MP Larry Maguire recently introduced Bill C-208 in the House of Commons
By Diego Flammini
Staff Writer
Farms.com
A new piece of legislation, if passed, would make it easier for farmers and other small business owners to sell their operation to family members.
Larry Maguire, the MP for Brandon-Souris, introduced An Act to Amend the Income Tax Act (transfer of small business or family farm or fishing corporation), referred to as Bill C-208, on Nov. 25.
Currently, when a person sells his or her small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend.
But if the business is sold to a non-family member, that transaction is considered a capital gain. The sale is taxed at a lower rate and the seller can use his or her lifetime capital gains exemption.
Maguire cited an example of a farmer beginning the succession planning process and looking for fair market value for his farm.
Selling the farm to a third party would result in a 13.39 per cent tax rate. But selling the farm to his family would mean the farmer would have to pay almost 50 per cent in tax, he said.
Bill C-208 would make the tax rate the same whether businesses like family farms sell to another family member or a third party.
“It’s completely unacceptable that it’s more financially advantageous for a parent to sell their farm or small business to an absolute stranger than it is to their children,” Maguire said in the House of Commons. “By making this change in Bill C-208, it’ll allow the next generation to become business owners.”
Family farmers support this piece of legislation.
Craig Riese, a third-generation farmer, grows about 5,500 acres of grains in Lockport, Man.
As farms get larger and have more assets, producers need avenues to ensure the business stays within the family.
“The tax liability that farmers face, especially with the generation that’s coming up and the huge expansion we’ve seen in asset value in the last 10 to 15 years, is massive,” he told Farms.com. “This will help those farm families who want to bring retirement income from one generation to the next in a more equitable way.”
The Canadian Federation of Agriculture and Canadian Federation of Independent Business also support the bill, Maguire said.
Farms.com has contacted both organizations for comment regarding Bill C-208 and the benefits it can have on farmers and business owners.