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Buying out a neighbouring farm

The Clarks have had a great neighbour relationship with the Smiths next door. They share similar philosophies and agronomic practices. The Smiths are nearing retirement, and with no children interested in the farm, were planning on having an equipment auction and eventually sell or rent out most of their land.
A conversation with the Clarks, who had two children wanting to return to the farm, opened the possibility for the Smiths to sell them the entire land base and some of the equipment. The Clark family sat down and estimated the land’s value and were ready to approach the Smiths with a cash buyout offer and before they set up a meeting, they reached out to their accountant to let her know the plan. The advice was to wait and get her professional advice before initiating the offer. It turned out to be a good move.
The Clarks’ accountant met with the Smiths and learned that Mr. and Mrs. Smith were 50-50 shareholders in the farm company, Smith Farms Ltd. The value of the company shares was estimated to be $4 million, and this included equipment, vehicles and land assets owned by the company. The Smiths owned the home farm and farmhouse outside the company (personally), and it was valued at $1 million. The Smiths expressed an interest in staying in the home farm residence, if possible.
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