COVER STORY
NON-FAMILY SUCCESS PLANNING Being patient and doing research are critical to a smooth transition By Treena Hein
CONTRIBUTOR
I
t’s an increasingly common scenario in Canadian farming—what happens when none of the children want to take over the farm? In some instances, a farmer may have no children. In other cases, a niece, nephew or grandchild might want to take over the farm, but some provincial regulations—at least in the past—can make that impossible to accomplish in a financially-feasible manner. Darren Kish, a dairy farmer in Abbotsford, B.C., was in this position. About 15 years ago, he decided he wanted to pursue succession with his long-term farm manager, Derrick Epp. At that point, only a spouse or a child were exempt from capital gains tax ramifications and other aspects of a quota transfer. Kish’s grandparents and parents had been dairy farmers but sold their cows and quota in the 1970s. When Kish graduated from high school, he grew hay and raised Holstein heifers and beef cattle alongside his parents. In 1986, a couple he knew purchased quota at an older farm about 40 minutes away from him. Three years later, when the couple wanted to get out of dairy farming, Kish entered into an agreement to buy some of the cows, run the dairy and eventually buy the quota. In those days in B.C., producers had to keep quota for 15 years before they could sell it. “In October 1990, I built a parlour at my family farm and moved the cows there,” Kish explains. “In 2003, I was able to get the quota transferred to my name.” By 2005, because many B.C. dairy farmers were swapping and leasing quota, the B.C.
Milk Marketing Board (BCMMB) brought in rules, which would have made transferring quota in that manner impossible. Around that time, Epp started working on the farm, and Kish had known the Epp family for a while. “I knew Derrick’s grandfather Jake,” Kish says. “Derrick had been working as a milker for another fellow before he moved away. Derrick heard I might like a bit of help. He started doing some hay here and then milking. He later did most of the milking and other tasks.” When Kish looked forward to his future, he realized he wanted to give Epp the same opportunity to get into dairy farming that he had as a youth. “I brought it up first,” he recalls. “I knew Derrick had the interest and we got along well. I suggested that down the line, we could do a deal where he buys a stake and eventually would buy me out.” Epp was quite excited and agreed, but it wouldn’t be as easy as either of them hoped.
MAKING THEIR MOVE
Epp continued to grow his management skills on the farm—both with the dairy and the cropping—and by 2011, Kish asked his lawyer to transfer some of farm corporation shares to Epp, making him a shareholder. “We should have checked (with BCMMB) because there was a rule that a sale of shares is deemed a sale of quota,” Kish says. “I wrote a letter of apology (to BCMMB, and) they applied an assessment fee, which amounted to two kilograms of quota. At the time, B.C. had the highest-priced quota in Canada—$42,000/kg. So, it was an $84,000 hit, and with legal and accounting fees, about $100,000.” Continued on page 30 WWW.MILKPRODUCER.CA
