Canada Revenue Agency
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Transfer of depreciable farm or fishing property to a child
If there is a transfer of depreciable farm property, or depreciable fishing property, you may be able to use a special amount for the deemed proceeds if all four conditions are met.
In most cases, when you use this special amount, the deceased will not have a capital gain, a recapture of capital cost allowance, or a terminal loss. This is because the transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.
The special amount (deemed proceeds) is the lower of:
- the capital cost of the property for the deceased; and
- the result of the following calculation:
| Capital cost of the property | ÷ | Capital cost of the property in the same class that had not been disposed of previously | × | Undepreciated capital cost of all of the deceased's property in the same class |
Example
A man who owned three fishing boats died in August 2011. His will transferred one boat to his son. The four conditions for transfer of fishing property to a child are met. You have the following details:
| Undepreciated capital cost of the three boats right before death | $ 90,000 |
| Capital cost of the transferred boat | $ 45,000 |
| Capital cost of all three boats | $100,000 |
The deceased's deemed proceeds on the transferred tractor are the lower of:
- $45,000; and
- ($45,000 ÷ $100,000 ) × $90,000 = $40,500.
When there is more than one property in the same class, you can choose the order in which the deceased is deemed to have disposed of the properties. When you calculate the special amount, adjust the undepreciated capital cost and the total capital cost of the properties in the class to exclude previous deemed dispositions.
Note
When you determine the special amount, you will need to recalculate the capital cost of any property in the class when:
- the property was acquired in a non-arm's length transaction;
- the property was previously used for something other than gaining or producing income; or
- the part of a property used for gaining or producing income changed.
For more information, contact us at 1-800-959-8281.
You can choose not to use the special amount for the deemed proceeds. If you make this choice, you can transfer the property for any amount between the special amount and its fair market value right before death.
You have to make this choice when you file the final return for the deceased.
You may want to do this to claim the capital gains deduction on the Final return. It may be best to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to a child.
For more information, see IT349, Intergenerational Transfers of Farm Property on Death, or contact us. You may also refer to the Guide T4003, Farming Income, or the Guide T4004, Fishing Income.
