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Lifetime Capital Gains Exemption and Farm Properties.


What you need to know

Before any of the following conditions are applicable, the farm property being sold must qualify.  The definition is complex, and the advice of an experienced tax attorney and accountant must be obtained.

According to CRA a qualified farm or fishing property (QFFP) includes:

a share of the capital stock of a family-farm or fishing corporation that you or your spouse or common-law partner owns;an interest in a family-farm or fishing partnership that you or your spouse or common-law partner owns;real property, such as land, buildings, and fishing vessels; andeligible capital property, such as milk and egg quotas, or fishing licenses.

Frequently Asked Questions:

1. What is the current LCGE?

The maximum LCGE for individuals who realize capital gains on the disposition of QFFP and qualified small business corporation shares is $866,912 for the 2019 tax year. Since only half of the capital gain on the disposition of property is taxable, the resulting capital gains deduction limit is $433,456. The deduction limit is indexed annually to inflation using the Consumer Price Index data as reported by Statistics Canada.

2. How is the limit changing for QFFP?

For QFFP disposed of after April 20, 2015, Budget 2015 allows an additional lifetime exemption amount to effectively increase the LCGE for QFFP to $1 million. The LCGE for QFFP will stay at $1 million until the indexed amount of the base LCGE ($866,912 in 2019) exceeds $1 million. At that time, the same LCGE limit, indexed to inflation, will apply to the three types of property.

3. How is the additional exemption calculated?

The additional exemption is calculated as the difference between $1 million and the indexed amount of the base LCGE ($866,912 in 2015). For properties disposed of in 2019, the additional lifetime exemption for QFFP is $133,088 and the additional lifetime deduction is $66,544.

4. Can I use the additional lifetime deduction when I dispose of qualified small business corporation shares?

No, the additional lifetime deduction can be used only for QFFP. Qualified small business shares only qualify for the additional deduction to the extent that they also qualify as shares of the capital stock of a farm or fishing corporation.

5. Can I use the additional lifetime deduction for QFFP before the LGE limit that applies to both QFFP and qualified small business shares is exhausted?

No, the additional lifetime deduction for QFFP can be used only after the existing LCGE limit that applies to both QFFP and the qualified small business corporation shares ($433,456 for 2019) is exhausted.

7. Where can I get more information about this?

The Canada Revenue Agency (CRA) is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available

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