Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
XXXXXXXXXX
Dear XXXXXXXXXX
RE: Capital Gains Exemption - Farm Property
This is in reply to your letter of January 6, 1993, and further to our telephone conversation (Thornley/XXXXXXXXXX) of February 20, 1993, concerning three questions relating to farm property and your duties as executor of the estate of XXXXXXXXXX
During our telephone discussion you indicated that since writing to this Department that you had received some legal advice in the matter and that you now had a clearer understanding of the capital gains aspects relating to the disposition of the farm property in question. As this is the case, the following are general comments regarding capital gains and the capital gains deduction.
1. The Income Tax Act provides for a deemed disposition in the year of death. Capital gains arising from the deemed disposition of farm property are eligible for the enhanced capital gain deduction providing they meet the definition of qualified farm property set out in subsection 110.6(1) of the Income Tax Act. From the information supplied in your letter and our subsequent telephone conversation, the farm property of XXXXXXXXXX appears to fit the definition. As discussed, the maximum life time enhanced capital gains deduction cannot exceed $500,000. This enhanced deduction cannot be combined with the $100,000 life time exemption for other properties to exceed $500,000.
2. As the farm property passes to XXXXXXXXXX under the will they will only be subject to the capital gains rules if, while holding the property, the value of the property increases to a point where upon disposition the proceeds exceed the value at which they received the property upon the death of XXXXXXXXXX.
3. As we discussed, the deemed disposition on death rules effectively tax any gain on the farm property in the deceased hands. Transferring the property to the beneficiaries will not cause a forfeiture of XXXXXXXXXX capital gains exemption.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert for Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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