Farmers Forum staff
OTTAWA — The Trudeau government’s 2023 federal budget contained a surprise Easter egg: A tightening up of the tax rules that apply when transferring farms and small businesses from parents to children. The tweaks aren’t raising too many alarm bells, barely two years after the law was finally amended to be more fair for in-family farm sales.
In 2021, farm advocates celebrated the passage of a private member’s bill that eliminated the effective tax penalty that farm and small business owners paid when selling the operation to their own children instead of a stranger. The prior discrepancy came down to taxing a farm sale as a dividend versus a lower-taxed capital gain. Only sales to strangers qualified as a capital gain, under the old rules. The bill that levelled the playing field — C-208 — was spearheaded by Manitoba MP Larry Maguire.
Drew Ostash, in Maguire’s office, said that accountants consulting with the Conservatives had so far found “no massive red flags” with the latest adjustments imposed by the federal budget. One change explicitly restricts the lower tax rate to farm sales when the buyer is an adult child who takes actual control of the operation. Finance department officials had been concerned that farm and small-business owners might sell to children or uninterested adult children uninvolved in the enterprise, effectively keeping the older generation as controlling owners while still deriving a tax savings on the sale of the business.
However, Maguire’s office “hasn’t heard of any abuse of the rule” since his bill became law in 2021, Ostash said, adding his boss is regularly thanked by farmers for eliminating the penalty that previously applied.
The Official Opposition Conservatives will be quizzing finance department officials on the issue prior to passage of the 2023 budget, Ostash said.