A Strategic Approach for Farmers and Farm Corporations
For both individual farmers and farm corporations, managing passive income is crucial to maintaining access to the Small Business Deduction (SBD) and ensuring financial stability. One effective strategy to achieve this is by investing in farmland funds. These funds offer exposure to the agricultural sector while providing a means to defer income generation and manage passive income levels. Here’s an in-depth look at how investing in farmland funds can benefit farmers and farm corporations alike.
Overview of Farmland Funds
Farmland funds are investment vehicles that pool capital to acquire and manage farmland properties. These funds offer investors the opportunity to gain exposure to the agricultural sector’s long-term growth potential without directly owning and managing farmland. Farmland funds focus on generating returns through both rental income from leasing farmland and capital appreciation of the land itself.
Benefits of Investing in Farmland Funds
- Capital Appreciation: Farmland values tend to appreciate over time due to factors such as increasing demand for food, limited supply of arable land, and inflation. Farmland funds provide farmers and farm corporations with the potential for significant capital appreciation, which can be realized when the fund sells its properties.
- Deferred Income Generation: Unlike traditional income-generating investments, farmland funds primarily focus on capital growth, resulting in limited annual income distributions. This characteristic helps farmers and farm corporations manage their passive income levels and stay below the $50,000 threshold, preserving their eligibility for the SBD.
- Diversification and Risk Management: Investing in farmland funds allows farmers and farm corporations to diversify their investment portfolios. By spreading investments across multiple farmland properties, these funds help mitigate risks associated with individual property ownership, such as adverse weather conditions or crop failures.
- Professional Management: Farmland funds are managed by experienced professionals who specialize in agricultural investments. This expertise ensures that the farmland is managed efficiently and sustainably, maximizing returns for investors.
Farmland Fund Options
- Bonnefield Financial: Bonnefield Financial is a leading farmland investment management firm in Canada. They focus on acquiring and managing high-quality farmland across the country, offering investors stable returns through a combination of rental income and land appreciation. Bonnefield’s farmland funds emphasize sustainable agricultural practices and long-term land stewardship, aligning with the values of many farmers and farm corporations.
- Land-Unit Exchange Program: Bonnefield Financial offers a unique Land-Unit Exchange Program designed to help farmers unlock capital tied up in their land while continuing to farm. This program allows farmers to sell their land to Bonnefield and lease it back under long-term, flexible lease agreements. This arrangement provides immediate liquidity for reinvestment in the farm’s operations or expansion while maintaining the ability to farm the land.
- Veripath Farmland Partners: Veripath Farmland Partners provides investors with access to a diversified portfolio of Canadian farmland. Their funds are designed to capture the value appreciation of farmland while minimizing annual income distributions, making them an ideal choice for farmers and farm corporations looking to manage passive income. Veripath’s innovative fund structures allow for flexible investment options and geographic diversification within the Canadian agricultural sector.
Investing in farmland funds offers both individual farmers and farm corporations a strategic way to manage passive income while benefiting from the long-term growth potential of the agricultural sector. By focusing on capital appreciation and deferring income generation, farmland funds help farmers and farm corporations maintain their eligibility for the Small Business Deduction and optimize their tax planning. Additionally, programs like Bonnefield’s Land-Unit Exchange Program provide flexible options for farmers to access capital without losing operational control of their land. For personalized guidance on incorporating farmland funds into your investment strategy, contact Harvest Time Wealth Advisory at info@harvestimewealth.com. Our team specializes in providing strategic investment solutions tailored to agricultural businesses, ensuring compliance and maximizing financial efficiency.
The information contained herein has been provided for information purposes only. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information has been provided by J. Hirasawa & Associates and is drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) and the authors do not guarantee the accuracy or completeness of the information contained herein, nor does WAPW, nor the authors, assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
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