Farming and fishing income and property
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Farming or fishing income
- Report on lines
- 13499 to 14300 (135 to 143 until 2019) on the deceased's Final Return
- 7 of the deceased's T3 Trust Income Tax and Information Return
Farming or fishing income received from January 1 to the date of death is generally reported as part of your self-employment income on the Final Return on lines 13499 to 14300.
However, if farming or fishing income is earned after the death, it is considered income of the estate, and must be reported on line 7 of the T3 Trust Income Tax and Information Return (T3 Return).
Calculate your farming or fishing income
The calculation is completed, for either the Final Return or the T3 Return, in:
Farming or fishing income eligible for an optional T1 return
If you file an optional Return for Rights or Things and you use the cash method, you must include income from harvested crops or livestock in the return. Otherwise, you can include the income in the Final Return. If the person who died was the proprietor or a partner in a farming or fishing business and the business’s fiscal year end is not December 31st, business income between the fiscal year end and the date of death may be reported in an optional Return for a Partner or Proprietor.
The value of unharvested crops can be optionally included in the Final Return or a Return for Rights or Things. Refer to archived interpretation bulletin IT-234, Income of Deceased Persons - Farm Crops, on how to treat unharvested crops.
Property used in a farming or fishing business transferred to a child
For property used in a farming or fishing business that is transferred to a child, the transfer may be made on a tax-deferred rollover basis. Provided that certain requirements are satisfied, you may elect an amount as the deemed proceeds of disposition of the property.
The election (subject to certain restrictions) must be made in the deceased's Final Return.
How to apply the elected amount
The elected amount is the proceeds amount included in Column 2 (Proceeds of disposition) of Schedule 3 when calculating the capital gains for the deemed disposition of the farm or fishing property. You can generally elect for the amount to be any amount between the property’s adjusted cost base and fair market value right before death.
The elected amount will allow you to reduce the capital gain, recapture of capital cost allowance, or terminal loss on the Final Return. However, the transfer postpones any gain, recapture, or terminal loss to the date the beneficiary disposes of the property.
If you do not elect an amount that will fully defer the capital gain and the deceased has not reached the lifetime capital gains deduction limits, you may be eligible to claim a capital gains deduction or an existing net capital loss on the Final Return to offset all or a part of the capital gain.
What is considered Qualified Farm or Fishing Property that is eligible for the transfer on a tax deferral rollover basis
Only certain farm or fishing properties qualify for the transfer:
- 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.
Conditions to qualify
To use the elected 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 immediately 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 principally for farming, fishing, or a combination of both on a regular and ongoing basis, before the deceased's death
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
- the deceased's child's spouse or common-law partner
The rollover provisions available for farm property also apply to land and depreciable property used mainly 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 IT373R2-CONSOLID, Woodlots, or contact the CRA at 1-800-959-5525.
You may also be able to elect an amount for the deemed proceeds when a share of the capital stock of a family farm or fishing corporation, or an interest in a family farm or fishing partnership is transferred to a child. For details, see interpretation bulletin IT349R3, Intergenerational Transfers of Farm Property on Death.
Capital gains deduction on Qualified Farm or Fishing Property
If you have capital gains on Qualified Farm or Fishing Property, you may be eligible for the capital gains deduction up to your lifetime capital gains deduction limit.
To find out more about eligibility, deduction limits and how to claim the capital gains exemption, refer to capital gains deductions.
Apply any remaining restricted farm losses
If the deceased has any remaining restricted farm losses carried forward, they can apply them, without the usual limit against gains from their farm property, in their Final Return.
Find out more about What is a restricted farm loss?
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