Humber Real Estate : Course 4 Module 14-Transactions Involving Development Land and Farms Questions And Answers Rated A+

As a general rule regarding HST, the sale of farmland is taxable unless what exemptions apply? - - A farmer who uses a smaller portion of the farm for living (this smaller portion would not be business and therefore HST exempt.) - The farm is sold to a relative, a former spouse or a common-law partner. - A corporation, trust or partnership sells the farm to a partner, beneficiary, shareholder or a related person. - A farm that has been used not as a business but for personal use only. Because of the complexity of selling and buying a farm property, the irrevocable time period is normally how long? - 1 business week, compared to 24 hours for a residential transaction. Buyer needs generally fall into 3 categories: - - Physical requirements: Specific needs such as site characteristics & transportation - Investor/user objectives: General goals of the buyer, including type of property being sought, investment return (if applicable), lease vs. own & type of ownership - Financial requirements: Amount of capital, other financial resources, credit standing & financial history Crop ownership should be covered in the agreement of purchase and sale of a farm property, as some crops can be________________________ per season. It should be clear in the APS who owns the yield from any crop currently planted. - Harvested more than onceExternal risks are often what? - Beyond the control of the investor. Farm building construction is regulated under what codes in Ontario? - - The Ontario Building Code - The National Farm Building Code of Canada Farm value can be affected by whether a ___________ or a ____________________, can be assigned at point of sale. For example, a dairy farm without a milk quota is of little value, even if it has excellent milk production facilities. - Quota, production contract For a farming property, how is the capital gains tax calculated? - As the difference between the adjusted cost base and the sale of the farmland, stocks or any such capital property. Note: Ontario farmers are eligible to receive a 75% tax reduction for municipal taxes. Generally risk is assessed as either ____________ or ____________. - External, internal. How can a buyer's salesperson ensure a seller has complied with the requirements of the Nutrient Management Act? - - Advise the buyer to consult with an appropriate third-party professional, such as a nutrient management consultant - Make the offer conditional upon the buyer and the buyer's nutrient management consultant reviewing the seller's nutrient management strategy and receiving a satisfactory report How often should soil testing be done on farming fields? - Every 2-3 yearsIn addition to minimum distance requirements for livestock or manure storage structures, the Nutrient Management Act also addresses what? - - Storage, handling, use and transportation of commercial fertilizers - Requirements to develop, document and retain records relating to nutrient management plans and strategies - Required qualifications for farmers and others applying such materials - Establishment of minimum distance requirements regarding land applications to protect adjacent land and watersheds/sources In an agreement of purchase and sale of a farm, what specific condition regarding quotas / contracts should a salesperson include? - The condition providing for successful transfer or assignment from seller to buyer of any quota, entitlement or contract that a buyer needs to market products for which the farm is being purchased. Specific marketing boards have their own transfer or assignment procedures and should be contacted directly for guidance. Internal risks are what? - Created by the management decisions of an organization. Land assembly is more commonly known as what? - Plottage MDS I calculations are part of a nutrient management strategy required under what legislation? - The Nutrient Management Act Most risk analysts divide risk into what 4 broad segments? - - Financial issues - Market issues - Business issues - Building issuesOntario farmers receive a ______ tax reduction for municipal taxes, based on the current residential property class if the property is assessed and valued as farmland by the _____________________________, AND if they: - Carry on farming business generating a pre-determined level of gross income - Are Canadian citizens or permanent residents of Canada - Have a valid farm business registration number under the Farm Registration and Farm Organizations Funding Act with the registration being completed by Sept. 1 of the year prior to the taxation year - Submit the appropriate application annually - 75%, Municipal Property Assessment Corporation (MPAC) The agricultural industry has evolved into larger industrial operations known as what? - Agribusiness The Places To Grow Act enables what? - - Designation of any geographic region of the province as a growth area with a specific focus - Development of a growth plan in consultation with local officials, stakeholders, public groups and members of the public and indigenous communities for a particular region - Decisions about growth to be made in ways that promotes greater housing and transportation options; investments in regional public service facilities in downtown areas; and maximizes infrastructure investments in communities while balancing regional needs for farmland and natural areas To ensure a farm's proper permits are in place, what steps