The farm rollover exists specifically for farming and fishing property, and it follows the active-engagement test, not just the family relationship.
Short answer
Yes, where the property qualifies. Subsection 73(3.1) applies where “the property has been used principally in a farming or fishing business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis”, letting land or depreciable farm property pass to a Canadian-resident child at cost rather than fair market value — but a parcel that is simply rented out, with no family member actively farming it, does not qualify.
The rollover in subsection 73(3.1) is conditioned on the property having actually been used principally in a farming or fishing business the family was actively engaged in — it follows the farming, not the family relationship on its own. A parallel rollover in section 70(9.2) covers the same active-engagement test where the transfer happens on death rather than during the parent’s lifetime, and shares of a family farm corporation carry their own version of the test under section 70(10).
Rolling the land to a child at cost is not the end of the risk. Subsections 69(11) and (12) allow CRA to deem proceeds at fair market value, and reassess, where property was transferred at less than fair value and disposed of again within three years as part of a series that had tax avoidance as one of its main purposes — a developer’s letter of intent signed shortly before a rollover can put that anti-flip rule squarely in play.
One file shows shares of one family farm corporation rolling to a child at cost while a second corporation, holding only rented-out land, did not qualify because nobody in the family actively farmed it. A second shows the standard two-step farm exit — roll to a daughter, then sell — running into the three-year anti-flip rule after a developer’s letter of intent was signed two months earlier. A third shows the same active-engagement logic applied to a farm partnership interest instead of shares.
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