Like so many questions in agriculture, the decision on where to build a new or second farm house often comes down to one answer: it depends.
As Ryan Kehrig, national lead for agriculture tax with MNP, explains, there are a multitude of factors that go into the decision, including who lives where, who pays for the build, and whether or not the house is held within the farm business or privately.
The emotional or relationship perspective isn’t one Kehrig claims to be an expert in, but he can weigh in when it comes to the tax implications of where a home is built and how it is held as an asset. Kehrig says that a house on the farm held as a capital asset within a farm corporation needs to be inhabited by members of the corporation.
What’s more, there are capital gains to consider when owning a home inside the farm corp vs. personally, as a primary residence held personally does not incur capital gains, but a farm asset does and would be included in the overall farm capital gains.
It’s also important to remember that when things change, the ownership structure may have to change too, like when the exiting generation moves on, for example. It’s important to re-visit the financial structure of how the house is owned or paid for in that scenario, he says.
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