There comes a time eventually when every farm will need be sold.
Often, farms are sold by the owner's choice, upon retirement or
to transfer to the next generation. In other cases the sale is
forced, as in the case of death, disability or financial
difficulty. Whether the sale is made to the neighbour down the road
or to the farmer's children, perhaps at less than fair market
value, planning is necessary to ensure the sale takes place in a
tax-efficient manner. A farm owner has several options.
Allocation of proceeds
There are conflicting tax consequences for the buyer and seller
of farm property. It is often the case, for example, that the
portion of the farm purchase price associated with the farm house
and one acre of land will be exempt from tax under the principal
residence exemption. The seller will want as much of the proceeds
allocated to the house as possible in order to avoid taxable
capital gains on this portion of the sale. The buyer, on the other
hand,
