Couple own a farm purchased 40 years ago. They have been living there and operating a horse breeding business.
They have decided to rent the farmland to neighboring farmer.
They will continue to operate the horse business just not farming the land.
Does this or will this impact the capital gains, does this property cease to be a qualified farm property?
You should look at the grandfathering rules for farm land owned before June 17, 1987. There are different rules depending on whether the property was owned before or after the threshold date. It could also depend on whether 50% of the property is being used in a farming business by a qualifying person in the year of a sale of the property. All you can do is give them the rules based on what you know. I would check the FCC website or the Ontario Federation of Agriculture site (in Ontario).
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Not sure if horse breeding has different rules than grain farming, but I have dealt with a similar issue for several grain farmers - they need to have farmed the land themselves for a minimum of 5 years during the period they owned it. If so, they qualify for the LCGE on disposal (not considering all other conditions or limitations).
This! I did similarly for someone this year.
Don’t know why horse breeding wouldn’t count as “farming” under the ITA but I’d bet there’s a tax case somewhere. A quick review on CanLII leads me to the suspicion that “horse breeding” IS considered as “farming” (although many of the cases end up as RFLs), but nonetheless, “farming”. So the use of the property would then be a consideration and I’d expect this is primarily pasturing and training…so seems reasonable that whatever area was used for this purpose would qualify.
In my case they were grain farmers forever, except on the home piece, and until it was subsequently rented when unable to continue actual farming.
Thai is interesting, so they own and farmed the land for 40 years but decide to rent land for 5 years before selling. Would the sale still qualify for the Farmland exemption?
@walt
I would think so, yes. But, I suggest you read through the relevant legislation (or at least CRA’s guidelines), and analyze your client’s situation fully, to ensure there aren’t additional snags or traps.
Is the tenant doing anything that could be construed as farming? If yes, then the fact it is rented would not interfere with CGE. If no, I’m not sure without a bit of research.
Gay Wise
Are you able to guide me to relevant legislation
Other than that, try Google…
If you want me to look up specific subsections and paragraphs, please message me directly to discuss payment options. I’m thinking $500? 
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