies. However, if the buyer was a non-family member, the sale was categorized as a capital gain, and therefore taxed at a lower rate and eligible for a lifetime capital gains exemption. C-208 amends the Income Tax Act to allow the sale of shares to a child or grand-child to be treated as a capital gain rather than a dividend.

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“On behalf of the farming families across Canada, we are appreciative that our long-standing recommendation to remove this barrier to smooth family farm transfers has reached a successful conclusion. We thank all the MPs, Senators, and in particular MP Larry Maguire and Senator Diane Griffin, who supported and tirelessly advocated on behalf of Canadian farmers,” adds Robinson.

Meanwhile, the future of two other agriculture-related private member’s bills — Philip Lawrence’s Bill C-206, which would remove the carbon tax from natural gas and propane used on farms, and John Barlow’s Bill C-205, which would tighten biosecurity legislation to address farm trespassing — are up in the air. The House of Commons gave its final approval to C-206 in its last scheduled day of sitting on Wednesday, sending it to the Senate. Senators, meanwhile, have agreed to add at least two days of sitting to their calendar next week, meaning there’s still a chance Lawrence’s bill could pass before the summer break. Any legislation that has not received Royal Assent would die on the Order Paper if the Trudeau government decides to call a late summer or fall election.

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Listen to Kelvin Heppner’s conversation with Alanna Gray, policy manager for Keystone Agricultural Producers, discussing the passage of Bill C-208:

Editor’s note: this story has been updated with details on C-206 and the interview with Alanna Gray.