I placed some baking in the grocery cart when a woman standing nearby said she would be putting baking in her cart too.
Then out of the blue she said: “This capital gains tax is making it impossible for me to pass on the farm to my family.”
“Really?’’ I responded.
“My son wants to farm. I can’t see how I can do that without selling some land.
“My father told me to never sell land unless I have to because they don’t make any more land.’’
She inherited a farm in the district north of Moose Jaw “when land prices were a fraction of today.
“Five sections isn’t a big farm.”
At 3,200 acres her farm is rated a small farm. Between 5,000 and 10,000 acres is a medium size farm with over 10,000 acres considered a large farm.
Her concern, even with the $1.25 million lifetime capital gains tax exemption, is that she will need to come up with millions to keep the farm in the family.
Selling some land would make the farm less viable.
“I have two other kids and I want to be fair with them.”
Leaving the farm to three siblings would also make the operation less viable.
She never said what the land was worth when she inherited it, but I assume it was in the early 1990s when that clay land was $500 an acre.
That land is now worth $3,000 an acre, jumping the value of her farm from $1.6 million to $9.6 million.
Strip away the price at inheritance and the $1.25 million lifetime capital gains exemption and $6.75 million is subject to capital gains tax.
And 66.6 per cent of that is taxed. Her problem when it was 50 per cent taxable is made worse by the increased inclusion rate.
The federal government has stated time and again that the policy is to preserve the small farmer. The lifetime exemption comes nowhere near doing that.
Farm land prices have been driven up by numerous factors: low interest rates, competition for limited new supply on the market, provincial laws allowing non-resident Canadians to buy farm land and the subsequent buying rush by long-term land investors.
Land valued a $500 an acre in the early 1990s, now at $3,000 gained 500 per cent, about in line with the stock market.
That good fortune makes it nearly impossible to leave the farm in family hands. The tax will only help increase large corporate farms.
Her predicament is widespread among farmers across Canada.
The federal government ought to take another look at the “tax fairness’’ policy to ensure goals are on the same page as policies to preserve the family farm and rural communities.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
