Income Tax Act Subsection 110.6(1), 110.6(1.3), 110.6(2)

In 2015, the amount increased that a taxpayer can claim for the lifetime capital gains exemption as it relates to qualified farm property. The amount is now $1,000,000.

The definition of qualified farm property comes from Subsection 110.6(1) of the Income Tax Act.

The farm property must be owned by an individual, the partner (spouse or common law) of the individual, or a family fishing partnership.

The farm property could be any of the following:

  • Real or immovable property that was used to farm in Canada by the same individuals that must own the property (found above);
  • Shares of a family farm corporation;
  • An interest in a family farming partnership; or
  • Capital property used by a person or partnership that was used to farm in Canada.

The rules pertaining to the shares are two-fold. One regarding their ownership, and the other regarding the use of the property.

The shares must have been owned by the individual selling them for 24 months prior to the sale, or a person or partnership related to that individual.

The use of the farming property must meet at least one of the following requirements:

  1. In at least 2 years while the farming property was owned:
    1. The gross revenue earned from farming must exceed all other income for the period; and
    2. The farming property was actively used as a farming business here in Canada.
  2. Throughout a 24 month period, the property was owned by the individuals referred to above, and it was used in an active farming business.

Farmers may also be living on the farm property. This means that a portion of the capital gain on the sale of the farm may be sheltered by the principle residence exemption.


Tax Court

The definition of qualified farm property was expanded by the Tax Court of Canada case 2014 TCC 250 Otteson v. The Queen. It is an interesting and education ruling made by Justice Hogan.

Otterson v The Queen, 2014 TCC 250 – What counts as Qualified Farm Property


CRA Resources

Lifetime capital gains exemption for qualified farm or fishing property (

Ontario Resources

Top Ten Tax Questions on the Capital Gains Exemption