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HomeMy WebLinkAboutZurich Citizens News, 1972-12-07, Page 13THURSDAY, DECEMBER 7, 1972 ZURICH CITIZENS NEWS PAGE 13 Transfer of farm assets (by J.J. Hagarty, Minister of Agriculture and Food, Stratford) Many farmers are considering changes in ownership of farm assets. The new tax laws and the resulting discussion have encouraged people to ask quest- ions about their own situation. One good thing about the tax changes is that it encourages us to think, plan and make some decisions. Hopefully these plans will benefit all members of the family. Separation of Principal Res- idence and One Acre of Land This has been recommended by some when buildings are included in a partnership and/or corporation. Some doubt has been cast on the advisability of this technique (1) the zoning by-laws may not allow it (2) loaning agencies such as Farm Credit Corporation may not allow it (3) depreciation of the house will not be taken as an expense (4) local taxes might be high- er due to separate assessments. However, there may be cases where houses should be kept out of the corporation to take ad- vantage of capital gains exemp- tions on principal residences. e.g. Where three brothers live in separate homes that would otherwise be owned by the corp- oration. Thebrothers will then not have to pay rent for the houses (which is income to the corporation and a non-deduct- ible expense personally). Transfer of Depreciable Asset; The new tax regulations dict - News of Kippen Ross Chapman, R,R,3, Kip - pen, is a patient in South Huron Hospital, Exeter. Elzar Mousseau, who has been a patient in Seaforth Hospital, for the past five weeks, has returned home. Mr. and Mrs. Alex McGregor and Mr. and Mrs. Elmer Hugill, Clinton, spent the week -end in Akron, Ohio . Mr. and Mrs. Robert Corn- ish, Guelph, visited with Robert Thompson. KIPPEN EAST W, I. The Christmas meeting of Kippen East Women's Institute will be held at the home of Mrs. Vern Alderdice on Dec- ember 13, at 8.30 p.m. Roll call will be "my favourite Christmas recipe" and samples of same. Mrs, Alex McGregor will give a demonstration, Mrs. Dave Triebner will be in charge of lunch and Mrs. Al Hoggarth the ice cream, ate that all depreciable assets purchased after December 31, 1971 be depreciated using the diminishing balance procedure (Part XI). With the new Income Tax Act, straight-line deprec- iation (Part XVII) is being phased out. All depreciable assets which were purchased prior to 1972 and are now being depreciated under Part XVII (the straight-line method), how• ever, may be left under the straight-line system. Machinery and buildings sold or rented to an individual, partnership or corporation will have to be depreciated on the declining balance basis (Part XI ), Most of these assets are on straight- line depreciation ( Part XVII ) now. Farmers with assets purchased prior to 1972 are strongly advis- ed to continue with the straight- line depreciation method for all assets presently being depreciat- ed by that method. The basic reason for recommending this course of action is the following When the diminishing balance method (Part XI) is being used, all depreciable items are lump- ed together in various classes according to the maximum rates of depreciation allowed by the tax laws, If all mach- ines of a certain class are sold, and if the returns from these machines are greater than the undepreciated balance of that class, the excess is considered a capital recovery which is taxable income for the year in which it is received. Alternat- ively, when as asset that has been depreciated under Part XVII (the straight-line method) is sold, the returns from the sale of this asset are tax free. Non -Arms Length Transfer of Machinery. If machinery is transferred from father to son, it is trans- ferred at fair market value. The son would of course be using Part XI method regard less of the method used previously by father. If the machinery is transfer- red from a father to a partner- ship or corporation, it is trans- ferred at the fair market value. On many smaller farms this is greater than book value. If the father has been using Part XVII there will be no recapture. If he has been using Part XI, the difference between book value and fair market value will be recapture of depreciation. On some large farms where machinery is used to cover many acres, the book value may be higher than the fair market value. If father has been using HESS JEWELRY ZURICH has a fine selection of DIAMOND and WEDDING RINGS Watches * Clocks * Cuckoos *Barometers* CHRISTMAS DRAW with a $1.00 purchase you have a chance to win a Ladies or Gents Wrist Watch. DRAW TO BE MADE ON CHRISTMAS EVE PROMPT WATCH AND CLOCK REPAIRING *WORK GUARANTEED* Part XI there would be a "term- inal loss" to balance against income. Should father continue owning machinery that is now on straight-line depreciation? Maybe. When the time comes to trade in the old machine, father and son could both go to the dealer. Father would re- ceive an allowance for his old machine. Son would buy the machine for the new price. This will allow him to take capital cost allowance on the full price. Father could make a gift to son. It will not be subject to gift tax unless it goes over the $2, 001 maximum gift exemption bet- ween individuals in any one year THANK YOU RESIDENTS OF ZURICH We, the cillors wish to orted us Our goal Village in which four newly -elected coun- in the Village of Zurich, thank all those who supp- at the polls on Monday. will be to make the of Zurich a better place to live, work, and play. Thanks again for your confidence. Fred H a berer Isidore Laporte Geoge Haggitt Leroy Thiel =MIN 11.11•ERMINOINMIQUIMINOM Snowmobile Owners WE CAN SUPPLY YOU WITH LOW COST INSURANCE *Third Party Liability *Accident Benefits *Physical Damage We Will Also Insure Your Sleighs And Trailers ROBERT F. WESTLAKE INSURANCE "An Types of General Insurance" PHONE 236-4391 - ZURICH