Bill urges tax deferred transfer of assets to siblings

NDP motion opposed by Conservatives, saying it would ‘loosen the application of the anti-avoidance rule’

A motion from an NDP member of Parliament seeks to “correct” income tax rules and simplify complex farm succession regulations. 


Under one section of the Income Tax Act, siblings aren’t considered related, leaving them unable to re-ceive the same tax exemptions on asset transfers as spouses and children.


An NDP-sponsored bill — C-661, Facilitating the Transfer of Family Farm or Fishing Corporations Act — would amend the rule, although private member bills rarely become law. 


“The value of farmland has jumped so much in recent years that it would be virtually impossible to pay even just the taxes on the transaction value if one of the partners had to quit the business. That is what is happening right now,” Francine Raynault, who introduced the bill, told the House of Commons earlier this month.


“There are two ways to deal with this problem, but they are complicated and costly, if not impossible. The first way to get around the provisions of subsection 55(2) of the Income Tax Act is what I just ex-plained: create a new company and transfer some of the assets of the business in order to save on taxes on the transaction. However, this solution is available only to people who are deemed not to be operating at arm’s length, which is not the case for brothers and sisters at the moment.”


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The change has previously been proposed by the Canadian Federation of Agriculture as one way to assist young farmers.


When debated earlier this month, the bill received support from a Liberal MP, but was opposed by members of the majority Conservatives, who say the rules are consistent with other regulations that don’t allow for tax-deferred transfers of assets be-tween siblings. 


In the federal budget released last month, the Conservatives did raise the lifetime capital gains exemption for farm owners to $1 million. 


“Bill C-661 would loosen the application of the anti-avoidance rule at a time when the government is trying to strengthen integrity of the tax system by closing loopholes that allow tax avoidance,” Conservative MP Mike Lake said May 12. ”


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