While parents who wanted to sell shares to an unrelated corporation could use the capital gains exemption to reduce the income tax on the resulting capital gain on the transaction, the same did not hold true if sold to their children. If family farmland or business was sold to their children, parents would get an income tax hit – and not the good type.
Basically, it was easier to sell to a third-party than it was to leave the family farmland and business to a family member. That is no longer the case.
Sales to children are no longer negatively affected by the amended Act, with parents receiving the same tax rights as if sold to an outside party.
Section 55 of the Income Tax Act was also amended. Previously, tax relief was provided for certain corporate reorganizations that assist in the transition of business or family farm or fishing assets between family members, but it was not allowed in a sale to siblings—apparently they weren’t considered to be family.
Coming to its senses, the amendment now allows for siblings to be considered a family relation relative to this tax rule.
Thanks to C-208, the amendments to Canada’s Income Tax Act will aid in the continuation of a family farm enterprise.
Photo by Luemen Rutkowski on Unsplash