Question: We’ need advice on whether we should seek farm status or not. We have 11 acres ALR land with barn and principal residence on Salt Spring Island. I’m an architect, my wife an executive coach. We’re unsure if we should maintain our small farm (currently not farm registered) as a hobby farm and part of our principal residence (it’s not sub divisible) or whether to seek farm status. I have one 22 year old daughter who I’d like to leave my portion of the property to.
You should definitely seek professional tax advice.
In order to claim the life time capital gains exemption of $750,000 (if you already have not claimed the exemption) your farm should be “qualified farm property.” Qualified farm property includes real property and eligible capital property used in Canada for farming by a taxpayer, the taxpayer’s spouse, or their children. The definition also includes a share of a family farm corporation and an interest in a family farm. To qualify for this deduction, the property must be owned for at least 24 months prior to its disposition.
Whether or not a property is used principally as farming property is a question of fact. From my understanding, if the property is principally used, that is ore than 50% of the property is used, in farming then is should qualify.
I have not dealt with farming property in the past and an accountant who has experience with farms should be consulted.
In terms of leaving a portion to your daughter, this may be done at or before your death and if it qualifies as farm property then the exemption on your estate should apply. However, you should be aware that in the event of your death, your spouse may make an election to accept the terms of your will or the provisions of the divorce act.