News in Farm Taxes: Livestock Tax Deferral Regions

Each year, Agriculture and Agri-Food Canada publishes a list of prescribed regions that have experienced either drought conditions or excess moisture. Farmers in these regions qualify to defer reporting the proceeds from the sale of a portion of their breeding herd if they meet certain conditions.

A large portion of famers in western Canada will qualify for the deferral in the 2015 tax year. The detailed list of qualifying regions for 2015 is available in pdf format at http://www.agr.gc.ca/eng/?id=1437654073935.   This can be printed in a pdf format at this link:
http://www.agr.gc.ca/resources/prod/doc/prog/pdf/2016-02_ltd1_final-eng.pdf

The amount of deferral depends on the percentage of reduction of the breeding herd:

• if the breeding herd is reduced by at least 15%, but less than 30%, then 30% of the proceeds (net of purchases) may be deducted in the year of sale;
• if the breeding herd is reduced by 30% or more, then 90% of the net proceeds may be deducted in the year of sale.

The deferred amount must be included in income by the first taxation year after the farm is no longer in a prescribed drought region.

A breeding herd is a group of animals kept for breeding that are at least 12 months old and may include horses, cattle, bison, goats, sheep, deer, elk and similar grazing animals. In addition, breeding bees may also be classified as a breeding herd.

Walter Harder is a Master Instructor with Knowledge Bureau.  He is the co-author of the T1 Professional Tax Preparation courses series, including the Proprietorship Course, which covers farm filing requirements and case studies in detail.  For more information, see the Tax Services Specialist Program.

Refer a Friend	Research	Calculators	Course Trials