Common use of Custom Farming Arrangements Custom Clause in Contracts

Custom Farming Arrangements Custom. farming arrangements provide an alternative to leasing for those landowners who wish to remain classified as a farmer under The Income Tax Act. The arrangement allows a landowner to retain close control of the farm business, without becoming actively involved in the operation. Considerations: • The capital gains rollover provision can be preserved. • The capital gains exemption on farmland is maintained. • Contributions to AgriInvest and to the Canada Pension Plan can be made on these earnings. • The landowner assumes all risk. • All farm operations are arranged by the landowner. • Types of Agreements Custom Hiring Agreement - The landowner makes all the farming decisions, arranges for the completion of all field operations and pays for all crop inputs. The landowner also receives all the income from grain sales and agrees to pay the custom operator a basic lump sum fee by a specified date, plus a bonus (usually on a crop share or percent of profit basis). Joint Farming Venture Agreement - The landowner and custom farm operator are both considered to be farmers. The parties share the crop sales and input costs on a percentage basis (e.g., 50:50). Farming partnership agreement - The landowner receives all of the income from crop sales and pays a farmer a share (e.g., two-thirds). The customer operator pays for all of the crop inputs and equipment. • It is important to consult a lawyer, accountant or farm management specialist before entering into any custom farming agreement. Some agreements may not meet the income from farming criteria. IV.

Custom Farming Arrangements Custom. farming arrangements provide an alternative to leasing for those landowners who wish to remain classified as a farmer under The Income Tax Act. The arrangement allows a landowner to retain close control of the farm business, business without becoming actively involved in the operation. Considerations: • The capital gains rollover provision can be preserved. • The capital gains exemption on farmland is maintained. • Contributions to AgriInvest and to the Canada Pension Plan can be made on these earnings. • The landowner assumes all risk. • All farm operations are arranged by the landowner. • Types of Agreements Custom Hiring Agreement - The landowner makes all the farming decisions, arranges for the completion of all field operations and pays for all crop inputs. The landowner also receives all the income from grain sales and agrees to pay the custom operator a basic lump sum fee by a specified date, plus a bonus (usually on a crop share or percent of profit basis). Joint Farming Venture Agreement - The landowner and custom farm operator are both considered to be farmers. The parties share the crop sales and input costs on a percentage basis (e.g., ie 50:50). Farming partnership agreement - The landowner receives all of the income from crop sales and pays a farmer a share (e.g., two-thirds). The customer operator pays for all of the crop inputs and equipment. • It is important to consult a lawyer, accountant or farm management specialist before entering into any custom farming agreement. Some agreements may not meet the income from farming criteria. IV.