Qualified farm property capital gains deduction

Qualified farm property is also eligible for an enhanced lifetime cumulative capital gains deduction limit of $1 million (again, reduced by the amount of capital gains deductions claimed on other property), effective for dispositions of qualified farm property after April 20, 2015.38 The amount of gain eligible for this deduction may be affected by the balance in your cumulative net investment loss (CNIL) account (see topic 149) and if you have ever claimed an allowable business investment loss (ABIL) (see topic 142).

A qualified farm property includes

  • a building used in carrying on a farm business;
  • a share of the capital stock of a family farm corporation;
  • an interest in a family farm partnership; or
  • a qualified capital property used in carrying on a farm business, e.g., a quota.

In general, if you acquired certain property before June 18, 1987, and it was used in the business of farming by you or a member of your family, it will be qualified farm property, provided the property was used for farming in the year you sell it or in any five previous years during which you or a member of your family owned it.

If you acquired the property after June 17, 1987, you must normally have owned it for at least two years, been engaged in farming on a regular and continuous basis and earned more gross income from farming than from other sources. Similar rules also apply to allow the deduction to be claimed for gains realized on the sale of shares of a family farm corporation and on an interest in a family farm partnership.

However, if you made a capital gains election (see topic 135) on property that would otherwise be considered qualified farm property, the qualifying tests may be different than outlined above. Discuss this with your tax adviser.


38 For dispositions prior to April 21, 2015, the lifetime limit was the same as the limit for the disposition of QSBC shares (see topic 136).