When a farm is sold as a going concern, it is fairly common for
the family home to be situated on the same parcel of land and also
form part of the sale transaction. An important consideration
in these circumstances involves the allocation of proceeds between
the farming assets and principal residence of the taxpayer.
Absent this determination, the gain ultimately attributed to the
residence may be subject to income tax or at the least utilize a
portion of any available capital gains exemption (capped at
$800,000 / individual) should the property be "qualified farm
property."
To calculate the gain attributed to the farmer's residence,
the Income Tax Act ("Act") generally provides two
options. The first involves a "reasonable"
allocation of proceeds and costs between the family home and
remaining assets. If specific and identifiable costs are
available, this may prove most accurate to establish a cost base
for the family home. A review of recent sales data