should a salesperson take? - - Advise the buyer to consult with a third-party professional, such as a lawyer, to check for any outstanding permits still open with the municipality - Discuss the findings with the buyer- Make the offer conditional upon the buyer obtaining the proper permits for the farm - Make the offer conditional upon the buyer's lawyer reviewing the APS and the seller's financial information - Include a waiver in the offer, as required To ensure that the well and septic tank are in proper operating condition, and that the water is clean, a buyer's salesperson should do what? - - Advise the buyer to arrange for an inspection of the well and septic tanks by third-party professionals - Advise the buyer to obtain a bacteriological analysis of the drinking water from the local health authority and obtaining a report that there is no significant evidence of bacterial contamination - Advise the buyer to obtain a chemical analysis of the drinking water where the risk of such contamination may be suspected - Advise the buyer to obtain a report confirming water service capacity in the area - Make the offer conditional upon the buyer receiving satisfactory reports about the well, septic tank, water capacity and bacteriological analysis To ensure the buyer of a farm property has the right type of insurance coverage for their specific needs, a buyer's salesperson should do what? - - Advise the buyer to consult with a farm insurance specialist - Make the offer conditional upon the buyer arranging insurance for the property To ensure the seller of a farm property has complied with both The Ontario Building Code and The National Farm Building Code of Canada, a salesperson should do what? - - Make the offerconditional upon the inspection of the property by an agricultural inspector and obtaining a report satisfactory to the buyer - Advise the buyer to contact the Canada Plan Services, a Canada-wide network of agricultural engineers and livestock specialists who plan, design and construct modern farm buildings (if the buyer wants to construct new buildings) To estimate highest and best use for an improved site, the improvements must: - - Either conform to the zoning or be legal non-conforming - Conform to the other buildings in the area - Add value to the land Upon hearing a nuisance matter, The Normal Farm Practices Protection Board may take what steps? - - Dismiss the complaint if the disturbance results from a normal farm practice - Order the farmer to cease the practice causing the disturbance if it is not considered to be normal farm practice - Order the farmer to modify the practice to be consistent with normal farm practice What 2 minimum distance separation criteria are used for a livestock barn or manure storage? - MDS I - The minimum separation distance required between new development and existing livestock facilities or manure storage. MDS II - The minimum separation distance required between new or expanding livestock or manure storage facilities and property boundaries, houses, recreational areas and other land uses. What 2 provisions in the Income Tax Act allow for income tax-free sales of farm property? - 1. A sale by an individual to that individual's child as long as the property involved is a qualifying farm property.2. A $750,000 capital gains exemption is available to exempt all or a portion of capital gain realized on qualified farm property, regardless of who buys the property. This exemption also applies to shares of family farm corporations and interests in family farm partnerships. What are 3 common land leasing arrangements that apply to crop land? - - Crop share lease (i.e. 1/3 share of all crop sales goes to the landlord and 2/3 to the tenant. Income is often divided as the crop is sold.) - Cash rent lease (i.e. Tenant receives the income from the crop sales, but pays the landlord a fixed amount each year as rent. Rent is normally paid in advance or by 1/2 payment in spring before seeing and balance in the fall after harvesting.) - Flexible cash lease (i.e. Tenant receives all income from crop sales but dollar amount paid to landlord varies with either the price of the commodity, the yield of the crop, or both.) Note: In all 3 types of farm land leasing arrangements, the landlord normally supplies the land and structures used to store the crops. The tenant pays the operating expenses and supplies the labour & machinery to farm the land. What are 3 key factors that an appraiser considers when estimating the highest and best use of an undeveloped vacant site? - - Zoning - the highest and best use should conform with the zoning, unless there is a probable and imminent prospect that the zoning will change or be amended to accommodate the highest or best use estimate not currently legal - Physical possibility of the proposed use in relation to factors such as the size or shape of the lot, soil condition, water drainage, etc. - The demand for the proposed use along with its economic and financial feasibility What are some common legislations that affect farms? - - Animal Health Act - Beef Cattle Marketing Act - Feeds Act - Food Safety and Quality Act- Health of Animals Act - Farm Products Containers Act - Grains Act - Seeds Act What are some examples of material facts that may affect a buyer's decision to proceed with the purchase? - - Improper farm measurements - Misrepresented state of the soil quality or farm equipment - Undisclosed use of harmful pesticides or their use in excessive amounts - Existence of any environmental hazard