The Rural Voice, 1985-09, Page 63FARM ADVICE
Budget has some benefits for farmers
The last federal budget contained a
few surprises, a few tax shocks, and a
few welcome benefits for farmers.
The most important change pro-
posed in the budget for farmers is the
$500,000 capital gains exemption for
each taxpayer's lifetime. For all but
farmers, the exemption will be phased
in over six years. For farmers, the ex-
emption applies to any farm sale
completed in 1985.
The budget specifies that to qualify
for the full $500,000 exemption in
1985 the sale must be of qualified
farm property — "farm land and
farm buildings held by an individual
under circumstances where the in-
dividual. his spouse or child uses the
property in a farming business in
Canada." In terms of basic, hard
cash, the budget means farmers will
not pay tax on the capital gain from
selling their farm. And in cases where
a husband and wife are partners, they
are each eligible for the full exemp-
tion. The tax savings could be quite
substantial.
However, provisions for the tax-
free roll-over of $120,000 from a sale
into a Registered Retirement Savings
Plan will be repealed. Farmers who
have already made that contribution
this year have several choices.
If the money is left in the RRSP,
the capital gains exemption for this
year will be reduced by the RRSP
contribution. Or, if the money is
removed from the RRSP, the full
value of the capital gain can be claim-
ed for the exemption.
One area that was not addressed by
the budget is the sale of quotas, which
can yield large sums and equally large
tax bills. Tax is paid based on 50 per
cent of the gain of the sale, minus the
costs of disposition. As many quotas
were received by farmers at no cost to
them, the proceeds of a sale may
equal the gain in a sale. The dif-
ference is included in income and tax-
ed. The gains on the sale of quotas
are not taxable capital gains and thus
do not qualify for the capital gains
exemption. Some quotas sell for
$600,000 or more, which means the
taxes owed could be up to $150,000
for someone in the 50 per cent
marginal tax bracket. This is an area
that should have been examined for
the additional relief it could provide
for farmers.
Another budget item of interest to
farmers is the extension of the Small
Business Bond Program. It was to
have expired at the end of 1985, but
will now run until 1987. Under the
program, farmers in need can arrange
financing of up to $500,000 at interest
rates five to six per cent less than the
market, for a maximum term of five
years. Renewals of existing bonds can
be applied for after the five-year term
is up.
Dollar Sense offers general financial
advice by members of The Institute of
Chartered Accountants of Ontario.
Harold Smith is with Hyde
Houghton, Chartered Accountants,
London.
Hill AND Hill
FARMS
LIMITED
VARNA \ Y CLINFIELD
482.3218 482.3191
ELEVATORS
are both ready
to
receive your 1985 soybean
and corn crops.
Come to Hill & Hill Farms
for fast friendly service
We have a good selection
of seed wheat
We are your distributor
for FIRST LINE SEEDS
SEED CORN & SOYBEANS
For more information, call
Bev Hill or Peter Rowntree
at
Hill and Hill Farms Limited
VARNA 482-3218
SEPTEMBER 1985 61