Selling Farmland and The Importance of Pre-Planning

When farmland changes hands, it is often one of the most significant financial transactions a family will make. Whether you’re considering selling some land, preparing for retirement, or estate planning, a thoughtful plan can make a big difference.

Tax implications of a land sale – including selling farmland

In Canada, the sale of land will trigger capital gains if the property has increased in value since it was acquired. With farmland these gains are often significant, especially if the land has been passed down through generations.

Without proper planning, many landowners are surprised by the amount of tax owing that comes along with the sale.

How we can help when it comes to selling farmland

Talk to your Stark & Marsh Advisor as soon as you start contemplating a sale. Early advice can help you structure the sale in a way that works best for your family. Our experts in Tax Advisory and Wealth Management can help:

• Identify available exemptions: The Lifetime Capital Gains Exemption (LCGE) may apply on the sale of the land. This exemption can shelter a substantial portion of gains from taxation.
• Structuring the sale: The allocation of the proceeds to the assets being sold (i.e. land, buildings and principal residence) and timing of payments can affect the eventual income taxes owing. Our advisors can provide advice to assist in maximizing the net after tax cashflows.
• Financial Planning – Plan for cash flow: Once your sale of land is complete, a financial plan can offer a roadmap in determining daily cashflow, investment opportunities, retirement and eventual distribution through your estate. Our Wealth Management team can guide you on how to put your new funds to work.
• Coordinate with estate planning: This transaction will impact the assets within your estate. Ensuring your estate plan and your last will and testament has been updated to reflect these changes is essential.  We can help ensure your wishes are carried out.