Upon the death of their father (Mr. X), Sons A and B received a devise of the farm that he had actively farmed until his death, but which was not farmed by them. Alternatively (in Scenario 2), Son A carried on the farming business for a number of years before Mr. X’s death. After indicating that both sons, in both Scenarios, could benefit from the capital gains exemption for qualified farm property, CRA went on to address s. 69(11), and stated:
Although the application of subsection 69(11) is a question of fact, it is possible that this provision will apply in the two Scenarios you have described. Specifically, in Scenario 1, it is possible that this provision applies because of the subsequent sale by both sons, while in Scenario 2, it could apply because of the subsequent disposition by Son B. Of course, subsection 69(11) will only apply if the subsequent disposition of the qualified farm property occurs before the day that is 3 years after the date Mr. X transfers the qualified farm property to his sons.