The taxpayer acquired farmland and rented 50% of it to an unrelated farm producer and 50% to a corporation that operated a nursery there and whose shareholders were him, his children and some of his brothers. During that time, the income from the nursery was his principal source of income. The corporation then was dissolved, and thereafter the taxpayer has been leasing all the farmland to a farm producer.
What would be the tax consequence if the taxpayer made a gift of the land to his sons during his lifetime? CRA responded:
[P]ursuant to paragraph 73(3)(a), the property must include, among other things, land of a farming business that is carried on by the taxpayer. In this case, the taxpayer has never carried on a farming business himself. We therefore do not believe that he can avail himself of the rollover provided for in subsections 70(3) and 70(3.1).