Transfer of depreciable farm or fishing property to a child
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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 4 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 lesser of:
- the capital cost of the property for the deceased
- 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 x Undepreciated capital cost of all of the deceased's property in the same class
Example
A man who owned 3 fishing boats died in August 2022. His will transferred one boat to his son. The 4 conditions for transfer of fishing property to a child are met. You have the following details:
Undepreciated capital cost of the 3 boats right before death: $90,000
Capital cost of the transferred boat: $45,000
Capital cost of all 3 boats: $100,000
The deceased's deemed proceeds on the transferred boat are the lesser of:
- $45,000
- ($45,000 ÷ $100,000 ) x $90,000 = $40,500
The deemed proceeds are $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 any of the following apply:
- The property was acquired in a non-arm's length transaction
- The property was previously used for something other than gaining or producing income
- The part of a property used for gaining or producing income changed
For more information, call 1-800-959-5525.
Tax Tip
You can elect 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 more beneficial to report a capital gain, recapture, or terminal loss on the final return instead of deferring it to a child.
For more information, see Interpretation Bulletin IT349R3, Intergenerational Transfers of Farm Property on Death, or contact us. You may also refer to Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Forms and publications
- Date modified:
- 2023-01-24