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Dean Gallimore PROPOSED TAX CHANGES WHAT DO THESE CHANGES MEAN TO YOUR FARM? Re red CPA & tax expert Dean Gallimore sums up the poten al impact. Dean Gallimore is a Chartered Professional Accountant & Business Valuator who was the Guest Speaker at the Alberta Crops Breakfast with a presenta on called Proposed Federal Tax Changes - What does this mean to your farm? Gallimore is a re red partner from KPMG LLP in Lethbridge where he spent his career working with agriculture clients. He has authored a Professional Development Publica on for CCH Canada Limited on Farm Taxa on and co-wri en Tax Strategies for Farmers (published by Alberta Agriculture). Below he answers some of the ques ons farmers are asking as they try to navigate the proposed federal tax changes. Please summarize the proposed federal tax changes that could impact farmers. Gallimore: Several of the changes will impact farmers! Two examples are as follows: A married farmer may no longer be able to split income with their spouse (and children) resul ng in higher taxes. Believe it or not, the government supports the fact that a one earner family that makes $100,000 should pay more tax than a family where both spouses work and also make a total of $100,000. The changes being proposed will con nue to ensure this inequity. For corporate farmers, the ability to put aside funds in their company for future opportuni es (like land purchases) will be severely curtailed by very high tax rates (while the government has announced some relaxa on of these rules recently, they s ll apply). In addi on, other changes may impact the use of the capital gain exemp on when transferring land to children. Note that at the me of wri ng, the government had indicated they will back off on these proposals, though details have not yet been released detailing how. Exactly how will these changes affect farmers? Gallimore: Generally, the impact will be higher taxes in many cases. While the government recently announced a reduc on to the tax rates on business income of corporate farmers (in response to the very nega ve reac on they received on the proposed changes), higher taxes will s ll result on investment income in corpora ons, and on the ability to tax income in the hands of family members in some cases. We await a government announcement of the "new" plan for using the capital gain exemp on for transfers of farm assets to family members, which will hopefully reduce the nega ve tax implica ons that would have resulted under their proposed changes. Are there any farmers who will be impacted more than others? Gallimore: While poten ally all farmers would be impacted by some of the proposals, those doing business through a company will have the largest issues to worry about. The more profitable the farming opera on, poten ally the bigger the tax issues will be as well. What changes do farmers need to make to their business to avoid large tax bills as a result of this legisla on? Gallimore: In some cases, the farmer may not be able to make changes to avoid some of the proposals and if that is the case, they need to plan for income levels and the impact on their cash flow of higher taxes. 6

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