OTTAWA — Legislation ending a tax penalty incurred by farmers who sell their business to family — as opposed to outsiders — has passed third reading in the House of Commons. Applauded by farm organizations, Bill C-208 heads to the Senate.
Bill C-208 will amend the Income Tax Act, ensuring equal treatment for farm operators who sell to immediate family members. Selling to kin generates a dividend between the original purchase price and the sale price. But selling outside the family to an un- related third party — even a foreign buyer — is treated as a capital gain, which is taxed at a much lower rate than a dividend.
“It is a real problem, and the difference can be much more than 25 per cent in some cases,” said C-208 sponsor MP Larry Maguire (Conservative, Brandon-Souris), who sought to “level the playing field” by resurrecting what was an NDP member’s bill that never made it into law during a previous parliament.
Maguire said the governing Liberals have rebuffed the bill as a “loophole for wealthy people to become rich.”
“Well, I guess they’ve never run a small, family business,” he added.
C-208 is a private member’s bill. It will die a quick death if an election is called before the bill is passed by the Senate.