Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Is farm land vested indefeasibly in the deceased's daughter if her brother is given an option to buy the land at 75% of its FMV when the daughter offers it for sale, or to lease it at FMV if the daughter or her immediate family ceases to farm the land?
Position: Yes.
Reasons: Relevant case law.
XXXXXXXXXX 2002-016563
Yves Moreno
April 8, 2003
Dear XXXXXXXXXX:
Re: Indefeasible vesting of farm land
This is in reply to your letter dated September 25, 2002, wherein you ask whether farm land vests indefeasibly in the deceased's daughter where his son has an option to buy the land when the daughter offers it for sale, or to lease it if the family ceases to farm the land. We apologize for the delay in responding to your letter.
Your letter states the following hypothetical facts:
1. Mr. A owns farm land.
2. Mr. A passes away and as a consequence of his death, he transfers the land to his daughter, subject to a double option granted to his son giving him the right:
a) to purchase the land at 75% of its fair market value should his sister offer it for sale (30 days exercise period); or
b) to lease the land at fair market rent for a period not exceeding 15 years, should his sister or her immediate family cease to farm it.
3. After the moment of Mr. A's passing, the son has 15 years to exercise the purchase option and 10 years to exercise the leasing option.
4. Both options are registered by way of caveat against the land.
Provided some conditions are met, subsection 70(9) of the Income Tax Act provides a rollover on farm property that is transferred when the owner passes away. One of those conditions is that the property must vest indefeasibly in the child. We do not consider that the above-mentioned right of first refusal and lease option would prevent the property from vesting indefeasibly.
This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.
We trust our comments will be of assistance.
Theresa Murphy
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2003
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2003
Email this Content