Eligible capital expenditures – farmers and fishers

You may buy property that has no physical existence, but gives you a lasting economic benefit. Some examples include milk and egg quotas, goodwill, franchises, concessions, or licences for an unlimited time period. This kind of property is eligible capital property. The price you pay to buy this kind of property is an eligible capital expenditure.

Depreciable property

Franchises, concessions, or licences with a limited period that are depreciable properties are not considered eligible capital properties. For more information on depreciable properties, see Chapter 4 of Guide T4003, Farming and Fishing Income.

Annual allowance

You cannot fully deduct an eligible capital expenditure. However, you can deduct part of the expenditures cost each year. The amount you can deduct is the annual allowance. For the chart and instructions you need to calculate your annual allowance and the balance in your cumulative eligible capital (CEC) account, see the charts in Chapter 5 of Guide T4003, Farming and Fishing Income.

Cumulative eligible capital account

You establish a cumulative eligible capital account (CEC) to determine your annual allowance. You also use your CEC account to keep track of the property you buy and sell. The property in your CEC account is your eligible capital property. You base your annual allowance on the balance in your account at the end of your fiscal period. You have to keep a separate account for each business, but include all eligible capital property for the same business in the same CEC account.

Sale of eligible capital property and the capital gains deduction

Part of your income from the sale of eligible capital property that is qualified farming or fishing property may be eligible for the capital gains deduction. For more information on qualified farming or fishing property, see Chapter 7 of Guide T4003, Farming and Fishing Income

To calculate the amount eligible for the capital gains deduction from the sale of eligible capital property, see the charts in Chapter 5 of Guide T4003, Farming and Fishing Income.

Eligible capital property of a deceased person

When a person dies, we deem that the person has disposed of all capital property right before death. Also, right before death, we deem that the person has received the deemed proceeds of disposition. For more information, go to Deemed disposition of property.

Partnerships

A partnership can own eligible capital property and ask to deduct an annual allowance for that property. Any income from the sale of eligible capital property the partnership owns is income of the partnership. For more information about eligible capital expenditures, see Chapter 5 of Guide T4003, Farming and Fishing Income.

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