Farm or fishing property transferred to a child

Here, we explain how to determine the deemed proceeds when there is a transfer of farm or fishing property to a child. For this kind of transfer, you may be able to use a special amount for the deemed proceeds. When you use this special amount, the deceased will not have a capital gain, recapture of capital cost allowance, or a terminal loss. The transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.

When we refer to the transfer of farm or fishing property, the terms farm property, fishing property, and child have the following meanings:

Farm property includes land and depreciable property of a prescribed class used for farming.

Fishing property includes land and depreciable property of a prescribed class used for fishing.

A child includes:

• the deceased's natural or adopted child;
• the child of the deceased's spouse or common-law partner;
• the deceased's grandchild or great-grandchild;
• a person who, while under the age of 19, was in the deceased's custody and control and was wholly dependent on the deceased for support; and
• the deceased's child's spouse or common-law partner.

Conditions

To use the special amount for the deemed proceeds, all of the following conditions have to be met:

• The farm or fishing property is used principally in a farming or fishing business carried on in Canada.
• The child was a resident of Canada right before the deceased's death.
• The farm or fishing property becomes locked-in for the child no later than 36 months after the date of death. If you need more time to meet this condition, you can make a written request to the director at your tax services office before the end of the 36 month period.
• The deceased, the deceased's spouse or common-law partner, or any child or parent of the deceased was using the farm or fishing property mainly for farming, fishing, or a combination of both on a regular and ongoing basis, before the deceased's death.

The rollover provisions available for farm property also apply to land and depreciable property used principally in a woodlot farming business. They apply where the deceased, the deceased's spouse or common-law partner, or any of the deceased's children was engaged in the woodlot operation as required by a prescribed forest management plan in respect of the woodlot. These provisions apply to transfers of property that occur after December 10, 2001. For more information, see Interpretation Bulletin IT-373, Woodlots, or contact us at 1-800-959-5525.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family farm corporation or an interest in a family farm partnership is transferred to a child. For details, see Interpretation Bulletin IT349, Intergenerational Transfers of Farm Property on Death.

You may also be able to use a special amount for the deemed proceeds when a share of the capital stock of a family fishing corporation or an interest in a family fishing partnership is transferred to a child.

Forms and publications

• Guide T4011, Preparing Returns for Deceased Persons
• Interpretation Bulletin IT349, Intergenerational Transfers of Farm Property on Death

Date modified:

2016-01-05