Federal politicians have given third reading to Bill C-208 that will amend the Income Tax Act so farms and small businesses that pass to children or grandchildren will be taxed the same way as sales to non-family people.
The bill now goes to the Senate which resumes sitting on May 25.
The bill was introduced by Conservaite MP Larry Maguire of Brandon-Souris riding in Manitoba; it is rare for a private member’s bill to gain House of Commons approval.
Maguire said, when a person sells their small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend, but if the business instead goes to a non-family member, the sale is deemed a capital gain, which is taxed at a lower rate and allows sellers to use their lifetime capital gains exemption.
“I think we can all agree that it is completely unfair for the tax rate to be significantly higher when the farmer sells his operation to his son rather than to a third party who, in many cases, is a complete stranger,” Maguire said in the House of Commons.